Valuer Guidance Notes VGN... · 2020-03-04 · 2 | P a g e Zephyr Homeloans Valuer Guidance Notes Version 2.0 Version control Version Date Comments /Changes Edited by 0.1 12/11/2017

1 | P a g e Zephyr Homeloans Valuer Guidance Notes Version 2.0

Valuer Guidance Notes

November 2019

Important Notice These valuer guidance notes will be subject to updates in line with operational experience or Zephyr Homeloans lending policy changes. Please ensure that you are using the most up to date version at all times.


Version control Version Date Comments/Changes Edited by 0.1 12/11/2017 Initial draft Connells

0.2 18/12/2017 Final for approval Connells/Zephyr

0.3 06/07/2017 Approved with two amendments:

• Reference 2016 RICS guidance notes for HMO valutions

• Multi-unit freehold blocks can be up to 10 (ten) units

Zephyr

0.4 11/07/2018 Updated policy in respect of minimum floor area that the measure is made against internal measurements, rather than external as per discussion on 10/07/2018. Rolled back changes in 0.3 to support contract finalization. Points to be clarified post-contract.

Raymond Briggs (Zephyr)

0.5 20/09/2019 Draft version with tracked changes. Incorporates update on combustible cladding and clarification MMCs that incorporate excluded construction features. Also a query regarding HMOs with more than one kitchen.

Adam van Lopik (Topaz)

2.0 22/10/2019 Changes accepted and issued as V2.0 following telecom with Connells

Adam van Lopik (Topaz)


Contents Introduction ........................................................................................................................................................................ 5

Valuation company responsibility ............................................................................................................................. 6

Geographical Coverage ................................................................................................................................................... 6

Photographs ........................................................................................................................................................................ 6

Zephyr Homeloans valuation enquiries .................................................................................................................. 7

Valuation Report Types ................................................................................................................................................. 7

Valuation Report – section guidance ........................................................................................................................ 8

Application details ....................................................................................................................................................... 9

Property Type ............................................................................................................................................................ 10

Minimum property values ................................................................................................................................ 10

Flats and Maisonette’s ....................................................................................................................................... 10

Flats above commercial ..................................................................................................................................... 10

Ex Local Authority ............................................................................................................................................... 11

Property close to commercial (all property types) ................................................................................ 11

Lease term/Tenure ............................................................................................................................................. 11

Flying Freehold ..................................................................................................................................................... 12

Commercial use within the subject property ........................................................................................... 12

Shared Ownership ............................................................................................................................................... 12

Exposure Limits .................................................................................................................................................... 12

New build or < 10 years old. ................................................................................................................................ 13

Warranties .............................................................................................................................................................. 13

Disclosure of incentives and part exchange .............................................................................................. 13

Accommodation ........................................................................................................................................................ 14

Current occupancy ................................................................................................................................................... 14

Construction ............................................................................................................................................................... 15

Acceptable and Unacceptable construction types .................................................................................. 15

Walls .......................................................................................................................................................................... 15

Roof ............................................................................................................................................................................ 16

Combustible Cladding ........................................................................................................................................ 16

Commercial/Residential conversions ......................................................................................................... 17

Locality & Demand ................................................................................................................................................... 17


Services ......................................................................................................................................................................... 17

Condition or Property ............................................................................................................................................. 18

Excluded property types ................................................................................................................................... 18

Reports .......................................................................................................................................................................... 20

Movement ............................................................................................................................................................... 20

Arboriculture/Invasive Plant Species ......................................................................................................... 20

Japanese Knotweed ............................................................................................................................................. 20

Other.......................................................................................................................................................................... 21

Essential Repairs ....................................................................................................................................................... 22

Retentions ............................................................................................................................................................... 22

Rental Information ................................................................................................................................................... 22

Standard BTL .............................................................................................................................................................. 23

High Value Tenancy ............................................................................................................................................ 23

House in Multiple Occupancy (HMO) ............................................................................................................... 24

Multi-Unit Freehold Blocks ................................................................................................................................... 26

Capital valuation................................................................................................................................................... 26

Rental valuation .................................................................................................................................................... 26

Valuation for mortgage purposes ...................................................................................................................... 27

General Remarks ....................................................................................................................................................... 27

Valuer details .............................................................................................................................................................. 27

Comparables ............................................................................................................................................................... 28


Valuer Guidance Notes

Introduction

These guidance notes are intended for valuers instructed by Zephyr Homeloans via the Panel Manager,

Connells Survey and Valuation to provide a Basic Mortgage Valuation, re-types or re-inspections.

