Where issues are found with compliance, the Regulated Firm and/or Valuer can face disciplinary action which can involve fines, compliance notices and expulsion from the scheme or even from membership of RICS with the publication of the offences. This can be disastrous for your reputation and your business.
Listed below are RICS Regulation’s top 10 most common areas of non-compliance and/or poor practices.
1. Confirmation of the Valuer’s qualification and demonstration of expertise and competence.
The terms of engagement and valuation report must confirm the Valuer’s expertise to undertake the valuation assignment although this is often missed off these documents. Valuer’s particularly operating in specialist areas or in a specific geographical area where they do not possess the relevant skills, knowledge and experience can leave the firm and/or the Valuer open to claims and risk of disciplinary action from RICS Regulation.
2. Confirmation of conflict of interest checks.
The terms of engagement and valuation report must confirm the Valuer and the Firm’s independence and objectivity although this is often missed off these documents. Consequently, a confirmation in the case file that a conflict of interest check (previous involvement check) has been carried out from the firm’s database/records and that no conflict of interest exists is a requirement. Without this and the confirmation in the terms of engagement and valuation report, it can leave the firm and/or the Valuer open to claims and risk of disciplinary action from RICS Regulation.
3. Terms of engagement.
This is the contract and sets out the scope of work that the Valuer will undertake for the client. It must be fully compliant with the Red Book, agreed with the client and retained on file yet this rarely happens in reality. Without this there are simply no excuses and therefore it can leave the firm and/or the Valuer open to claims and risk of disciplinary action from RICS Regulation.
4. Recording of inspection and investigation notes.
These include the details captured during the inspection process and will include detailed notes of the property and the locality as well as drawn plans, dimensions taken and photographs. They must be compliant with the Red Book (there are different requirements for residential mortgage valuations) legible, comprehensive and retained on file, yet rarely are. Without detailed and legible inspection and investigation notes on file, it can leave the firm and/or the Valuer open to claims and risk of disciplinary action from RICS Regulation.
5. Recording of comparable evidence.
The evidence used (the comparable information) to arrive at the valuation(s) must be retained on file together with a full analysis of those comparables in order to justify the valuation(s) reported and to meet the requirements of the Red Book. This is particularly important and yet this information is often missing from the file. Without detailed and legible comparables with relevant analysis on file, it can leave the firm and/or the Valuer open to claims and risk of disciplinary action from RICS Regulation.
6. Linking the comparables to the valuation.
This is a key part of the audit trail in the file yet Valuers rarely show their thought processes or rationale clearly. Without it the firm and/or the Valuer are open to claims and risk of disciplinary action from RICS Regulation.
7. Valuation calculation and methodology.
The methodology used to arrive at the valuation figure together will all relevant valuation calculations must be clearly stated and demonstrated in the file (the working papers) as well as the valuation report. This is a requirement yet it is a common failure of Valuers. Without detailed valuation calculations on file, it can leave the firm and/or the Valuer open to claims and risk of disciplinary action from RICS Regulation.
8. The valuation report.
This must be easy to read and understand by someone with no prior knowledge. It must also be fully compliant with the Red Book. Poorly structured and worded reports, with unclear advice is a common failing of Valuers and can leave the firm and/or the Valuer open to claims and risk of disciplinary action from RICS Regulation.
9. File management processes.
The best files show a full audit trail of information and due diligence from first contact with the client through to the eventual valuation report with full reasoning at every stage. They are indexed, sectioned off and tabbed for ease of reference with a file checklist at the front. This is not difficult to do and as the Red Book lays down a set of processes to follow this demonstrates that you have followed every process in a consistent and comprehensive way.
Without this, it is much harder to defend yourself against claims and criticisms from RICS Regulation of poor file maintenance and management and therefore not following best practice.
10. Quality assurance systems and protocols.
Every firm should employ simple measures to ensure compliance and best practice. A simple framework or file checklist approach in every file together with the use of fully compliant templates or proformas for all aspects of the valuation assignment will ensure consistency, avoid omission, confirm that all the relevant standards have been met and ensure that the file is complete before filing away. This clearly shows a professional and proactive approach to quality assurance as without this, it is much harder to defend yourself against claims and criticisms from RICS Regulation of poor file maintenance and management and therefore not following best practice.
ARC Compliance can help you with all these areas of poor practice so contact us now.
