In January 2018, RICS published the eagerly awaited 2nd edition of the Risk, Liability and Insurance in Valuation Work guidance note. This guidance note is intended to assist both members and their clients in understanding the main risks and liabilities associated with valuation.
This article will look at the relevance of this important update to APC candidates. Clearly, this will be of most interest to candidates declaring valuation competency to level 3 but other candidates, especially those who interact with valuers, should have an awareness of this guidance note. This is because the publication of a new guidance note by RICS is often seen by assessors as a hot topic and the subject of professional indemnity insurance is a central part of rules of conduct, ethics and professional practice competency, which all candidates must declare to level 3.
Risk management is the key theme of this guidance note and this concept links neatly with the risk management approach to APC: the whole point of competency-based assessment is to minimise risk to the profession, the brand and your clients.
It follows, therefore, that avoiding claims of professional negligence will be an important lesson for all APC candidates to learn. This guidance note updates the professional advice in the light of advice from the insurers and recent negligence case law.
Valuation competency
Valuation competency at level 1 requires a lot of knowledge, much of it centred on the RICS Valuation, Global Standards 2017 (the Red Book). The pathway guide specifically mentions appropriate standards, relevant law and professional indemnity insurance.
Appropriate standards
The action point that valuers should be taking from this guidance note is to update their terms and conditions so their contractual agreements with clients are fit for purpose in the current legal environment. The process for this is regulated by the Red Book’s valuation and technical performance standard, VPS 1. This is a common area of questioning for assessors in valuation competency and candidates will be expected to be up to date with the 2017 requirements.
There are two additions to the previous minimum required terms of engagement: the valuer must state the currency and should agree a liability cap, where legally permissible. This is important and results from recent case law and the conclusions drawn from it by the insurance industry.
A liability cap is a contractual agreement that a client can only claim damages up to the amount agreed, even if the law would otherwise award a greater sum in damages. Many professions use this contractual device but the surveying profession has been slow to adopt the practice, hence the push via the Red Book, this guidance note and professional indemnity insurers.
The guidance note has some useful and practical advice on managing the inclusion of a new contract term. This includes suggested language to include in the terms and conditions between valuer and client, as well as advice on the appropriate level of the cap.
Relevant law
There is not much relevant law in valuation; the job of regulation is effectively performed by the Red Book and generic contract law. However, any potential gaps in valuation regulation can produce case law, which is a key driver for updates to professional regulation and guidance.
This liability cap focus in the Red Book and the guidance note was initiated by the Supreme Court decision in Tiuta International Ltd (in liquidation) v De Villiers Surveyors Ltd [2017] UKSC 77; [2018] EGLR 2.
This is an interesting case and candidates who specialise in loan security valuation and those who are declaring valuation reporting and research competency are advised to read the EG law report.
Professional indemnity insurance
Professional indemnity insurance (PII) is an important part of valuation competency because of the need to protect clients and valuers from negligence. The guidance note is explicit about PII and the evolving insurance environment for valuers.
Conduct rules, ethics and professional practice competency
The level 1 rules of conduct, ethics and professional practice competency requires knowledge of RICS expectations in terms of behaviour (rules of conduct) and professional practice.
Rules of conduct – rule 9
For valuers this will definitely include protecting your clients from your negligence. It is the right thing to do and is also an explicit requirement in rule 9 of the rules of conduct for firms: “A firm shall ensure that all previous and current professional work is covered by adequate and appropriate indemnity cover which meets standards approved by the Regulatory Board.”
Professional practice
Professional practice is about the general professionalism of surveyors but also the business realities of running a surveying practice. Assessors are often keen to ascertain that a candidate understands the RICS requirements for setting up in business. A key part of that is an understanding of the business context, which will include relevant case law and the climate for PII.
Conclusion
Inevitably, for APC candidates who are at the start of their career, this article will be at level 1 (knowledge) and they will be unlikely to be applying that knowledge (level 2) or giving complex reasoned advice (level 3). None of the examiners expects a legal expert but an overview of this important guidance note and the Tiuta International case will impress the assessors.
Useful resources
■ APCeye magazine
Critical APC information in a free monthly magazine from DeLever.
■ APC presentation
Online masterclass discussing key elements of the APC final assessment interview. Hints and tips on best practice.
■ APC mock interviews
Practice your APC final assessment interview, including your presentation and specific competency-based questioning. A full hour interview just like the real thing and immediate constructive feedback from the two assessors including hints and tips on best practice.
■ APC final assessment competency revision workshop
Land, property and built environment APC candidate preparation day. Understand everything you need to know for the APC plus useful resources.
■ Free supervisor and counsellor APC training – formal CPD
Managing candidates and
feeling a little out of your depth? Get key tips on how to manage and support your candidates.
■ Commercial Property Quick Start Revision Guide 2016, by Kate Taylor FRICS
■ Free APC explained masterclass
This helps candidates to understand what needs to be done to achieve the APC, including a walk-through of the DeLever APC process timeline with an explanation of what to do at each milestone.
■ Valuation skills workshop
Valuation Skills Workshop by APCTaylorMade on 16 June.
■ Free timeline wallchart
A2 pictorial view of the whole APC process, based on the RICS guides and Jon Lever’s professional knowledge and experience of the APC. A new version containing enhanced features and the latest RICS updates will be available in
early 2017.
■ RICS APC guides
These should be read every three to four months and understood. Candidates from outside the UK also need to check their regional websites for any local APC requirements.
■ WhatsApp: APC 101
A new WhatsApp group supported by Jon Lever and DeLever APC expert coaches. Ask APC questions and receive considered and professional answers.
Action points for candidates
■ Read the Risk, Liability and Insurance in Valuation Work guidance note 2nd edition
■ Learn the RICS minimum requirements for terms of engagement
■ Gain a basic awareness of the decision in Tiuta
Action points for supervisors and counsellors
■ Get the candidate to review your standard terms of engagement in the light of this guidance note and have a discussion
