This article is to address the counter-signing of valuation reports prepared by an unregistered valuer for a “third party”.
It would be fair to say that in the past (hopefully) valuation companies were employing unregistered valuers to undertake inspections on properties without supervision. For mortgage valuations in particular, these reports were countersigned by the registered valuer, so that the report can be relied on by the lender. We are now seeing a movement by lenders to change this practise.
Some of the main lenders/banks in New Zealand have recently published their own valuation guidelines and minimum reporting standards. These state that the valuation report must be signed by the valuer(s) who undertook the assessment, and more importantly, all signatories must have completed a full internal and external inspection of the property and be familiar with all comparable data and supporting evidence.
In New Zealand, property valuers are governed by the Valuers Act 1948 and adhere to the New Zealand Institute of Valuers (NZIV) Code of Ethics. Since the introduction of the Act, and with the globalisation of valuation standards, property valuers in New Zealand also have to comply with:
- The International Valuation Standards (IVS) 2017,
- Property Institute of New Zealand (PINZ) and Australian Property Institute (API) Valuation Guidance Notes (ANZVGN & NZVGN), and
- API & PINZ Real Property Guidance Notes (ANZRPG & NZRPGN)
NZRPGN 2 refers to counter-signing of valuation reports prepared by unregistered valuers. This section refers to the NZIV Code of Ethics, clauses 1.4 - 1.6 & 2.4.
Of particular note is clause 1.6 of the NZIV Code of Ethics, which states that “when asked for a valuation of real property, or an opinion on a real estate matter, no member shall give an unconsidered answer. A member’s council constitutes professional advice which must be prepared to the highest standards of competency and rendered only after having properly ascertained and weighed the facts”.
NZRPGN 2 clause 2 details the registered valuers responsibilities when signing a report prepared by an unregistered valuer.
Clause 2.1 “A registered valuer who signs a valuation report prepared by another person accepts full responsibility for the valuation and content of the report”.
Clause 2.2 “the responsibility of registered valuers cannot be limited by the use of conditional clauses in respect to the valuation”.
Valuers Registration Board Decisions:
Numerous cases have been put to the Valuers Registration Board on this matter.
These cases tend to highlight poor business practises, limited supervision/mentoring and a lack of a duty of care to the public.
Two of these cases are summarised below.
This case related to the banks requirement for sign-off from a registered valuer with ANZIV status. At the hearing the registered valuer who had counter-signed the valuation report advised the Board that they did so without reading it. The registered valuer was charged with (1) Incompetence in a gross over-valuation of the property and (2) Unethical conduct in providing an unconsidered answer being in breach of Clause 1.6 of the NZIV Code of Ethics. The findings of the Board raised a number of concerns from registered valuers counter-signing valuation reports. In this situation the Board viewed the countersigning of a report without reading it as serious.
This case was put to the Board some eight years after the valuation report was completed and also highlights a valuers “duty of care” to the public. The complainant (who was the eventual purchaser of the property) alleged that they had originally based their purchase price on a valuation report prepared for the existing owner. Eight years on, they came to believe the price that they paid for the property was substantially overstated.
The registered valuer who counter-signed the valuation was charged with incompetent and unethical conduct in the performance of the duties as a valuer required by Clause 1.5 of the Code of Ethics.
The findings from the Board were “that a counter-signing valuer is required to take responsibility for the contents of a valuation report even though he or she may not have physically inspected the property or carried out any measurements associated with it”.
Furthermore, although the valuer could not have foreseen the use of the valuation report by the complainant, the Board was of the view that “once a valuers report is in the public domain this does not automatically preclude others form reliance upon its contents. Whether or not there is a relationship is considered under the Doctrine of Proximity”.
LPMS Valuer Members
To avoid or mitigate any potential claim LPMS directs its valuer members to adhere to sound business practises and valuation standards.
We are now experiencing an easing in the property market in general around New Zealand. Therefore as has occurred in the past, claims will potentially rise. With recent changes to the IVS, and banking valuation guidelines, LPMS urges valuers to keep up to date with these.
In this article we have addressed the issue of countersigning. To reiterate, when countersigning a valuation report, it is the registered valuer who is accepting full responsibility for the valuation and its contents. Failing to do so could have serious consequences to the valuers business and more importantly the valuers credibility, reputation and registration.
Patrick Foote, LPMS Board Member