You may be asked to arrange for a Chartered Surveyor to undertake a Red book valuation by your solicitor for a range of purposes – Taxation, Probate, Matrimonial, Shared Ownership, Court Proceedings or even something like valuing a loft space. This is due to its strict and consistent standards of global compliance as stated in the RICS Valuation – global standard 2017 “To provide an effective framework within the rules of conduct so that the users of valuation services can have confidence that the valuation of a RICS Member is consistent with internationally recognised standards”
In the UK, we use two versions of the Red Book:
To carry out such a valuation a surveyor must be be suitably qualified in terms of its purpose – this means having undergone the relevant training for each specific type of valuation. Surveyors should never undertake a valuation that is outside their area of expertise. In many cases, it will be mandatory that the surveyor be a Member of the RICS (MRICS) and/or an RICS Registered Valuer although Associate Members of the RICS (AssocRICS) can undertake certain types of work.
The Red Book is broken down into the following sections:
PS 1 Compliance with standards where a written valuation is provided
PS 2 Ethics, competency, objectivity and disclosures
This section is focused on ethics and how to comply with the standards in this regard. All the terms in the above are mandatory when carrying out a Red Book compliant valuation.
Valuation technical and performance standards:
VPS 1 Terms of engagement (scope of work)
VPS 2 Inspections, investigations and records
VPS 3 Valuation reports
VPS 4 Bases of value, assumptions and special assumptions
VPS 5 Valuation approaches and methods
This second part of the Red Book sets out the mandatory steps to take when valuing properties, land and assets. The above are also mandatory and will help both the client and surveyor establish clearly the extent and boundaries of the instruction. The terms of engagement are first on the list and the natural starting point. There are a minimum of 10 items that must be considered and outlined include:
VPGA 1 Valuation for inclusion in financial statements
VPGA 2 Valuation of interests for secured lending
VPGA 3 Valuation of businesses and business interests
VPGA 4 Valuation of individual trade related properties
VPGA 5 Valuation of plant and equipment
VPGA 6 Valuation of intangible assets
VPGA 7 Valuation of personal property, including arts and antiques
VPGA 8 Valuation of real property interests
VPGA 9 Identification of portfolios, collections and groups of properties
VPGA 10 Matters that may give rise to material valuation uncertainty
This further section deals with guidance notes on the different types of valuation. As opposed to the previous sections, it isn’t mandatory. However, a valuer should only deviate from these standard in exceptional circumstances.
International Valuation Standards 2017 (IVS)
In the latest version of the Red Book, the International Valuation standards (IVS) was introduced and is additional guidance that has been agreed in countries around the world by various professional bodies. The idea was to reinforce the global consistency when carrying out valuations (including in measurement) and enable valuers to work across borders while keeping a high level of professionalism.