Assumptions and Definitions

Market Value

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.

Market Rent

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.

Investment Value (Worth)

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.

Fair Value

VPS 4 paragraph 1.5 indicates that there are two recognised definitions of Fair Value being:-

1. The definition adopted by the International Accounting Standards Board (IASB) in IFRS 13, being:- The price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date and
2. The definition adopted by the IVSC in IVS Framework Paragraph 38, being:- The estimated price for the transfer of an asset or liability between identified, knowledgeable and willing parties that reflects the respective interest of those parties.

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 for Inclusion in Financial Statements

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

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:-

1. The property will be transferred with vacant possession
2. All required valid planning permissions and statutory approval for the buildings and their use, including any extensions or alterations have been obtained and complied with. The Valuer will not make enquiries into town planning or other matters which are left to the lender’s/borrower’s legal advisors.
3. In the case of a building that has not yet been constructed the Valuer will, unless otherwise instructed, provide a valuation in respect of the assumption that the development has been satisfactorily completed as at the date of inspection, in accordance with planning permission and other statutory requirements.
4. No deleterious or hazardous materials have been used in the construction.
5. The site is not contaminated and is free from other environmental hazards.
6. The property is not subject to any unusual or especially onerous restrictions, encumbrances or outgoings and good title can be shown.
7. The property and its value are unaffected by any matters that would be revealed in a local search, replies to usual pre-contract enquiries or any statutory notice that may indicate the property and its condition, use or intended use are, or will be, unlawful.
8. An inspection of those parts of the property which have not been inspected, or a survey inspection, would not reveal material defects or cause the Valuer to alter the valuation materially.
9. There is unrestricted access to the property and the property is connected and has the right to use, the reported mains services on normal terms.
10. Sewers, mains services and the roads giving access to the property have been adopted and any lease provides rights of access and egress over all communal estate roadways, pathways, corridors, stairways and use of communal grounds, parking areas and other facilities.
11. In the case of a newly constructed property it has been built under recognised Builder’s Warranty or insurance scheme approved by the lender or has been supervised by a professional consultant capable of fully completing the CML Professional Consultant’s Certificate acceptable to the lender.
12. There are no ongoing insurance claims or neighbour disputes.

Valuations Without Internal Inspection

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.

Reinstatement Cost Assessment

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.