The Royal Institution of Chartered Surveyors has introduced mandatory rotation cycles for valuers.
The updated UK supplement of its "Red Book", its master document for regulating the valuation profession globally, includes the change.
RICS's independent review of real estate investment valuations was overseen by then-Wellcome Trust chief executive Peter Pereira Gray and published in January 2022.
His 13 recommendations called for more oversight over and stricter rules governing property valuations, including the introduction of a valuation compliance officer role for RICS-regulated firms undertaking valuation, the creation of a dedicated panel and extra guidance on the culture within the sector and behaviour that is expected of valuation professionals. They represent the biggest change to the property valuation industry in a generation.
The latest UK supplement update addresses the string of recommendations he made but focuses on one of the most significant changes – proposals to introduce mandatory rotation of valuation firms and new governance arrangements for the commissioning and receiving of valuation reports. The change is aimed at improving the impartiality of valuers and the advice they provide.
The update also includes measures to ensure an orderly and consistent transition to the policy, standardise its governance and prevent conflicts of interest in the commissioning and receiving of valuation reports.
RICS said the new rules will prevent valuation firms from valuing an asset for regulated purposes for more than 10 consecutive years, requiring a change or "rotation" to a different valuation firm. It said this is critical to improving transparency.
It said because it changes business models it has set a "transition period" so that clients and firms have a "reasonable" timeframe to rotate business relationships. The new regulations will come into effect on 1 May 2024, and RICS will give a series of briefings to help the industry understand its requirements over the coming months. That includes an online webinar that takes place on 6 November 2023.
RICS' valuation review implementation committee and its knowledge and practice committee developed the changes after two rounds of consultations with the industry. The amended standards have been approved by its standards and regulation board.
It says that it has become clear from its consultations that a tailored approach is necessary for governance and rotation of valuations undertaken for public sector-related investment properties. That is because a legislative and regulatory framework is in place for the public sector, and some valuation is undertaken internally. The commission said it will monitor its implementation and work with public sector stakeholders.
RICS Board chair Martin Samworth said in a statement: "This update is a logical evolution for valuation practice. The new provisions on rotation are aligned with other similar requirements for audit. The amendment will help to enhance the integrity, transparency and robustness of all valuations conducted in accordance with the RICS Red Book provisions, underpinning it as the global valuation standard. These changes are also appropriate for the continued good governance of our profession."
Among other things the 80-page independent valuation report also called for another major change with the "primary mechanism" for valuing real estate to shift from estimating the "exchange price" to values based on future income calculated using discounted cashflow.