Zephyr Homeloans is a first charge mortgage provider and may request a valuation for various purposes

including;

• Buy to Let (purchase or re-mortgage)

• House in Multiple Occupancy (HMO), separate form provided, please see the dedicated HMO section

of these notes for full form completion instructions.

• Multi-Unit Freehold Blocks, separate form provided, please see the dedicated MUFB section of these

notes for full form completion instructions.

Valuers must check the instruction notes appended to the valuation instruction. These notes will detail the

purpose of the Valuation and any other relevant matters.

The various sections of the report consist mainly of tick boxes however some sections require the valuer to

make subjective comments. In order for the Underwriters at Zephyr Homeloans to obtain a full understanding

of the property and whether it is suitable security, the written content of the report must be clear and

unambiguous.

Where possible the valuer should write their comments in ‘plain English’ keeping the use of colloquialisms and

technical language to a minimum. All recommendations and assumptions must be clearly stated so that the

underwriters at Zephyr Homeloans can easily understand what the valuer is advising.

The valuer should adhere to the requirements of the current version of the RICS Valuation – Professional

Standards (Red Book) when preparing the report for Zephyr Homeloans.

The valuer must value the Property on a comparable evidence basis. Zephyr Homeloans does not accept

valuations on a rental yield basis.

In the current environment of heightened fraud and identity theft, the valuer must be extra vigilant, in order to

reduce the risk of such fraud or identity theft occurring in relation to a valuation. The valuer undertakes to advise

the client immediately of anything unusual to include suspected fraud, negligence, misrepresentation or

misstatement by any of its employees, agents, the broker, borrower of any other third party. The email address

to use when reporting such matters is; [email protected] and the SARS reporting template can be

found at the end of these notes.


Valuation company responsibility

● Valuers acting for Zephyr Homeloans are our representatives and are expected to act in a

professional and competent manner.

● Valuers must advise Zephyr Homeloans or the panel manager, Connells Survey and Valuation, of any

material conflicts of interest, e.g. if the valuer has an existing relationship with the homeowner.

● It should be noted that Zephyr Homeloans still requires roof space inspections to be undertaken.

Additionally, the provision of a reinstatement cost remains a requirement.

● Each valuation company must have their own internal complaints process and comply with RICS

Requirements.

● Each valuer undertaking a valuation MUST be part of the RICS Valuer Registration Scheme.

● All valuers must either be AssocRICS, FRICS or MRICS qualified.

● The valuation report is confidential and must not be discussed with the owner/vendor of the

proposed security property or any other third party claiming to be connected to the application.

● The Valuation report must be submitted in the format provided by Zephyr Homeloans.

Geographical Coverage

Zephyr Homeloans currently lend in England and Wales only.

The area within which the valuer may carry out valuations pursuant to this agreement is defined as follows:

● No more than a 25 mile radius from the surveyor’s office or place of work (if located outside the

M25) and is subject to the valuer having expert knowledge of the area in which the property is

located.

● Restricted to a 5 mile radius from the surveyors office or place of work (if located within the

M25).

● Adjusted coverage may be applied at the absolute discretion of Connells Survey and Valuation

and Zephyr Homeloans.

Photographs

Zephyr Homeloans requires the following five (5) photographs to be attached to the form, Street view, Front,

Rear, Kitchen and Bathroom. Where an issue is identified (e.g. structural), a photo of the potential issue should

also be provided


Zephyr Homeloans valuation enquiries

If you have any questions relating to the valuation you can contact the panel manager, Connells Survey and

Valuation, on the following numbers;

Valuation case progress - Call 01525 218602 between 9.00am and 5.30pm, Monday to Friday.

Post valuation enquiries - Call 01525 218647 between 9am to 5.30pm Monday to Friday.

Please have the property address and postcode, or the case reference number of the property to hand prior

to the call.

Valuation Report Types

Zephyr Homeloans will instruct a written valuation (or a re-type of the primary lender’s valuation report) to

provide independent verification of property value, condition and restrictions. The valuation and re-type

report returned will be in a format stipulated by Zephyr Homeloans. External appraisals (drive-by valuations)

are not used by Zephyr Homeloans for the purposes of loan origination.

Re-type reports are only accepted if the report related to an inspection conducted for a primary mortgage lender

for a mortgage application made simultaneously with a Zephyr Homeloans loan application subject to the

following:

• The original valuation not being a re-type direct from the applicant.

• The valuer being on Zephyr Homeloans valuation panel.

• The time period between original valuation and requested retype is no more than 28 days (except by

specific exception as instructed by Zephyr Homeloans).

