Protecting Surveyors Bulletin 9: Guidance on multi-storey residential valuations

For the latest in our Protecting Surveyors series, we look at the latest draft Guidance Note on the Valuation of Properties in Multi-Storey, Multi-Occupancy Residential Buildings with Cladding, which the Royal Institute of Chartered Surveyors (RICS) opened for public consultation on 3 October 2022. The consultation will close on 31 October 2022, and the provisional date for the implementation of the guidance is 1 December 2022.

What is the purpose of the guidance?

With uncertainty around fire safety, defective materials and who would be responsible to cover any remediation works, it has been difficult for all stakeholders (including valuers, owners, purchasers and lenders) concerned with high-rise blocks of flats to accurately determine the valuation of properties. The guidance is therefore introduced against the backdrop of the Building Safety Act 2022, which confirms that no costs relating to the removal and replacement of external cladding will be recoverable from qualifying leaseholders, and instead remediation costs will be recoverable from developer or government schemes.

The purpose of the guidance is to support valuers in their valuations for lenders with the appropriate use of assumptions for buildings where remediation works are required but may not have been completed or even started, but where it is known who will cover those remediation costs and lenders have indicated that they will lend.

What does the draft guidance say?

The guidance deals with a variety of scenarios facing a valuer when valuing a property in a multi-storey multi-occupancy building (one that has 5 or more storeys or is 11 metres or more tall). The in-depth guidance can be found here: In essence, the following considerations apply:

• Whether a Fire Risk Approval of External Walls has been carried out and has identified remedial work to the external walls and attachments.
• Whether the costs of the remedial or mitigation work are known.
• The eligibility of the building owner/landlord to pass on costs to the leaseholder.
• Whether the capped contributions of leaseholders (if relevant) are known.
• Whether the building is eligible for one of the remediation funding schemes in England.
• Whether an eligible lease has been established. (Valuers are reminded that if a building is eligible for a remediation funding scheme, regardless of lease eligibility, remediation costs will be met by the developer as set out in the building safety repairs pledge.)
• Whether dates for commencement and completion or remediation works have been scheduled.

What are the key considerations for valuers?

Until now, there has been uncertainty for valuers regarding the practical impact of the Building Safety Act 2022. This, married with a general uncertainty in the market, means that the RICS’ guidance is welcome in that it should provide standardisation and consistency in approach to valuations. It should be borne in mind, however, that in the event of any claims it is a standard by which claimants will look to hold valuers to account.

Further, valuers should remain alive to the limitations of their reports, and make it clear what the scope of its liabilities are to both a lender and a borrower. As set out above, and in the guidance, there are quite complex issues that a valuer should consider when valuing these types of properties. Valuers should be mindful that remediation work (affecting value) may still be required for buildings which are outside the scope of the guidance. It does not apply to individual terraced, semi-detached or detached houses, bungalows or developments considered to be non-domestic.

Ensuring clear communication with clients to confirm what information will be relied upon, excluded or missing from final valuation reports, and the source of that information, will be crucial in protecting a valuer’s liability to its clients.