In a response to changing market dynamics, the RICS Standards and Regulation Board (SRB) commissioned the Valuation Review in the public interest to assess practices in the valuation of real estate assets for investment purposes. The updates to the Red Book UK Supplement are ultimately intended to reduce the risks of conflicts of interest in the commissioning of valuation reports.

The RICS UK national supplement 2023 updates take effect from 1 May 2024 and applies to all valuations where the valuation date is on or after that day.

Our Valuation team have saved you the time of going through the 164-page document and summarise the top 10 things you need to know from the update below:

1. Introduction of Mandatory Rotation Policy

A maximum period of 5 years before the rotation of an individual ‘responsible’ valuer and 10 years before a valuation firm must rotate for regulated purpose valuations (VPS 3.3). 

2. Public Sector Adaptation

The exclusion of all public sector valuations (local authority, central government and government agencies) of the requirements set out in requirements in UK VPS 3.3–3.5 relating to regulated purpose valuations relating to rotation policy, terms of engagement, and reporting.

3. Depreciated Replacement Cost

Where the value of a site for a potential alternative use may be significantly higher than the value derived from using the DRC method, a statement to that effect must be made in the valuation report (UK VPGA 1.5).

4. Leasehold interests

Under IFRS adopted by the UK, IFRS 16 removes the need to separate between finance and operating leases for lessees. Under FRS 102, a lessor’s interest in an operating lease would always need to be valued (UK VPGA 1.9).

5. Land and Building apportionments

These apportionments are hypothetical in nature, with accepted methods including a) use of prevailing land values b) use of DRC building value and c) percentage approach (UK VPGA 1.10).

6. Valuation Reporting

Unless agreed in the terms of engagement, the valuer is not required to provide a valuation on an alternative basis of value; and where an alternative basis of value is materially different from market value clients should be alerted to the fact. (UK VPGA 4.5)

7. Existing Use Valuation

When instructed to value operational property for the public sector under IFRS, valuers should be aware of the adaptation made for the public sector – that require the basis of value used is EUV and not fair value as defined in IFRS 13 (UK VPGA 6).

8. Sustainability and ESG

The relevance and significance of sustainability and ESG matters should form an integral part of the valuation approach and reasoning supporting the reported figure. This includes commentary on potential future cost liabilities to meet regulatory and investor requirements (UK VPGA 10). 

9. Valuation of UK residential property

RICS will be providing separate, detailed guidance to residential valuers operating in the UK. In the interim, valuations of UK residential properties on behalf of building societies, banks, and other lenders for mortgage purposes, this (UK VPGA 11) guidance must be followed.

10. Project Value for lending

In exceptional cases, where a ‘projected value’ is to be provided (i.e. a date after the date of the report) and the valuer has provided consent, great care should be taken to ensure that any associated provisos or disclaimers are accurately stated in the SLA/terms of engagement. (UK VPGA 14.5)

Find out more

Our extensive team of RICS Registered Valuers operate across the UK and Ireland from 17 locations, offering unrivalled coverage of your property market. For more information about how the Red Book update may affect you and your investments please contact valuations@lsh.co.uk.