http://www.isurv.

com
Qualifications and experience
The first question a valuer must ask himself when offered a valuation instruction is: 'Am I
suitably qualified, skilled and knowledgeable to take on the work?' PS 1.4 of the Red Book sets
out the ground rules, and states:

'Each valuation to which these standards apply must be prepared by, or under the
supervision of, an appropriately qualified valuer who accepts responsibility for it.'

The commentary then states that the test of whether an individual is appropriately qualified
combines:

- 'academic/professional qualifications, demonstrating technical competence;
- membership of a professional body, demonstrating a commitment to ethical
standards;
- practical experience as a valuer;
- compliance with any state legal regulations governing the right to practise valuation;
- where the valuer is a member of RICS, registration in accordance with the
registration and monitoring scheme.'

It goes on to say that membership of RICS alone does not imply that an individual has the
necessary practical experience of valuation in a particular market or sector. So professional
qualifications in isolation are not sufficient, they have to be combined with practical experience.

There is therefore no opportunity for boys to do men's work, but what is allowed is for a valuer
who meets the criteria to supervise others who don't providing he or she takes total
responsibility.

Market knowledge is the other important factor and PS 1.5states that:

'The valuer must have sufficient current local, national and international (as appropriate)
knowledge of the particular market, and the skills and understanding necessary to
undertake the valuation competently.'

It is important that the knowledge and practical experience relates to the particular type of
property being valued. For example,VIP No.2 The Capital and Rental Valuation of
Restaurants, Bars, Public Houses and Nightclubs in England and Walesstates:

'The valuer needs to be actively involved in the market for this class of property because a
practical knowledge of the types and classes is essential together with:

- knowledge of the appropriate proportions between the trading area, kitchen and
ancillary spaces for the various types of business;
- the different types of liquor, entertainment and gaming licences; and
- the trading aspects of the business such as turnover, profitability, market demand
and supply ties.'

Working in unfamiliar markets is a recipe for disaster but the Red Book allows for the
sub-instruction of another firm subject to obtaining the client's approval. You could ask your
client to instruct the other valuer directly or incorporate the subvaluer's report in your own with
confirmation that it complies with the Red Book. The former is probably the best way forward.

On large portfolios a team of valuers may be used to contribute different skills and the Red
Book covers this eventuality by stating in para. 2 ofPS 1.5:

'The personal knowledge and skill requirements may be met in aggregate by more than one
valuer within a firm provided that each meets all the other requirements of this practice
statement.'

For monitoring purposes, a list of the valuers who have contributed to the valuation must be
retained within the working papers, together with confirmation that each named valuer
complies with the requirements of PS 1.
Page 1
http://www.isurv.com
Conflicts of interest
PS 1.6 states:

'Valuers undertaking valuations must act with independence, integrity and objectivity.'

The Rules of Conduct state that a member shall at all times act with integrity and avoid any
actions or situations which are inconsistent with their professional obligation.

Appendix 1.1, para. 3.1 gives guidance from a valuation perspective listing typical situations
where conflicts arise such as:

- acting for the buyer and seller of a property in the same transaction;
- acting for two or more parties competing for an opportunity;
- valuing for a lender where advice is being provided to the borrower;
- valuing a property previously valued for another client;
- undertaking a valuation for third-party consumption where the member's firm has
other fee-earning relationships with the client; and
- valuing both parties' interest in a leasehold transaction.

It is a matter of professional judgment for the valuer to decide the extent to which such
potential conflicts might compromise the strict obligation to act with independence, integrity
and objectivity. Clearly the purpose of the valuation, the client's objectives, as well as the
opportunity to manage the situation using 'Chinese walls' must be taken into consideration. An
important factor in considering the matter is the interest of third parties and the reliance they
may put on the valuation and the potential for adverse criticism.

It has been said that if you think you have a conflict you almost certainly have, so the best rule
has to be immediate disclosure to the client. Many conflicts may be of no relevance or concern
to the client and others can be effectively managed by Chinese walls, but nonetheless all must
be considered against the background of theRules of Conductfor members. Dealing with
conflict situations requires a high degree of professionalism.
Confidentiality
Confidentiality is a difficult area in a profession that relies so heavily on the exchange of
information and market knowledge. Members are under a general duty to treat information
relating to a client as confidential unless it is in the public domain.

Particular care must be taken when considering whether to accept an instruction if it might
involve the use of confidential information or where it can only be accepted by disclosing
details of a member's involvement with the subject of the valuation which might in itself
disclose confidential information - this might be of relevance to a new or prospective client (
Appendix 1.1, para. 2.2.).

'2.2 The risk of disclosure of confidential information is a material factor that valuers should
consider in assessing whether or not they can act where there is a potential conflict. It is
also a factor that should be borne in mind should it be necessary to disclose some details of
a valuer's involvement with the subject of the valuation. If an adequate disclosure of the
involvement with the subject of the valuation cannot be made without breaching the duty of
confidentiality, then the instruction should be declined.'

