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Who owns the Appraisal report? Who is the client?

By March 5, 2020Appraisal Advice

You the property owner, or potential purchaser are paying the appraiser for services of preparing an appraisal report.

When you are buying services inquire to confirm that you are the client.

When you allow another individual or organization to “order the appraisal services”, you might be surrendering your rights of ownership over the report. The person or group who pays for the appraisal report is not necessarily the client who controls the report.

I advise you to be clear with all parties to your transaction and claim “Your Rights”. Regardless of the intended use and the intended user who may rely on the report, (say; a lender), clearly communicate your intention to be the client who owns and controls the direction of distribution and naming of intended users.

As the real property owner or potential purchaser of a real property ensure you are the client who owns and controls the report and ensure you are the one who determines the intended user of the report. I said this twice to make sure you read and understood the statement.

The Appraisal Institute of Canada (AIC) staff and the Professional Practice Committee at the AIC and are often asked these questions:

  • What does the client relationship mean?
  • Who gets a copy of the report?
  • What happens when another user of the report (other than the client) requests a copy?
  • What are your responsibilities to your clients, past or present?

The Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP 2020) defines client as: (3.14) The individual or organization for whom the Member renders or agrees to render professional services.

CUCPAP 2020 3.35 Intended User: A party identified by name as a user of the Professional Services of the Member, based on communication between the Member and the Client.

CUSPAP 2020 (6.2.1) says the Appraiser is required to identify the client by name and identify the intended user by name.

Also (7.2.2) The Client and/or Intended User must be identified by name in the Report. (7.2.3) The client/Member relationship lasts at least until the completion of the intended use of the original report, or release from client is granted. But, (7.2.3.i). A party receiving a copy of a report does not become an intended user unless authorized, and clearly identified by name and in writing, by the Member and the client.

However, (7.2.3.ii.) where an assignment is prepared by the Member for consideration by a tribunal or court, such as assisting in resolving a formal dispute, an intended user including: a judge, mediator, arbitrator, or other trier of fact does not need to be identified by name.

When the appraiser receives a request, (7.3.1) before accepting an assignment, a member must communicate with the client to identify and consider the client’s intended use in order to (7.3.1.i) properly define the problem under study; and (7.3.1.ii) understand the development and reporting responsibilities of the assignment.

Within the report prepared by the appraiser a statement similar to the following is required “This report is intended for use only by (client name) and (intended users by name). “This report is intended for the use of those specifically identified and any other use is strictly unauthorized. The Member is not liable for any unauthorized use of this report.” Examples of acceptable intended user names include: “Lender ABC”; “Solicitor D”; “Condominium Corporation E”; “Strata Corporation F”; Agency (Name); City of (Name) Corporation (Name).

Types of intended users such as “To be determined”, “To be confirmed”, “John Doe and his lenders”, “Jane Doe and her subsidiaries”, “John Smith and his assignees” or other similar references are not acceptable. The use of vague or undefined intended user names or types is not permitted.

A lack of critical thinking leads many to surrender their rights and the Intended User of the assignment becomes the client. The fine print of your agreement with a potential lender may reveal a reason for you do decline their offer for services at a later date, prior to release of any funds. Those property owners and purchasers of real property, who allowed the lender to make the call to the appraiser have lost the right to take that appraisal report to a different lender.

Even in the case when the assignment is ordered by an Appraisal Management Company (AMC), the report may identify the AMC requesting the report in the “Requested By” section of the report to make it clear to the reader that the AMC is neither the client nor the intended user. The client and intended user shall be identified by name. You can ensure it is your name, not the lender name, who is the client.

If you make a mistake, pay for a report but are not the client, you cannot have a copy of the report, and you cannot direct the report to be relied upon by another lender without permission by the client. The client, might be kind to release the report, but the appraiser requires legal documents to release and indemnify the appraiser when switching to a new client.

And, the client/member relationship lasts at least until the completion of the intended use of the original appraisal or release is granted by the original client. Prior to accepting an assignment from a potential second client, the Member must confirm that the intended use of the original appraisal has been completed.