Australia & New Zealand
Valuation and Property Standards

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11.0 Australia and New Zealand Real Property Guidance Notes

11.1 ANZRPGN 1 Disclaimer Clauses and Qualification Statements

ANZRPGN 1 Disclaimer Clauses and Qualification Statements 11.1 (PDF 45 KB)

1.0 Introduction

  • 1.1 Purpose

  • The purpose of this Guidance Note is to provide advice to members in the drafting and notifying disclaimer clauses and qualification statements when reporting to clients.
  • 1.2 Status of Guidance Notes

  • Guidance notes are intended to embody recognised 'Good Practice' and therefore may (although this should not be assumed) provide some professional support if properly applied.
    While they are not mandatory, it is likely that they will serve as a comparative measure of the level of performance of a Member. They are an integral part of the Valuation and Property Standards Manual.
  • 1.3 Scope

  • This Guidance Note applies to members reporting to clients on any solution to a property problem. It relates specifically to the need for, and the drafting and notifying of, disclaimer clauses in those reports and should be used in conjunction with other guidance notes and practice standards which are either over-arching or directly applicable to the
    type of property, purpose or issues involved.
  • 1.4 International Valuation Standards

  • This Guidance Note recognises the International Valuation Standards 1 and 2, and the International Valuation Application 2, effective from 2007 by the International Valuation Standards Committee and it is intended to be consistent with the concepts and definitions contained in those standards, however, there may be departures from IVSC
    Standards to reflect Australian & New Zealand law and practice.
  • 1.5 Unlikely Instructions if Seek Exemption

  • Members are unlikely to be given instructions to value or give advice on property if they seek exemption from liability to their clients.
  • 1.6 Protect from Unrelated Third Parties

  • They may, however, wish to protect themselves from unrelated third parties by attempting to limit the class of person to whom a duty of care may be owed. For that purpose members will often, and indeed, may be required by their professional indemnity insurer to, use a variety of third party disclaimers.
  • 1.7 Qualification Statements

  • Similarly, a Member may wish to include qualification statements in a property report to bring to the attention of the reader assumptions and/or other issues concerning factors which might affect the property, and ultimately its value and any other conclusions in the report.

2.0 Third Party Disclaimer Clauses

  • 2.1 Third Party Disclaimer Clauses

  • Third Party Disclaimer Clauses can take many forms, but would usually contain one or more of the following components:
    • • the purpose for which the valuation was prepared.
    • • the person for whom the report was prepared.
    • • a statement as to who can rely on the information contained in the report.
    • • a statement that the signatory/firm accepts no responsibility (other than to the client) for the document or its contents.
  • 2.2 Not Able to Exclude Liability

  • A disclaimer will not, of itself, be able to exclude a member's liability in negligence where such a liability would otherwise exist. [Refer Barwick C.J in the Evatt's case and Allen J in Burke and Ors v Forbes Shire Council (1987), Supreme Court of New South Wales, Australian Torts Reports 80-122].
  • 2.3 Disclaimer Clause May be Effective

  • However, in spite of those rulings a disclaimer clause may be effective. The presence of such a clause is one factor which could be considered relevant in establishing whether there was a sufficiently close relationship between the parties, in particular whether it was reasonable, in the circumstances, for the third party to rely upon the information set out in the report.
  • 2.4 Legislation

  • Similarly, under the various legislation e.g. Federal Trade Practices Act and the various State Fair Trading Acts in Australia, and the Fair Trading Act in New Zealand, it is not possible to avoid liability to third parties simply by stating that the member does not accept responsibility to that person.
  • 2.5 May be Effective Where Limitation Reasonable

  • A disclaimer may be effective to avoid liability under these acts where the limitation upon liability to third parties sought to be created by the member is reasonable having regard to all the circumstances including the instructions provided,
    the purpose of the report, the intended circulation of the report (who is likely or intended to receive and rely upon it) and the clarity of the disclaimer.
  • 2.6 Sufficient Warning to Third Parties

  • In such circumstances, the third party disclaimer will be effective because it provides a sufficient warning to third parties that it may not be safe to rely upon the report without further recourse to the author. A report containing such a third party
    disclaimer may be held not to be misleading or deceptive to a person of the class of third parties to which liability has been disclaimed.
  • 2.7 Specifically Drafted