• The comparable evidence underlying the re-typed valuation remains current. Confirmation from the

Valuer will be required.


Valuation Report – section guidance The following section provides guidance and information on the completion of particular fields and sections

within the valuation report. It follows the same order as the valuation form templates

The valuer should complete the entirety of the valuation report wherever possible, even when it is

identified that a property would not represent suitable mortgage security for Zephyr Homeloans.


Section name Guidance notes

Application

details

All fields will be pre-populated. If the address provided on the instruction is not

correct;

• If there are only minor errors in the form of the address and the valuer

is confident of the property being referenced, the valuation should be

completed and the valuer should enter the correct address details in the

General Remarks Section.

• Otherwise, Zephyr Homeloans must be contacted. The instruction will

be cancelled and a new instruction will be submitted for the correct

address.


Property Type Only one of the six property type options should be selected.

Minimum property values

Standard BTL property Min valuation is £ 75,000

HMO/MUFB/Flats above commercial – min valuation is £100,000

New build property – min valuation is £75,000

If valuation is going to be less than the minimum, the valuer should mark as not

suitable security, but still provide a valuation complete with comparables.

Flats and Maisonette’s

If a flat or maisonette the valuer is to indicate which floor it is located on.

Ground floor being zero, basement being -1. The valuer is also to indicate the

number of floors in the block.

Zephyr Homeloans will not lend on flats in a block with more than three floors

above ground floor which are not serviced by a lift. Top floor and attic can be

considered as one floor where they are part of the same flat.

• Studio flats must have a minimum internal floor area of 30 sqM

• Serviced flats or apartments are not acceptable

• Flats with an occupancy restriction are not acceptable

• Flat roofs are acceptable if covering is Copper, Lead, Zinc, asphalt, single

ply elastomeric membranes or mineralized felt.

The valuer is asked to indicate whether the flat/maisonette is converted and if so

the approximate year of conversion. (If within the last 10 years a suitable

warranty is required).

The valuer is also required to provide the number of units/flats within the block.

Flats above commercial

If the valuer confirms that the subject flat is above commercial details should be

provided in the dedicated text box.

Zephyr will consider flats above commercial subject to the valuer confirming

them to be readily saleable and readily mortgageable. The following should be

used as a guide;

• If any commercial activities in the block are likely to cause a nuisance by

virtue of noise, smell or unsocial hours, and therefore in the valuers

opinion makes the subject property not readily saleable and

mortgageable, a zero value should be returned with a full explanation of

why.

• Some flats over commercial premises have unsatisfactory access which

may involve passing through the business area, through yards



containing commercial refuse, or using poorly maintained external

stairs. If any of these factors apply the valuer should return a zero value

with a full explanation explaining this

Ex Local Authority

• The valuer is to indicate if the property was built by or is currently

owned by a local authority or housing association.

• If yes the valuer should indicate on a best endeavours basis the level of

privately owned or owner occupied by selecting one option from Low,

Medium or High.

• The valuer is also asked to indicate on a best endeavours basis the

approximate percentage of owner occupation or privately owned units.

(Please note, Owner Occupation on the form template should be read

as privately owned).

Property close to commercial (all property types)

Zephyr Homeloans will rely on the valuer to advise if saleability or

mortgageability is affected due to the proximity of the property to commercial

premises. If the valuer believes the value to be adversely affected to a point

where the property is not readily saleable, a zero value should be returned.

Otherwise the impact should be considered and reflected in the value provided.

A full explanation for doing so should be entered into the general remarks

section of the report.

Lease term/Tenure

If known the valuer is to indicate the remaining term of the lease. If the lease

term is unknown, a residual lease of 85 years should be assumed, and NK should

be entered into the remaining term box. A note should be added in the general

remarks stating that the lease term remaining has been assumed as 85 years.

If at a later date the residual lease is discovered to be less than 85 years, the

lease information will be referred back to the valuer who should seek suitable

comparable evidence or refer to the Beckett and Kay Mortgage Dependent

Graph of Relativity.

Freehold Flats are not acceptable. (Unless part of a Multi-Unit Freehold Block

which is being purchased by a single applicant, and has been instructed as such

specifically as an MUFB). Tyneside arrangements are also not acceptable.

Cross Tenure properties (criss cross lease) are not acceptable.


Flying Freehold

Flying freehold may be considered where less than 10% of the gross floor area of

the subject property extends over/under another and the Valuer states that re-

sale ability is unaffected. If greater than 10% flying/subsumed freehold the

application should be declined.

The exception to this is Modern Coach House style properties which are

acceptable.

