UNIFORM STANDARDS OF PROFESSIONAL REALTY CONSULTING PRACTICE @SPRCP) (SECOND EDITION, JULY 14, 2016) Prepared and recommended by DOMINGO D. DE VERA, Licensed Appraiser /Comsuliant, For Promulgation hy the PRC-PBRESTABLE OF CONTENTS UNIFORM STANDARDS OF PROFESSIONAL REALTY CONSULTING PRACTICE ( USPRCP ) INTRODUCTION PREAM THICS PROVISION COMPETENCY PROVISION coo... DEPARTURE PROVISION JURISDICTIONAL EXCEPTION ...0 SUPPLEMENTAL STANDARDS DBPINITIONS = STANDARDS AND STANDARDS RULES SYANDARD 1 REAL ESTAT REAL PROPERTY CONSULTING STANDARD 2 REAL ESTATE / REAL ESTATE CONSULTING. REPORTINGUNIFORM STANDARDS OF PROFESSIONAL REALTY CONSULTING PRACTICE (USPRCP) PREAMBLE A professional real estate consultant must arrive at and communicate his competent, disinterested and unbiased advice, professional guidance, and sound judgment in a manner that will be meaningful to the client and will not be misleading to the public. This Standards of Professional Realty Consulting Practice describes the desirable standards of the real estate consulting practice. The important rale of the realty consultant demands competency and ethical standards on those who are in the practice. These standards begin with an ETHICS PROVISION for integrity, objectivity, independent judgment, and ethical conduct. The COMPETENCY PROVISION requires observance as a responsibility prior to acceptance of an engagement. DEFINITIONS applicable to these Standards provide clarity in interpretation. The standards contain binding requirements and specific guidelines to which the DEPARTURE PROVISION may apply under certain limited conditions. Those limited conditions do not include departure from the ETHICS PROVISION, COMPETENCY PROVISION and DEFINITIONS section. These standards provide procedural guidelines in performing consulting service and in the manner in which the service is communicated. STANDARDS 1 and 2 relate to the development and communication of real estate consultancy. These standards are for realty consultants and the users of their services. Consultants must observe these Standards to achieve a high level of professional practice. The users of consultancy services should demand work performed in conformance with these Standards.ETHICS PROVISION Because of the fiduciary responsibilities inherent in professional practice, the consultant must observe the highest standards of professional ethics as pravided by the ETHICS PROVISION on Conduct, Management, Confidentiality, and Record Keeping Conduct A Consultant must not engage in conduct that Is unlawful, unethical, or Improper. A Cansultant who acts as 2 disinterested third party In rendering an unbiased consulting service must perform engagements with impartiality, objectivity, and Independence and without accommodation of personal interests ‘A Consultant is required to avoid any action that could be considered misleading or fraudulent. In particular is unethical for a consultant to use or communicate a misleading or fraudulent report, or to knowingly permit an employee or other person to communicate a misleading or fraudulent report. The development of consulting service based on 2 hypothetical condition is unethical unless: 1) the use of the hypothesis is clearly disclosed; 2} the assumption of the hypothetical condition Is clearly required for legal purposes, for purposes of reasonable analysis, or for purposes of comparison and would not be misleading: and 3) the report clearly describes the rationale to this assumption, the nature of the hypothetical condition, and its effect on the result of the consulting service. Management The acceptance of compensation that Is contingent upon the reporting of 2 predetermined result or a direction that favors the cause of the client, the attainment of @ stipulated result, or the occurrence of a subsequent event ic unethical. The restriction of contingent compensation apply to consulting services on a professional basis, for a fee, and where the consultant is acting in a disinterested manner and would reasonably be perceived as performing a service that requires impartiality. The payment of fees, commissions, or things of value in connection with the procurement of consulting engagement is unethical. Advertising for er announcing the av: mistaading or exaggerated is unethical. bility of consulting services in a manner which is false,Confidentiality A Consultant must not disclose confidential factual data obtained from a client or the results of an engagement prepared for a client to anyone other than: 1) the client and persons specifically authorized by the client; 2) such third parties as ray authorized by due process of law; and 3) a duly authorized professional peer reviewer. Likewise, it is unethical for a member of a duly authorized professional peer teviewer to disclose confidential information or factual data presented to him. Record Keeping A Consultant must prepare written records of consulting