Professional Statements, Guidance Notes and Laws Flashcards
Level 1 APC
1
Q
What is a balance sheet?
A
It is shows the assets and liabilities of a company at a certain period of time, usually at the end of a financial year.
2
Q
What is a profit and loss account?
A
It is a summary of a business’s income and expenditure transactions, prepared usually on an annual basis. It is also known as an income statement.
3
Q
What is PACT?
A
Professional Arbitration on Court Terms - a scheme offered by RICS as a form of alternative dispute resolution for lease renewal disputes. PACT offers a quick, efficient and cost- effective solution to your commercial lease renewal dispute.
4
Q
What is the difference between an Arbitrator and an Independent Expert?
A
Arbitration is suitable for disputes where the evidence is less straight forward or legal issues are more complex. An Independent expert’s determination is quicker and cheaper, specialist knowledge (valuation or construction defects etc).
Arbitrator can award costs as he wishes, there’s a limited right to appeal. Arbitrator cannot be liable for negligence and cannot be sued, has full power sof disclosure. Acts within the Arbitration Act 1996. Acts on evidence provided. The outcome is called an award.
Independent expert can award costs in accordance to the lease terms. No right of appeal. Can be sued (liable for damages as result of negligence), no powers of discloses. Can use its own knowledge and expertise to reach its decision and does not have to simply consider only the evidence provided.
Outcome – called a decision.
4
Q
What are the main principles for GDPR?
A
General Data Protection Regulation’s implementation and UK / Jersey Data Protection Act 2018 states:
Fair and lawful processing;
Purpose limitation;
Data minimisation and
Data retention.
5
Q
How do you ensure an inclusive environment?
A
Adhere to the Equality Act 2010 and it’s main principles:
Do not discriminate due to Age, Disability, Sex, Race, Religion etc
5
Q
What does RICS do to ensure diversity and inclusion?
A
RICS has a scheme called ‘inclusive Employer Quality mark’ to improve diversity and inclusion. The scheme requires employers to pledge their commitment to adopting and continually improving against the following six principles:
Leadership and vision
Recruitment
Stall Development
Staff retention
Staff engagement
Continuous improvement
6
Q
How do you handle a complaint?
A
PwC’s complains procedure: The complaint is logged in the complaints handling log, escalated to my director, if the issue remains it is further elevated to the partner who is the complaints handling offices for the form.
7
Q
How do you ensure sustainability in valuations?
A
EPC minimum standard E in the UK. B in 2023.
JEPA’s to be introduced in 2026.
UK’s government to reduce carbon emissions level to 100% by 2050 to a 1990 base level or 78% in 2023.
8
Q
How do you ensure integrity?
A
I comply with the Bribery Act 2010 and my firms policies on receiving gifts.
The main principles being:
Principle 1: Proportionate Procedures.
Principle 2: Top Level Commitment.
Principle 3: Risk Assessment.
Principle 4: Due Diligence.
Principle 5: Communication (including Training)
Principle 6: Monitoring and Review.
9
Q
What are the four main offences defined by the Bribery Act 2010?
A
Bribing another person. …
Being bribed. …
Bribing a foreign public official. …
Failure by commercial organisation to prevent bribery.
10
Q
What is RICS Rules of Conduct?
A
Act with Integrity
Always provide a high standard of service
Act in a way that promotes trust in the profession
Treat each other with respect
Always take responsibility
11
Q
What does RICS professional statement say about countering bribery, corruption and money laundering?
A
- Zero tolerance
- Compliance with laws and regulation in your jurisdiction
- Risk management
12
Q
What can you tell me about PII?
A
Firms must ensure that all previous and current professional work is covered by adequate and appropriate professional indemnity cover that meets the standards approved by RICS.
It’s on a every claim basis. Run-off cover of 6 years is required.
13
Q
How did you handle a conflict of interest?
A
Immediately disclose the potential conflict of interest to both the seller and the buyer. Transparency is crucial to maintaining trust and professional integrity.
Provide written disclosure to both parties detailing the nature of the conflict and how it might affect the transaction.
Advise both clients to seek independent professional advice from another surveyor outside the firm before proceeding with the instruction.
If the clients wants to proceed - Set out proposals for dealing with the conflict (Information barrier).
Obtain written consent from both the seller and the buyer acknowledging the conflict of interest and agreeing to proceed with the transaction despite the potential conflict. Ensure that both parties understand the implications and their rights
14
Q
What difference conflict can occur?
A
Personal Conflict of Interest: When a surveyor’s personal interests might influence their professional judgment or actions. For example, having a financial stake in a property being assessed.
Professional Conflict of Interest: When duties to one client conflict with duties to another, or when the surveyor’s professional obligations conflict with their personal interests.t.
15
Q
What can you tell me about the Red Book?
A
RICS Global valuation standards 2021, effective 2022.
To promote and support high standards in valuation delivery worldwide. The publication details mandatory practices for RICS members undertaking valuation services.
16
Q
What is the UK supplement?
A
Valuer’s rotation was introduced in May 2024. 5 years for individuals and 10 for firms of financial reporting valuations.
17
Q
Was is the IVS? And what new chapters are included?
A
The International Valuations Standards Council (IVSC) develops and sets the international technical and ethical standards for valuations.
The latest version was published in January 2024 and will be effective January 2025.
In what is a significant update, the latest version includes new chapters on Data & Inputs, Documentation, and Financial Instruments.
18
Q
What is VPS5?
A
5 valuation approaches
1. Comparative
2. Investment
3. Cost
4. Profit
5. Residual
18
Q
What is VPS4?
A
Dictates the basis of value.
Market value
Market rent
Investment value
Fair value
19
Q
Define Market Value
A
The estimated price in which a property should sell for in an arm’s length transaction, between a willing seller and a willing buyer, at the valuation date, after proper marketing, where the parties have acted prudently, knowledgeably and without compulsion.
20
Q
Define Investment Value
A
Investment value is the value that an investor is willing to pay to obtain an asset or investment. It is based on the individual’s subjective goals, criteria, and opinion about the asset.
