Red Book Call for Views - Overview
In its "Call for Views" issued in April 2022, RICS indicated the proposed update of the UK Supplement will have two main purposes:
Technical updates to all relevant sections reflecting market and other changes, and
Regulated purpose valuation (UK VPS 3) updates in light of the Review of Real Estate Investment Valuation led by Peter Pereira-Gray.
RICS also explains it is seeking to canvas industry stakeholder opinion on “what currently works within the standards, and what may need to be updated or removed in light of the above.”
The UK Supplement only contains three mandatory requirements for specific types of valuation in the UK. The vast majority is guidance on relevant legislation, regulation and market practice as they affect valuers in the UK. The Global Standard is where most of the rules concerning the conduct of valuers and the procedures they should follow in providing valuations in the UK are to be found. RICS is therefore interested in any views on how the overall standards, both Global and in the UK Supplement may be improved.
To help generate debate and hopefully a meaningful response, we offer a few thoughts of our own on the accompanying pages.
There is no doubt the Red Book is a formidable “brand” for RICS, especially in the world of real estate. It is widely cited and recognised around the world by clients and valuers, RICS members and non-members. However, perhaps because of this ubiquity, we know from our work that the knowledge of its actual objectives and the detail of what it contains falls far short of the familiarity with its name. Many clients or regulators simply see it as a recognised stamp of quality, which may seem great but sometimes leads to unrealistic expectations that it can solve any and every valuation problem. On the other hand, some criticise it because they think it only allows valuations to be prepared using specific methods which they do not think are appropriate for their requirements, as we have seen in some of the comments arising from the Pereira-Gray Review.
We also see many valuers who equate Red Book compliance with complexity and who fail to see past the sometimes verbose prose to understand that basically all the Red Book requires is that you must be a) suitably experienced, b) free from conflict, c) write down what you are going to do, c) do it, d) write down what you have done. OK, this is a deliberate over-simplification and different things need to be done for different types of valuation but is made to illustrate the point that too many valuers get lost in the sheer weight of the material, currently just under 300 pages in the global standards and another 150 in the UK Supplement and fail to see the wood for the trees.
For these reasons we agree with Pereira-Gray that a fundamental review of what the Red Book is for and what should be in it, which has not taken place for at least twenty years, is more than overdue. However, this begs the question of whether the UK Supplement can be significantly changed without also looking at the Global standards, since the former have to reflect the requirements of the latter. Indeed, some of the matters RICS has highlighted in its calls for views are not just applicable to valuations within the UK but affect members, and clients, elsewhere.
The Call for Views has specifically highlighted the following topics on which comments are required:
Responses to the Pereira-Gray recommendations, e.g. valuer rotation, and improved governance of valuations.
All of the above will benefit from revisiting. However, we focus on the general invitation to comment on what currently works within the standards and what may need to be updated or removed, and especially on whether and how the Red Book could be simplified
Based on our experience of working with valuation firms and client side organisations on standards compliance we have identified a few issues which we believe need to be addressed as part of a strategic review of the RICS valuation standards and associated material. We encourage others to consider the following and let RICS know what you think: