The UK real estate industry is pushing to end to unlimited valuer liability for external fund valuers as part of its responses to consultations by the Treasury and Financial Conduct Authority (FCA) on proposed reforms to the Alternative Investment Fund Managers Director (AIFMD) regime, which closes today and aims to update the UK’s inherited EU rules governing real estate and other AIFMs.
The proposed reforms which include creating a simpler regime for UK AIFMs, removing unlimited liability for external fund valuers and ensuring the new rules avoid regulatory cliff-edges or arbitrage opportunities between different fund types, have been welcomed by trade associations, including the Association of Real Estate Funds (AREF) and the European Association for Investors in Non-listed Real Estate Vehicles (INREV).
Following the closure of the consultations, the FCA now plans to consult on the detailed rules in the first half of 2026. This will be subject to the feedback received from the recently concluded consultations and the final decisions made by the Treasury regarding the future regime.
Paul Richards, CEO at AREF, said: “These are very welcome consultations. And we are particularly pleased to see the focus on valuers – who are so fundamental to the international appeal of UK real estate. AREF has campaigned, on behalf of our members, for the removal of unlimited liability for external fund valuers ever since it became a requirement under AIFMD many years ago. We support this being changed in the UK and continue to support a change in the EU too.”
Melville Rodrigues, head of real estate advisory at Apex Group and co-ordinator of the industry response through a working group of the associations, said: “I am delighted government is considering whether the liability for external valuers be reviewed. It is unfair that external valuers face unlimited liability under legislation.”
Rodrigues, who has previously argued for removing unlimited liability imposed by AIFMD, added: “Valuers cannot obtain [professional indemnity] cover, so prevented from acting as fund external valuers. This means that fund investors lose out, as they are unable to benefit from valuations that are transparently external and independent from the manager.
“Over recent years, FCA and Treasury officials have constructively engaged with me on fixing this problem. I have had a lead industry role in proposing a legislative reform solution whereby a limit of liability can be agreed that is reasonable and proportionate to value of the fund assets. Terrific that this proposal has been endorsed by the associations and has widespread industry support, and hopefully will be implemented in the reformed regulations.”
Chris Ormond, knowledge and innovation counsel in Goodwin’s private investment funds group, said: “The introduction of a new proportionate and appropriate regime for UK AIFMs is to be welcomed and also provides a potential opportunity for the UK government to facilitate greater EU/UK cross-border access.
“A question raised in our response is how existing firms are to be re-classified/grandfathered – in particular, any small AIFMs currently subject to the registration-only regime. Our preference would be not to have twin regimes in the future, but neither do we want all existing firms to have to immediately re-classify/re-comply where this involves unnecessary costs and compliance burdens.”
Jeff Rupp, director of public affairs, INREV, said: “Beyond the important work of recommending updates to the regulation of the real estate investment industry, the close co-operation between a number of associations and stakeholders again resulted in tightly aligned views. It’s important for our industry and ensures that we present thought-through, consistent and coherent responses to policymakers.”
James Alder and Amelia Stawpert, Hogan Lovells, said: “We welcome HMT’s consultation and the FCA’s call for input as an important step in streamlining UK AIFMD rules. It is an excellent opportunity to address issues such as overlapping requirements for London listed real estate funds, external valuer liability and leverage.”
John Forbes, John Forbes Consulting, said: “We welcome HMT’s consultation, and improving UK AIFMD to create a simpler and more proportionate regime for the regulation of fund managers is an important step forward.
“It is important that the revised rules do not create regulatory cliff-edges nor arbitrage opportunities – for example, between listed and unlisted funds. I am happy to have contributed to the draft consultation response, particularly on this aspect, which I believe is so key.”
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