21
Q
Define Fair Value
A
The price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.
22
Define Market Rent
The rent that would be received on the valuation date between a willing lessor and willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had
each acted knowledgeably, prudently and without compulsion.
23
What can you tell me about DCFs?
Discounted cash flow (DCF) is a valuation method that estimates the value of an investment using its expected future cash flows.
24
How do you undertake an inspection and what do you adhere to?
RICS guidance note for surveying safety, 2018.
Risk assessment - Assessing hazards and risks
Put the inspection in my open diary
Ensure I tell someone where I was going and for how long
Wear appropriate protective clothing (PPE)
Consider whether safe to inspect alone.
25
What do you adhere to when undertaking measurements?
RICS Property Measurement (2nd Edition) (2018) and International Property Measurement Standards (IPMS).
The Code of Measuring Practice is still relevant to certain types of property but is now a separate document.
26
What is IPMS1?
The sum of the areas of each floor level of a building measured to the outer perimeter of external construction features and reported on a component basis on each floor.
27
What is IPMS2?
The sum of the areas of each floor level of an office / residential building measured to the internal dominant face reported on a component-by-component basis for each floor of a building.
27
What is the difference between GEA (Gross External Area) vs IPMS 1?
Measures the total external area of the building, similar to GEA, but may include additional elements like balconies (but stated separately) and accessible rooftop terraces.
28
What is the difference between GIA (Gross Internal Area) vs IPMS 2?
Similar to GIA but provides more clarity for international comparisons by excluding external walls and emphasising the use of internal floor space for specific functions (e.g., office vs. industrial). Includes Area occupied by the reveals of windows when measured and assessed as the internal dominant face if more than 50% of the wall.
29
What is IPMS3?
The floor area available on an exclusive basis to an occupier, but excluding standard facilities and shared circulation areas, and calculated on an occupier-by-occupier or floor-by-floor basis for each building.
30
IPMS 3 vs NIA
Very similar to NIA but is more standardised for global use. It also excludes shared spaces, focusing on the area available exclusively to the tenant.
31
What 5 standards do you adhere to when undertaking a letting?
Real Estate Agency and Brokerage 2016
UK Commercial Real Estate Agency 2016
Estate Agency Act 1979
Code for Leasing Business Premises in England and Wales 2023
Unfair trading 2008
32
Tell me about Real Estate Agency and Brokerage 2016
Members must:
1 Conduct business in an honest, fair, transparent manner.
2 Carry out work with due skill, care and diligence
3 Ensure that clients are provided with terms of engagement which are fair and clear. These should meet all legal requirements including reference to complaints-handling procedures
4 Do the utmost to avoid conflicts of interest and, where they do arise, deal with them openly, fairly and promptly.
5 Not discriminate unfairly in any dealings.
6 In all dealings with clients, ensure that all
communications are fair, clear, timely and transparent.
7 Ensure that all advertising and marketing material is honest, decent and truthful.
8 Ensure that all client money is held separately from other monies in appropriately designated accounts and is covered by adequate insurance.
9 Have adequate and appropriate professional indemnity insurance or equivalent in place that complies with the RICS Rules of Conduct. Having proper cover is a key
part of managing your risk.
10 Ensure that it is made clear to all parties with whom you
are dealing the scope of your obligations to each party.
11 Where provided as part of the service, give a realistic
assessment of the likely selling, buying or rental price,
associated cost of occupancy or of the likely financial
outcome of any issues, using best professional
judgment.
12 Ensure that all meetings, inspections and viewings are
carried out in accordance with the client’s lawful and
reasonable wishes, having due regard for
33
What are the compliance requirements of the Estate Agency Act 1979?
The requirements cover set fees, how costs are calculated, additional charges, etc. The Act also requires estate agents to declare any personal interest in a transaction and the services provided to the other party.
34
What is the Code for Leasing Business Premises in England and Wales 2023 and its requirements?
The Code for Leasing Business Premises in England and Wales by the Royal Institution of Chartered Surveyors (RICS) represents commercial landlords and commercial tenants. It is in place to try to:
encourage fair commercial leases for both landlords and tenants;
ensure a clear head of terms;
ensure that parties adhere to the lease;
make landlords and tenants more aware of typical property issues; and
help commercial tenants negotiate good deals in commercial property space.
In addition to an introduction, the Code consists of three parts:
mandatory requirements for commercial landlords;
best practice for landlords;
appendices with a heads of terms template, a checklist and guide for landlords and tenants on commercial leases.
35
What is the UK Commercial Real Estate Agency 2016 and the responsibilities for a commercial agent?
The Professional statement sets out the responsibilities of commercial property agents to ensure they are working to the highest ethical and professional standards.
1 Conduct business in an honest, fair, transparent and professional manner.
2 Carry out work with due skill, care and diligence, and ensure that any staff employed have the necessary skills to carry out their tasks.
3 Ensure that clients are provided with terms of engagement which are fair and clear.
36
What is the Unfair Trading Regulations Act 2008?
They impose a general prohibition on traders in all sectors from engaging in unfair commercial practices with consumers. Specifically, they protect consumers from unfair or misleading trading practices and ban misleading omissions and aggressive sales tactics
37
What do you adhere to when undertaking property management?
RICS Service Charge in Commercial Property 2018 (reissued 2023)
and Commercial Property Management in England and Wales 2011
38
What can you tell me about RICS Service Charge in Commercial Property?
This document was reissued in September 2023 as a professional standard from 2018.
The aims and objectives of this professional standard are to:
- improve general standards and promote best practice, uniformity, fairness and transparency in the management and administration of services charges in commercial property
- ensure timely issue of budgets and year-end certificates
- reduce the causes of disputes and to provide guidance on resolution, and
- provide guidance of service charges in the negotiation, drafting, interpretation and operation of leases, in accordance with best practice.
39
What can you tell me about Commercial Property Management in England and Wales 2011?
This guidance note details best practice in the management of commercial property, with particular emphasis on how the person(s) in control of a building should manage, communicate and control income and expenditure.
