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IOV Valuer practice questions

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Question 1Valuation Principles, Standards and Ethics

Under the RICS Red Book, which basis of value is defined as the estimated amount for which an asset should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing, where each party had acted knowledgeably, prudently and without compulsion?

  1. Market value Correct answer.
  2. Investment value
  3. Fair value
  4. Market rent

Explanation

Market value is the central basis of value in the Red Book and carries the full willing-buyer/willing-seller definition with the knowledgeable, prudent and non-compelled conditions. The other bases describe different transactional settings or reporting frameworks and do not carry this exact wording.

Question 2Valuation Principles, Standards and Ethics

A valuer is asked to value a specialised chemical plant with no comparable market transactions. Which approach is most appropriate as the primary method?

  1. Residual method
  2. Depreciated replacement cost Correct answer.
  3. Direct capitalisation of passing rent
  4. Comparable sales approach

Explanation

Specialised assets with no active market are normally valued using depreciated replacement cost, which measures the cost of providing equivalent utility less physical, functional and economic obsolescence. The other methods depend on market evidence or income streams that are absent here.

Question 3Valuation Principles, Standards and Ethics

Which body issues the International Valuation Standards (IVS) used widely for cross-border valuations?

  1. The Appraisal Institute
  2. The International Accounting Standards Board
  3. The International Valuation Standards Council Correct answer.
  4. The Royal Institution of Chartered Surveyors

Explanation

The International Valuation Standards Council is the independent standard-setter that publishes the IVS. The other bodies issue their own professional standards or accounting rules rather than the IVS.

Question 4Valuation Principles, Standards and Ethics

A valuer holds shares in a company that is the subject of a valuation instruction. According to fundamental ethical principles, what should the valuer do?

  1. Proceed without disclosure because the shareholding is small
  2. Decline the instruction or disclose and manage the conflict so independence is preserved Correct answer.
  3. Delegate the report to a junior colleague without disclosure
  4. Proceed but reduce the fee to offset the conflict

Explanation

Objectivity and independence require the valuer to avoid or properly manage conflicts of interest. A direct financial interest in the subject normally means declining the work, or disclosing and putting safeguards in place where the conflict can be managed.

Question 5Valuation Principles, Standards and Ethics

In valuation terminology, what does 'highest and best use' describe?

  1. The current use of the property at the valuation date
  2. The use preferred by the local planning authority
  3. The use that is physically possible, legally permissible, financially feasible and produces the highest value Correct answer.
  4. The use that generates the highest rent per square metre

Explanation

Highest and best use is the most probable use that meets four tests: physically possible, legally permissible, financially feasible and maximally productive. It is a forward-looking concept and need not be the current use.

Question 6Valuation Principles, Standards and Ethics

Which of the following best describes 'depreciation' in the context of property valuation?

  1. The reduction in rent at lease renewal
  2. The fall in market prices over a reporting period
  3. The annual accounting charge for wear and tear
  4. The loss in value from an asset relative to its replacement cost new Correct answer.

Explanation

In valuation, depreciation is the difference between the cost of a new equivalent asset and the value of the existing asset, arising from physical, functional and economic obsolescence. It is distinct from accounting depreciation charges or general market movements.

Question 7Valuation Principles, Standards and Ethics

A valuer is instructed to provide an opinion of value for secured lending purposes. Which statement best reflects the appropriate professional conduct?

  1. The valuer should value only the lender's preferred outcome
  2. The valuer should omit the basis of value to keep the report concise
  3. The valuer should adopt the borrower's estimate to speed up the process
  4. The valuer should confirm the purpose, basis of value and any reliance restrictions in the terms of engagement Correct answer.

Explanation

Terms of engagement must record the purpose, basis of value, scope and any restrictions on use and reliance. This protects both valuer and lender and is a core requirement of professional standards.

Question 8Valuation Principles, Standards and Ethics

Which concept holds that value is determined by the present worth of future benefits expected from an asset?

