RICS has been engaging with stakeholders in relation to leasehold reform matters contained in the 7 November Kings Speech and the subsequent Government consultation: Modern leasehold: restricting ground rent for existing leases. We have also been monitoring related UK Parliament activity.
RICS works with the UK valuation leaders forum to monitor markets and key risks. Members of the forum have suggested that in appropriate circumstances they are currently including material valuation uncertainty declarations in relation to residential ground rent investments. Consequently, less certainty, and a higher degree of caution may be attached to these valuations than would normally be the case. The declaration considers coverage of material valuation uncertainty at VPS 3 and VPGA 10 of the RICS Valuation – Global Standards (“the Red Book”). Given the unknown future impact that the consultation referenced above might have on the ground rent investment market valuers are, where appropriate, advising that the valuation of residential ground rent investment assets be kept under frequent review. The inclusion of a material valuation uncertainty declaration does not mean that the valuation cannot be relied upon.
Residential ground rent investments are a specialist asset class and similar impacts should not be assumed across residential investments more widely.
Commentary such as this from the UK valuation leaders forum is based on a high-level overview of market conditions, and necessarily cannot take into account factors applying to specific assets, regions or markets. RICS reminds regulated members that the decision whether to insert, maintain or remove commentary that a valuation is materially uncertain is that of the valuer, considering the specific attributes and performance of the individual asset and its market. Regulated members should consider on a case-by-case basis whether it would be appropriate to include commentary that a valuation is materially uncertain. They should have a sound rationale for the decision they reach upon such consideration and should maintain a record of that rationale for future reference. The commentary of the leaders forum is not a substitute for that process.
Neither RICS or any member of the UK valuation leaders forum (UK) accepts any responsibility, duty or liability to any party in respect of the contents of their output. Any such responsibility, duty or liability is expressly disclaimed. RICS and the leaders forum shall therefore not be held accountable, either collectively or individually, for any losses relating to or arising out of a valuer’s decision to insert, maintain or remove any declaration of material valuation uncertainty.
04 December 2023