Practitioners involved in valuing public-sector, owner-occupied properties are sometimes interpreting existing use value (EUV) and the conceptual framework in UK VPGA 6 in different ways – and this is leading to confusion and inconsistency.
The interpretation and practical application of service potential in the definition of EUV in VPGA 6 of the RICS Valuation – Global Standards (Red Book Global Standards): UK National Supplement seems to have given valuers the most difficulty – more so, given that the concept is generally better understood by accountants.
Other issues that have arisen include different interpretations of how to deal with vacant possession. Are valuers assessing the value of the actual property in use, or potentially a different property in an alternative, lower-value location? And when is it appropriate to draw the line between a specialised and a non-specialised property?
Recognising these issues, RICS convened an expert working group of stakeholders involved in public-sector valuation in autumn 2021 to clarify how to interpret and apply UK VPGA 6, which has itself been updated as part of this process.
Enabling a more consistent approach, a new professional standard prepared by the working group will also recommend best practice for making such valuations. The document is intended to help members by explaining and reaffirming the principles underpinning EUV when used in public-sector financial reporting.
The target readers for the standard are practising valuers dealing with public-sector valuations, as well as auditors, end users of valuations such as local authority finance departments, and other stakeholders involved in the process. All are in need of a consistent approach to EUV application.
In following the requirements of this professional standard, members and firms may wish to carry out internal checks or reviews to ensure they comply fully with the Red Book Global Standards when undertaking valuations in this area.
RICS is consulting on the new standard, Existing use valuations for UK and Ireland public sector financial statements, from 3 April 2023.
We would like to hear from all members working in this area of practice. We want a representative view of the market from professionals interpreting and applying this valuation basis, particularly given its importance in public-sector financial reporting and the shift in focus to providing figures for the balance sheet.
Jen Lemen FRICS 29 May 2023
Ben Willis 26 May 2023
Dr Paul Beckett 22 May 2023