Commercial use within the subject property

The valuer is to indicate if any part of the subject property is in or appears to be in

commercial use and if so state the percentage. Zephyr Homeloans do not accept

Live/Work units.

Shared Ownership

Zephyr Homeloans do not accept properties subject to a Shared Ownership

deed. The valuer should select the required box if this is the case and return a

zero valuer.

Exposure Limits

This is for information purposes only as Zephyr Homeloans will be monitoring

this, however if the valuer is aware of an issue the panel manager should be

notified.

It is important to consider exposure in relation to the number of properties to

avoid excessive concentrations, which may present difficulties in the event of a

forced sale. Applicant exposures are also important for the same reason.

Property Exposure limits – Zephyr will restrict lending to a maximum of a single

unit in developments of up to 7 properties, 25% of units in developments of

between 8 and 50 properties and 15% where the development comprises of 50

properties or more. The exception would relate to Multi-Unit Freehold Blocks

(MUFBs) where we may lend on the whole unit which may comprise up to 6

individual units.

The Zephyr Homeloans product team will provide regular updates on areas and

developments where our exposure limits have been reached.



New build or < 10

years old.

Zephyr Homeloans define a new build property as follows;

‘A new build property is one that has been recently constructed or converted

and is being sold for the first time as completed and ready for occupation or,

has been previously sold on this basis within the last twelve months’.

The minimum value acceptable for a new build property is £75,000

The valuer is asked to confirm if the property is under construction or complete.

If the property is under construction at the point of inspection a zero value

should be provided, with the completed value stated in the after essential

repairs box. It should also state that a reinspection is required.

Warranties

If the property has been built or converted within the last 10 years a suitable

warranty is required. The following is acceptable;

• NHBC Build mark

• NHBC Solo

• Zurich

• Castle 10 New Home Warranty

• LABC

• Premier Guarantee Certificate

• Build zone

• CRL Management Ltd

• UK Finance compliant Professional Consults Certificate’s may also be

accepted, if signed by a Qualified Architect, who is a corporate member

of the Royal Institute of British Architects, or Qualified Chartered

Building Surveyor, who is a corporate member of the Royal Institution of

Chartered Surveyors

• Evidence of appropriate valid personal indemnity insurance will be

required and the certificate must be for the benefit of the borrower(s).

The Architect/Surveyor must confirm that they have supervised the

whole project

Disclosure of incentives and part exchange

The valuer is asked to disclose if the transaction involves an element of part

exchange.

The valuer should confirm if the UK Finance Disclosure of Incentives form (DIF)

has been seen. If seen, details should be provided in the dedicated text box. If

the DIF has not been seen a value should still be provided. Zephyr Homeloans

may raise a PVQ at a later date to ask the valuer to confirm that the details on

the incentives form do not alter the valuation figures provided.

If the property is a new build the valuer should record the name of the developer



in the dedicated box provided.

Accommodation In this section the valuer is to indicate the number of relevant

rooms/lifts/garages/outbuildings etc.

If outbuildings are present, details should be provided in the dedicated text box.

The valuer is asked to provide an internal floor area of the dwelling. If less than

30 sqM a zero value should be returned.

Current

occupancy

The valuer is asked to indicate if the property appears to have been previously

occupied.

On a best endeavours basis the valuer is to indicate the number of adults

appearing to live in the property. It is recognised that this will not always be

known.

The valuer is asked to indicate if the property due to its layout, location or other

factors, is like to require a mandatory or discretionary HMO licence.

The valuer should also select the box if the property appeared to be subject to an

existing tenancy at the time of inspection.


Construction Property acceptability is based on a satisfactory valuation report from Zephyr

Homeloans’s appointed Valuer in accordance with the construction and valuation

policy detailed below. Non-standard construction will be assessed on individual

merit

Standard Construction can be broadly defined as masonry/timber frame clad

with masonry, under tiled or slated roofs. Non Standard construction can be

wide ranging and will be considered on individual merit. We will at all times be

guided by our Valuer as, dependent on the location and condition, we may be

prepared to lend on the property.

Modern Methods of Construction (MMC) will be considered on individual merit,

and Zephyr Homeloans will at all times be guided by the comments and

professional opinion of the valuer. As a general rule if the construction type

would be considered readily saleable and readily mortgageable it is likely to be

acceptable to Zephyr Homeloans.

Walls and roofs should be of a traditional construction and of a type that ensures

a ready future market for the property.