  • Accordingly, at both common law and under the Trade Practices Act and state Fair Trading Acts in Australia, and the Fair Trading Act in New Zealand, the most effective third party disclaimer will be one that is specifically drafted for the circumstances of the particular report and which, thereby reflects the instructions, purpose and intended recipients
    of the report.
  • 2.8 Most Impact at the Beginning of Report

  • Generally, the clause is more likely to be effective if included at the beginning of the report.
  • 2.9 Ambiguity

  • Where there is any ambiguity in the meaning of the clause, a Court is likely to interpret the disclaimer in a manner which is least helpful to the party relying on that clause. It is therefore necessary to consider carefully each set of
    instructions and to adopt clear, concise wording appropriate to the particular valuation or property report being undertaken.
  • 2.10 Inappropriate Disclaimer

  • Members should also note that the use of a third party disclaimer, where the disclaimer is inappropriate to the instructions, purpose and intended recipients of the report, could itself constitute misleading or deceptive conduct in breach of the Federal Trade Practices Act or State Fair Trading Acts in Australia, and the Fair Trading Act in New Zealand.
  • 2.11 Instruction Paragraph Details

  • Ideally, the instruction paragraph should set out the details of the party issuing the instruction, the date of their written instructions, the party to whom the report is addressed, the names of any other parties to whom liability is extended under the report and the purpose of the report. For example:
  • Acting on written instructions from ... dated ... on behalf of ..., we have inspected the property situated at ... for the purpose of assessing the current Market Value of that property for mortgage security purposes.
    This valuation may only be relied upon by ... The report has been prepared for the private and confidential use of the above parties and it should not be reproduced in whole or in part or relied upon for any other purpose or by any party other than ... without express written authority.

3.0 Qualification Statements

  • 3.1 Highlight Factors Affecting Reliability

  • Qualification statements should be used whenever the quality of the information provided by the member can be improved by highlighting any factor which may affect the reliability of that information.
  • 3.2 Clearly Inform the Reader

  • Qualification statements should clearly inform the reader of:
    • • any factors which might affect the reliability of information in the report;
    • • any additional steps which the reader should take to make the information more reliable;
    • • the potential effect on the value if the information is not correct.
  • 3.3 Not a Substitute - Highlight Limitations

  • Qualification statements should not be used as a substitute for the member's own reasonable enquiries and verification of information. They do, however, have a legitimate role in highlighting particular aspects of the instructions, limitations upon the extent of enquiry, which the member is reasonably able or expected to carry out, and/or limitations in expertise.
  • 3.4 Most Impact Adjacent Information Intended to Qualify

  • Qualification statements will have the most impact on the reader if they are included in the body of the report immediately adjacent to the information which they are intended to qualify. Where particular qualification statements (including assumptions) are of central importance to a particular property report, it may be good practice to repeat those qualification statements in a prominent place such as adjacent to the conclusion or statement of valuation opinion.
  • 3.5 Mould to the Circumstances

  • While it is useful to have a standard set of commonly used qualification statements to act as a reminder or 'trigger', members should take care to mould the appropriate qualification statements to the circumstances of each particular report.
    A slavish adherence to standard qualification statements may undermine the effectiveness of those statements.
  • 3.6 Appended Page Less Useful

  • Similarly, a page of qualification statements appended to a property report may not assist the reader of the report to focus on the issues and may be less useful in assisting the Member to resist allegations of negligence and/or misleading or deceptive conduct.
  • 3.7 Must Inform the Reader

  • Qualification statements d• not effect. In order to be of assistance in minimising liability they must actually inform the reader in a way that allows the reader to assess the information provided by the property report in a balanced and informed manner. By doing so qualifications will assist the member to meet his or her duty of care and avoid information in the property report creating a misleading or deceptive impression.
  • 3.8 Examples Relevant to Situations

  • Some examples of qualification statements which may be relevant to situations commonly encountered by members are set out below. The manner in which these examples are designed to address limitations in the member's role, instructions or expertise should be noted. They may assist to draft specific qualification statements to address particular circumstances or reports, however they should be used as a guide only.
  • Disclaimer clauses should be specifically designed to suit particular instructions as appropriate.
  • 3.9 Site Survey Member Generally not Qualified

