10 September 2016 – by David Hatcher
Valuers are edging towards removing uncertainty clauses from their reports ahead of the end of the month and the next quarter valuation date.
The clauses were widely applied after the result of the EU referendum owing to the unusual market conditions
and lack of deals just after the vote.
As transactional evidence mounted over the summer, valuers have been gaining confidence in their valuations.
The removal of the clauses is of particular importance to open-ended retail fund managers, some of which have been pressing for the removal of the clauses to provide clarity to their trustees and investors.
The funds themselves experienced a run of redemptions following the vote but sentiment has been improving in recent weeks. Today most funds have reduced penalties for redemptions and some that were gated have since reopened.
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Since exception clauses were applied the day after the referendum, the major valuation firms have been working with RICS and the Association of Real Estate Funds to ensure that a unified uncertainty clause is applied to all open-ended funds so that no one fund is seen to have more of an advantage than another and to agree best practice.
Last week the valuers of the open-ended funds removed a more extreme sentence from within the clause which stated that the likelihood of them coming to an accurate valuation had reduced (see box).
Valuers are personally responsible for their own valuation and for applying the clause if needed. RICS does provide guidance to its members and on 26 July Fiona Haggett, RICS’ UK valuation director, encouraged members to revisit the use of the clause based upon transactional evidence that had become available.
“There is the intention to move away from the clause gradually, depending on the market. This will happen earlier in some markets than others,” she said.
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