spanish valuation standards of real … · translation by cohispania avda de europa, 34, edificio...

Translation by COHISPANIA Avda de Europa, 34, Edificio B, Escalera Izda, 3ª Planta Dcha – 28023 – Madrid (Spain)

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SPANISH VALUATION STANDARDS OF REAL PROPERTY

AND CERTAIN REAL RIGHTS

(Translation by COHISPANIA)



Please Notes: This Valuation Standards are an Order of the Ministry of Economy of Spain. (http://www.mineco.gob.es) No responsibility for loss occasioned to any person acting or refraining from action as a result of the material included in this translation can be accepted by COHISPANIA. Date of translation: February 2016. COHISPANIA © is an independent society of valuation approved by the Bank of Spain since 1989. Our Values:

Shareholding independence Professional responsibility Business and confidentiality ethics Transparency in its services and Inspected by The Bank of Spain Pursuit of Excellence Quality – Our reason to be. Ratified and approved by AENOR and IQNet Constant evolution of the technological innovation

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The Ministry of Economy Order ECO/805/2003, of 27 March,

on standards of valuation of real property and particular real rights for certain financial purposes.

The present Order sets forth standards for the calculation of the appraised value of real property and certain property rights for the purposes referred to in its scope of application as well as for the drawing up of reports and certificates which shall be executed therein. The purpose of said standards is, keeping in line with Royal Decree 775/1997, of 30 May, on the legal framework for the official approval and standardisation of appraisal services and companies, in enhancing the technical and formal quality of the valuations in order to better protect third party interests as investors or policyholders. It should be remembered that the present Order contains no provision of a subjective nature related to the ability to assess nor appoint the valuer, which is governed by the relevant regulations pursuant to the purpose of the appraisal. The calculation and execution of the appraised value was regulated by Order of 30 November 1997 on standards of valuation of real property and particular rights for certain financial purposes. This provision, which is now repealed, was the last exponent and example of a regulation whose origin is the Law on the Mortgage Market Regulation. The 1994 Order has contributed decisively in the improvement of the valuation market for financial purposes. Nevertheless, it was considered advisable to replace said text for a new text. The reasons for this regulatory change are basically three: a) The terminological clarification of certain aspects of related to real estate valuation for mortgage purposes and pension schemes. Certain recent developments in Europe tend to differentiate market value (the value at a point in time) and mortgage value (sustainable value over time). Although officially the 1994 Order based the calculation of the appraised value at the market value, the obligation to use a strict and rigorous methodology based on the principle of prudence (or prudent person rule) led to the calculation of an appraised value comparable to the mortgage value. So as to rectify this problem which is more formal nature than material, the mortgage value has been introduced as the basis for obtaining the appraised value of the real estate and pension schemes purposes, making explicit some practices intended to comply with the principle of prudence (or prudent person rule). In either event, it must be emphasized that these amendments do not in any way whatsoever represent a break/breach in the appraised value calculation standards, but only an explanatory revision inscribed in the general desire for continuity which gives impetus to the Order. b) The adaptation of the appraised value calculation and its formalisation to the recently enacted legislation. Since the entry into force of the 1994 Order new standards which directly or indirectly affect same have been approved. Including inter alia Law 6/1998 of 13 April on land use and valuations, Law 46/1998 of 17 December on the introduction of the Euro, the Royal Decree-Law 14/1999 of 17 September on electronic signature, Royal Decree 2486/1998, of 20 November, on the regulation and supervision of private insurance was approved and Royal Decree 845/1999, of 21 May , partially amending the Royal Decree 1393/1990, of 2 November, wherein the Regulations to Law 46/1984 of 26 December regulating collective investment schemes in relation to real estate investment funds and companies and other available financial measures.