Chartered surveyor managing agents should adhere to these key principles:
- Manage the property on behalf of the landlord
- Manage third party suppliers to carry out those operations that property managers do not do themselves
- Provide a primary duty of care to the landlord, secondary responsibility to the occupiers and, in some cases, a duty of care to parties providing finance for the properties being managed
40
Commercial property managers' core duties include?
Liaising with and reporting to the landlord
Collecting monies
Clients' accounts
Dealing with defaulting occupiers
Service charges
Deposits held
Managing the building(s) and policies
Insurance relating to the property
Liaising with occupiers
Energy management
Building management systems (IT)
Health and safety/fire safety
Management fees
41
What is the difference between Residual and Development appraisal?
A residual is based on the valuer's inputs and is for a practical purpose. A development appraisal will be on costs provided by your client. You are able to play around with the costs to achieve your desired profit levels. Development appraisal is usually based on the clients inputs.
42
How do you value a development property and what do you adhere to?
I adhere to RICS Professional Standard valuation of development property 2018 and the red book.
The two main valuation methods are the comparable and residual methods. Ideally, both methods should be used to ensure that the end value is cross-checked appropriately.
The Guidance Note explores the due diligence required for development property valuations, ensuring that appropriate assumptions and special assumptions can be made.
It also discusses how to assess development potential, including seeking advice from external specialists, e.g. planning consultants.
43
A development property is defined in IVS 410 as?
‘interests where redevelopment is required to achieve the highest and best use, or where
improvements are either being contemplated or are in progress at the valuation date and
include:
a the construction of buildings,
b previously undeveloped land which is being provided with infrastructure,
c the redevelopment of previously developed land,
d the improvement or alteration of existing buildings or structures,
e land allocated for development in a statutory plan, and
f land allocated for a higher value use or higher density in a statutory plan.’
44
What are the four main options for development property which are likely to influence the valuation approach and outcome?
To develop
Develop in phases
Sell or dispose
Defer or wait.
45
What should be included when carrying out valuations for commercial secured lending purposes?
Any previous (past 2 years) current or anticipated involvement with the perspective borrower or the property to be valued must be disclosed to the lender. Or a statement that the valuer has no involvement.
Current marketability of the property
Current market trends
Whether the property is suitable for mortgage purposes
Any special assumptions made
Any matters that might affect the valuation.
Valuation methodology used.
Potential alternative uses or changes of use.
Assumptions and recommendations regard future repairs / disrepair.
46
How do you undertake a secured lending valuation and what do you adhere to?
the Red Book and the provisions in VPGA 2, Valuations for Secured Lending.
Provides guidance on valuations specifically for secured lending, i.e., when a property is used as security for a loan.
2. Instructions and Terms of Engagement
Valuers must receive clear, written instructions from the lender, outlining the purpose, scope, and terms of the valuation.
The terms of engagement should specify the basis of value, assumptions, special instructions, and the extent of investigations.
3. Basis of Value
Market Value (MV): Most commonly used basis for secured lending, reflecting the estimated amount the property would sell for on the valuation date.
Other bases of value, such as Market Rent (MR) or Fair Value, may be used if specified and agreed upon.
4. Assessment of Risk
The valuer must assess any risks that may affect the property's value, such as market conditions, property condition, legal issues, or economic factors.
Special attention should be paid to factors that could impact the property’s ability to generate income or be sold in the event of a loan default.
5. Valuation Assumptions and Special Assumptions
Clearly distinguish between standard assumptions (e.g., property is free of defects unless otherwise stated) and special assumptions (e.g., assuming a lease is in place).
Any assumptions made should be explicitly stated and justified within the report.
6. Property Inspection
An adequate inspection must be carried out to understand the property’s condition, layout, and any factors that might affect its value.
The level of inspection should be appropriate to the nature of the property and the lender’s requirements.
7. Valuation Approach and Methodology
Use appropriate valuation methods, such as the comparison method, income approach, or cost approach, depending on the property type and available data.
Justify the choice of methodology and ensure it aligns with the property's characteristics and market context.
8. Report Content and Format
The report must be clear, comprehensive, and tailored to the needs of the lender.
It should include details such as the basis of value, methods used, supporting evidence, risk assessment, and a statement of compliance with the RICS Red Book.
9. Compliance and Ethics
Valuers must comply with the RICS Red Book standards, relevant regulations, and ethical requirements.
The report should include a statement confirming compliance with RICS standards and the qualifications of the valuer.
10. Confidentiality and Data Protection
Maintain confidentiality of all information provided by the lender and other parties involved.
Ensure compliance with data protection regulations when handling sensitive data.
47
What do you adhere to when undertaking real estate consultancy?
I have been part of a wide range of consultancy work, such as Employer’s Agent Services for the new IFC building I adhered to RICS standard form of consultant's appointment 2022.
48
What is the role of RICS?
Three main roles:
1. Maintain highest standards of education and training
2. Protect consumers through regulation and standards
3. A leading source of information and independent advice on property
49
Who is the current RICS president?
Tina Paillet
50
Are you aware of any RICS guidance that applies to RICS members when using social media?
RICS introduced Guidance note ‘Use of Social Media: Guidance for Members Version 1’ effect from June 2021. Still adhere to the Rules of Conduct when using social media
51
What does good governance mean to you?
The need to ensure that there is clear transparency amongst all stakeholders and a structured process for decision making.
52
What do you understand by the term self-regulation?
Self-regulation means that an organisation can operate within its own published regulatory framework, rather than being legislated by the government.
53
What is the purpose of Professional Indemnity Insurance?
Protect insured member pr firm against liability to pay damages.
54
Can you tell me about the RICS requirements in relation to PII?
All firms must have PII.
All policies must be underwritten by a RICS approved insurer.
55
What would you do if you received a notice of a PII claim from a client or their solicitor?
Follow my firm’s complaints handling procedure and Inform insurers immediately.
56
How do you undertake anti-money laundering checks?
Requesting individuals' ID and proof of address or confirmation of a business's details. Copies of this documentation must be kept for five years from the end of the business relationship or completion of the transaction.
