New Rotation Rules for Regulated Purpose Valuations
Amendments to the Red Book UK National Supplement published in October 2023 have established specific new governance standards which take effect from 1 May 2024.
These introduce a compulsory rotation cycle for valuation firms and responsible valuers valuing an asset for regulated purposes and includes:
Two year transition policy until 1 May 2026
Maximum single engagement period of five years
Maximum period of ten years before the rotation of a valuation firm - this might include multiple engagements
Maximum period of five years before the rotation of an individual ‘responsible’ valuer
Minimum three year break after rotating off an engagement
Valuations undertaken for internal purposes only are excepted
Public sector and secured lending valuations are excluded
The changes concern those involved in instructing or undertaking regulated purpose valuations upon which third party reliance is placed, such as for financial reporting, takeovers, and collective investment schemes.
In respect of valuations for financial reporting, the additional provisions are only applicable in respect of assets owned or part owned by entities whose transferable securities are admitted to trading on a regulated market or large companies. It does not apply to small, medium, and micro entities.
The Red Book defines large companies as those that do not qualify as a micro entity, small or medium company under the Companies Act 2006. This is generally those that have two or more of the following:
Turnover more than
Balance sheet total more than
Number of employees more than
Valuers and their clients will make decisions about whether, in their professional judgement, there are exceptional circumstances which justify a deviation from the rotation policy. An independent audit chair, non-executive director, or compliance officer of an instructing client must provide a written statement confirming that they have been unable to instruct a different valuation firm / responsible valuer. This, together with written agreement to accept instructions by the valuation firm’s Responsible Principal, must be notified to RICS Regulation prior to acceptance of the instructions.
For further information on the new Rotation Rules please click here.