New property valuation obligations on lenders
Following French Government Order 2016-351 of 25 March 2016 transposing Credit Directive 2014-117 EU and its enacting decree 2016-607, from the 1st July 2016 lenders must meet new obligations, particularly in relation to property valuation.
- APR (Annual Percentage Rate of Charge)
In addition to lenders fees, insurance, compulsory guarantees and account opening and maintenance fees, the APR must include “the cost of valuing the property excluding registry costs related to transfer of ownership of the property”.
- Determination of Loan to Value Ratio
This is the maximum amount of loan available compared to the value of the property. The enacting legislation stipulates that this ratio must be stated on the loan. Cofaris Evaluation has anticipated this by already indicating the LTV ratio in its assessment reports.
- Who can value a property?
According to article R.312-0-8 of the enacting legislation, the property valuation must be performed by a property expert.
“1. Either an external valuer, either a natural person or legal entity that is a valuation expert and has no connection to the lender, whether of subordination, family or capital ties and which has no personal economic interest in the property being valued.
Or an internal valuer, either a natural person or legal entity that does not meet one or more of the conditions listed in para 1 subject to:
– The valuation task being functionally and managerially independent of the credit decision making process and
– The lender implementing measures to guarantee the absence of conflicts of interest and influence on the valuer”.
- Capabilities of the Property Expert
According to Article R.312-0-9 the enacting legislation specifies that the valuer must demonstrate professional skills obtained from:
“1. Either a second cycle higher education diploma with specific education on property and professional experience of at least three consecutive years with a property valuation expert or a property valuation company.
Or a higher education diploma with specific property training leading to a degree in that field and professional experience of at least two consecutive years with a property valuation expert or a property valuation company.
Or seven consecutive years of property related professional experience, of which at least four years is in the area of property valuation with a property valuation expert or a property valuation company.”
In addition as Government Order 2016-351 of 25 March 2016 stresses, the property expert must apply “reliable valuation standards which take into account internationally recognised standards”.
There are three international standards: TEGoVA, RICS and IVCS. Cofaris’ property experts who are REV (Recognised European Valuer) certified by TEGoVA have the experience, qualifications and international standards to meet the requirements laid down by the Order and its enacting legislation.
Our teams are ready to answer any questions you have or requests for additional information on the new rules.
Read the full enacting legislation 2016-607 here.
The full text of Order 2016-351 can be found here.