  1. The profits method
  2. The sales comparison approach
  3. The income approach Correct answer.
  4. The cost approach

Explanation

The income approach rests on the principle that value reflects the present value of anticipated future income or benefits. The cost and comparison approaches rely on replacement cost or market evidence instead.

Question 9Valuation Principles, Standards and Ethics

A valuer values a property assuming a hypothetical lease that does not currently exist, to show its value under an alternative letting structure. How should this be described in the report?

  1. As a special assumption, clearly stated and justified Correct answer.
  2. As the market value without qualification
  3. As an investment value calculation
  4. As a normal assumption needing no disclosure

Explanation

A special assumption is one that assumes facts different from those existing at the valuation date, such as a hypothetical lease. It must be expressly stated and its effect explained so readers understand the departure from reality.

Question 10Valuation Principles, Standards and Ethics

Which statement correctly distinguishes 'market value' from 'market rent'?

  1. Market value concerns the capital exchange of an interest, while market rent concerns the letting of an interest Correct answer.
  2. Market value excludes any allowance for condition, while market rent includes it
  3. Market value is set by statute, while market rent is set by the valuer
  4. Market value applies only to residential property, while market rent applies only to commercial property

Explanation

Market value estimates the capital sum for an exchange of the interest, whereas market rent estimates the rent for which an interest would be let. Both use the same willing-party logic but apply to different transactions.

Question 11Valuation Principles, Standards and Ethics

In the sales comparison approach, which adjustment would a valuer typically make when the comparable sold three years before the valuation date in a rising market?

  1. A rent-free adjustment
  2. A market conditions adjustment to reflect price movement over time Correct answer.
  3. A planning gain adjustment
  4. A depreciation adjustment for physical deterioration

Explanation

Time or market conditions adjustments bring comparable prices to the valuation date by reflecting market movement between the sale and the date of valuation. Without this, the comparison would not reflect current market levels.

Question 12Valuation Principles, Standards and Ethics

A valuer is asked to value a property for financial reporting under IFRS. Which basis is generally required?

  1. Depreciated replacement cost
  2. Market rent
  3. Fair value as defined in the relevant accounting standard Correct answer.
  4. Forced sale value

Explanation

Financial reporting under IFRS generally requires fair value as defined by the applicable accounting standard, which the valuer measures in accordance with that definition. Other bases may be used for different purposes but not as the primary reporting basis here.

Question 13Valuation Principles, Standards and Ethics

Which of the following is an example of functional obsolescence?

  1. An office building with an inefficient layout that cannot be reconfigured cheaply Correct answer.
  2. A reduction in value due to general inflation
  3. A building damaged by a recent flood
  4. A decline in demand caused by a new competing development nearby

Explanation

Functional obsolescence arises from deficiencies or excesses in the asset's design, layout or specification relative to what the market expects. Flood damage and nearby competition are physical and economic factors respectively.

Question 14Valuation Principles, Standards and Ethics

A valuer's report includes a statement that the valuation is subject to a 'material uncertainty clause'. When is this most appropriate?

  1. When the valuer has not inspected the property
  2. When market conditions are so volatile or illiquid that the valuation is unusually uncertain Correct answer.
  3. When the client requests a lower figure
  4. When the property is newly built

Explanation

A material uncertainty clause is used where the evidence base is thin or market conditions are highly volatile, so the valuation is subject to a greater than usual degree of uncertainty. It is not a substitute for inspection or a tool to adjust figures.

Question 15Valuation Principles, Standards and Ethics

Which principle underlies the requirement for valuers to keep proper records of their valuation work?

  1. Independence from the client
  2. Accountability and the ability to demonstrate compliance with standards Correct answer.
  3. Confidentiality toward the client
  4. Competence in a single asset class

Explanation

Record-keeping supports accountability and enables the valuer to demonstrate that the work complied with professional standards if challenged. Confidentiality and independence are separate principles, though records must also respect them.

