RICS guidance note, UK

1 Risk, liability and insuranceGUIDANCE NOTEUK1st edition, April 2021 RISK, LIABILITY AND INSURANCERICS guidance note, UK1st edition, April 2021 Effective from 1 April 2021 Published by the royal Institution of chartered Surveyors ( rics ) Parliament Square London SW1P 3AD No responsibility for loss or damage caused to any person acting or refraining from action as a result of the material included in this publication can be accepted by the authors or rics . ISBN 978 1 78321 416 7 royal Institution of chartered Surveyors ( rics ) April 2021. Copyright in all or part of this publication rests with rics . Save where and to the extent expressly permitted within this document, no part of this work may be reproduced or used in any form or by any means including graphic, electronic, or mechanical, including photocopying, recording, taping or web distribution, without the written permission of rics or in line with the rules of an existing licence.

2 Typeset using TypefiIPiAcknowledgementsWorking groupAlexandra Anderson (RPC LLP)Joe Arnold (Arnold and Baldwin chartered Surveyors)John Baguley (Countrywide)Martin ConlonHugh Garnett ( rics )Andrew Gooding FRICS (Knight Frank LLP)Greg Harrison (Howdens)Michael Holden (Michael Holden chartered Surveyors)Robert Jones (CMS)Chris Lee (Savills)Anthony Major (Barclays)Charles Phayer (eSurv)David Reynolds (David Reynolds Building Preservation)Paul Tonkin (Hogan Lovells LLP) rics Standards leadsChristine O RourkeHugh GarnettProject managerSarah CrouchEditorsJo FitzLevertonMegan ReedIPiiRISK, LIABILITY AND INSURANCEC ontentsAcknowledgements .. iiRICS professional standards and guidance .. 1 rics guidance notes 1 Glossary .. 31 Introduction.

3 Scope and purpose English law/Scots law Effective date 72 The court's approach to professionals liabilities .. Breach of contract Negligence The differences between contract claims and negligence claims Damages The purpose of the work The legal entity that provides the professional services/personal liability How long after the services a claim can be brought 103 Liability caps.

4 134 Third-party reliance .. 165 Contractual terms .. Engagement letter Contracting entity/exclusion of personal liability Proportionate liability Liability caps Fees Scope of work Dispute resolution Third-party reliance Governing law and jurisdiction 226

5 Professional indemnity insurance (PII) .. 237 Conclusion .. 26 IPiiiRISK, LIABILITY AND INSURANCEA ppendix A: Valuations .. 27A1 The court s approach to professionals liabilities 27A2 Liability caps 28A3 Third-party reliance on valuations 29A4 Terms of engagement 30 Appendix B: Residential valuations and building surveys .. 32B1 Issues specific to valuations in the residential sector 32B2 Nature of building surveyors' liabilities 33B3 Liability caps 35 Appendix C: Valuations for commercial lending.

6 37C1 Bilateral loans 38C2 Assignment of your valuation engagement contract 38C3 Syndicated loans 39C4 Valuations for mezzanine financing 40C5 CMBS (Securitisation) 40C6 Crowdfunding and peer to peer lending 41C7 Restricting third-party reliance 42C8 Invoicing parties other than the client 43C9 Vacant possession valuations 43C10 Reinstatement cost 44C11 Summary: key questions 44 Appendix D: Valuations for investment funds and public offerings.

7 46D1 Public offerings including IPOs 46 Appendix E: Dispute resolution .. 47E1 Court proceedings/litigation 47E2 Arbitration 48E3 Expert determination 48E4 Mediation 48E5 Ombudsman 48 IPivRISK, LIABILITY AND INSURANCERICS professional standards and guidanceRICS guidance notesDefinition and scopeRICS guidance notes set out good practice for rics members and for firms that are regulated by rics . An rics guidance note is a professional or personal standard for the purposes of rics Rules of Conduct.

8 guidance notes constitute areas of professional, behavioural competence and/or good practice. rics recognises that there may be exceptional circumstances in which it is appropriate for a member to depart from these provisions in such situations rics may require the member to justify their decisions and of these provisions in legal or disciplinary proceedingsIn regulatory or disciplinary proceedings, rics will take account of relevant guidance notes in deciding whether a member acted professionally, appropriately and with reasonable competence. It is also likely that during any legal proceedings a judge, adjudicator or equivalent will take rics guidance notes into recognises that there may be legislative requirements or regional, national or international standards that take precedence over an rics guidance , LIABILITY AND INSURANCED ocument status definedThe following table shows the categories of rics professional content and their statusType of documentDefinitionRICS Rules of Conduct for Members and rics Rules of Conduct for FirmsThese Rules set out the standards of professional conduct and practice expected of members and firms registered for regulation by standardHigh-level standard developed in collaboration with other relevant professional statement (PS)

9 Mandatory requirements for rics members and rics -regulated guidance note (GN)A document that provides users with recommendations or an approach for accepted good practice as followed by competent and conscientious code of practice (CoP)A document developed in collaboration with other professional bodies and stakeholders that will have the status of a professional statement or guidance jurisdiction guide (JG)This provides relevant local market information associated with an rics international standard or rics professional statement. This will include local legislation, associations and professional bodies as well as any other useful information that will help a user understand the local requirements connected with the standard or statement. This is not guidance or best practice material, but rather information to support adoption and implementation of the standard or statement , LIABILITY AND INSURANCEG lossaryAlternative dispute resolution (ADR)The process of resolving disputes, including negligence disputes, other than by litigation.

10 See Appendix private dispute resolution process. See Appendix process whereby the benefit of all or part of a contract, is transferred by one of the original parties to a 'third party'. If a contract is assigned by the client, the assignee is effectively treated as the member's client. Assignment can be prevented by express words in the contract. See Appendix loanA simple type of commercial loan. See Appendix bracket of hypothetical reasonable valuations used to assess whether the valuation actually given was negligent. See Appendix madeThe basis on which most professionals (and all members ) professional indemnity insurance is provided. It means that the relevant policy for any claim is the policy in place when the claim is made (not when the work is provided to the client, or any other time).