57
What is negligence?
Failure to provide services with the standard of skill and care that would be expected from a reasonable body of the professional’s peers.
58
What are Terms of Engagement?
Every single client instruction must be formalised in writing, using terms of engagement. These set out the key terms agreed between the client and surveyor, in addition to limitations on liability and other caveats applying to the instruction.
59
What is the limitation Act 1980?
Outlines the limitation periods for negligence: Contract - 6 years from date of negligence. Tort - 6 years from date the claimant suffered the claim.
60
What H&S Legislation are you aware of? And how do you comply with it?
H&S at Work Act 1974 - duty of every employer to ensure so far as reasonably practicable the health and safety and welfare at work of all employees.
I undertake Risk Assessments prior to going on inspections. Comply with my firm’s health and safety procedures. I have the relevant PPE required.
61
What is Personal Protective Equipment (PPE)?
PPE is protective clothing, helmets, goggles, gloves, high vis to protect the body from injury.
62
Tell me something you understand from reading RICS Surveying Safely Guidance 2018?
it provides advice on personal safety and requirements for firms to provide a safe working environment.
1. I undertake risk assessment prior to leaving
2. I inform a colleague of where I am going and update my outlook calendar
3. I wear appropriate clothing
63
What is a risk assessment and what does it include?
It is a legal requirement for organisations employing more than 5 people. Must carry out documented health and safety risk assessments of all significant hazards.
1. Identifying any potential hazards.
2. Decide who might be harmed and how.
3. Evaluate the risks and decide on control measures.
4. Record your findings and implement them.
5. Review your assessment and update if necessary.
64
What is the difference between a risk and a hazard?
A risk is the probability that someone will be harmed. A hazard is anything that has the potential to cause harm.
65
What is asbestos?
Asbestos is an insulating material which can cause serious health problems and fatal diseases.
66
What do you understand by the Control of Asbestos Regulations 2012?
The Control of Asbestos Regulations 2012 placed legal duties on duty holders to manage asbestos in non-domestic properties and prevent risk exposure to employees who carry out works in a building; Anyone involved in the management or maintenance of buildings have a duty to manage asbestos; and They are required to undertake a management survey.
67
Who is the duty holder?
The duty holder is the owner of the premises if vacant or a tenant if holding a repairing lease.
68
Q. What are the two types of asbestos survey?
1. Management survey – to locate and assess asbestos during normal occupation ; 2. Refurbishment/demolition survey – samples of materials expected of containing asbestos are taken and analysed.
69
Tell me about your understanding of fire safety?
Regulatory Reform order 2005 and the Fire safety act 2021. Following Grenfell there has been a significant importance that all owners, landlords and managers of properties have robust fire assessments.
69
When was asbestos banned?
1999
70
Who is a responsible person?
Employer if workplace is under their control; The person in control of a premises; and Where person has tenancy obligations to repair.
71
What is your understanding of a corporate structure?
Different types of corporate structures include: Hierarchical Structure, Flat Structure, Functional Structure, Team-Based Structure.
PwC operates under a networked corporate structure, which is common among large professional services firms. PwC is organized as a partnership rather than a corporation. This means that the firm is owned by its partners, who share in the profits and responsibilities of the business. Each partner typically has a stake in the firm and plays a role in its governance.
PwC operates as a global network of member firms, each of which is a separate legal entity. These member firms are locally owned and managed but are united under the PwC brand and adhere to common standards and policies. This structure allows PwC to maintain a strong local presence while benefiting from the resources and expertise of a global network.
PwC's services are divided into several key functional areas.
72
What forms of taxations are you aware of in work?
SDLT – paid on completion of a purchase – know basic rates / VAT – value added tax on goods and services – 20%, GST in Jersey / Council tax – banded per property / Inheritance tax – property purchasers – date of death
73
How do you determine the covenant strength of a tenant?
* References
* Ask an accountant to check at least 3 years of audited accounts
* KYC - check JFSC register and google the members
74
Why do you need Business planning?
To achieve corporate objectives, identify new business opportunities, improve existing business etc.
75
How would you avoid a conflict?
Clear and concise documentation and terms; Managing expectation; and Careful negotiation
76
Tell me what you understand about Complaints Handling Procedure?
It is mandatory and must be approved by the RICS. Must be within the ToE and issued in ToB. Firms must include an RICS approved Alternative Dispute Resolution method. Complaints to be acknowledged in 7 days and investigated within 28 days.
77
What is an ADR and why would it be used?
Alternative dispute resolution – if falls outside litigation. Advantages – speed, less cost, more opportunity for negotiation.
78
What does GDPR applies to?
GDPR applies to personal data
79
What is the meaning of non-disclosure agreements?
Used to protect against the disclosure of sharing of any confidential information. Prior to the confidential data being shared with a recipient, clients will typically request that the recipient signs up to an NDA. They are often used when confidential, sensitive, innovative or intellectual property information is being shared to prevent this information being used by competitors.
80
What is unconscious bias and how can you reduce it?
Unconscious bias is where one person favours another person due to them having similar characteristics or traits as them. To reduce it: Be aware: 1) Recognize that you can have unconscious biases and try not to let them affect your decisions or behavior. 2) Question your perceptions: Re-evaluate your experiences and consider how you're reacting to a situation. 3) Avoid assumptions: Don't assume you know best or rely on your gut instinct. 4) Look for facts: Be open to seeing and hearing what's there.
81
What is the principal system to measure sustainability in the UK and global? What is the highest rating?
BREEAM or EPC, LEED globally.
Outstanding and A
82
Which RICS guidance covers carbon assessments?
RICS whole life carbon assessment (WLCA) standard, 2nd edition in full effect from 1 July 2024. A standard for consistent and accurate carbon measurement in the built environment to deliver a net-zero future for the built environment.
83
What are the methods of valuation?
Comparative / Residual / Investment / Profits / DRC– Depreciated Replacement Costs
84
How do you value using DRC?