engagement and retain such record for a period of at least two (2) years after preparation. The written records of an engagement are the workfile. Care should be exercised in the selection of the form, style, and type of medium for written records to ensure they are retrievable by the consultant throughout the prescribed records retention period. A workfile must be in existence prier to and contemporaneous with the issuance of a written report. A written summary of an oral report must be added to the workfile within a reasonable time after the issuance of the oral report. A workfile must be made available by the consultant when required by due process of law.COMPETENCY PROVISION Prior to entering into any consulting engagement a consultant must properly identify the subject of consultation ta be addressed and have the knowledge and experience to complete the engagement competently; or alternatively: 1. disclose the lack of knowledge and/or experience to the client before accepting the engagement; and 2. take all the steps necessary or appropriate to complete the engagement competently; and 3, describe the lack of knowledge and/or experience and the steps taken to complete the engagement competently in the report. When a consultant discovers during the course of an engagement that he lacks the required knowledge or experience to complete the engagement competently, the consultant is obliged to notify the client and comply with the above items 2 and 3 of the provision.DEPARTURE PROVISION This provision permits limited departures from sections of the Uniform Standards that are classified as specific guidelines rather than binding requirements. The burden of proof is on the consultant to decide before accepting an engagement and inveking this provision that the result will not confuse or mislead, The burden of disclosure is also on the consultant to report any departures from specific guidelines: A consultant may enter inta an agreement to perform an engagement that calls for something less than, or different from, the work that would otherwise be required by the specific guidelines, provided that prior to entering Into such an agreement 2. the consultant has determined that the consulting process to be performed is not so limited that the resulting report would tend to mislead or confuse the client or the intended users of the report. 2. the consultant has advised the client that the engagement calls for something less than, or different from, the work required by the specific guidelines and that the report will clearly identify and explain the departure(s); and 3. the client has agreed that the performance of a limited consulting service would be appropriate. Exceptions to the following requirements are not permitted: Standards Rules 1-2, 2-1, and 2-3. ‘This restriction on departure is reiterated throughout the document with the reminder comment: Departure from this binding requirement is not permitted The DEPARTURE PROVISION does not apply to the PREAMBLE, ETHICS PROVISION, COMPETENCY PROVISION and DEFINITIONS section of USPRCP. For the purpose of this provision, intended users of the report might include parties such as lenders, employees of government agencies, partners of a client, and client's attorney and accountant. In this context, the purpose and intended use of the consulting service are critical. If 3 consultant enters into an agreement to perform a consulting service that calle for something less than, or different from, the work that would otherwise be required by the specific consulting guidelines, Standards Rule 2-2(i) requires that the report clearly identify and explain departure(s) fram the specific guidelines.JURISDICTIONAL EXCEPTION If any part of these standards is contrary to the law or public policy of any jurisdiction, only that part shall be void and of no force or effect in that jurisdiction. Comment: The purpose of the JURISDICTIONAL EXCEPTION is strictly limited to providing a saving or severability clause intended to preserve the balance of USPRCP if one or more of its parts are contrary to law or public policy of a jurisdiction. By logical extension, there can be no violation of USPRCP by a consultant disregarding, with proper disclosure, only the part or parts of USPRCP that are void and of no force and effect in a particular engagement or assignment by operation of legal authority. It is misleading for a consultant to disregard a part or parts of USPARCP as void and no force and effect in a particular engagement without identifying the part or parts disregarded and the legal authority justifying this action in the consultant's report. As in the JURISDICTIONAL EXCEPTION, law means a body of rules with binding legal force established by controlling governmental authority. This broad meaning includes, without limitation, Philippine constitution, legislative and court made laws, national administrative rules, regulations, and local ordinances, Public policy refers to more or less well-defined moral and ethical standards of conduct, currently and generally accepted by the community as a whole, and recognized by the court with the aids of statutes, judicial precedents, and other similar available evidence. Jurisdiction relates to the legal authority to legislate, apply, or interpret law in any form at the national and local levels of government.