Acceptable and Unacceptable construction types

Walls

Solid Wall Construction Yes

Cavity Wall Construction Yes

Wall Type

Brick Yes

Natural Stone Yes

Reconstituted Stone Yes

Concrete Block Yes

Cob and Flint Yes

Concrete - Wimpey no Fines No

Concrete – Laing Easi Form No

Pre-Cast Reinforced Concrete (PRC) where the property has

been repaired under the PRC (Homes) Ltd repair scheme.

No

Large Panel Systems (LPS), no more than two storeys high

and subject to structural engineers report

Yes

Steel Framed Houses, (subject to being readily

mortgageable and saleable).

Yes

Timber framed houses, (with brick, reconstituted stone or

rendered block work)

Yes



Timber Framed – Inner and Outer Leaf (Unless MMC and

recommended by valuer)

No

Any property where there is ongoing movement and

monitoring is required.

No

Mundic properties where the property is not graded A 1,2

or 3 following a Petrographic Test

No

Property where high alumina cement or Mundic block has

been used in the construction

No

Prefabricated building and PRC construction (Unless MMC

and recommended by valuer)

No

Property which has been underpinned No

Property suffering from progressive structural movement No

Properties with floor areas of less than 30sqM (IFA) No

Roof

Timber frame covered with either tiles or slates Yes

Reed or Straw Yes

Copper Yes

Lead Yes

Zinc Yes

Asphalt Yes

Mineralized Felt Yes

GRP & EDPM Yes

If the valuer identifies any structural alterations or extensions the should (best

endeavours basis) indicate the approximate age of the work, and whether or not

Building Regulations or planning consent would have been required.

In general property with an anticipated lifespan of less than twenty-five years

beyond the end of the mortgage term and/or where the condition significantly

affects marketability is not acceptable.

Combustible Cladding

We require the Building Owner and/or its agent, as the 'responsible person'

under the Regulatory Reform (Fire Safety ) Order 2005, to produce a written

statement, prepared by a suitably qualified independent professional advisor

who is a member of one of the professional bodies approved by the Ministry of

Housing, Communities and Local Government (MHCLG) in Information Note 1 (or



any subsequent approved list), to confirm that the subject property meets the

requirements of the current guidance from MHCLG.

In the event that the statement identifies the presence of any aluminium

composite material (ACM), we require the Building Owner and/or agent to

produce written evidence that the external wall system complies with the testing

regime described in BS8414 and with the BR135 classification.

Commercial/Residential conversions

Zephyr Homeloans will limit exposure to inappropriate conversions and each

case will need to be judged on its individual merits.

Properties must be readily saleable, readily mortgageable and suitable for owner

occupation. This is most likely to be encountered as office to residential schemes

but also includes retail and agricultural conversions.

Conversions situated in desirable residential locations within good quality

buildings are likely to be considered acceptable but conversions situated in office

parks or where the predominant use is commercial/agricultural are unlikely to be

suitable.

The property must have the benefit of a suitable warranty.

Locality &

Demand

This section is intended to establish the mortgageability and saleability of the

subject property. The valuer is asked to give an opinion on a number of areas

including the likely market appeal of the property, taking into consideration the

sales activity in the area and potential planning applications.

If the valuer is aware of a situation where the property could be subject to a

compulsory purchase or clearance scheme details should be provided in the

dedicated text box.

Of the valuer notices boarded up or vacant properties in close proximity details

should be provided in the dedicated text box.

If there is a possibility of an occupancy restriction full details should be provided

in the box provided.

If the property is close to any high voltage electrical equipment full details should

be provided.

Services The valuer should select all boxes which are applicable to the subject property

from the following options; Water mains/private, Gas, Electricity, Central

Heating. The type of central heating should be reported in the dedicated text

box provided.

The valuer should indicate whether the property benefits from mains drainage or



a private system.

The valuer should confirm if solar panels are identified on the property. Solar

panels are acceptable subject to the valuer confirming that the property is

suitable security and where confirmation is gained from the conveyancer that

the terms of the lease meet the UK Finance minimum standards.

The valuer is to confirm if the property is subject to any shared access and if the

roads appear to be adopted.

If any easements or rights of way appear to be present details should be given in

the text box provided.

If the house/property is split into separate flats (on a best endeavours basis) the

valuer should confirm whether the flats appear to be separately metered. If not

known or not necessary ‘n/a’ should be selected.

Condition or

Property

The valuer is asked if the property is considered to be suitable security for Zephyr

Homeloans. If ‘no’ full details should be provided in the dedicated text box

provided. Careful consideration should be taken to the guidance notes keeping

in mind the requirement of the subject to be readily mortgageable and readily

saleable.