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c) The introduction of technical and formal improvements the result of the experience gained in the practical implementation of the 1994 Order , both by the supervisory bodies as well as the organisations and that of the appraisal companies and services. The Order consists of 88 articles, five additional provisions, a transitional provision, a repeal provision and three final provisions. The sections are divided into four headings and these into chapters and sections. Heading I contains the general provisions: the scope of application, principles and definitions; the minimum verifications and available documentation; the provisos and caveats, both general as well as specific, and in general all those issues which the valuer must take into account both in the technical as well as the formal framework. Heading II contains the technical provisions for determining the appraised value of the various valuation items and for different purposes. To this end, the diverse technical methods of valuation and the valuation of the various assets and rights are regulated. All the contents thereof are based on the principle of prudence (or prudent person rule) and the principle of sustainability for those values with effects over time. Heading III contains the formal provisions for the drafting of the report and certificate wherein the corresponding appraised value shall be executed. To that end, a single structure with a minimum number of sections which the valuer shall have to fill in whichever is the subject matter of the valuation is established. All the contents thereof are based on the principle of transparency in the sense that documents and data handled by the valuer so as to calculate the values must be made available to the corresponding supervisor. Heading IV contains a number of provisions whose scope of application is limited to the valuation to cover the technical provisions of insurance companies and for determining the net worth of the real estate collective investment institutions. The present Order is promulgated in exercise of the regulatory authorisations set forth in Article 37(4) of Royal Decree 685/1982 of 17 March 17, whereby certain aspects of Law 2/1981 of 25 March, regulating the mortgage market were implemented; Article 74(5) of the Regulations of Law 46/1984 of 26 December regulating collective investment institutions, approved by Royal Decree 1393/1990, of 2 November 2 (as amended by Royal Decree 686/1993, of 7 May); Article 50.10 of the Regulations on the regulation and supervision of private insurance (approved by Royal Decree 2486/1998, of 20 November ) and Article 37(1) of the Pension Schemes and Funds Regulation (approved by Royal Decree 1307/1988, of 30 September), In virtue whereof, I hereby state:

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HEADING I

General provisions

CHAPTER I

Scope of application, principles and definitions

Article 1. Purpose. The present Order is designed to regulate the legal system which must be complied with as regards the calculation of the appraised value of real property and certain property rights, as well the drawing up of reports and certificates which shall be executed therein, whenever said calculation is undertaken for any of the integral purposes of its scope of application. Article 2. Scope of application. The present Order shall apply whenever the appraised value is used for any of the following purposes:

a) Mortgage backed credits (mortgage warranty) or loans which are or shall become part of the hedging portfolio of mortgage securities issued by the institutions, property developers and constructors to which reference is made in Article Two of Royal Decree 685/1982 of 17 March, implementing certain aspects of Law 2/1981 of 25 March, on Mortgage Market Regulations. b) Ascertainment of the fair value for the purposes of Paragraph 4 of the second registration and valuation standard of the second part of the accounting plan of insurance and reinsurance companies, approved by Royal Decree 1317/2008, of 24 July , and determination the valuation of assets for the purposes of Article 68 of Law 20/2015, of 14 July, on management, supervision and solvency of insurance and reinsurance companies insurers and reinsurers. c) Ascertainment of the assets of the Real Estate Collective Investment Institutions regulated by Royal Decree 1309/2005, of 4 November, whereby the Regulation of Law 35/2003, of 4 November 4, regulating Collective Investment Institutions is approved. d) Ascertainment of the Real Estate assets of the Pension Funds regulated by Royal Decree 304/2004 of 20 December, whereby the Regulation of Pension Schemes and Funds was approved.

Article 3. Principles. 1. Credit institutions which have valuation services and approved appraisal companies when undertaking valuations for any of the purposes consolidated in the scope of application of the present Order shall do so by applying, in the terms established therein, the following principles:

a) Principle of anticipation, whereby a property is economic exploitation, its value is based on the expectations of income that is expected to provide in the foreseeable future.

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b) Principle of purpose whereby the purpose of the valuation determines the method and valuation techniques to be followed. The valuation criteria and methods used are consistent with the purpose of the valuation. c) The principle of highest and best use, whereby the value of a property susceptible of being earmarked to the different uses shall be the result of earmarking same, within legal and physical possibilities, the most financially advisable, or is susceptible of being constructed with different degrees of construction, within legal and physical possibilities, with the degree which enables to obtain the highest value. d) Principle of probability, whereby if there are several scenarios and or reasonable choice opportunities, those deemed most likely must be selected. e) The principle of proportionality, whereby the valuation reports shall be drawn up with the appropriate amplitude taking into account the importance and use of the item subject to valuation, as well as its uniqueness in the market. d) Principle of prudence, whereby if there are several equally likely scenarios or equally choice opportunities, the one which results in a lower appraised value must be selected. This principle shall be mandatory whenever the appraised value is used for any of the following purposes set forth in Articles 2.a), b) and d) of this Order. g) Principle of substitution, whereby the value of a property is equivalent to the value of other assets with similar characteristics which could replace the former. h) The principle of temporality, whereby the value of a property varies over time. i) The principle of transparency, whereby the valuation report of a property must contain the all necessary information for easy understanding thereof and must specify the assumptions and documents used. j) Principle of residual value, whereby the value attributable to each of the production factors of a property shall be the difference between the total value of said asset and the values attributable to the remaining factors.