Question 16Valuation Principles, Standards and Ethics

In the investment method, a valuer capitalises a net income of 80,000 at a yield of 8%. What is the indicated value?

  1. 800,000
  2. 1,000,000 Correct answer.
  3. 640,000
  4. 1,250,000

Explanation

Value is net income divided by the yield: 80,000 divided by 0.08 equals 1,000,000. This is the direct capitalisation formula used in the investment method.

Question 17Valuation Principles, Standards and Ethics

Which statement best describes the role of a 'peer review' in valuation practice?

  1. A process where the client approves the final figure
  2. An independent review of another valuer's work to check compliance and reasonableness Correct answer.
  3. A statutory audit of the valuer's accounts
  4. A marketing exercise to promote the report

Explanation

Peer review provides independent scrutiny of the valuation process and conclusions against professional standards. It strengthens quality assurance and is distinct from client sign-off or financial audit.

Question 18Valuation Principles, Standards and Ethics

A valuer is asked to act for both the buyer and the seller in the same transaction. What is the principal ethical concern?

  1. A conflict of interest that threatens objectivity and confidentiality Correct answer.
  2. An error in the discount rate
  3. A breach of planning law
  4. A lack of technical competence

Explanation

Acting for both sides creates a conflict of interest because the parties have opposing interests and confidential information may be shared. The valuer must decline or manage the conflict with appropriate safeguards.

Question 19Valuation Principles, Standards and Ethics

Which of the following best explains why a valuer must state the 'valuation date' in a report?

  1. Value is time-specific and depends on market conditions at that date Correct answer.
  2. It identifies the valuer's registration date
  3. It confirms when the fee was paid
  4. It records when the report was printed

Explanation

A valuation is an opinion of value at a specific point in time, so the valuation date anchors the analysis to the market conditions prevailing then. Without it, the figure cannot be interpreted.

Question 20Valuation Principles, Standards and Ethics

A valuer values a leasehold interest with 15 years remaining at a rent below market. Which factor most directly increases the value of that leasehold interest?

  1. The freeholder's insurance premium
  2. The profit rent arising from the difference between market rent and passing rent Correct answer.
  3. The length of the freeholder's reversion
  4. The building's replacement cost

Explanation

A leasehold interest below market rent has value because the occupier enjoys a profit rent, being the difference between market and passing rent over the remaining term. This profit rent is capitalised to derive the leasehold value.

Question 21Valuation Principles, Standards and Ethics

A valuer is instructed to provide a valuation for a client who insists the figure must meet a bank covenant threshold. How should the valuer respond?

  1. Decline to tailor the figure and explain that the opinion must be independent and objective Correct answer.
  2. Report the client to the regulator before responding
  3. Adjust the figure to meet the threshold while noting the instruction
  4. Withdraw the report but keep the fee

Explanation

Independence and objectivity require the valuer to resist pressure to produce a predetermined figure. The correct response is to explain the professional obligation and, if necessary, decline the instruction.

Question 22Valuation Principles, Standards and Ethics

In applying the residual method to a development site, which treatment of developer's profit is consistent with professional practice?

  1. Add developer's profit to the gross development value
  2. Ignore developer's profit entirely
  3. Treat developer's profit as equivalent to finance costs
  4. Deduct an appropriate profit allowance from the gross development value as part of the appraisal Correct answer.

Explanation

The residual method deducts all costs, including construction, fees, finance and developer's profit, from gross development value to arrive at the site value. Profit is a required deduction reflecting the risk and return to the developer.

Question 23Valuation Principles, Standards and Ethics

A valuer is asked to value a property where the only comparable evidence is a sale between related parties at a price well above the market. How should the valuer treat this evidence?

  1. Average it with other evidence to smooth the result
  2. Use it only if the client approves
  3. Give it little or no weight because it is not an arm's length transaction Correct answer.
  4. Adopt it as the primary comparable because it is recent

Explanation

Comparable evidence must reflect arm's length transactions; a related-party sale at an inflated price is not reliable market evidence. The valuer should seek better evidence and give the transaction minimal weight.