Furthermore, the possession of confidential information might cause an irresolvable problem
when the act of passing on that information would be a breach of the duty of confidentiality but
failing to pass on material information to a subsequent client might lead to a claim of
negligence (Appendix 1.1,para. 2.3):

'2.3 The possession of confidential information may create an irresolvable conflict where
passing on that information would be a breach of the original duty of confidentiality, but
failing to pass on materially relevant information to a subsequent client, or failing to use it to
that subsequent client's advantage, might lead to a claim of negligence or breach of
contract.'
Page 2
http://www.isurv.com

It should also be remembered that the duty of confidentiality is not only owed to current clients
with whom the member has a fee-earning relationship, but also to previous clients and even
potential clients. The duty is continuous and ongoing but with the passage of time the
significance of information may decrease, so it is a matter of careful judgment whether to
accept an instruction to act for another client.
Conflict management
Clearly the management of potential conflict situations requires skill and professionalism. The
Red Book highlights the situations where these may arise:

1. because of a valuer's own interest in the property concerned by proper disclosure
to the interested parties;
2. because of loyalty to different clients by creating a 'Chinese wall' between those
acting for the respective clients.

Fundamentally one of three courses can be followed:

1. the valuer determines that an irresolvable conflict exists and instructions are
declined;
2. a potential conflict is disclosed in writing to the client or clients, agreement sought
and obtained as to how it will be managed and that agreement is confirmed in
writing by the valuer;
3. where a conflict or potential conflict arises from former clients of the valuer he or
she should consider informing the former clients (in writing) of the current
circumstances in order to obtain their confirmation that they have no objection.

In the case of (b), it is important to consider the nature, standing and sophistication of the
client. Clearly a large client familiar with business practice and employing professionals will
find it easier to give an informed consent. However, a small business inexperienced in
employing professionals may not fully understand the issues and ramifications. In such a case
you should advise the client to take advice from another professional or decline the instruction.
Most importantly it is the responsibility of the member or firm to determine if there is an
irresolvable conflict or not.

A Chinese wall is an expression used to make sure that different parts of a firm are kept apart
so that confidential information does not circulate freely between them. The term is believed to
originate from the US following the Wall Street crash in 1929 - when the US government saw
the need to maintain an artificial barrier between investment bankers and brokers.

RICS has very strict guidelines on the minimum standards which must extend beyond taking
reasonable steps. Any Chinese wall set up and agreed to by clients must ensure that:

- 'the individual(s) acting for conflicting clients must be different. Note this extends to
secretarial and other support staff;
- such individuals or teams must be physically separated, at least to the extent of
being in different parts of a building, if not in different buildings;
- any information, however held, must not be accessible to 'the other side' at any time
and if in a written form must be kept secure in separate, locked accommodation to
the satisfaction of the compliance officer, or other senior independent person within
the firm;
- the compliance officer, or other senior independent person, should oversee the
setting up and maintenance of the 'Chinese wall' while it is in operation, adopting
appropriate measures and checks to ensure it is effective. The compliance officer
must have no involvement in either of the instructions, and should be of sufficient
status within the organisation to be able to operate without hindrance;
- there should be appropriate education and training within the firm on the principles
and practice relating to the management of conflicts of interest.'

Given the strict rules laid down it is clear that Chinese walls are unlikely to work in small firms
or offices.
Page 3
http://www.isurv.com
Questions
Q. Can anyone who is not a chartered surveyor undertake a valuation in accordance with the
Red Book?

Q. May I delegate the inspection and due diligence work for a valuation in accordance with the
Red Book to an unqualified assistant?

Q. My practice is in Wales and it specialises in retail property. I have been asked to value an
officeproperty in Edinburgh. May I do this or should I sub-instruct a local valuer?

Q. May I instruct another valuer with the required level of expertise without first getting my
client's approval?

Q. Nine months ago, I acquired a property formy client. Can I now value it for his annual
accounts?

Q. I have been asked by a bank to value a property for mortgage purposes that I acquired for
the bank's customer two months ago. Is it in order for me to accept this instruction?

Q. Can you explain the meaning of 'Chinese walls'?

Q. A client for whom I have carried out a valuation has asked for details of comparables. Some
of these are not in the public domain and are only known to me by working for another client.
May I pass on this information?

Q. My client wishes to discuss the valuation with me before I sign off. May I do this?

Q. I have been asked to value a property for mortgage purposes that belonged to my wife's
family three years ago. Do I need to disclose this to the bank?

Q. I have been asked by a client to value an investment property which he owns for his annual
accounts. I find that my firm is acting for the major tenant in an ongoing rent review
negotiation. May I accept the instruction and if so what action must I take?

Q. I have been asked by a client to value a property for accounts purposes on which my firm
gave planning advice to the previous owner some three years ago. May I accept the
instruction?

Q. My client to whom I have submitted a draft valuation report for his annual accounts wants
me to increase my valuation due he says to commercial pressures from shareholders in the
company of which he is the managing director. How should I react to this request?

Q. I have undertaken valuation assignments outside my immediate area of work but of a class
of property with which I am familiar. I carefully reserach the market and speak to local valuers.
Is this sufficient to comply with PS 1.5 Knowledge and skills?
Page 4