The valuer is asked if there is any evidence of structural movement and if yes,

does it appear to be historic and non-progressive. If there are any signs of an

ongoing problem full details should be provided in the dedicated text box and a

recommendation of a structure engineers report should be advised.

The valuer is also asked to report on any structural modifications which have

been effective in the text box provided.

If any of the following are thought to apply the relevant boxes should be

selected; Flooding, Subsidence, Heave and Landslip. Full details should be

entered into the text box provided.

The valuer is asked to indicate if the boundaries to the property are well defined

and if the total plot is 1 acre or less.

The valuer is also asked to comment if the property is on a steeply sloping site, or

if there are any trees within influencing distance of the property.

Excluded property types

• Mobile Homes

• Commercial Property

• Landlocked property

• Houseboats



• Property held on a commercial basis

• Property held on a Common hold basis

• Property with Planning Use classes Order other than C3 or C4

• Property with pre-emption clause in existence

• Property with restrictive covenants or saleability e.g. retirement

homes/houses or apartments

• Holiday Lets

• Right to Buy - unless purchased more than 5 years ago

• Property subject to a shared ownership deed

• Farms, small holdings or properties with agricultural restrictions in

place

• Studio flats and/or flats with a total floor area of less than 30 sqM

internal floor space

• Property where a Flying Freehold exists affecting more than 10% of the

gross external floor area

• Flat in a block with more than three floors above ground floor and

which does not have a lift. Note: top floor and attic can be considered as

one floor where they are part of the same flat.

• Flats or maisonettes in blocks exceeding 10 storeys are acceptable

subject to mandated approval by the funder

• Bed & Breakfast establishments

• Serviced Flats or Apartments

• Retirement Flats

• Park Homes

• Sheltered Accommodation

• Property affected by progressive Japanese Knotweed

• Property on which there is a local authority grant outstanding

• Live/work units

• Property with no kitchen or bath/shower room

• Property which has shared access where the applicant or a relative

controls the property/ies which share the access

• Property which has any shared services with any adjoining or adjacent

property which does not form part of the security

• Social Housing Schemes

• Property where material environmental hazards are present

• Property where saleability may be adversely affected by local planning

matters or by an unsatisfactory mining report

• Property which is being bought from the customer’s own limited

company


Reports Zephyr Homeloans may require a specialist’s report, for example:

• Timber and damp, electrical, trees (arboriculture), drains, roof, structural,

cavity wall tie;

• Mining report or metalliferous mining report (as these are obtained by

the solicitors, a special condition is imposed at offer);

If any such reports are require a special condition will be imposed at offer stating

a report needs to be obtained and the completed report will be forwarded to

valuer for review.

Examples may include the following. However if a specific report, which is not

mentioned is required, the valuer should select other and indicate in the text box

required the recommended requirements.

Movement

If the valuer indicates that the property is suffering from progressive movement,

or has been underpinned or otherwise subject to structural repair the security

will be rejected for mortgage purposes.

Alternatively, should the applicant wish to commission a structural engineers

report on the integrity of the property the case will be reconsidered only if:

• The structural engineer is suitably qualified (i.e., MISTRUCT.E.,

FISTRUCT.E, C.ENG., MICE), and

• The report is approved by the valuer who confirms that it will not affect

saleability, and

No commitment to lend will be given until the structural engineer’s report has

been seen and approved. If the valuer states that there is structural movement

or settlement but that it is non-progressive or of a historic nature then no further

action is required. Zephyr Homeloans will not consider any property which

requires monitoring.

Arboriculture/Invasive Plant Species

Japanese Knotweed

Properties with specific issues highlighted by the surveyor, including progressive

Japanese Knotweed are not acceptable to Zephyr Homeloans.

Zephyr Homeloans will adopt the following approach if Japanese knotweed is

discovered;

Valuers are to follow the guidelines set out in the RICS Information Paper on

Japanese Knotweed and Residential Property.



Properties assessed as category four (4) are not considered suitable security.

Property assessed as category three (3) or two (2) will be subject to full retention

and only considered acceptable security once a suitable management plan has

been put in place with the benefit of a long term guarantee. In addition payment

needs to be made up front and held in escrow in order that the full treatment

programme is guaranteed to be undertaken, (solicitor to confirm). The

treatment contractor must be a member of the Property Care Association

Invasive Weed Control Group.

Properties assessed as category 1 do not require further investigation.

• Trees within influencing distance should be reported.

Other

• Properties built on or near contaminated land that may affect future

saleability may not be acceptable

• Properties deemed at risk by local mining by the valuer are not

acceptable.