Question 24Valuation Principles, Standards and Ethics

Which statement best captures the relationship between the Red Book and the IVS?

  1. The Red Book incorporates the IVS and adds mandatory requirements for RICS members Correct answer.
  2. The IVS override the Red Book in all cases
  3. The two standards are unrelated and cannot be applied together
  4. The Red Book replaces the IVS entirely for all valuations

Explanation

The Red Book adopts the IVS as its technical basis while adding mandatory requirements and guidance for RICS members. The two are complementary, with the Red Book building on the international standards.

Question 25Valuation Principles, Standards and Ethics

A valuer must value a property interest where the tenant has a strong covenant but the lease has a break option in two years. Which factor most affects the capitalisation yield applied?

  1. The building's original construction cost
  2. The freeholder's tax position
  3. The risk to the income stream arising from the break option and re-letting prospects Correct answer.
  4. The valuer's fee level

Explanation

Yield reflects the risk attached to the income stream, and a near-term break option introduces uncertainty about continuity of income and re-letting. This risk is priced into the yield applied to the capitalisation.

Question 26Valuation Principles, Standards and Ethics

Under the RICS Red Book, which of the following best describes the 'basis of value' that must be stated in a valuation report?

  1. The fundamental measurement basis on which the reported value is expressed Correct answer.
  2. The stated assumptions and limiting conditions attached to the instruction
  3. The fee arrangement agreed between the valuer and the client
  4. The method used to reconcile comparable evidence into a single figure

Explanation

The basis of value is the fundamental premise on which the reported figure is expressed, such as market value or market rent, and it must be identified in every Red Book valuation. It is distinct from the approach or method used, and from the assumptions and limiting conditions, which are separate report elements.

Question 27Valuation Principles, Standards and Ethics

A valuer is instructed to provide a valuation for a client who is also a lender, and the instruction requires the valuer to confirm the property will support a specified loan-to-value ratio. Which course of action is most consistent with professional ethics standards?

  1. Accept the instruction and report the figure that satisfies the lender's lending criteria
  2. Adjust the comparables upward or downward until the target ratio is achieved
  3. Decline to comment on lending criteria and value independently on the agreed basis of value Correct answer.
  4. Report the required figure but disclose the instruction in a confidential annex

Explanation

A valuer must form an independent, objective opinion and must not allow a predetermined outcome, including a lending threshold, to influence the reported figure. Where an instruction seeks to predetermine the result, the valuer should value on the proper basis and make clear that lending decisions remain with the lender.

Question 28Valuation Principles, Standards and Ethics

A valuer inspects a property and finds that the building cannot be lawfully used for its current occupation because it lacks a required fire safety certificate. How should this be treated in the valuation?

  1. As physical deterioration requiring a cost-to-cure deduction
  2. As functional obsolescence attributable to poor design
  3. As an external obsolescence factor caused by market conditions
  4. As a legal or regulatory constraint affecting the property's utility Correct answer.

Explanation

A missing statutory consent or certificate restricts lawful use and is a legal or regulatory matter, not physical wear or design deficiency. The valuer should reflect the constraint in the valuation and disclose it as a special assumption or material matter where appropriate.

Question 29Valuation Principles, Standards and Ethics

A valuer is preparing a report for a court and is asked to include an opinion on a matter outside the valuer's demonstrated competence. What is the most appropriate response consistent with professional standards?

  1. State the limit of competence and decline to give the requested opinion Correct answer.
  2. Provide the opinion and rely on the client to assess its reliability
  3. Provide the opinion but qualify it as being given on a without-prejudice basis
  4. Provide the opinion because the court has requested it in the instruction

Explanation

Valuers must only act within their competence and should clearly identify the scope of their expertise. Where an instruction extends beyond that competence, the professional response is to disclose the limitation rather than offer an unsupported opinion, even in litigation.

