Property Surveys and Valuations amidst Coronavirus

Due to the current lock-down, inspecting property may be difficult as a result of restrictions applied by the Government and/or the surveyor’s firms. The RICS bulletin advises that surveyors should not expect to carry out non-urgent surveys where people are in residence, and no inspections should take place if any person in the property is showing symptoms of COVID-19, is self-isolating or being shielded. The RICS does accept that it may be possible to perform urgent surveys on empty properties or those where the occupants are temporarily out of the property provided that these are carried out in accordance with the social distancing guidelines.

The RICS guidance reminds that a member should act in a transparent and professional manner and so if they experience any restrictions on information and/or the ability to inspect a property, this must be made clear to and agreed with the client. Such agreement should clearly be recorded and the surveyor should make detailed file notes to support the rationale that underpinned the changes.

In respect of valuations, the RICS guidance recognises that comparable evidence may currently be in short supply and advises that members should consider whether any changes need to be made to valuation assumptions as a result. The guidance goes so far as to advise that a member should decline instructions if it is impossible to provide a valuation on such a restricted basis. It does also provide the pragmatic suggestion that information prepared by third parties, such as other RICS members, owners, tenants or occupiers of similar real estate or their agents and clients’ own records may be used to form an opinion on valuation provided that confidentiality issues can be respected. It also reiterates that a member must reasonably believe that the information prepared by third parties is adequate and reliable.

The bulletin also provides suggested “material uncertainty” wording to be included in any valuation where a member considers necessary. This advises a client that in the current circumstances “less certainty – and a higher degree of caution” should be placed on the valuation and recommends that this is kept under regular review by the client. In the words of Ben Elder FRICS RICS Global Director of Valuation:

“Where a material uncertainty clause is being used, its purpose is to ensure that any client relying upon that specific valuation report understands that it has been prepared under extraordinary circumstances. The term is not meant to suggest that the valuation cannot be relied upon; rather, it is used in order to be clear and transparent with all parties, in a professional manner that – in the current extraordinary circumstances – less certainty can be attached to the valuation than would otherwise be the case. Indeed, with regard to the process itself, professional valuers will almost certainly have undertaken far more due diligence than normal, in order to arrive at their estimate of value.”

It will be interesting to see what view credit committees will take when presented with such wording in a valuation report.

The RICS are continually updating their guidance and advice and members should ensure that they are up to date and can provide the surveys and valuations required by clients in a safe and responsible manner that looks after not only themselves but also their businesses. As with many of the issues we have encountered, a pragmatic and responsible approach, taken in this case by the RICS in its guidance, is the only approach that allows transactions to progress in the current circumstances.