‘SUPPLEMENTAL STANDARDS These Uniform Standards provide the common basis for all consulting practice. Supplemental consulting standards prepared for specific purposes or property types may be issued by public regulatory agencies and certain client groups. Consultants and clients must ascertain whether any supplemental consulting standards in addition to these Uniform Standards apply to the engagement being considered. Comment: The purpose of the SUPPLEMENTAL STANDARDS section is to provide a Teasonable means to augment USPRCP with additional requirements set by clients, employers, governmental entities and/or professional consulting organizations. Supplemental standards cannot diminish the purpose, intent, or content of the requirements of USPRCP. By certifying conformity with USPRCP for an engagement in which a consultant satisfied a professional consulting ethics or practice standard not in USPRCP, the consultant acknowledges that this supplemental standard adds to but does not diminish the purpose, intent, or content of USPRCP.DEFINITIONS, For the purpose of these Standards, the following definitions apply: ABSORPTION ANALYSIS: An analysis of the amount of space (usually expressed In square meter) or the number of units (absorption rate) that can be sold, leased, put into use or traded on the market during 2 predetermined or estimated period of time {absorption period), and at prevailing prices or rentals. ADVICE: Considered judgment arrived at after careful investigation and analysis, discussion and deliberation with the cfient in @ consulting engagement. BINDING REQUIREMENT: All or part of a standards rule of USPRCP from which departure is not permitted. (SEE DEPARTURE PROVISION}. CASH FLOW ANALYSIS: A study of the anticipated movement of cash into or out of an Investment. CLIENT: The party who engages a consultant by contract in a specific engagement. CLIENT'S PROBLEM: Any question, doubt, uncertainty, or difficulty arising from a historical realty situation in which something has gone wrong from a normal situation without yet available explanation. CLIENT'S OBJECTIVE: Any question or doubt arising from historical or prospective realty investment desire dealing with difficult decision on available alternative courses af action, project, of situation, This cells for the cansultant’s decision-making service. CONSULTANCY: The provision of competent, disinterested and unbiased advice, professional guidance, and sound judgment on diversified problems in the broad field of real estate, on a fee basis, by qualified professionals who subscribe to a suitable standards of practice and code of professional ethics. CONSULTING: The act or process of providing information, analysis of real estate date, and recommendations or conclusions on diversified prablems in real estate, other than estimating value in a disinterested manner. (See REAL ESTATE CONSULTANT)DATA: The information pertinent to © specific assignment. Such date may be divided into four different classes: general (relating to the economic and demographic background, the region, the city and the neighborhood) specific (relating to the subject property end comparable properties in the market), primary (information gathered by the consultant that is not available in a published source, such as property dimensions and characteristics), and secondary (published information such 35 census data}. See also general data, primary data, secondary data. DATE OF THE REPORT: The date of the transmittal letter of a written report or the date a written report lacking a transmittal letter is prepared by the consultant. The date of an ore! report is the date it is communicated to or for the client. The date of the report may or may not be the same asthe effective date at which the analyses, opinion, and advice in a consulting service apply. ECONOMICALLY FEASIBLE: Refers to 2 real estate project that is able to meet defined financial investment objectives, the ability of 2 project to produce sufficient cash flows te repay all the expenses involved in creating and marketing the project plus provide a competitive return to the owner/developer. A criterion of highest and the best use analysis. EFFECTIVE DATE: The date at which the analyses, opinions, and advice in an appraisal, review or consulting service apply. EFFECTIVE DEMAND: The desire to buy to satisfy need coupled with the ability to pay. When the word demand is used in economic writings, effective demand is usually assumed. FEASIBILITY ANALYSIS: A study