APC: Why it pays to be well read on the Red Book

Kate Taylor reflects on the challenges and pitfalls that lie ahead for APC candidates as the RICS implements its new Red Book standards Valuation competency is technical, challenging and underpinned by mandatory global standards from the professional body. Any candidate declaring valuation at any level must have a good understanding of these standards (commonly known as the Red Book). The challenge for candidates is that these standards change on an approximately biannual basis in line with the International Valuation Standards. The standards have just changed again, with an implementation date of 1 July 2017. The new name is the RICS Valuation – Global Standards 2017. This means every written valuation after this date must comply with the 2017 Red Book (see Professional Standard 1 – Compliance, RICS Valuation – Global Standards 2017, page 15). This presents a challenge for candidates, as any valuation referred to in the summary of experience carried out before 1 July 2017 will be covered by the RICS Valuation Professional Standards 2014 (the 2014 Red Book) and candidates will need a knowledge of both editions. This article will explain how the 2017 Red Book relates to each level of valuation competency. Level 1 The pathway guide for valuation references the Red Book in the description of competence at every level. For level 1 it says: “Demonstrate knowledge and understanding of the purposes for which valuations are undertaken; the relevant valuation methods and techniques; the appropriate standards and guidance; and any relevant statutory or mandatory requirements for valuation work” (RICS Valuation Pathway Guide 2015, page 40). The knowledge required for level 1 will underpin the competence at level 2 and 3 and its importance cannot be over-emphasised. For example, if a candidate is still sending out terms of engagement on the 2014 Red Book, which has 15 minimum headings (a-o), this will be evidence of incompetence and quite the reverse of what the candidate hopes to achieve. The 2017 Red Book has 18 (a-r) minimum headings for terms of engagement listed in Valuation Practice Statement 1, RICS Valuation – Global Standards 2017, pages 39-40. Rule 4 of the RICS Rules of Conduct for members and firms is usually summarised by candidates as competence. The full text of rule 4 refers explicitly to surveyors having proper regard for technical standards. In a valuation context, this means the latest Red Book. At level 1, candidates should know the contents of the Red Book, its purpose and the key updates from the 2014 edition. One interesting change in the 2017 edition is the increasing separation of process (valuation practice statements) and policy (professional standards), as well as the added clarity on which content is mandatory and which is guidance via useful text boxes at the start of each section. In other words, the 2017 Red Book is more user-friendly. Keep an eye on the RICS website news section as RICS Valuation is working hard to update valuers with regular news items. Level 2 If level 1 is revision and learning, level 2 is putting it into practice. This is articulated clearly in the Valuation Pathway Guide: “Show how the relevant valuation standards and guidance have been applied to your valuation experience” (RICS Valuation Pathway Guide, page 40). To demonstrate level 2, candidates need specific examples where they can describe the terms of engagement (a-r), basis of valuation and due diligence. Due diligence will include the conflict of interest checks as required by Professional Standard 2 and the new RICS Professional Statement – Conflicts of Interest, as well as the information-gathering process as described in the new valuation application, VPGA 8 – Valuation of real property interests. Level 2 will also cover the new Valuation Practice Statement 5 – Valuation approaches and methods. Candidates should describe the approach (market, income or cost) and the method (comparable, investment, residual, profits or depreciated replacement cost). Level 3 Level 3 is about providing complex reasoned advice to client, and in the context of valuation this means a valuation report. This is made clear by the Valuation Pathway Guide: “Be responsible for the preparation of formal valuation reports under proper supervision and provide reasoned advice. Demonstrate a thorough knowledge of the appropriate valuation standards and guidance and how they are applied in practice” (RICS Valuation Pathway Guide, page 40). Valuation reporting is covered by Valuation Practice Statement 3 of the RICS Valuation – Global Standards 2017. There are two more mandatory requirements in valuation reports (a-p) than in the 2014 edition. Reporting uncertainty remains very important in valuation advice and the useful uncertainty guidance note (formerly VPGA 9) has been retitled and renumbered as VPGA 10 – Matters that may give rise to material valuation uncertainty. This corresponds with reporting requirement o – “comment on any material uncertainty where it is essential to ensure clarity on the part of the valuation user” (Valuation Practice Statement 3, RICS Valuation – Global Standards 2017, page 55). This means you must report uncertainty where it exists. This increases in importance with each edition of the Red Book, as a result of many causes of political and economic uncertainty as well as the terrible tragedy at Grenfell Tower. This article emphasises the importance of the 2017 Red Book for APC, but it cannot hope to cover all the relevant points. Candidates should ensure they carry out further revision and training before sitting final assessment interview for RICS APC. SUPERVISOR AND COUNSELLOR TIPS Get your candidate to review the standard terms of engagement against the new requirements of VPS 1 Get your candidate to check any inspection templates you have against VPGA 8 Get your candidate to review any reporting templates you have against VPS 3 and VPS 5 Ask your candidate to study the RICS Valuation Global Standards 2017 and present their conclusions at a team meeting EXAMPLE QUESTIONS Level 1 What are the differences between the 2014 Red Book and 2017 Red Book? What is the new Valuation Practice Statement 5 about? Level 2 Describe how you have drafted a valuation report in accordance with Valuation Practice Statement 3 Describe how you applied VPGA 8 in your valuation of… Level 3 How did you advise your client on uncertainty in your valuation? Which part of the 2017 Red Book provides guidance on this? Kate Taylor FRICS is an APC chair and a DeLever APC coach. Follow Kate Taylor and Jon Lever on Twitter: @katetay73593006 and @deleverapc USEFUL RESOURCES APCeye magazine Critical APC information in a free monthly magazine. www.mydelever.com APC101 – WhatsApp Open group on APC Process discussions. All welcome. www.delever.co.uk/whatsapp APC presentation Online masterclass discussing key elements of the APC final assessment interview. Hints and tips on best practice. www.delever.com Free timeline wallchart A2 pictorial view of the APC process, based on the RICS guides and Jon Lever’s professional knowledge. www.delever.com Supervisor and counsellor APC training – formal CPD Tips on how to manage and support your candidates. www.delever.com APC mock interviews Practice your APC final assessment interview, including your presentation and specific competency-based questioning. A full-hour interview just like the real thing and immediate feedback from the two assessors. www.delever.com APC commercial property and residential revision guides Every forward-thinking APC candidate’s reference book for APC preparation. www.apctaylormade.co.uk Free trial: myAPCDiary This resource can save up to 60% of a candidate’s day-to-day APC administration. www.apcdiary.com RICS APC guides These should be read at least once every three to four months. Candidates from outside the UK also need to check their regional websites for any local APC requirements. www.rics.org • Click here for full access to EG’s pathway to success series on APC competencies.  • EG has launched a new tool for surveyors to manage and produce commercial property valuations. Click here for more information.