Essential Repairs The property must be habitable, readily saleable and / or rentable, structurally

sound and be able to have unconditional buildings insurance arranged upon it that

covers full rebuilding and replacement costs to the property including all

professional fees and the costs of meeting planning and local authority

requirements.

Retentions

The mortgage advance may be wholly or partially retained pending completion of

works required bringing the property to a suitable condition for lending, subject to

recommendations made by the Surveyor.

When the valuer recommends that part of the proposed mortgage amount is

retained until specified property improvements are completed, the Mortgage

Offer will need to reflect the valuers’ comments. Once Zephyr Homeloans are

advised that the required work has been completed, they will instruct the original

valuer to re-inspect the property.

The minimum retention should be no less than £3,000. Retentions should reflect

impact on value, not cost of work.

Rental

Information

Taking into consideration the basis of the valuation e.g. Standard BTL, HMO,

MUFB, the valuer is asked if there is suitable rental demand in the area. If the

valuer answers this ‘no’ a full explanation should be provided in the dedicated text

box.

Properties considered suitable for private renting are those that show no works

required to make a property liveable and lettable.



Standard BTL The valuer is asked to provide their opinion of the monthly market rent assuming

a 6 or 12 month AST is, or will be in place, with the subject property in its current

condition.

If improvements could be made to the property, or if essential repairs are required

in order to make it suitable for private renting an after works of improved

condition rental valuation should be provided.

The valuer is to confirm if their valuation is based on a furnished or unfurnished

basis.

High Value Tenancy

Where the rental income exceeds £100,000 per annum from one property, the

tenancy is considered to be a ’ Common Law Tenancy’ as opposed to an ‘Assured

Shorthold Tenancy’ . It is to be noted that the figure of £100,000 is annualized

and, therefore, if the proportional monthly rental is greater than £8,333.33 per

month for a shorter term (e.g. for 6 months) the tenancy is still not an AST. This

type of tenancy is acceptable subject to recommendation by our appointed valuer.

If there are any other matters which may impact on the ongoing demand for

residential letting, the valuer should select yes and provide full details in the

dedicated text box provided.

If the valuer considers demand for the subject property to be on an ‘investor to

investor’ basis only, full details should be provided in the dedicated text box.


House in Multiple

Occupancy (HMO)

Property occupied by at least 3 tenants, forming more than 1 household and with

shared toilet, bathroom or kitchen facilities.

The method of calculating rental value will be on the basis of the aggregated

individual room rentals (furnished) without deduction of landlord’s costs.

Should the aggregated rental values of the above be less than what the property

would let on an unfurnished AST basis; the latter should be given, together with

supporting commentary.

The maximum number of lettable rooms should be no more than 6 (six) and the

rental figure should be supported on a comparative basis. The construction should

be considered standard as per the construction section of these notes.

Investment yield based valuations are NOT acceptable.

Comment should also be made on the requirements for any licensing and

compliance with current legislation, including the Housing Act 2004, together with

similar legislation in Wales. The valuer is also expected to have knowledge of (and

report on) any local variations such as Article 4 Directions and Discretionary

Licensing.

For HMOs, the minimum capital valuation of the property should be no less than

£100,000.

The valuer is asked to indicate whether or not the property is lettable as an HMO

in its current condition. If no is selected full details should be provided. and a zero

value returned.

The valuer is asked to confirm if there is suitable tenant demand for multiple

occupation in the area. If no is selected the final question in this section ‘Any other

matters which may have an impact on the ongoing demand’ should also be

answered yes and full details provided.

The valuer is to confirm the current passing rent (if known or as reported). The

valuer is then asked to provide their opinion on the monthly sustainable rent likely

to be achieved on a furnished basis in the properties current condition and the

likely rental if the property was presented in an improved condition.

On a best endeavours basis the valuer is asked to indicate if an HMO licence is

required, and if so which type, e.g. mandatory or discretionary.

The following circumstances are not acceptable to Zephyr Homeloans, if

applicable zero value should be returned with a full explanation of why;

• Heavily converted HMOs unless suitable comparables can be obtained



and there is sustainable demand.

• Hostels

• Hotels

• Properties where any tenant has a right of tenure not determined by a

six month AST or shorter term periodic tenancy agreement. Specifically

(but without limitation) any property with one or more tenants holding

an Assured Tenancy is not acceptable

• Properties which, in the opinion of the valuer, in any part provide

accommodation which is not fit for human habitation.

• No more than one kitchen

The Valuer is to use the Zephyr Homeloans HMO form (ZH3).