of @ proposed economic activity’s capability of boing accomplished under certain conditions and assumptions of marketing. technical, or financial aspects. Also, a study of the cost-benefit relatianship of an economic activity. FEASIBILITY STUDY: (See FEASIBILITY ANALYSIS) GENERAL DATA: Information that is not specific te @ certain property, e.g.. Interest rates, ‘employment rates and census information. HIGHEST AND BEST USE (HBU): The reasonable and probable use that results in the highest present value of the land after considering all legally permissible. physically possible and economically feasible uses. Capitalization rates or discounts rates for each feasible use shouldreflect typical returns expected in the market, Highest and the best use Is usually determined under two different premises: as if the site was vacant and could be improved in the optimal manner or as the site is currently Improved. In the latter premise, the highest and the best use of the site will either be to keep the existing building or to demclish the building and develop a building as long as it contributes to the value of the site. INTENDED USE: The use or uses of a consultant's reported consulting engagement, opinions and conclusions, as identified by the consultant based on communication with the client at the time of the engagement INTENDED USER: The client and any other party at identified, by name or type, 35 users of the consulting report, by the consultant based on communication with the client at the time of the engagement. INVESTMENT ANALYSIS: A study that reflects the relationship between acquisition price and anticipated stream of future benefits of areal estate Investment. LAND UTILIZATION STUDIES: An analysis of the potential uses of 2 parcel of land and a determination of the highest and best use for the parcel; a complete inventory of the parcels in @ given community or other area classified by type of use, plus (in some cases) an analysis of the spatial patterns of use revealed by this inventory. Land utilization studies do not embody the viewpoint of any particular investor nor de they focus on any one parcel, Furthermore. no consideration of markets and feasibility is normally included. LETTER OF TRANSMITTAL: 4 letter accompanying a consulting report that formally presents the report to the person who requested It and may include information such as: address and description of the property problem, or property interest subject of consulting engegement, statement that property inspection and all necessary anslyses were completed by the consultant, date of consulting report, summery conclusion and recommendations, any extraordinary essumptions or limiting conditions, consultant's signature and reference to accompanying consulting repert. LETTER REPORT: A shortened consulting report that states the conclusions and recommendations of the consultant's study and analysis. A letter report typically contains astatement of the problem or issues of the subject of consulting engagement, purpose of the consulting engagement, a description of the analysis, the date of study and analysis, limiting conditions. Much of the data and reasoning are omitted. (See also REPORT). LIMITING CONDITION: Specifications in 2 consulting report that restricts the assumptions in the report to certain situations, for example, date and use of the consulting service, definition of value, identification of real estate and property rights being valued, definition of surveys used oF not used. MARKETABILITY STUDY: A real estate analysis of a specific property that addresses the ability of the property ta be absorbed, sold or leased under current and anticipated market conditions. MARKET ANALYSIS: A study of the supply and demand conditions for specific type of property in the real estate market. MARKET SEGMENTATION: The identification and analysis of submarkets within 3 larger market, resulting in the Classification of consumers or buyers into relatively homogeneous groups based on their economic, demographic and/or psychographic characteristics (such as attitudes, habits, and lifestyle). This process aggregates the potential users of the subject property from the general population, according to defined consumer characteristics PRIMARY DATA: Information gathered by the consultant that is not available in a published REAL ESTATE: Under RA No. 9646, Real estate “refers to the land and all those items which are attached to the land. it is the physical, tangible entity, together with all the additions or Improvements on, above or below the ground.” Also, an identified parcel or tract of land including improwements, if any. REAL ESTATE CONSULTANT: Under RA 9646 (Real Estate Service Act of the Philippines}, "a duly registered and licensed -natural persan who, for a professional fee, compensation or other valuable consideration, offers or renders professional advice and judgment on: (i) the