2. The principles contained in the previous section shall be used as criteria for interpretation and, where applicable, inclusion of the regulations of the present Order. Article 4. Definitions. For the purposes of the present Order the following definitions shall apply: Appraisal updating. Is any revision of an earlier valuation, issued by the same valuation company before the expiration of two years from the date of issue, wherein with reference to the prior valuation, the caveats, provisos or any of the values which are included therein. This period shall be three years for the purposes referred to in Article 2.b) (Scope of application), pursuant to that set forth in Article 84.1 of this Order.

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Antiquity. It is the number of years between the date of construction of a property or the last comprehensive rehabilitation thereof and the date of valuation. Comparable Properties. Comparable properties are those which are considered similar to the property that is being valued or appropriate to apply the homogenisation, taking into consideration its location, use, type, size, antiquity, condition, or other relevant physical characteristics for that purpose. Forward commitment to purchase property. It is a contract under which the contracting parties undertake to purchase a property at a predetermined price and at a specific date. Physical depreciation. Is the loss undergone by the gross replacement value (VRB) of a property based on its antiquity, state of repair and duration of its components. Functional depreciation. Is the loss undergone by the gross replacement value (VRB) of a property based on its poor adaptation to the function for which it is intended. Includes losses brought about by factors in the property due to obsolescence, design, poor adaptation for its use etc. Building. It is any type of construction, solid, durable and suitable to house one or more spaces intended for the development of any activity. Building intended for a specific use (residential, office etc.) Is any building wherein the above ground surface area intended for a specific use is equal to or greater than two thirds of the total above ground surface area thereof. Building under Construction. Is all new construction work commenced and not completed which has the corresponding permit and is undertaken according to a project approved by the relevant professional association. Planned building project. Is any type of construction (new construction or rehabilitation) which shall be undertaken on a particular land or property under a project approved by the relevant professional association. For these purposes, rehabilitation works shall be construed as those which meet the requirements stipulated in the definition of property under rehabilitation. Common elements of a building. Are all those spaces which, are not of a private exclusive use, shall be taken into account for purposes of the calculation of the surface area. Element of a building. Is any physical, functional or registration unit, which is part of a building comprising of additional units for the same or other uses and that is susceptible of an individual sale. Speculative elements. Is those data, offers or scenarios which still remain relevant for ascertaining the market value which may result, either a behaviour related to the intention of an operator to profit from the short-term fluctuations in the prices of real estate assets, or expectations for change of use or buildability, or other extraordinary factors (such as new infrastructure or investments which entail a revaluation of properties) whose future presence is not assured. Valuation company. The valuation companies approved and registered in the Special Register of the Bank of Spain, as well as, with respect to the valuations which have the purpose referred to in point a) of

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Article 2, the appraisal services of credit institutions approved and registered in the Special Register of the Bank of Spain. Surroundings. Is the space of suitable amplitude and with homogeneous characteristics both physical as well as structural in which the property that is being valued is located. Rural property. Is that land of an Urban Level II to which it is dedicated to may be dedicated to the development of an agricultural activity. Price Homogenisation of comparable properties. It is a procedure wherein the characteristics of the property which is valued in relation to other comparable properties, in order to deduce, by comparing their similarities and differences a purchase price or rental price approved for same is analysed. External infrastructure of the land. Are necessary in order to equip the land with the urban services required for consideration thereof as urban land pursuant to the law on land use and urban planning. Building in rehabilitation. Is any building or element of a building wherein works have commenced which meet the following requirements:

a) are carried out under the corresponding building permit. b) Are carried out according to a project approved by the relevant professional association. c) whether or not altering its structural elements involving the improvement of at least 50 per cent of the constructed surface area prior to the commencement of the works.

For these purposes rehabilitation works shall be considered as those works intended to improve the living conditions of a building by the replacement, refurbishment or upgrading of the constructive elements or installations thereof, and intended for a substantial alteration of the morphology of the building, whether or not same expands the constructed surface.

d) The budgeted cost of the work reaches at least 50 percent of the gross replacement value of the building (excluding the land value). When the valuation makes reference to an entire building and in which a partial reform is being carried out, the above definition may be applied to the part affected by the works when the works cover, at least a complete storey.

