VPS4 Paragraph 1.2 of RICS Valuation – Professional Standards (January 2014) adopts the definition of Market Value as defined in IVS Framework Paragraph 29 as:-
The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.
Unless otherwise stated in this report, no ‘special assumptions’ have been made in arriving at the MV and we deem the following items to fall within the definition of land and buildings included in the valuation:
Landlords fixtures and fittings, air handling, air extraction systems (except where connected with conduction machinery), air conditioning and other essential services, landlord’s fixtures and fittings, mains electrical installations, lighting, permanent heating installations, water and gas mains and fittings, drainage pipes and fittings, sprinkler installation, craneage, permanent partitions, fences, yards and hardstanding.
VPS4 Paragraph 1.3 of RICS Valuation – Professional Standards (January 2014) adopts the definition of Market Rent as defined in IVS 230 Real Property Interest Paragraph C9 as:-
The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s-length transaction, after proper marketing and where the parties had each acted knowledgably, prudently and without compulsion.
Market Rent will vary significantly according to the terms of the assumed lease contract. The appropriate lease terms should reflect current practice in the market in which the property is situated in matters such as the duration of the lease, frequency of rent reviews and responsibilities of the parties for maintenance and outgoings will impact on Market Rent. The definition of the basic lease terms assumed will be included with calculation of Market Rent.
VPS4 paragraph 1.4 of RICS Valuation – Professional Standards (January 2014) states that Investments based on Investment Value (Worth) shall adopt the definition included in IVS Framework Paragraph 36, being:-
The value of an asset to the owner or prospective owner for individual investment or operational objectives.
VPS 4 paragraph 1.5 indicates that there are two recognised definitions of Fair Value being:-
The two definitions of Fair Value differ and when adopting Fair Value the Valuer will establish the correct definition for the purpose and this will be set out in full within the body of the report and, where practical, confirmed prior to the release of the report in the Terms of Engagement.
Valuations undertaken for inclusion in Financial Statement to be provided in accordance with UKVS1 – Valuation of Real Property, plant and equipment for Financial Statements under UK GAAP (April 2015) to RICS Standards UK provides that:-
Valuations for inclusion in financial statements prepared in accordance with UK Generally Accepted Accounting Principles (UK GAPP) which is effective from 1 January 2015 should be measured on the basis of historical cost (the Cost Model) or Fair Value (the Revaluation Model) as defined in FRS102 as:-
The amount for which an asset could be exchanged, a liability settled or an equity instrument granted could be exchanged, between knowledgeable, willing parties in an arm’s length transaction.
Valuations of residential property for mortgage purposes will be undertaken in accordance with the RICS Residential Mortgage Specification (UK Appendix 10 of RICS Valuation – Professional Standards UK revised April 2015). The Valuer will inspect the property to be valued either on the basis of visual inspection to cover as much of the exterior and interior of the property as is readily accessible without undue difficulty or risk to personal safety while standing at ground level within the boundaries of the site and adjacent public/communal areas and when standing at the various floor levels. The basis of value adopted will be Market Value as defined above. The following additional assumptions and special assumptions may be made without verification:-
Where an opinion of value is provided following a request for a valuation without internal inspection (desktop or driveby valuation/external appraisal); the party commissioning such a valuation should be aware that when an opinion of value is provided on this basis this should not be disclosed to any third party unless required to do so by the FCA Rules in Mortgages and Home Finance – Conduct of Business Source Book (MCOB). Such opinions of value should be used only as a preliminary assessment prior to a more detailed investigation at a later date. Because the valuation is provided on restricted information this is provided solely for the internal use of the recipient. It is not to be used in any proceedings without the Valuer’s consent as the opinion may change if the Valuer is later required to give evidence in formal proceedings having received additional information.
For the avoidance of doubt a replacement cost figure for assets other than personal property that is provided within any report, for the purposes of insurance is not a written opinion of value for the purposes of undertaking valuation services as defined in VPS1 Paragraph 1.2, mandatory application, of the RICS Valuation – Professional Standards UK (January 2014 – updated April 2015). The Reinstatement Cost Assessment is accordingly provided solely for guidance purposes and is given without liability. The recipient should be aware that if a formal Reinstatement Cost Assessment or building cost estimate is required this should be sought from either a Quantity Surveyor, Architect or Surveyor experienced in providing Rebuilding Cost Assessments.
The reinstatement cost figure does not reflect any form of valuation (for market or other purposes) and where the property is a flat or maisonette the assessment would be based on an estimate of the reinstatement cost of that part of the total structure consisting of the proposed property to be valued. It is the recipient’s responsibility to enquire whether management committee or landlord arranges insurance for the building as a whole and whether that cover is adequate.
In providing a Reinstatement Cost Assessment we will consider Architect’s and Quantity Surveyor’s fees, an allowance for debris clearance but not VAT. The estimate will be based on current costs as at the date of the report and will not make any allowance for future inflation. The recommendation of the provision for building costs is annually is made in updating the Reinstatement Cost Assessment throughout the period of ownership.