RORY LAVELLE gives us the lowdown on the recent launch of RICS Valuer Registration and reminds us all of the importance of the Red Book.
What is Valuer Registration and how does it work?
RICS Valuer Registration is an independent system of regulatory monitoring, which includes a register of valuers. It was conceived at the request of the profession and in response to the global financial crisis of the last few years.
Introducing Valuer Registration is part of the ongoing commitment from the RICS and the Society of Chartered Surveyors Ireland to protect client and public interests by underpinning the standards that our members work to with a quality assurance mechanism.
RICS Valuer Registration monitors the application of RICS Valuation Professional Standards, and the application of the Irish chapter, developed in conjunction with the Society of Chartered Surveyors Ireland, which are laid out in the Red Book. The scheme seeks to minimise the risk associated with valuations. It has already been rolled out in the UK and Europe, where it has been well received by financial institutions.
First launched in October 2010, there are now over 13,500 Registered Valuers worldwide, including members in all RICS world regional directorates.
RICS regulation monitors and reviews all registered valuers against our risk criteria to ensure compliance with RICS standards. As well as a compliance regime, it provides advice and guidance as a core part of the process, and the RICS produces lessons and CPD to help all members to comply with their professional and statutory duties.
Its aim has always been to ensure that the International Valuation Standards that underpin so much economic activity are being maintained and correctly applied. In short, RICS Valuer Registration monitors valuation professionals and is already achieving its aim of reinforcing the quality of property valuations in accordance with Valuation Professional Standards (Red Book).
Why do we need RICS Valuer Registration?
The fundamental purpose of both the RICS and the Society of Chartered Surveyors Ireland is to bring about higher standards of property industry professionalism. Any changes and developments to the way we operate must reflect this underlying principle.
As valuation professionals, we are well aware that there has been a lot of talk about the exact causes of the financial crisis linked to real estate. Of course, the reasons are complex and many factors influence the situation we are in, but a clear theme has emerged – that there is a need for effective regulation and enforcement throughout the profession, particularly in the valuation sector.
For these reasons, RICS Regulation, in co-operation with the Society of Chartered Surveyors Ireland, formally launched Valuer Registration in Ireland on July 2, 2012. Although some of our members had already joined, a high profile official launch was necessary to ensure that all suitably experienced and qualified RICS/Society valuers have the opportunity to register. There was significant national media coverage of the public launch of Valuer Registration in Ireland to introduce it to stakeholders in Government, the business and financial communities, and the wider public.
Why is our work as professional property valuers so important and why do we need to follow the Red Book?
Accurate valuations are vital to a healthy business environment and a stable economy, as they underpin so many business decisions.
More specifically, asset valuations conducted for the purposes of bank lending is one area of valuation practice that has come under particular scrutiny.
The Central Bank report entitled ‘Valuation Processes in the Banking Crisis – Lessons Learned – Guiding the Future’ published at the end of 2011, highlighted key failings in terms of the way valuations were requested, used and carried out during the boom, particularly in relation to the provision of valuation instructions, which it found were a contributing factor to the level of property losses by banks.
Among other things, the report identified a need for more appropriate qualifications, professional indemnity cover and improved valuation processes and reporting.
It was highlighted that many bankers had failed to recognise the importance of a robust and independent valuation report. This essential document provides a firm foundation to help mitigate risk and improve the quality of lending decisions.
The same Central Bank report also highlighted the valuation principles developed by the RICS in accordance with International Valuation Standards (IVS). The Central Bank recommended that lenders should seek Red Book valuations from suitably qualified valuers when considering applications for loans or reviewingexisting loans.
Can you provide a brief summary of the Red Book?
The Red Book contains mandatory rules and guidance for RICS and Society members who are working as valuation practitioners. It contains full procedures for preparing valuation reports, including conflict of interest checks, terms of engagement, instructions, and the provision of clear reasoning and use of relevant comparables.
The Red Book is a global standard and has been used in Ireland by Chartered Surveyors undertaking valuations for lending since 1996.
It was originally developed by the RICS Assets Valuation Standards Committee in 1974 as a series of guidance notes. The Red Book has continued to grow in stature and importance, and is now mandatory and available in 11 languages.
In March of this year, an Irish chapter of the Red Book, which sets out mandatory rules for residential property mortgage valuations, was published for the first time.
How is it being implemented in Ireland?
The RICS and the Society have provided five free Valuer Registration CPD sessions in Dublin, Carlow, Cork, Dundalk and Galway. At these sessions, RICS Regulation staff met with members to discuss the benefits of Valuer Registration and how the education and compliance regime works. Over 200 Irish valuation practitioners attended these sessions over a period of two weeks.
As well as answering questions and providing information about how to improve quality assurance systems and protocols within their own firms, practitioners were reminded of how essential it is to follow the standard and follow clear processes to manage and mitigate risk.
It is essential that the valuation profession embraces Valuer Registration and provides sound, independent and consistent advice that is delivered to recognised and globally accepted standards. By doing this, we will be demonstrating a commitment to high standards and rebuilding trust in the profession.