Material Valuation Uncertainty - Update

15 June 2020

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The declaration of the COVID 19 pandemic led to the RICS recommending that valuers include a material uncertainty clause in valuation reports due to the scarcity of contemporaneous transactional evidence.  

The RICS’s Material Valuation Uncertainty Leaders’ Forum met on 11th June to discuss market conditions and as a consequence the RICS has recommended that material uncertainty clauses be removed for valuations of all industrial and logistics; build to rent residential property of institutional grade which is professionally managed.

It follows the earlier recommendation in May that the clause be removed for:-

  • long dated annuity income with at least 20 years unexpired with a secure covenant such as government;
  • institutional grade primary healthcare facilities;
  • non reversionary residential ground rents;
  • social housing owned by housing associations;
  • standalone food stores let to major operators;
  • commercial forestry;
  • specialist supported housing let to Registered Providers on FRI leases;

This is encouraging because it shows that there have been sufficient transactions in these sectors to provide some certainty.  At Cooke & Arkwright we believe that the removal of the clause will further encourage transactions in these sectors.    

It is still necessary for the valuer to make a judgement as to whether to include the clause on a case by case basis, based on the specific asset and its location.  In Wales where movement restrictions have not been lifted to the same extent as in England, it might therefore sometimes still be relevant to include the clause for certain types of property listed above.

Notably the clause has not yet been lifted for offices and non-food retail, the sectors that have been most affected by the movement restrictions.

Cooke & Arkwright have been providing rating valuation advice to The Welsh Rugby Union Limited (“WRU”) and Millennium Stadium plc for many years. They were recently successful in achieving substantial reductions in the assessments of the Millennium Stadium, covering both the 2005 and 2010 rating list. These negotiated reductions yielded savings of c.£3.5m which, crucially, allows the WRU to re-invest in rugby throughout Wales. They advise the WRU across the group portfolio including the National Centre of Excellence in the Vale of Glamorgan. The valuation issues across the WRU portfolio are complex requiring a high level of understanding of the funding and finances of professional sport in Wales. Cooke & Arkwright’s experience and understanding of these issues and application to the rating valuation have yielded these substantial negotiated reductions. The WRU and the Millennium Stadium entrust our work to organisations with the required levels in experience and expertise in dealing with these complex issues. I am glad to say we have this expertise in Wales. I would have no hesitation in recommending ratepayers making use of this Welsh based expertise.

Steve Phillips, Group Finance Director, Welsh Rugby Union Group