Property connected to an economic activity. It is any building or building element, of a single purpose use which is or may be connected to an economic exploitation. Other types include the following:

a) Industrial, manufacturing and agricultural production buildings and facilities. b) Transport facilities, car parks and buildings or facilities related to the transport services. c) Hospitality properties, in their different categories and types. d) Hospitals and other healthcare nature facilities. e) Recreational, sports and entertainment facilities. f) Education institutions and other cultural facilities. g) Social infrastructure centres.

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h) Student residences, retirement homes or similar. Polyvalent installations. Are the installations, which have been designed or installed for a particular purpose, allow, in the opinion of the valuer, its use for other permitted uses. Under no circumstances whatsoever shall polyvalent installations be construed as those facilities with those features and structural elements which limit or impede uses other than those existing, such as the vaults; cold rooms; laundry facilities, kitchen and specific services in hospitality and catering establishments. Locality. It is the urban centre wherein the property being valued is located. Local market. The property of an urban area or homogeneous rural area (neighbourhood, village, municipality, district) where the property (building, building element, rural property or land) is located or, when its use or characteristics do not allow the availability of comparables in that area, the real estate sector market (offices, shopping centres, hotels, corresponding dominant crop agricultural holding) whenever it is representative for its comparison within the national territory. Urban planning levels of the land. For the purposes of its valuation, the land is classified into the following levels: Level I. Includes all land not belonging to Level II. Level II. Includes all classified as non-developable wherein construction is not permitted for uses other than agricultural, forestry, livestock or which are connected to an economic exploitation permitted by prevailing legislation. Likewise includes land classified as developable land which are not included in the scope of development of urban planning or if so, have not defined therein the conditions for development thereof. Call Option. It is a contract under which the vendor grants an option to purchase a property at a predetermined price and at a specific date or deadline. Public protection. Is any legal regime which limits the sale or rental price of the property being valued. Urban land, non-developable land, developable land. The definitions set forth in the prevailing legislation on land and urban planning shall be used. Checked surface area. Is the area measured by the valuer taking into consideration the usable or built surface and the corresponding dimension plan. Built area with common elements. Is the built surface area without common parts plus the corresponding proportionate part according to its share in the surface area of the common elements of the building. . Built area with no common elements. Is the useful area, not excluding the area occupied by the interior elements mentioned in said definition and including the exterior walls at 100 percent or at 50 percent, depending on whether, respectively, the façade walls or party walls, or enclosures shared with other elements of the same building.

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Useful surface. Is the land surface bounded by the perimeter defined by the inner face of the external walls of a building or of an element of a building, including half of the floor surface of its covered private use outdoor spaces (such as terraces, balconies and clotheslines, porches, loading docks, overhangs etc.), measured on the horizontal projection of the roof. The useful surface area occupied on a floor by the fixed interior walls, by the vertical structural elements, and the pipes or conduits having a horizontal section greater than 100 square centimetres and the soil surface whose clear height is less than 1.5 metres is not considered as useful surface area. Nor that area occupied by uncovered outdoor spaces is considered as useful surface area. Usable or computable surface area. Is the surface area used in valuations to determine the technical values. Valuer (appraiser). The professional who, pursuant to that set forth in the valuation standards applicable to each type of valuation must necessarily sign the valuation report. The market or venal market of a property (VM). Is the price at which the property could be sold under private contract between a willing vendor and a separate purchaser on the valuation date in the event of a public offering of the property on the market that the market conditions permit its availability in an orderly manner and is made available in a normal period, having regard to the nature of the property, so as to negotiate the sale. For these purposes the following shall be taken into consideration:

a) That there is no prior relationship whatsoever between the vendor and purchaser, and that neither the vendor or purchaser hold a personal or professional interest in the transaction not connected to the cause of the contract. b) That the public offering to the market entails both the undertaking of a proper marketing strategy to the type of property in question, well as the absence of inside information by any of the intervening parties. c) That the price of the property is consistent with the aforementioned public offering and reflects a reasonable estimate the price (more likely/best estimate) which would be obtained under the market conditions existing on the date of the valuation. d) Taxes are not included in the price. Neither are marketing costs included.

Property value for the finished building hypothesis. Is the value which can be expected to be obtained a building under a planned building project, construction or rehabilitation at the date of termination, if constructed in the estimated deadlines and technical specifications included in its construction or rehabilitation project. Replacement value (RV) or replacement cost or reinstatement cost may be: gross or new and net or current.