Question 30Valuation Principles, Standards and Ethics

A valuer is asked to value a property interest where the current passing rent exceeds the market rent and the lease has a fixed uplift in three years. Which statement best explains how the valuer should treat the excess rent in the investment approach?

  1. Apply a premium to the market yield to reflect the security of the higher rent
  2. Capitalise the whole passing rent at the market-derived yield for the entire term
  3. Treat the excess over market rent as a short-term income flow with its own capitalisation Correct answer.
  4. Ignore the passing rent and capitalise only the current market rent for the whole term

Explanation

Where passing rent exceeds market rent, the excess is a temporary income advantage that ends at the next rent review or lease event, so it is normally valued separately using an appropriate short-term capitalisation rate. The market rent is capitalised in perpetuity or for the term, and the two elements are added to reach the capital value.

Question 31Legal and Regulatory Framework for Property

Under the UK valuation framework, which body issues the RICS Valuation – Global Standards (the 'Red Book') that governs professional valuation practice?

  1. The Insolvency Service
  2. The Land Registry
  3. The Royal Institution of Chartered Surveyors Correct answer.
  4. The Financial Conduct Authority

Explanation

The Red Book is published by the Royal Institution of Chartered Surveyors and sets mandatory professional standards for RICS-registered valuers, including terms of engagement, bases of value and reporting. It operates alongside, but is separate from, statutory regulators.

Question 32Legal and Regulatory Framework for Property

A valuer is instructed to assess a property for a lender considering a mortgage. Which basis of value is normally adopted for this purpose?

  1. Market value Correct answer.
  2. Fair value under IFRS 13
  3. Liquidation value
  4. Market rent

Explanation

Mortgage lending decisions are based on market value, defined as the estimated amount for which an asset should exchange on the valuation date between a willing buyer and willing seller in an arm's length transaction. Market rent applies to lettings, not capital lending.

Question 33Legal and Regulatory Framework for Property

Which statutory provision in England and Wales requires that a contract for the sale of an interest in land be evidenced in writing and signed by the parties?

  1. Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 Correct answer.
  2. Section 1 of the Land Registration Act 2002
  3. Section 205 of the Law of Property Act 1925
  4. Section 52 of the Law of Property Act 1925

Explanation

Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 requires contracts for the sale or other disposition of an interest in land to be made in writing, incorporating all agreed terms, and signed by each party. Failure to comply renders the contract void.

Question 34Legal and Regulatory Framework for Property

A registered freehold title in England and Wales is described as 'absolute'. What does this class of title indicate?

  1. The title has not yet been substantively examined by the registrar
  2. The title is subject to a rentcharge in perpetuity
  3. The title is held for a fixed term of years
  4. The state guarantees the title subject to any overriding interests and entries on the register Correct answer.

Explanation

Absolute freehold is the best class of registered title: the registrar has investigated the title and the state guarantee applies, subject to registered entries and overriding interests. Lesser classes such as possessory or qualified indicate reduced investigation or protection.

Question 35Legal and Regulatory Framework for Property

A property is subject to a restrictive covenant benefiting a neighbouring estate. Which statement best describes the general enforceability position at law and in equity?

  1. The burden runs with the land at law, so any owner is bound as a matter of common law
  2. Only the original covenantor remains liable, regardless of notice
  3. The burden may run in equity against a purchaser with notice, while the benefit must be shown to touch and concern the benefited land Correct answer.
  4. Neither the benefit nor the burden can ever pass to successors in title

Explanation

At common law the burden of a positive or restrictive covenant does not run with freehold land, but in equity the burden may bind successors who take with notice, provided the benefit touches and concerns the dominant land. This is why valuers check registered notices and indemnity covenant chains.

Question 36Legal and Regulatory Framework for Property

In England and Wales, when must a lease of a residential dwelling be granted by deed?

  1. Only where the rent exceeds a statutory threshold
  2. Never, because leases are exempt from deed requirements
  3. Only where the term exceeds seven years
  4. Where the lease is for a term exceeding three years Correct answer.