The DRC method is used to value specialised properties with no comparable sales data. It involves the following steps:
1. Value land in its existing use
2. Add current cost of replacing the building (BCIS)
3. less a discount for depreciation and obsolescence / deterioration (BCIS)
85
How do you value using investment method?
Investment method is used when there is an income stream to be valued, rental income is capitalised.
85
How do you value using profits method?
1. Calculate NOI
2. Less tenants / share
3. Adjusted net profit capitalised by the appropriate yield
86
How do you value using residual method?
Residual method is used for developments to find the land value. GDV minus costs & profit
86
What is the statutory due diligence for a valuation?
Used to check there are no material matters which could impact valuation: Asbestos; Contamination; Environmental issues; EPC rating; Fire Safety; Legal Titles and Tenure – boundaries, ownership, Rights of way.
86
What is included in a term of engagement for a valuation?
Client name, property address, valuer, date of valuation, bases of valuation, fee, any special assumptions, PII insurance.
87
What must be ensured before starting a valuation instruction?
Competence. Independence ( C of I) and Terms of Engagement.
88
When did the new Red Book come into effect – what are the key differences?
2021 - Effective Jan 22. Changes regarding ESG and Sustainability changes to inspection and reporting regarding ESG and Sustainability factors for LSV – ESG and sustainability should form an integral part of valuation.
89
What must be included in a valuation report?
Valuer; Client or intended users; Purpose of valuation, Property address, Basis of valuation, Valuation date, Any assumptions/special assumptions, Valuation approach and why, Valuation figure(s).
90
What is an assumption and special assumption – what is the difference?
Assumption is something that could be true and is assumed to be for the purpose of the valuation. SA – something that is not true but is assumed to be for the purpose of the valuation.
91
What is VPGA 2?
Secured Lending – and it differs from a standard valuation as there are different terms of engagement, wider range of conflict-of-interest checks (24 months) and reporting style which includes a risk analysis and advice on whether it is suitable for lending.
92
How is the RICS Guidance Note on Comparable Evidence used in your work?
When analysing comparable evidence
outlines the principles of comparable evidence hierarchy of evidence outlining which data should be relied on in the first instance.
93
Please explain your understanding of rotation rules Valuers and Valuation Firms?
RICS released an updated supplement to the RICS RB, mandatory rotations for regulated valuations to improve transparency/independence. Effective May 2024
Firm - max 10 year valuation of assets (with 3 year break)
Individual - max 5 year period for valuation signatories (with 3 year break).
93
A registered valuer can do what?
Ensure quality of valuations raise the credibility of values and provide clients with clear valuation advice.
94
lease explain your understanding of RICS DCF Valuations Guidance Note November 2023?
Provides clarity between MV and Investment Value definitions set under RICS VPS 4.
95
How do you calculate a property using DCF?
Estimate cash flow and estimate exit value at the end of a holding period. Select a discount rate to represent the time value of money. Discount cash flow and exit value to get a NPV. Sum these values
96
How do you prepare for an inspection?
Read the lease.
H&S assessment at the office re. lone working, PPE.
96
What are they key areas to look for during an agency inspection?
amenities; layouts; aspects; views; specification.
97
What steps comprise a typical inspection?
1) Prepare for the inspection.
2) Inspect the area.
3) Inspect externally.
4) Internal inspection
Interior finishes.
97
How do you inspect an area for a letting?
Location, situation and aspect.
Local market / economic conditions.
Vacancies, letting boards, tenant mix etc.
Availability of services – transport links, car parking.
Check site boundaries against an OS or title plan.
Environmental factors such as contamination or risk of flooding.
98
How do you expect a letting externally?
Repair/decoration and condition of external envelope.
Defects.
Age of the building.
99
How do you expect a letting internally?
Interior finishes.
Layout, quality and specification of the accommodation.
Condition, repair and defects.
Fixtures and fittings.
Services
100
What is hope value and how is it used in Dev App?
An element of market value in excess of the existing use value, reflecting the prospect of some more valuable future use
101
What is a contingency and what is currently the typical rate?
A contingency is a future event or circumstance that cannot be predicted with certainty i.e., additional build costs. 5%-20%
102
What are the typical planning obligations and how are they calculated?
In the UK - S106 and CIL - Generally be provided by the developer and cross-referenced on the planning portal.
103
What professional fees typically include?
Architects, surveyors, QS, etc. 8 - 15 % of construction costs.
104
What are the main types of development finance?
Debt – lending from a bank or other financial institution or Equity – selling shares or JV or using own money.
105
What are the limitations to a residual?
Fluctuations in the inputs such as GDV and Build Costs have a significant impact on residual land value therefore it is vital these inputs are as accurate as possible.
106
What is Client Money Handling, 1st edition?
This professional standard provides clear rules for RICS members and regulated firms to have the appropriate controls and procedures to keep client money safe. It provides confidence to clients and consumers that RICS-regulated firms are operating to high standards. The document applies to all RICS members and regulated firms operating in the UK.
107
There are certain building types which lenders will not provide mortgage finance – what are these?
Historical – former LA owned properties, flying freeholds Design and condition – e.g., high-rise, materials such as concrete, uninhabitable. Use and/or management - live/work units, short leases etc…
108
What is the RICS Client Money Protection Scheme?
RICS operates a Client Money Protection Scheme (CMPS) in the UK. This scheme provides protection, as a last resort, in instances where an RICS Regulated firm is unable to repay a client's money, up to the limits and exceptions set out in the scheme rules.
109
How do you collect rent?
Most leases require rent to be paid in advance, but this should be checked in the unusual event that it is required in arrears. If the lease says nothing on the matter, the rent will be payable in arrears. Rent payments tended to be required on the English quarter days
110
What actions do you undertake if the tenant defaults?
Payment plans, rent deposits, Existing guarantors, Court proceedings.
111
What is the service charge structure?
Calculation - prepares a yearly budget for the costs to maintain the property and tenants pay a proportion based on their space relative to the building;
Payment - Tenants pay in installments
Reconciliation - at the end of the SC year landlord compares actual costs to the budget. Tenant either get a refund or required to pay
112
What are the three bases of agency?