  • The member is often asked to state that the improvements on a property are located within the boundaries of the site. Generally the Member is not qualified to make that certification, unless also qualified and registered as a Surveyor.
  • 3.10 Survey Qualification

  • The Institute suggests that the following qualification may be appropriate for inclusion in reports.
    'A current survey has not been sighted. The valuation is made on the basis that there are no encroachments by or upon the property and this should be confirmed by a current survey report and/or advice from a Registered Surveyor. If any encroachments are noted by the survey report, the member should be consulted to reassess any effect on the value stated in this report'
  • 3.11 Town Planning/Resource Management Verbal Enquiries

  • In most instances a member will only make verbal enquiries of the Local Authority or the State Planning Department as to the zoning or planning area of a property. In some locations - it is not possible to obtain a 'zoning or planning area certificate' and obtaining written confirmation of zoning can take considerably more time than is generally available to the Member and/or the client.
  • 3.12 Extent and Nature of Enquiries

  • It is therefore necessary to set out the extent and nature of the enquiries made in ascertaining the zoning and development requirements of the subject property. For example:
    Town planning information was verbally obtained from offices of the Town Planning Department. ........................ Council, however, we recommend that this zoning or planning area should be verified by application to Council for the issue of a zoning certificate pursuant to Section 149 of the Environmental Planning and Assessment Act, 1979.
  • 3.13 Environmental/Contamination Issues

  • Increased Awareness
    An increased awareness of environmental issues in the community today has brought about a need for members reporting on property to be conscious of influences which may affect the value of a particular property at the time of reporting or at some time in the future.
  • Issues Include
    Those issues may include:
    • • contamination - through petroleum or chemical products;
    • • nutrient management for properties adjacent to rivers/ streams or over underground water supply sources;
    • • conservation - including rare flora and fauna species;
    • • Native title claims.
  • Examples
    Some examples of clauses relevant to this issue include the following:
  • • Environmental Issues
  • Our enquiries at ....... Council indicate that the site has not previously been utilised for any industrial or manufacturing use or for the storage (either above ground or underground) of any chemical substance. Our verbal enquiries at EPA indicate that the Authority is unaware of the existence of any site contamination. Whilst our inspection of the site surface confirms the results of these enquiries, we have not investigated the site beneath the surface or undertaken vegetation or soil sampling. This valuation is therefore subject to a satisfactory contaminated site assessment report from environmental consultants.
  • or
  • The site is (or has been) occupied by an undertaking which, having regard to the nature of process or chemicals used or stored, has a potential to cause soil contamination. Whilst our enquiries at EPA indicate that the Authority is unaware of contamination, we recommend a site inspection by an Environmental Consultant.
  • • Petroleum products
  • The subject property is operated as a service station and workshop and therefore fuels, oils and other products capable of causing contamination are used on the site as part of the operation. There are no visible signs of any pollution on the property; however, we are unable to certify that there is no contamination of the property beneath the surface of the soil.
  • • Asbestos
  • Inspection of the improvements showed the use of asbestos products in the building. We must point out that we are not experts in this area and therefore, in the absence of an environmental consultant's report concerning the presence of any asbestos fibre within the subject property, this valuation is made on the assumption that there is no health risk
    from asbestos within the property. Should it subsequently transpire that an expert report establishes that there is an asbestos related health risk we reserve the right to review this valuation.
  • • Pest Affectation
  • The subject property is located in an area considered susceptible to termite infestation.
    Inspection of the subject improvements did not reveal any apparent termite infestation.
    This should however, be confirmed by a certified pest control firm.
  • • Right to Review
  • The right is reserved to review and if necessary vary the valuation figure if any contamination or other environmental hazard is found to exist.
  • 3.14 Improvements