Explanation

Section 52 of the Law of Property Act 1925 requires a deed for the creation of a legal lease, but section 54(2) preserves short leases not exceeding three years at best rent as exceptions. A residential lease over three years must therefore be granted by deed.

Question 37Legal and Regulatory Framework for Property

A valuer is asked to advise on a property where the seller has not disclosed a pending compulsory purchase order. Which professional obligation is most directly engaged?

  1. The duty to report suspected money laundering to the National Crime Agency
  2. The duty to act as an advocate for the client in negotiations
  3. The duty of professional scepticism and verification of material planning and statutory information Correct answer.
  4. The duty to provide a fixed-price quotation before inspection

Explanation

Professional standards require the valuer to exercise due diligence and scepticism, verifying material statutory matters such as compulsory purchase, planning and highways proposals because they affect value. Relying solely on undisclosed or unverified information can mislead the lender or buyer.

Question 38Legal and Regulatory Framework for Property

Which of the following is an 'overriding interest' under Schedule 3 to the Land Registration Act 2002 that binds a registered purchaser even though it is not entered on the register?

  1. A local land charge
  2. A registered mortgage
  3. The interest of a person in actual occupation Correct answer.
  4. A registered lease of twenty years

Explanation

Schedule 3 preserves certain unregistered interests that override registered dispositions, notably the rights of persons in actual occupation whose occupation is obvious on a reasonably careful inspection. Such interests bind a purchaser despite the absence of a register entry.

Question 39Legal and Regulatory Framework for Property

In Scotland, which statute governs the creation and transmission of real rights in land and the registration of deeds in the Land Register?

  1. The Conveyancing (Scotland) Act 1924
  2. The Title Conditions (Scotland) Act 2003
  3. The Land Registration etc. (Scotland) Act 2012 Correct answer.
  4. The Abolition of Feudal Tenure etc. (Scotland) Act 2000

Explanation

The Land Registration etc. (Scotland) Act 2012 provides the current framework for the Land Register of Scotland, including registration rules and the real right in land. The 2000 and 2003 Acts address feudal abolition and title conditions respectively.

Question 40Legal and Regulatory Framework for Property

A valuer inspects a commercial unit and notices a business operating from it. The occupier claims a lease that is not on the register. Why is this material to the valuation?

  1. Because the occupier becomes liable for the valuer's fee
  2. Because occupation automatically extinguishes the freehold title
  3. Because an unregistered occupational interest may override registration and reduce the realisable value Correct answer.
  4. Because it converts the property to a leasehold estate

Explanation

An occupier's rights may override a registered disposition under Schedule 3, meaning a purchaser or lender could take subject to an unexpected lease. This affects marketability and value, so the valuer should investigate and report the occupation.

Question 41Legal and Regulatory Framework for Property

Which of the following best describes the purpose of the National Planning Policy Framework (NPPF) in England?

  1. It provides national planning policy to which local planning authorities must have regard in plan-making and decisions Correct answer.
  2. It imposes building regulations standards on new dwellings
  3. It sets the market value of land for compensation purposes
  4. It replaces local development plans with a single national zoning map

Explanation

The NPPF is national planning policy guidance that local authorities must have regard to when preparing plans and determining applications. It does not itself set land values, replace local plans or impose building standards.

Question 42Legal and Regulatory Framework for Property

A developer wants to build a new dwelling on a plot. Which statutory consent is normally required before works begin?

  1. A highways adoption agreement
  2. A building regulations completion certificate
  3. Planning permission Correct answer.
  4. A certificate of lawful use

Explanation

Development, including the construction of a new dwelling, requires planning permission unless it falls within permitted development rights. A completion certificate is issued after works, not before, and a lawful use certificate confirms existing status.

Question 43Legal and Regulatory Framework for Property

What is the principal effect of a listed building designation on a valuer's assessment of development potential?

  1. It transfers ownership of the building to the local authority
  2. It exempts the building from planning permission for all works
  3. It prevents any change of use of the building
  4. It requires listed building consent for works affecting the special architectural or historic interest Correct answer.