Sole – only one agent – paid a fee if the buyer is introduced by agent in contractual period; Joint agency – two or more joint agents sharing a fee on pre-agreed basis; Multiple – any number of agents but only successful agent gets a fee.
113
What is RICS motto and when was RICS founded?
There is measure in all things
1868
114
What is Royal Charter?
Legal independency given by the queen / king
115
How many RICS members are there?
Over 130,000
116
What are the 4 levels of membership?
MRICS
FRICS
AssocRICS
Trainee
117
How do you become a fellow?
5+ years as MRICS
Leadership role
Professional/technical achievement
Raised the profile of the RICS
118
How is the RICS Governance Structure shaped?
RICS is a Royal Charter body. Our Royal Charter requires RICS to act in the public interest.
Governed by council and boards
119
What is the role of the RICS?
3 main roles:
Maintain high education and training standards
Protect consumers through regulations and standards.
Leading source of information and advice for the sector.
120
What are the principles of regulation?
They provide a framework within which members and firms can decide how they can best meet the requirements of the Rules of Conduct.
121
What are the principles of regulation?
To be consistence, and transparent and hold accountable
122
What are the RICS rules for members and firms?
Members and firms must be honest, act with integrity and comply with their professional obligations, including obligations to RICS.
123
How does your firm demonstrate implementation of the Rules of Conduct for Firms?
My firm has a CHP
My Firm holds PII over the minimum requirements.
Endeavours to provide a high standard of service.
124
How does you demonstrate implementation of the Rules of Conduct for Members?
I always assess my competence prior to undertaking instructions.
I comply with the CPD requirements.
I provide a high level of service.
125
What is the RICS Ethical Decision Tree?
The decision tree provides a framework of questions which members should ask themselves when facing a situation in which they are asked to act in a potentially unethical manner.
Ultimately, would you be happy with the information/act to go public?
Is it legal
Is it in line with the RICS ethical standards
Happy for it to be made public
126
How does the RICS regulate itself?
Self-regulated
127
What do you know about disciplinary procedure?
Complaint to RICS to RICS.
Not every short coming will give rise to disciplinary proceedings.
However failure to comply with RICS guidance will be considered when examining a firm or member.
128
What are the different advice levels of RICS documents?
1. International standards (IPMS & Red book)
2. Professional standards (property measurement, anti-money laundering corruption, Money Laundering and Terrorist Financing)
3. Practice information (surveying safely, discounted cash flow valuation)
129
What would you need to do if you were starting a new practice?
Inform RICS
Arrange PII
Set up how you will handle client’s money
Seek RICS approval for CHP
Ensure CPD is logged online
130
What do you need to do if you close a practice?
Inform RICS
Inform Clients
Hand over arrangements to new firm
Return any money held
Inform insurers
Get run off cover for minimum of 6 years
Retain files for minimum of 6 years
131
Why is it important for RICS members to undertake CPD?
One of the Rules of Conduct.
But means we can continue to offer the best service possible to clients by being up to date and in the know on latest guidance and information.
20 hours - 50% formal
132
When may a surveyor be negligent?
Duty of care exists to clients and third parties.
If this is breached and there is a loss, they can claim for damages.
133
How can a surveyor avoid negligence?
understanding client’s instruction
competent
undertake work in accordance with RICS Standards & Guidance Notes
make detailed notes and take photographs
keep up to date with market knowledge
134
What do you know about the RICS Guidance Note: Complaints Handling?
A firm’s written CHIP must be approved by the RICS.
Notify PII insurers as soon as possible if a compliant arises.
Details of CHP issued same time as ToB.
Complaints log must be maintained showing details and status.
CHP must include an RICS approved Alternative Dispute Resolution.
135
What is professional indemnity insurance?
Insurance to protect clients, surveyors and third parties against negligence claims.
136
What are the minimum PII requirements?
Based on firm turnover:
Less than £100k = £250k min
£100,001 to £200k = £500k min
> £200,001 = £1,000,000
137
What are the RICS 3 rules regarding PII?
Mandatory requirement - Rules of Conduct for Firms
Need RICS approved insurer (list on website)
Need adequate and appropriate level for each instruction.
138
How long should old files be held for?
6 years
139
What is a bribe?
The giving or receiving of an advantage such as payment / gift for an action
140
What are the penalties of the Bribery Act 2010?
Prison or unlimited fine
141
What is your company’s policy on gifts?
gift under £100
hospitality £1000
141
what is money laundering?
Proceeds of criminal activities are disguised/ converted and then realised as legitimate assets.
142
What money laundering checks do you need to do for private limited companies?
Certificate of incorporation
Full name
Registered Office
Registered number
Business address
Name of all shareholders with over 25% stake.
143
What would you do if you were offered a gift after an instruction had completed?
Check company gift policy.
Check reasonableness.
Accept if reasonable.
delince for a 3rd party
144
What would you do if you were offered a gift during an instruction?
Politely decline as the instruction is not yet complete and this could impact my impartiality.
145
What is the Red Book?
The Red Book contains mandatory rules, best practice guidance and related commentary for all members undertaking valuation work across the globe.
146
Who can carry out Red Book Valuations?
Registered valuers
147
Why was the Red Book created?
To improve consistency and transparency in valuation approach across the globe.
148
What are the different sections of the Red Book?
1. Introduction
2. Glossary
3. PS - Professional Standards
4. VPS - Valuation Technical and Performance Standards
5. VPGA - Valuation Practice Guidance Applications
6. International Valuation Standards
149
What are the Professional Standards in the red book?
PS 1 - Compliance with standards where a written valuation is provided.
PS 2 - Ethics, competency, objectivity and disclosures.
150
What 5 valuations are excluded from the Red Book?
Statutory
Agency
Internal
Negotiation/Litigation
Expert Witness
151
Which sections of the Red Book are mandatory?
Professional Standards
Valuation Technical and Performance Standards
International Valuation Standards
152
What are the Valuation Technical and Performance Standards?