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The value of gross replacement or new replacement value (VRB) of a property is the sum of the investments required to construct, on the date of valuation, other property of the same characteristics (capacity, use, quality etc.) but using current technology and construction materials. The net or current replacement value (NRV) is the result of deducting from the VRB the physical and functional depreciation of the property on the date of valuation. Appraised value (VT). Is the value that the present Order establishes as such for each type of property or right to be appraised. Said value shall be legal value or legal effects for the purposes inherent in the scope of application thereof. Mortgage value or value for the purposes of a mortgage credit (VH). Is the value of the property as determined by a prudent valuation, of the future marketability of the property, taking into account the lasting long-term aspects thereof, the normal and local market conditions, its use at the time of the valuation and any corresponding alternative uses. In determining that to which reference is made in the preceding paragraph, speculative elements shall not be included. Maximum legal value (VML). Is the maximum selling price of a dwelling or property, if where appropriate, subject to public protection, established in the specific regulations applicable thereto. Value comparison, value update, residual value. Is the value obtained by applying the technical comparison, rental income updating and residual methods respectively. Intermediate valuation of a construction work. Is any of the valuations which are issued after the initial valuation and during the construction or rehabilitation process of a building or an element of a building, wherein the progress of the works and the percentage of the work executed and any other circumstance whatsoever of the construction that may affect the appraised value is included. Its issue does not entail the updating of the values contained in the initial valuation. Primary residence dwelling. Is that which due to its nature and location is most likely intended for its use as the main residence or permanent home, regardless of its actual use. Second residence dwelling. Is that which due to its nature and location is most likely intended for its use as the second residence, regardless of its actual earmarking. Useful life. Is the period during which a property is in a state of repair so as to be used for the purpose for which it is intended. Shall be the comprehensive period if calculated from the time of construction or last comprehensive rehabilitation and shall be residual if calculated from the date of the valuation. Article 5. Usable or computable surface area. 1. In order to calculate the value of a building or an element of a building element, the surface area as verified by the valuer shall always be used. Furthermore the following specifications should be taken into account:

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a) Where it is not possible to check the surface area of the building or element of a building, the lowest surface area between the cadastral and property registry surface area shall be used. b) In the event of elements of buildings wherein it has been possible to verify the useful surface area or that constructed without common parts, the lowest surface area between the cadastral and property registry surface areas with common parts may be used, even if it has not been possible to verify such surface areas with common parts, whenever there is a special operational difficulty for the verification duly substantiated by the valuer, there is no reasonable doubt as regards the size stated in the registry surface area, if the latter is used, and the percentage of the area used and that verified as reasonable in the opinion of the valuer. c) When the verified surface area exceeds by more than 5% to that of the property registry or to the cadastral or in the case of a building in the absence of a declaration of new building work entered in the property registry, its adoption will require the verification of the adequacy thereof to the applicable urban planning regulations. In the case of elements of a building will require the verification of the adequacy thereof to the applicable urban planning regulations when the difference exceeds by more than 10% the property registry or cadastral surface areas. d) In the event that the surface area of the private outdoor spaces for the exclusive use of the building or an element of a building exceeds by more than 15 percent of the total surface area thereof, that surface shall be measured separately and shall be valued using a unit price surface different to that of the surface areas of the outdoor spaces. Must likewise be valued using a different unit price for uncovered outdoor spaces and those due to its use, constructive and functional characteristics are considered to have independent values. All these surface areas shall be subject to substantiation, specifying the criteria used. e) In the valuation of homes subject to public protection, for the purposes of calculating the maximum legal value thereof, the surface area contained in the corresponding Qualification Certificate shall be taken as the surface area.

2. In order to calculate the value of a property or a rural property the surface area verified by the valuer shall be used. Whenever said verification is not feasible the lowest between the property registry or cadastral surface areas shall be used. Notwithstanding the provisions of the preceding paragraph, the highest between the property register and cadastral surface areas may be used provided that, once the appropriate estimates have been carried out, are expressly and reasonably substantiated in a noteworthy manner. Article 6. Expression of values. 1. The values of real estate and rights being valued shall be included in a report and where appropriate an appraisal certificate whose drafting thereof shall be carried out pursuant to that stipulated in Heading III of the present Order. 2. Said values shall be expressed in the currency of the country where the assets or the subject of the rights are located. If said currency is not the Euro, the values to which reference is made in the preceding paragraph shall likewise be expressed in Euros using as currency exchange rate those exchange rates officially published on the date of valuation or, where appropriate, on the nearest following day.

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CHAPTER II

Verifications and documentation.