  • Extent of Investigations
    In describing the improvements to a property, and their condition, it is important to highlight in the report the extent of the member's investigation as to the structural integrity of the building and its plant and equipment. For example:
    • An inspection of all readily accessible parts of the improvements on the property has been carried out by the member.
    • We have not sighted a qualified engineer's structural survey of the improvements, or its plant and equipment. The member is not a building construction and/or structural expert, and is therefore unable to certify as to structural soundness of the improvements.
    Prospective purchasers or mortgagees would need to make their own enquiries in this regard.
    • We have not sighted a structural report on the property nor have we inspected unexposed or inaccessible portions of the premises. We therefore cannot comment on the structural integrity, defect, rot or infestation of the improvements nor can we comment on any knowledge of the use in construction of material such as asbestos or other materials now considered hazardous.
  • 3.15 Tenancy Details

  • Extent of Investigation of Lease Details
    In reporting the specific lease details of a property it is important to advise the extent of the investigation of lease documents and other supporting documentation undertaken by the Member.
    Valuation of a Proposed Development
    On occasions, particularly when undertaking an 'as if complete' valuation of a proposed development, lease negotiations or preparation of documentation may not have been concluded. In those circumstances it is necessary to specify in the report that the valuation is subject to satisfactory conclusion of those lease negotiations and the sighting by the member of a stamped lease agreement by the parties. For example: This assessment of Market Value is based on the assumption that the proposed lease agreements outlined earlier in this report are all executed, signed and stamped.
    Upon being stamped those documents should be referred to the member for sighting to confirm that the particulars of the document concur with those set out in this report.
  • 3.16 Value As If Complete

  • Requires a Variety of Assumptions
    In Australia it is normal practice in valuing a proposed development for mortgage security purposes to assess the market value of that development as though the property were completed at the date of valuation. Such a process requires a variety of assumptions to be made, which may include:
    • • construction and development costs;
    • • in accordance with plans and specifications at the time of valuation;
    • • the impact of existing and future competition;
    • • the level of sale prices; and
    • • in the case of income properties, the likely level of rents, the lease-up period, rental concessions and commissions, capitalisation rates, discount rates, etc.
  • 3.17 Set Out in Detail Assumptions Made and Qualifying Clauses

  • It is therefore imperative that the Member, in undertaking an 'As If Complete valuation, sets out in detail the assumptions made and inserts a qualifying clause in the valuation report stating that the valuation is subject to the assumptions
    outlined in the report, particularly where those assumptions are based on purported lease negotiations or pre-sale contracts. These qualifying clauses could include:
    • • Satisfactory completion of the improvements in accordance with the plans, specifications and details as provided.
    • • An inspection by the valuer following practical completion of construction.
    • • Confirmation or variation of the original valuation figure relevant to the original valuation date, following an inspection of the project and any leases after practical completion.
      • Issue of all relevant approvals including a satisfactory building completion certificate under the appropriate legislation.
      • Sighting of any reports from other experts who have provided advice in aspects of the construction of the buildings.
      • Such other matters/issues that the valuer is of the opinion should be drawn to the attention of the lender.
      • The right to review and, if necessary, vary the valuation if there are changes in the project itself or leasing.
      An example of what could be stated follows:
  • 'The Value As if Complete assessed herein is the Market Value of the proposed improvements as detailed in the report on the assumption that all construction had been satisfactorily completed in all respects at the date of this report. The valuation reflects the valuer's view of the market conditions existing at the date of the report and does not purport to predict the market conditions and the value at the actual completion of the improvements because of time lag.
    Accordingly, the 'As If Complete' valuation must be confirmed by a further inspection by the valuer, initiated and instructed by the lender, on completion of improvements. The right is reserved to review and if necessary, vary the valuation in this report if there are any changes in relation to the project itself or in property market conditions and prices'.

4.0 GST Qualification

In analysing the sales and/or leasing evidence referred to herein, it is noted that we have attempted to ascertain whether or not the sale price/rental is inclusive or exclusive of Goods and Services Tax (GST). In relation to sales evidence, it is emphasised that Land Titles Offices in Australia and the Land Registry Offices in New Zealand do not currently differentiate between or record whether or not the sale price is inclusive or exclusive of GST.
Where we have not been able to verify whether or not GST is included in the sale price or rental, we have assumed that the record of sales price or the rental is inclusive/exclusive of GST. Should this not be the case for any particular sale or letting used as evidence, we reserve the right to reconsider our valuation.