VPS 1 - Terms of Engagement (scope of work)
VPS 2 - Inspections, investigations and records
VPS 3 - Valuation reports
VPS 4 - Bases of value, assumptions and special assumptions
VPS 5 - Valuation approaches and methods.
153
VPS 1 - What is included with your standard Terms of Engagement?
ID & Status of Valuer
ID of Client
The property
Purpose of valuation
Basis of Valuation
Valuation date
All assumption and special assumptions
Restrictions on use
Fee
Firm registration and CHP
Compliance
PII Caps
154
VPS 2 - why must valuers inspect?
To verify the necessary information being relied upon for a valuation to ensure the information is professionally adequate for its purpose.
155
VPS 2 - What factors must a valuer consider when undertaking a desk-top valuation?
Must be agreed in writing in the Terms of Engagement
Must disclose possible valuation implications in writing
Must consider whether it is reasonable with regard to the purpose of valuation
Must refer to the restriction in the report.
155
VPS 2 - can you conduct a re-valuation of a property and not inspect?
Yes you can, only if you’re satisfied that there have been no material changes to the property or the nature of its location since the previous report.
Must confirm this in the terms of engagement.
156
VPS 3 - can you give preliminary (draft) valuation advice?
Yes, however it must be:
marked as a draft, subject to completion of the final report
marked for internal purposes only
stated that it cannot be relied upon and can’t be published.
156
VPS 3 - can you discuss the valuation report with the client prior to issuing?
Yes you can, however, you must not be influenced by the client in any way.
Any information given by the client in the discussion, must be stated within the report
157
VPGA 10 - What is the material uncertainty clause?
Material uncertainty clause is used where the level of uncertainty is expected to be higher than normal circumstances.
it can still be relied upon, however less certainty and a higher degree of caution should be attached when having regard of the report.
158
What are the UK VPGAs?
Valuation for financial reporting
Valuation for commercial secured lending purposes
Valuation for residential mortgage purposes
159
Can you name some of the IVS general standards?
IVS 104 - Bases of Value
IVS 105 - Valuation Approaches and Methods
160
Can you name a IVS asset standards?
IVS 410 - Development Property
161
When undertaking a loan security valuation, what parts of the Red Book would you have view on?
VPGA 2 and VPGA 10 of UK National Supplement.
162
What areas does VPGA 2 cover?
Conflict of interest checks
Taking instructions
Basis of value
Assumptions and special assumptions
Reporting and disclosures
163
Under VPGA 2, what must you include in your ToE for LSV?
Disclose any previous involvement with the borrower within the last 24 months in ToE.
Disclose any anticipated future involvement too.
164
What additional things do you need to report on for LSV?
Disclosure of involvements
Valuation methodology
Comment on environmental consideration
Comment on suitability for loan security purposes.
Special assumptions
165
What would you look at for environmental factors?
Flood risk
EPC
Contamination
Invasive species
166
What is the comparable method?
Use of comparable evidence to establish opinion of value - adjustments are made reflecting differences in characteristics and analysis of the local market whilst applying professional scepticism.
167
What is the comparable method?
Use of comparable evidence to establish opinion of value - adjustments are made reflecting differences in characteristics and analysis of the local market whilst applying professional scepticism.
168
What is the residual method?
It is used to value land with development potential.
Technicque requires assessment of GDV, from which development costs (including build costs, professional fees, contingency, finance, marketing, legal and purchasers costs) and profit are deducted to arrive at a residual land value.
169
How do you value a under-rented property?
Use the comparable method to determine the market rent of the property.
Once established that it is under-rented, I applied the term and reversion method i.e.
I applied a capitalisation yield (all risks yield) to the term on the passing rent for the remainder of the term/until break clause, and then applied to the market rent in perpetuity
170
What is the profits method?
It is used to value operational assets where profitability of the business is a key component of value.
e.g. care home, restaurant, hotel, pub.
Calculating NOI which is then capitalised at an appropriate yield to achieve Market Value.
171
What is the Depreciated Replacement Cost method?
Used to value sets which rarely transact on the open market, therefore very limited comparable evidence.
i.e. lighthouse, oil refinery.
Calculated by establishing the existing use value of the land, adding on the cost of replacing the building and fees, minus a discount for depreciation/obsolesce.
172
If the yield is increased in an investment valuation, what happens to the capital value?
If the yield increases, the capital value decreases.
173
what is yield?
A measure of investment return, expressed as a percentage of capital value invested.
174
How do you calculate years purchased?
income / price * 100 = yield
yield / 100
175
What is years purchased?
The number of years required for its income to repay its purchase price.
176
What is the major factor in determining a yield?
Risk! e.g.
prospects for rental and capitla growth
quality of location
quality of covenant strength
lease terms
voids
liquidity (how quickly it can sell)
177
What is a gross yield?
Not adjusted for purchaser costs
178
What is an equivalent yield?
the weighted average yield
179
Define gross development value
The aggregate market value of the proposed development, assessed on the special assumption that the development is complete on the date of valuation in the market conditions prevailing on that date.
180
What is an arm’s length transaction?
Where the seller and purchaser don’t know each other, there’s no personal interest and no special purchasers.
181
Is there any guidance note on the Comparable Method? What does it say?
Comparable Evidence in Real Estate Valuations, 2019 (effective 2019).
Provides guidance on the sources of comparable evidence, how to record and how to analyse.
Provides information on the hierarchy of evidence.
182
What is the hierarchy of comparable evidence?
Category A (Direct Comparables)
completed transactions of similar properties with full details
completed transactions of similar properties with enough data present
asking prices
Category B (General Market Data)
historic evidence
indices
Category C (Other Sources)
- evidence from other location and types
183
What are the types of debt finance?
Senior Debt – first level of borrowing, takes precedence over secondary/mezzanine funding.
Mezzanine – additional funding for additional monies required over the normal LTV lending.
184
What would be a key risk of loan secured on a development site?
A key risk would be needing to sell the site in a part-built state.
184
How would you comment on the terms of the loan?
I only comment on the terms of the loan in the context of my valuation advice.