Article 7. Minimum verifications. 1. In order to determine the appraised value of a property the following verifications are required to be carried out so as to know the characteristics and actual situation of the property being valued, and the contents of the documents to which reference is made in Article 8 of the present Order shall be used. 2. From among the verifications to which reference is made in the preceding paragraph, shall include at least the following:

a) The physical identification of the property, through its location and visual inspection by a competent technician, verifying as to whether or not its surface area and other characteristics match the description recorded in the documentation used for valuation, as well as the existence of visible easements and its apparent state of construction or state of repair. b) The status of occupancy of the property and use or exploitation for which the property is intended. c) In the case of housing, the public protection regime. d) The architectural heritage protection regime. e) The adequacy of the property to all prevailing applicable urban planning regulations, and, where applicable, the existence of the availability of the right to the valued urban use.

Article 8. Required documentation. 1. In order to carry out the calculation of the appraised value, all documents necessary for the comprehensive identification of the property that is being valued, taking into consideration the type of property, the purpose thereof, the status of occupancy and that construction thereof and the valuation method used must be made available beforehand. From among the documents to which reference is made in the preceding paragraph shall include the registry certificate attesting to both ownership of the property and liens incumbent thereon, as well as its complete description, issued within three months prior to the date of valuation, or any legal equivalent thereof in alternative media. Shall likewise be included the cadastral document with the descriptive and graphic cadastral information on the property obtained directly through the virtual office of the Property Registry. In both cases these documents must have been issued within three months prior to the date of valuation. Nevertheless, the valuation of the assets for the purpose specified in Article 2.a) (Scope of application) of the present Order, said certification may be replaced by an original or copy of the registry note, issued within the three months prior to the date of valuation, which contains at least the ownership and complete description of the property, including, where appropriate, the in rem property rights and the limitations to

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ownership rights; or a photocopy of the Property Registry of the property; or a photocopy of the title deeds, or any equivalent documents issued by the Property Registry through the use of telematic procedures. When the purpose of the valuation is that stipulated in Article 2.c) (Scope of application) of the present Order, the registry certificate shall only be required in previous periodic valuations of the properties under construction, promoted by a third party other than that of the IIC for which the valuation is made, including the off-plan purchases, purchase options, acquisition contracts and forward purchase commitments. In all other cases as regards the purposes of 2.c) of the present Order the registry certificate may be replaced by any document which meets that set forth in the preceding paragraph. When the purpose of the valuation is any one of those stipulated in Article .2.b), c) and d) of the present Order, the inclusion of the document with the descriptive and graphic cadastral information of the property obtained directly through the virtual office of the Cadastre shall only be required in prior valuations, and in periodic valuations of the property or rights wherein changes which affect the description of the property or right have occurred. 2. In addition to that set forth in the preceding paragraph, the following should be made available:

a) In the case of buildings under construction which are valued for the finished building hypothesis, the project thereof shall be approved by the competent professional association. b) In the case of buildings under construction or rehabilitation which are valued for the finished building hypothesis, and in addition to the project thereof approved by the relevant professional association, the building permit, the final certification of the performed work issued by the project management as well as the works execution or building contract and the schedule of construction costs, if any. c) In the case of housing subject to public protection, qualification certificate or official document which certificates or enables to determine the maximum price for sale or rent. d) In the case of buildings (whose main use is housing) to which reference is made in Article 2 of Law 38/1999, of 5 November, on building regulations, a document certifying the issuance of liability for material damages insurance contemplated in Article 19.1.c) (decennial insurance for structural property damage). e) In the case of property whose use has been conveyed in whole or in part, the lease contract or another title of occupancy, the last receipt of the rent paid as well as a certificate issued by the owner wherein it is clearly stated: each of the surface areas leased within the property; the overall annual net income produced and by each of the parties; the status of occupancy of the property; the payment status of the current rents; expenses attributable to the property, specifying those passed onto the occupant during the last year and the use of the property. For the purpose of the intent specified in Article 2. a) of the present Order, the data to which reference is made in the preceding paragraph must be equally available however the certificate issued by the owner shall not be necessary.

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f) Property connected to economic exploitation, the necessary documents so as to calculate the cash flows to which reference is made in Article 27 (Cash flow in the updating method) of the present Order. g) In the case of rural properties, the relevant cadastral documentation concerning its system of exploitation and, where applicable, that of the rights of irrigation and execution. h) In the case of land which is valued according to its urban use thereof or for buildings under construction, urban planning or municipal certificate or any other documentation which enables to determine the type of soil, and where appropriate, its urban use, conditions for development and documentation necessary to determine same. i) In the case of buildings under a horizontal property regime or building elements other than housing or garages, the statutes of the homeowners association, an equivalent document or certification from the community manager certifying the limitations of use or any other circumstances contained therein able to affect the value thereof. j) Any other document required by these Regulations in accordance with the valuation method adopted, the type of building or the purpose of the valuation concerned.

