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 has advised Telereal Trillium on a wide variety of development sites and properties all over Wales . They consistently deliver the levels of local knowledge, expertise, initiative and successful outcomes that you need when running a large UK wide portfolio.

Mark Kelly, Director, Development & Disposals, Telereal Trillium