For example, I would typically look at:
the length of the loan.
amount of the loan (LTV).
184
Outline the new guidance note on Valuing Development Property?
Valuation of Development Property, 2019
Confirms best practise when valuing development property that both the residual and comparable methods should be used together. The residual method should be cross-checked with comparable evidence.
and Confirms best practice requires risk analysis to be used so that changes to inputs which might affect the valuation of development property can be assessed and various scenarios modelled.
184
Where can you find information on assumptions in the Red Book?
VPS 4 basis of value and special / assumptions
185
What do you consider when commenting on the suitability of a loan?
SWOT
MV
Risks
Liquidity
186
How do you minimise risk when carrying out a LSV?
Detailed notes
Clear audit trail
Liability in place
Up to date with CPD
Use of ‘professional skepticism’
187
What is Bridging Debt?
Short term debt
Riskier than senior and mezzanine - so higher level of interest
188
How would a lender manage risk?
Ensure they have first charge.
Careful consideration of LTV
189
Define Development Property?
Interest where redevelopment is required to obtain highest and best use or where improvements are being contemplated or are in progress at valuation date.
190
When would you use a Development Appraisal?
I would use a development appraisal when I needed to calculate the profit of a client’s proposed development, or offer advice on a proposed development.
191
Outline the differences between a residual valuation and a development appraisal?
Residual = finding residual land value, based on market assumptions.
Appraisal = assessing the profitability of a scheme and are based on client assumptions and market assumptions.
192
What are some of the main costs included in a residual?
Build Cost
Professional fees
Contingency
Marketing & Legal costs
Purchasers costs
Agents fees
193
What is profit erosion?
The period from PC which the profit is decreasing to 0.
194
What is IRR?
Internal rate of return is a time weighted measure of return.
Internal rate of return is the annual rate of growth an investment is expected to generate.
195
What is an S-curve?
The S-curve is the pattern of cash flow which I assume the construction costs follow within my Argus Residual Appraisal.
It represents the assumption of how costs are spread across the construction period, with the majority expected during the middle of the construction period.
The purpose is to reflect when monies will be spent.
196
What are the limitations to the residual method?
The use of assumptions and not real costs.
Assumes 100% debt finance which isn’t realistic.
Small changed to inputs can have a large impact on profit/residual land value.
As per the RICS guidance note: Valuation of Development Property 2019 - you should cross check with the comparable method.
197
What is the basis of measurement used for the calculation of build costs and where would you find an up to date estimate of such costs?
GIA
BCIS (Build Cost Information Service)
Consult a building surveyor
198
What is a sensitivity analysis?
It’s a risk analysis technique, used to presented potential outcomes in changes to key variables.
199
What are the 2 forms of sensitivity analysis?
Simple sensitivity analysis of key variables i.e. GDV and construction costs.
Monte Carlo Simulation
200
What inputs would you vary in a simple sensitivity analysis?
i.e. upwards and downwards changes in construction costs and sales rates.
201
What outputs would you expect to show in a sensitivity analysis for a development or residual appraisal?
Effect on land value
2. Effect on profit amount
202
What do you know about the RICS Property Measurement 2nd Edition 2018?
International Property Measurement Standards are a mandatory framework and definitions for the measurement of property.
203
What are International Property Measurement Standards (IPMS)?
A global mandatory Internal Property Measurements Standards and practices aiming to avoid current inconsistent definitions of measurement in different countries and bring greater global transparency.
204
How are offices constructed?
Steel or concrete frame
205
How are offices graded?
Grade A = brand new or undergone complete refurbishment
Grade B = previously occupied / “average”
Grade C = lowest spec / buildings over 20 years old. Can become grade B but never Grade A.
206
What are the different types of office fit out?
Shell and core = common parts finished. office area left as shell ready for occupier to fit out.
Category A = refers to the base condition of an office space provided by the landlord. It includes the essential infrastructure and finishes necessary for occupancy.
Category B = involves the customisation and interior fit out of the office space to meet the specific requirements of the tenant
207
What is the Fire Risk Management Regulatory Reform (Fire Safety) Order 2005?
Risk assessment for fire prevention in non-domestic properties
208
What financial reporting standards are there?
International Financial Reporting Standards
Generally Accepted Accounting Principles (GAAP)
209
What is in a statutory financial statement?
written reports
profit and loss account (income statement)
balance sheet (statement of financial position)
cashflow statement (statement of cashflow)
210
Explain LLP?
A limited liability partnership is a partnership in which some or all partners have limited liabilities.
211
Explain PLC?
A public limited company is a public company which offers shares of stock.
212
Explain limited company?
The company is separate to it’s owners, it’s its own entity.
213
What impact can property have on the environment?
The built environment accounts for nearly 40% of emissions globally
214
Any new RICS guidance on Sustainability?
Guide Note: Sustainability and ESG within Commercial Property Valuation
215
What are methods of ADR?
Mediation
Arbitration
Independent Expert Determination
216
What are alternative dispute resolutions?
Dispute resolutions that fall outside the scope of court litigation.
217
What are the main forms of dispute resolution?
Negotiation
Mediation
Court process
218
What does ‘Without Prejudice’ mean?
that statements which are made in a genuine attempt to settle a dispute cannot be used in court as evidence of admissions against the party that made them.
219
What is arbitration?
Their decision is binding.
They have specialist knowledge.
Can’t be sued for negligence.
220
What is Independent Expert Determination?
An independent expert is appointed.
They have expert knowledge.
Parties are bound by the decision.
They review evidence but also use their own opinion and experience to determine outcome.
221
What is litigation?
Court process.
Lots of different stages.
Negotiations can occur before the pre-trial stage.
Mediation can occur in the pre-trial review stage.
As a result, lots of cases don’t actually end up in court.
222
What is the difference between litigation and arbirtation?
Litigation:
can’t choose judge
public
lower cost
open court
Arbitration:
can choose judge
confidential
private court
higher cost as pay for judge too
223
What is an expert witness?
Someone who provides expert knowledge in court.