3. In the case of valuations of properties or rights located overseas, the documentation required in Sections One and Two may be replaced by its equivalent in the country where they are located, taking into account its internal regulations. Shall likewise require the calculation of the appraised value which considers, furthermore, specific aspects of the regulations of the country wherein the property is located, which may affect said value. In this regard, it should have, inter alia, of all documents contemplated in said legislation, even when not envisaged in Spanish law, and shall be necessary pursuant to that set forth for the complete identification of the property being valued, so as to determine the fitness for use or urban use which it is being given or is contemplated to be given so as to carry out the construction or rehabilitation of a building, in its different stages, and for the valuation of public protection housing or equivalent housing.

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CHAPTER III

Provisos and caveats Article 9. Qualified appraised value. Except for that contemplated in Article 14, in order that an appraised al value is calculated pursuant to the present Order which may be used for any of the purposes specified in Article 2 (Scope of application) must be stated without being subject to any constraint pr proviso whatsoever. Article 10. Provisos. 1. For the purposes of the present Order there shall be deemed to be a proviso in the following cases:

a) When it has not been possible to carry out the verifications to which reference has been made in Article 7.2 (Minimum verifications), except in the case contemplated in subparagraph d) of said paragraph, which shall be only a constraint when it affects complete buildings or business premises. b) When the use of the property is assigned, there is no lease contract or other occupancy title available nor the current conditions of the lease or assignment. c) When the property is subject to public protection and the maximum legal value thereof has not been able to be calculated. d) When any of the following documents or equivalent thereof in the case of property located overseas, where applicable, are not available: The documentation to which reference is made to in the second, third and fourth paragraphs of Article 8.1 (Available Documentation) of the present Order. The approved project to which reference is made in Article 8.2.a). The building permit to which reference is made in Article 8.2.b). Urban planning certificate or documentation to which reference is made in Article 8.2.h) of the present Order. That of the ascription of the irrigation rights to the rural property to which reference is made in Article 8.2.g) when it is valued as irrigated land. e) When other requirements contemplated under the present Order have not been complied with, or in other circumstances which entail reasonable doubts as regards the correct identification, physical or registry, of the property to be valued, or the existence of the characteristics thereof used in the valuation, which can significantly affect the calculation of its technical values.

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2. When the valuation is carried out for the purposes of that set forth in Article 2.c) (Scope of application) of the present Order, the appraised value shall condition the appraised value when the registered owner of the property or right does not match: a) With the collective investment institution which includes for the purposes of calculating its heritage value in the cases of direct investments contemplated in paragraphs a), d) and e) of Article 56.1 of the Regulations of Law 35/2003, of 4 November, on Collective Investment Institutions, approved by Royal Decree 1309/2005, of 4 November, and in the cases of investments in real estate affected by the property development activity, or b) With the leasing company or entity to which reference is made in paragraph a) of Article 56.1. of the Regulations of Law 35/2003 of 4 November, on Collective Investment Institutions, approved by Royal Decree 1309/2005, of 4 November, in the case of investments of the institution through same, or c) With the natural or legal person acting as a counterparty in the contract, in cases of:

i) Off-plan purchases and buildings under construction when real estate development is not executed directly by the institution, ii) Forward purchase commitments and purchase options, as well as acquisition contracts.

That stipulated in paragraphs a) and b) shall not apply when valuations carried out prior to the acquisition of properties by real estate investment institutions or by leasing companies and entities through which the collective investment institutions are to carry out its investments in real estate or rights.

Article 11. General warnings. For the purposes of the present Order it shall be deemed to be a "warning case", whenever there is any doubt as regards any of the data used in the calculation of the technical values of the property being valued, and at least in the cases which are specified below:

a) When there is a discrepancy between the physical reality of the property and its property registry or cadastral descriptions, if such discrepancy does not lead to doubt as regards the identification or characteristics and is not expected to affect the calculated values. b) When the property which is valued is not in accordance with the applicable urban planning, unless certain limitations have been stated or when not being required the issuance of a limitation, or it was not possible to verify the architectural heritage protection system. c) When the valued property is subject to expropriation or was constructed on the basis of building permits or administrative authorisations which contain conditions which if not met, may result in changes to the certified value. d) When the valuation has been calculated using different methods than those specified in Article 15.1 (Methods) of the present Order.

