Red Book Valuations: Understanding the new RICS Rotation Policy 

The Royal Institution of Chartered Surveyors (RICS) has introduced significant changes to its Red Book UK Supplement, focusing on the governance of property valuations for regulated purposes in the UK.

These changes, effective from 1 May 2024, include a mandatory rotation policy for valuation firms and new governance arrangements for commissioning and receiving valuation reports. 

What are Regulated Purpose Valuations? 

Regulated Purpose Valuations (RPVs) are valuations relied upon by third parties who typically haven’t commissioned the valuation themselves. These include: 

• Valuations for collective investment schemes 

• Valuations for unregulated property unit trusts 

• Financial reporting of investment properties 

Key changes in the new Rotation Policy 

The new policy introduces several important changes: 

• Valuers cannot value the same asset for more than five consecutive years 

• A three-year break is required before resuming responsibility for the same valuation 

• Valuation firms cannot contract for more than five years to value the same asset for the same purpose 

• A three-year break is necessary if a firm has valued an asset for the same purpose for more than ten consecutive years 

Who does the new Policy affect? 

The rotation policy applies to a subset of valuations for financial reporting, specifically for: 

• Assets owned by entities with transferable securities traded on regulated markets 

• Large companies (as defined by the Companies Act 2006) 

The RICS recognised the administrative cost of running procurement exercises, particularly for charities, can be high and this cost may not outweigh the perceived benefits of any further valuer independence. As a result, the scope was narrowed to exclude smaller charities and companies, while retaining governance around larger organisations. In summary, it will only apply to companies which are “large companies” as defined by Section 172 (1) of the Companies Act 2006 and those with transferable securities traded on a regulated market.  

Companies are considered ‘large’ (according to the Companies Act 2006) if they meet two or more of these criteria: 

• Turnover exceeding £36m 

• Balance sheet total over £18m 

• More than 250 employees 

In addition, all public sector and secured lending valuations are excluded. 

How might these changes impact your business? 

The new rotation policy may affect your valuation processes, especially if your company falls under the ‘large company’ category or has securities traded on regulated markets. It’s crucial to understand whether these regulations apply to your business and how to manage the transition between valuers if necessary. 

Why choose Cluttons for your Regulated Purpose Valuations?

At Cluttons, we offer expert guidance on the new RICS regulations and provide top-tier valuation services: 

• Extensive experience in residential and commercial property asset valuation 

• Dedicated team of partner-led professional valuers 

• Commitment to delivering thorough, professional, and personalised service 

• In-depth understanding of the new RICS regulations and their implications 

• Ability to tailor our approach to your specific needs and circumstances 

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