Building value from knowledge

8 February 2010

Mandatory registration and monitoring will promote uniformity of valuation standards worldwide

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RICS has confirmed the introduction of a regulation and monitoring scheme this year. This follows the Governing Council's approval of the Valuation Regulatory Framework at the end of last year, which will apply to all members carrying out valuations under RICS Valuation Standards (the Red Book).

The scheme will encompass all property types and registration will be mandatory. After launch in the UK and Europe, it will be rolled out across many world regions.

Through this scheme, RICS will take a much more active role in ensuring there is consistency in the level of professionalism and expertise displayed by valuers. The scheme will be transparent and clients and the public will have access to a register of valuers and regulated firms participating in the scheme. Thus, it will constitute a major step forward for public protection.

For members, it will provide a clear kite mark of quality. Because registration will be a Red Book requirement, lenders will insist on mortgage valuations being carried out by RICS-registered valuers only.

All members and associate members will be able to register without pre-qualification and will, like all regulated firms, be asked to provide information that will allow targeted and continuous monitoring.

The operational details of the scheme are being finalised and further announcements will be made in due course to ensure members are kept up to date with the process of registration.

Questions and answers on the scheme are reproduced below from www.rics.org/valuation.

What will the registration and monitoring scheme cover?

Following the vote by Governing Council, RICS will now proceed with the operational planning and subsequent introduction of the regulatory monitoring framework for valuations. The scheme will be mandatory for all qualified members or associate members and regulated firms who undertake valuations set out in the Red Book.

Red Book practice statement 1.2 lists any valuation related activities which are exempt from the standards. However in broad terms the Red Book applies to the following valuation purposes:

• Loan Security
• Financial reporting (including valuations for investment funds and companies)
• Investment portfolio performance
• Takeovers and mergers
• Stock exchange (e.g. IPOs)
• Purchase reports (other than pricing advice provided in the course of agency which is exempt under PS 1.2)
• Taxation (other than valuations which are subject to separate statutory processes).

(Unless produced for third parties, rent review or lease renewals are generally considered to be advice provided in the course of negotiations and are exempt under PS 1.2).

Will there be a barrier to registration?

There will be no barrier to registration and no retesting for existing qualified members of RICS.

Our members have already achieved their qualification as Members or Associate Members of the RICS and are subject to CPD to ensure lifelong learning and personal professional development.

What will monitoring involve?

Once introduced compliance monitoring will be risk-based and will aim first and foremost to be educational and to propagate best practice. This means that RICS Regulation will focus its efforts on the areas of the profession that it believes pose the highest risk to the public.

Registered members and regulated firms who undertake valuation will be asked to provide a limited amount of information each year about their valuation practice to allow RICS to undertake this risk assessment. Auditing by RICS could involve a range of activities with a combination of desk-based and onsite methods including regulatory review visits to regulated firms.

In the case of regulated firms, they will be expected to demonstrate appropriate systems are in place to ensure compliance with standards. Monitoring will generally be undertaken at the firm level with the aim of examining compliance with RICS standards. This means the interaction will primarily occur between RICS Regulation and the compliance officer of the firm. However, where necessary, RICS will inspect the work of individual valuers within the firm.

For valuers working in non-regulated organisations, monitoring will only be undertaken at the individual level with the objective of examining compliance with RICS standards. Communication here will primarily be between RICS Regulation and the individual valuer.

It is important to emphasise that monitoring will be of compliance with the requirements of the Red Book and not a review of the valuer's judgements and conclusion upon value.

How will the scheme be brought into operation?

Having now approved the policy proposals RICS will enter a period of detailed operational planning and development. Before going live, systems and processes will be carefully tested in coordination with the industry. Implementation of monitoring will then be rolled out on a phased approach.

At this stage it is agreed that the scheme will:

• be for global application but will be phased in region by region with initial focus on the UK, mainland Europe and Hong Kong, before extending to other world regions. Initial monitoring focus will be on regulated firms within these regions;
• work through the regulated firm structure to ensure minimum bureaucracy but will also be flexible enough to cover individual members working outside regulated firm; and
• include a transitional period to allow sign up before the scheme becomes mandatory.

How will it be funded?

It has been agreed that the cost will be borne by those members and firms who fall within the scope of the scheme as set out above. The detailed approach to charging will be established by the RICS Management Board in early 2010. This annual fee will cover the costs of compliance monitoring.

Further information

See also Core valuation issues in isurv valuation.