APIV Scheme Update – Low Risk Valuations Amendment Approved By PSC
The API is delighted to announce that the Professional Standards Councils (PSC) have approved the Low Risk Valuation Scheme Amendment Application on 12 April 2019.
Background and Scheme Amendment Application Process
The Australian Property Institute Valuers Ltd Professional Standards Scheme (APIV Scheme) has been successfully operating for the past 8+ years to protect the members of the APIV with an opportunity to cap their liability in claim situations arising from Valuation of Real Property.
In the past, APIV members carrying out Low Risk Valuation (LRV) work have been held to the same liability caps as higher risk valuation work and have been required to maintain professional indemnity insurance (PII) coverage solely based on the assessed value of properties.
On 27 September 2018, the API submitted the Scheme Amendment Application to the regulatory body, the PSC, seeking to delineate LRV work from higher risk work (LRV Scheme Amendment Application). The Application was supported by years of consultation, research and analysis.
On 21 February 2019, the LRV Scheme Amendment Application progressed to the public notification stage, which expired on 21 March 2019. On 12 April 2019, the PSC approved the LRV Scheme Amendment.
The next stage of the approval process is for the Ministers to authorise the gazettal of the APIV Scheme, as amended by the LRV Scheme Amendment Application. The amended APIV Scheme will come into operation two (2) months after the date of its publication in the Government Gazette of all states and territories in Australia.
Approval of LRV Scheme Amendment
Once the amended APIV Scheme commences, APIV members will be able to apply a liability cap of $1 million for any claim arising from a Low Risk Valuation, irrespective of the assessed value of the property.
Low Risk Valuation work will no longer be included in the valuation dataset used to capture the ‘Upper End Value’ for the purpose of determining each APIV member firm’s Monetary Ceiling.
This will also mean that the minimum PII coverage required for Low Risk Valuation work will be $1 million (plus $500,000 to cover defence costs, if the PII policy limit of indemnity is cost-inclusive).
What is classified as LRV?
A Low Risk Valuation is defined in the approved amended APIV Scheme as:
a) Valuation of Real Property undertaken in the capacity as an arbitrator;
b) Binding Determination;
c) Expert Evidence Valuation;
d) Financial Reporting Valuation;
e) Insurance Valuation;
f) Valuation of Real Property undertaken for the purpose of determining a rate of tax that applies in respect of the property; or
g) Valuation of Real Property for Resumption purposes.
The following are defined terms in the APIV Scheme, as amended by the LRV Scheme Amendment Application:
- Valuation of Real Property means valuation of any right, interest or benefit related to the ownership, occupation or use of real property including land and all things that are a natural part of the land as well as any improvements to the land.
- Binding Determination means Valuation of Real Property undertaken for the purpose of making a binding determination acting as an expert pursuant to an agreement or deed where all relevant parties have agreed to indemnify, release or hold the valuer harmless in respect of any liability in connection with the valuation.
- Expert Evidence Valuation means any Valuation of Real Property undertaken for the purpose of providing expert evidence in relation to a proceeding before a court or tribunal where the expert’s primary duty is to the court or tribunal (excluding a Valuation of Real Property undertaken for resumption purposes).
- Financial Reporting Valuation means any Valuation of Real Property undertaken for the purpose of the preparation and issue of financial reports by any entity in the general course of the entity’s operations. It excludes special purpose financial reports prepared in respect of a specific transaction including any sale, merger, takeover or fundraising.
- Insurance Valuation means any Valuation of Real Property undertaken for the purpose of advising on the insurable value or real property in connection with any proposed purchase of insurance.
- Resumption means compulsory acquisition of land (including compulsory acquisition or appropriation of Crown land) under the provision of any Act of the Commonwealth or a State authorising compulsory acquisition or appropriation of land.
We are currently in the process of preparing a Q&A document for our members, which will set out example scenarios and explain the transitional arrangements in more detail. The Q&A document will be made available to you in the next coming weeks.
We anticipate that the amended APIV Scheme will come into effect sometime in the last quarter of 2019.
If you would like further information on the Application, please contact the APIV office at firstname.lastname@example.org or (03) 9644 7505