Multi-Unit

Freehold Blocks

Taking a single mortgage for a Multi-unit Freehold block (single freehold) is

acceptable providing the block comprises of a maximum of 6 (six) individual units.

They may constitute a purpose built block of flats or a house converted into

individual units. Each unit will be the subject of a separate tenancy agreement.

The units must also be physically self-contained including services and above

30sq.M. (Internal floor space). If below 30sqM a zero value should be returned

along with a full explanation of why.

Capital valuation

Where the Client is lending against a freehold block (Maximum 6 Flats), the Valuer

is to value the freehold of the property on the basis the block will be purchased by

an investor on an open market basis but discounted to reflect local market

conditions, the property is a freehold block, all units are being purchased at the

same time and assuming a single AST on each flat.

The resulting value is likely to be a figure lower than the combined market values

of the individual flats within the block. Justification should be provided if no

discount has been applied.

Rental valuation

The rental value of a freehold block will be the sum of sustainable rents achievable

in the open market for each of the flats within the block. Please note as well as

breaking down the rents which you feel each flat will achieve individually on the

form, you will need to total these up on the ‘total market rent box’.

The valuer is asked to provide the total number of units, and provide their opinion

of whether or not there is suitable rental demand for the subject units in the area.

If no is selected to the demand question a full explanation should be provided in

the dedicated free text box. If no demand is identified, a zero value should be

provided.

By individual unit the valuer is asked to specify the number of bedrooms, kitchens,

living rooms, Bath/WC/Shower. The valuer is also asked to provide the GEA for

each unit along with the individual anticipated rents. If a 6th unit is present, these

details should be provide in the over flow free text box.

The valuer is asked if the units appear to be individually metered for utilities.

If the valuer feels there are any other matters which may have an impact on the

ongoing rental demand for the security they should select yes, and provide full

details in the box provided.

Finally the valuer is required to provide the total rent which the block is expected

to achieve.



Valuation for

mortgage

purposes

The valuer is asked whether or not they have previously valued the property

within the last 12 months. If yes, no further comment is required and the box can

be left blank.

If the property is considered suitable security, a current market value should be

provided on the basis specified by the instruction type/security type, as defined

within these guidance notes. The market value of the property should reflect its

present condition, taking into account recommended retentions.

If essential repairs are required, or the property is an incomplete new build the

after works/after completion valuation should be supplied in the dedicated box.

The purchase price, or value as estimated on the instruction should be added into

the dedicated box provided.

A BICS figure should be inserted into the dedicated box. If the valuer feels there is

a possibility that Buildings Insurance will not be accepted on standard terms, they

should select yes and provide full details in the dedicated text box.

General Remarks This section is for any additional comments or observations about the subject

property.

Valuer details The valuer should check that these fields are all completed and accurate. They

should also confirm that the instruction was received from/on behalf of Zephyr

Homeloans.

Due to the electronic submission of this form, a physical signature is not

required.



Comparables Three comparables should be provided to support the capital valuation along with

the rental valuation which the valuer has provided. These should be in the valuer’s

opinion, the most suitable and appropriate comparables available.

With respect to the capital valuation the comparables should ideally be located

within 5 miles of the subject property and sold on the open market within the last

6 months. All should be completed sales. The comparables should also ideally be

within 10% of the valuation provided.

If three comparable properties cannot be identified within the above criteria, the

valuer must give an explanation in the additional comments boxes provide of

either (a) why fewer than 3 comparables have been provided, or (b) why it is

acceptable that the suggested/ideal criteria have not been met in all cases.

Examples of (b) may include:

• Insufficient local sales in the immediate vicinity within the last 6 months but

evidence shows that the local market has been flat and so an older

comparable has been used.

• Due to lack of comparables, one of the properties is an agreed sale price

from a local (named) estate agent which has not yet sold or been recorded

with the Land Registry/Registers of Scotland.

In the case of Multi Unit Freehold Blocks, the comparables selected should be an

appropriate snapshot of the various units which make up of the block as a whole.

E.g. if the block has four units and three of them are 2 beds, with the fourth being

a 1 bed, the comparables should be weighted towards 2 bed flats (two x 2 beds,

one x 1 bed).

The final question at the end of the comparable section relates to non-standard

construction properties. If the property is considered to be outside of standard

construction, is it likely to perform differently in a downturn when compared to

more standard properties? If yes is selected full details should be provided in the

dedicated text box provided.


Documents

Valuer Guidance Notes VGN... · 2020-03-04 · 2 | P a g e Zephyr Homeloans Valuer Guidance Notes Version 2.0 Version control Version Date Comments /Changes Edited by 0.1 12/11/2017