Clause has been in place as industry standard on RICS independent valuations since 31 March because of the impact of the coronavirus
RICS’s newly formed Material Valuation Uncertainty Leaders Forum, which was convened by RICS to consider the unique events relating to the global COVID-19 pandemic and its impact on valuation assignments, has announced a consensus that reporting material valuation uncertainty may no longer be appropriate for three asset types.
A new RICS webpage hub and resources have been set up regarding material valuation uncertainty.
The concensus is that all forthcoming RICS independent valuations should, at the valuers’ discretion, include a statement highlighting “material valuation uncertainty” in response to the coronavirus and the impact it is having on real estate markets, in a hugely significant development for UK real estate.
The change was highlighted by Schroder Real Estate Investment Trust’s market update, in which it stated that RICS had informed that the wording “would be applied to all independent valuations at least in the UK”.
As such the industry standard wording for the group’s independent valuation as at 31 March 2020 has included a statement highlighting “Material Valuation Uncertainty”.
RICS used its first new forum update on the matter to say that while it is the judgement of the valuer on a case by case basis, there is consensus that the following classes may no longer require the clause:
— Long dated annuity income with at least 20-years unexpired term certain with a secure covenant such as Government or very strong investment grade
— Standalone food stores let to major operators
— Institutional grade primary healthcare facilities
RICS have advised that the group will be publishing updates on a regular basis, and as part of the first output from the group, it has been recommended that in the limited circumstances of assets with Long dated annuity income with at least 20-years unexpired term certain with a secure covenant such as Government or very strong investment grade; standalone food stores let to major operators; and institutional grade primary healthcare facilities; Material Uncertainty Valuation declarations may no longer be appropriate. However, Valuer discretion should again remain in all cases and if it is felt that any investment in the valuer’s opinion remains materially uncertain, the declaration should remain in place.