Explanation

Listing protects the special interest of a building by requiring listed building consent for demolition or alteration affecting that interest, in addition to any planning permission. It does not transfer ownership or remove planning requirements.

Question 44Legal and Regulatory Framework for Property

A valuer is valuing a property affected by a restrictive covenant prohibiting commercial use. Which factor most directly determines whether the covenant reduces value?

  1. The colour of ink used in the original deed
  2. The age of the covenant
  3. Whether the covenant is enforceable by a person with standing and the likelihood of enforcement Correct answer.
  4. Whether the covenant was drafted by a solicitor

Explanation

A covenant only affects value if it is enforceable and likely to be enforced; a stale or unenforceable covenant may be disregarded. The valuer should consider the benefited land, notice and the practical attitude of beneficiaries.

Question 45Legal and Regulatory Framework for Property

Which body is responsible for maintaining the register of local land charges in England?

  1. The Land Registry
  2. The local authority Correct answer.
  3. The Planning Inspectorate
  4. The Valuation Office Agency

Explanation

Local land charges are registered and maintained by the local authority, and a local land charges search is a standard pre-purchase enquiry. The Land Registry maintains title, while the VOA handles rating assessments.

Question 46Legal and Regulatory Framework for Property

A valuer is instructed on a property in an area where the local authority has made a compulsory purchase order but has not yet confirmed it. How should the valuer treat this in the report?

  1. Value the property as if the order were already confirmed and compensation paid
  2. Disclose it as a material uncertainty and consider its effect on marketability and value Correct answer.
  3. Advise the client to withhold the information from the lender
  4. Ignore it because confirmation is required before it affects value

Explanation

A pending compulsory purchase order is material information that can affect marketability and value even before confirmation, so it should be disclosed and analysed. Concealment would breach professional duties and could mislead a lender.

Question 47Legal and Regulatory Framework for Property

Under the RICS Red Book, which term describes the assumption that a property is free from mortgages and other encumbrances unless stated otherwise?

  1. Gross external area
  2. Special assumption
  3. Unencumbered interest Correct answer.
  4. Depreciated replacement cost

Explanation

Valuations are normally of the unencumbered interest unless the instruction specifies otherwise, and any departure must be stated as a special assumption. Depreciated replacement cost and gross external area are valuation and measurement methods, not interest definitions.

Question 48Legal and Regulatory Framework for Property

A valuer discovers that the property has been used for a trade that may have caused contamination. Which statutory regime in England and Wales governs the remediation liability?

  1. Part 2A of the Environmental Protection Act 1990 Correct answer.
  2. The Water Industry Act 1991
  3. The Housing Act 2004
  4. The Town and Country Planning Act 1990

Explanation

Part 2A of the Environmental Protection Act 1990 provides the contaminated land regime, allowing local authorities to require remediation and to recover costs from appropriate persons. This affects value through potential liability and blight.

Question 49Legal and Regulatory Framework for Property

Which of the following is a 'special assumption' in a valuation report?

  1. The valuation date is the date of inspection
  2. The property is valued as if a proposed planning permission had been granted Correct answer.
  3. The property is in the condition inspected on the valuation date
  4. The valuation is expressed in the local currency

Explanation

A special assumption is a supposition that differs from the factual position at the valuation date, such as assuming planning consent exists when it does not. It must be clearly stated because it changes the basis of the opinion.

Question 50Legal and Regulatory Framework for Property

In the context of the IOV code of conduct, which behaviour best reflects integrity for a valuer?

  1. Declining an instruction where the fee depends on the outcome of the valuation Correct answer.
  2. Providing a valuation without inspecting the property to save time
  3. Accepting a success fee contingent on the valuation reaching a target figure
  4. Reporting only the comparables that support the client's desired price

Explanation

Integrity requires independence and objectivity, so contingency fees linked to the valuation outcome create a conflict that should be declined. Selective reporting and non-inspection undermine the reliability of the opinion.