The Conflict on a Valuation

Conflicts identified

1. Firm-level conflict: the firm is advising the borrower on the refinancing of the very asset it is valuing for the bank. This is a direct conflict - the firm has an interest in a higher valuation helping the refinancing, and a duty of independence to the bank.
2. Fee dependence: the borrower has referred £90,000 of work. That creates a commercial incentive to favour them, whether or not anyone intends it.
3. The draft request: showing the borrower a draft before the bank sees it invites influence over the figure and breaches the independence the bank is paying for.
4. Information asymmetry: the colleague advising on the refinancing may hold information the valuer should not receive, or may receive the valuation and use it.

Can you accept?

• The bank's instruction expressly prohibits other involvement with the borrower on the asset. On the facts, the firm is in breach of that condition already through the colleague's refinancing work. The instruction should not proceed on the current footing.
• Options: (a) decline and return the instruction, explaining why; (b) seek the bank's informed consent to proceed with robust safeguards, if the bank is willing - but the express prohibition suggests it will not be; (c) have the refinancing work transferred out or walled off, if that is possible and the bank agrees.
• Do not simply carry on and hope. An independent valuation produced in breach of the instruction is a professional and contractual problem, and the bank may rely on it.

Safeguards if it proceeds with consent

• Information barriers: no sharing between the valuation and refinancing teams; the valuer does not see the refinancing file.
• Separate fee arrangements: the valuer's remuneration not linked to the borrower relationship.
• No draft to the borrower. The bank is the client; the borrower is not entitled to review the valuation before the bank.
• Document the conflict analysis and the consent.

Response to the borrower

• Decline, courteously and clearly. Explain that the valuation is prepared for the bank, that the bank is the client, and that you cannot share a draft with the borrower before the bank receives it.
• Explain the reason in professional terms: independence, the bank's instruction, and the fact that the borrower's interests and the bank's are not the same. The borrower will not like it, but they will understand a principled refusal better than an evasive one.
• Offer a legitimate route: if the borrower has comparables they believe are relevant, they can send them to you and you will consider them on their merits, as you would any evidence. What they cannot have is a preview of the conclusion.
• Put it in writing and copy the bank if appropriate, so the exchange is documented.

Why it matters beyond this instruction

• Independence is the product. A valuation the borrower has reviewed and influenced is worth less to the bank, and the bank is paying for an independent opinion. The value of the service depends on the process.
• The precedent problem. If the borrower learns that a request for a draft works, it will be made again, on this and other instructions, and the firm's independence will erode instruction by instruction.
• Regulatory and professional exposure. Valuation independence is a regulated area; a valuer who shares drafts with borrowers ahead of the lender risks their own position and the firm's panel status.
• The borrower's own interest. If the bank later discovers the borrower saw a draft, the valuation may be challenged, which harms the borrower more than a refusal would have.

The general principle

Client identification matters. The bank is the client. The borrower is a third party with an interest in the outcome. Treating a third party as if they were the client is a common and serious error.

Evaluating the argument

• Information barriers manage conflicts; they do not erase them. A barrier reduces the flow of information but does not remove the firm's financial interest in the borrower's refinancing succeeding.
• The barrier is only as good as its enforcement. In a small firm or a single office, 'everyone is professional' is not a control. Who audits the barrier? What happens if the valuer learns something by accident?
• The bank's instruction is the decisive point. The instruction prohibits other involvement with the borrower on the asset. The firm's internal confidence in its barriers does not override the client's express condition. The firm cannot consent on the bank's behalf.
• 'Everyone is professional' is not a safeguard, it is an assumption. Conflicts are managed by structure, disclosure and consent, not by good intentions.
• The fee dependence sharpens the risk. £90,000 of referred work is exactly the kind of pressure that barriers are supposed to counter, and exactly the kind that quietly defeats them.

If the firm decides to proceed

1. Put your concerns in writing to the person responsible for the decision, setting out the bank's instruction, the conflict, and the risk.
2. Ask for the bank's informed consent in writing before any valuation work continues. Without it, proceeding is a breach.
3. Do not personally sign a valuation you consider compromised. If you are the named valuer, your signature carries your professional accountability.
4. Consider escalating within the firm (compliance, risk, or a senior partner not involved) and, if unresolved, take advice from your professional body.
5. Record your position. If the matter later comes under scrutiny, the contemporaneous record of your objection is important.

The professional standard

Independence is not a feeling; it is a position that must be structurally defensible. If you cannot explain to the bank, in one paragraph, why the valuation is independent, it probably is not.