acquisition, enhancement, preservation, utilization or disposition of lands ar improvements thereon; and (li) the conception, planning, management and development of real estate projects.” REAL ESTATE DEVELOPER: Under RA No. 9646, “Real estate developer" refers to any natural or juridical person engaged in the business of developing real estate development project for ‘her or its own account and offering them for sale or lease.REAL ESTATE DEVELOPMENT PROJECT: Under RA No. 9646, "Real estote development project" means the development of land for residential, commercial, industrial, agricultural, institutional or recreational purposes, or any combination of such including, but not limited to, tourist reserts, reclamation projects, building or housing projects, whether fer individual or condominium ownership, memorial parks and others of similar nature. REAL PROPERTY: Under RA No. 9646, "Res! property" includes alll the rights, interests and benefits related to the ownership of real estate. Also, the interest, benefits, and rights inherent in the ownership of real estate. REALTY: Refers to both real estate and real property. ( In some jurisdiction or usage, the terms real estate and real property may have the same meaning. The separate definition recognizes the tradition as twe concepts in appraisal and consulting theory). RENT-UP PERIOD: The time period during which an income property is expected to this lease up te a level stabilized occupancy. Stabilized occupancy assumes rental achievement at market levels as well as physical occupancy at stabilized levels REPORT: Any written communication of 2 consulting service that is transmitted to the client upon completion of an engagement. REPUBLIC ACT NO. 9646: (Real Estate Service Act of the Philippines), An Act Regulating The Practice of Real Estate Service in The Philippines, Creating for the Purpose a Professional Regulatory Board of Real Estate Service, SECONDARY DATA: Date obtained from published sources that have not been collected by the consultant, ¢.g., census information, demographic information and published interest rates. See also data, primary data. SPECIFIC GUIDELINES: All or part of @ standard rule of USPRCP from which departure is permitted under certain conditions. (See DEPARTURE PROVISION) SIGNATURE: Personalized evidence indicating authentication of the work performed by the consultant and the acceptance of the responsibility for content, analyses, and the conclusions In the report. STANDARD: The authoritative rule which serves as guide to achieve competent and ethical practice in developing and reporting the consulting service.STANDARD 1: REAL ESTATE / REAL PROPERTY CONSULTING In performing real estate or real property consulting services, a consultant must be aware of, understand, and correctly employ those recognized methods and techniques that are necessary ta produce a credible result. Standards Rule 1—3 In performing real estate or real property consulting services, a consultant must a b) ° be aware of, understand, and correctly employ thase recognized consuiting methods ang techniques that are necessary to produce crecible results; not commit a substantial error of omission or commission that significantly affects the results of 2 consulting service: not render consulting service in a careless or negligent manner, such as @ series of errors that. considered individually. may net significantly affect the results. but which, when cansidered in the aggregate. would be misleading. Standards Rule 1— 2 In performing real estate or real property consulting services, a consultant must observe the following specific guidelines: a) b) clearly identify the client's objective; define the problem to be considered, define the purpose and intended use of the consulting service, consider the extent of the data collection process, adequately identify the real estate and / or property under consideration {If any). describe any special limiting conditions, and identify the effective date of the consulting service: collect, verify, and reconcile such data as may be acquired to complete the consultinga if the market value of specific property is pertinent to the consulting engagement. an appraisal in conformance with standards of professional appraisal proctice must be included in the data collection; 4) apply the appropriste consulting tools and techniques to the data callecta e) _ base all projections on reasonably clear and appropriate evidence. Standards Rule 1-3 In performing real estate or real property consulting services, a consultant must observe the following specific guidelines when 2 conclusion or recommendation ic required by the nature of the engagement: a) _ Identify alternative courses of action to achieve the client's objective and analyze their implications; b) identify bath known and anticipated constr: their probable impact: 's to each alternative and measure ©) Identify the resources actually or