TECHNICAL UPDATE – Lifting of ‘Material Valuation Uncertainty’ (RICS Update)
The Royal Institution of Chartered Surveyors (RICS) has updated its advice making recommendations for the general ‘lifting’ of Material Valuation Uncertainty on all UK real estate, excluding some assets valued with reference to trading potential.
22nd September 2020
Many of our clients who have been commissioning valuations in the last few months will have seen reference to the RICS and their recommendation to its members to include the Material Uncertainty (MU) clauses in letters of instruction and Red Book reports.
THE RICS’s RESPONSE TO THE PANDEMIC – Establishment of the Material Uncertainty Leaders Forum (UK)
The RICS, as a response to the pandemic, established the Material Uncertainty Leaders Forum (UK) to consider the unique events and the impact on valuation. The incorporation of the MU clauses was to set out clearly, to those commissioning valuations, that there is a higher level of uncertainty surrounding market conditions and that pre-Covid market evidence is likely to be less reliable than would normally be the case leading to a higher risk that valuations might be less reliable.
The MU Leaders Forum, having reviewed market evidence, have concluded that in most circumstances there should be a general lifting of the MU clause with the exception being those assets valued with reference to their trading potential i.e. leisure, hospitality and care sector properties.
Acknowledging it is the individual valuer’s judgement whether to use the MU clause in specific circumstances, RICS advice stipulates, the valuer should have a sound rationale for the decision they have made and record this for future reference.
More details about the forum and its recommendations can be found on the RICS website and in the full press release
My own view, and as someone who has recently used the MU clause, is that while the clause can and should be lifted in some cases valuers need to make clients aware that there are still higher than normal risks when valuing commercial properties. The MU clause clearly applies to trading properties but I would argue that retail is still significantly impacted with considerable valuation uncertainty.
The impact of Covid on industrial and warehouse premises is generally less than other sectors and here valuations should be more certain especially where there is post Covid market evidence.
In providing valuation advice at the current time the valuer must use his experience and apply market data to arrive at his views but take into account the new political and economic factors that have an impact.
If you require a valuation and would benefit from a 30 minute Complimentary Consultation contact Chris Price, Lead Director and registered RICS Valuer
(t) 0117 456 8775, (e) firstname.lastname@example.org
Chris Price is lead director at PACT Property & Assets Ltd with more than 30 years experience in the property sector.
An MRICS registered property valuer and fellow member of NARA (Non-Administrative Receivers Association), Chris has
carried out numerous valuations on behalf of IP’s, Banks, Financial Institutions and corporate clients throughout his career.
T: 0117 456 8775
M: 07979 541215
CHRIS PRICE BSc. (Hons) MRICS, NARA