expected te be available to teach alternative and measure their probable impact; d) identify the optimum course of action to achieve the client's objective. Standards Rule 1-4 In performing 2 market analysis, 2 consultant must observe the following specific guidelines when applicable: 2) define and delineate the market ree and apply appropriate market segmentation; b) define and analyze the current supply and effective demand conditions that make up the specific real estate market segment;). identify, measure, and forecast the effect of anticipated development or other changes and future supply; ¢) identify, measure and forecast the affect of anticipated economic or other changes and future demand. Standards Rule 1-5 In developing @ cash flaw and/or investment analysis, a cansultant must observe the following specific guidelines when applicable; a) consider and analyze the quality of the income stream; b) consider and analyze the history of expenses and reserves: ¢) consider and analyze financing viability and terms; 6) select and support the appropriate method of processing the income stream: ) consider and anatyze the cash flow return(s) and reversion(s) to the specified investment position aver 3 projected time periad(s}. ‘Standard Rule 1-6 In devel ping 2 project feasibility study analys specific guidelines when applicable , @ consultant must observe the following a) prepare a complete market analysis; b) apply the results of the market analysis to alternative courses of action to achieve the client's objective: 0 consider and analyze the probable costs of each alternative; ") consider and analyze the probability of altering any constraints to each alternative: ii) cansider and analyze the probable outcome of each alternativeSTANDARD 2: REAL ESTATE/REAL PROPERTY CONSULTING, REPORTING tn reporting the results of @ reaf estate or real property consulting service, @ consultant must communicate each analysis, opinion, end conclusion in a manner that is not misleading. ‘Standard Rule 2-1 Each written of oral consulting report must: a) clearly and accurately set ferth the consultir misleading; 1B service in a manner that will not be b) contain sufficient information to enable the person(s) who receive or rely on the report to understand it properly; ©) clearly and accurately disclose any extraordinary assumption or limiting condition that directly affects the consulting service and Indicate its impact on the final conclusion or recommendation (if any). Standard Rule 2-2 Each written consulting report must comply with the following specific reporting guidelines: 8} define the objective to be considered; b) state the purpose of the consulting service; ¢) identity and describe the real estate and/or property under consideration (if any); d) set forth the effective date of the consulting service and the date of the report; ) describe the overall range of work and the extent of the data collection process; ) set forth all assumptions and limiting conditions that affect the analyses, opinions, and conclusions;g) set forth the informatian considered, the consulting procedures followed, and the reasoning that supports the analyses, opinions, and conclusions; h) set forth the consultants final conclusions er recommendations(if any); i) set forth any additional information that may be appropriate to show compliance with, or clearly identify and explain permitted departures from, the requirements to Standard i j)_ include a signed certification in accordance with Standard Rule 2-3. Standard Rule 2-3 Each written consulting report must include a certification that is similar in content to the following form: | certify that, to the best of my knowledge and belief: - the statements of fact contained in this report are true and correct. - the reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, unbiased professional analyses, opinions, and conclusions. - have no {or the specified) present or prospective interest in the property( if any) that is the subject of this report, and | have no (ar the specified) personal interest or bias with respect to the parties involved. = my compensation is not contingent on any action or event resulting from the analyses, opinions, or conclusions in, or the use of this report.- | have made a personal inspection of the property (if any) that is the subject of this report. (If more than one person signs the report, this certification must clearly specify which individuals did and which individuals did not make a personal inspection of the property.) - Noone provided significant professional assistance to the person signing this report. (if there are exceptions, the name of each individual providing significant professional assistance must be stated.) Standard Rule 2-4 To the extent that it is both possible and appropriate, each oral consulting report (Including expert testimony) must address the substantive matters in Standards Rule 2-2.