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e) When calculating the maximum legal value the documentation to which reference is made in Article 8.2.c). is not available. f) When any of the following documents is not available: The necessary documents to calculate the cash flows to which reference is made in Article 8.2.f). In rural properties, the relevant cadastral documentation or that relating to its operating system or performance. The documents stipulated in Article 8.2.b), except for the building permit which shall apply to that set forth in Article 10.1.d). In the cases to which reference is made in subparagraphs d)and i) of Article 8.2, the documents specified therein. g) When the cadastral reference does not exist or cannot be known by the means contemplated in Article 41.1 of the revised Law of Real Estate Cadastre or directly through the virtual office of the Property Registry. h) Where, in the case of valuations of real estate or rights located overseas, the documentation required in Sections One and Two of Article 8 cannot be replaced by its equivalent in the country where they are located, and the fact shall be expressly recorded. Furthermore, it is warned herein, if it has not been conditioned for that purpose, when all the documentation is not available, pursuant to the regulations of the country wherein the property or right is located, if it is necessary for the complete identification of the property being valued, to determine the fitness for use or use which it is being given or is contemplated to give, so as to carry out the construction or rehabilitation of a building, in its different stages, and for the valuation of public protection housing or equivalent housing, or which may affect the value of the property.

Article 12. Specific warnings. 1. Notwithstanding the general warnings specified in the preceding article, when all the circumstances specified in the following section arise, the valuation company must advise in an express and substantiated manner the possibility that the appraised value of the property suffer losses in the future, highlighting the data (past cycles in the same local market, common expectations among experts, volatility assessed in the price of its comparables; market dominated by speculative elements etc.) which is available on the characteristics and situation of the considered property market. 2. The circumstances to which reference is made in the preceding paragraph are as follows:

a) The appraised value is calculated for the purpose specified in paragraph 2.a) of the present Order. b) That in the calculation of the appraised value the comparison method is used only.

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c) That the property being valued is intended for a use whose comparables, in the local market where it is located has undergone any significant and lasting fall in its nominal prices over the last ten years.

3. In valuations which have as its purpose that contemplated in paragraph 2.a) of the present Order, shall likewise include a specific warning, in the manner which is specified below, when, although there is no situation contemplated in subparagraph c) of the preceding paragraph, the valuation company considers that there is a high probability that the appraised value will undergo a significant reduction in nominal terms within one year from the date of valuation which lasts at least three years. The estimate must be based on solid data available on the economic circumstances of the local market, and the warning should mention that probability substantiating its existence and the data on which the estimate of the company is based. Article 13. Actions of the valuation company. 1. When a limitation occurs, the valuation company must select one of the following alternatives:

a) Deliver to the client the report as regards the expressly qualified appraised value. b) Deliver to the client the report as regards the refusal to set an appraised value.

Nevertheless, when the valuation is carried out for the purpose of the intent specified in Article 2.a), and it has not been possible to physically or register wise identify the property, the entity shall refuse in a reasonable manner the issuance of a report. 2. When a warning arises, the valuation company shall state, where appropriate, its effect on the valuation. Article 14. Rectification and lifting of the constraint. 1. Notwithstanding that specified in Article 9, the reports and certificates containing the constraints may be used whenever they have been lifted as contemplated in paragraph 2 and, furthermore, for the purposes of the intent contemplated in Article 2.d) the reports and certificates contained therein may be used: The constraint referred to in subparagraph b) of Article 10.1, if prior to the execution of the mortgage the ownership of the property free of tenants and occupants has been conveyed. The constraints specified in subparagraphs a), to which reference is made to the verification of the public protection regime of the property to be valued, and c) of Article 10.1, if prior to the execution of the mortgage, it is included to the file of the corresponding credit, under the responsibility of the credit institution granting said credit, the documentation from the competent administrative authorities or the corresponding Property Registry, which reflects the legal regime of the property (existence or absence of public protection, execution of the maximum legal value ), together with a statement signed by the authorised attorney-in-fact of the entity wherein the identity of the property is stated to which reference is made in the aforementioned documentation and those contemplated in the valuation. Furthermore, and for the purposes of the intent specified in Article 2.b), the reports and certificates containing the constraints stipulated in subparagraph b) of Article 10.1 may be used, in the case of lease

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contracts executed into prior to 1 January 1995 wherein the original copy thereof is not available, when the managing body or IBS can substantiate, to the valuation company, all of the current conditions of the lease and the non-possession of the original contract. 2. The valuation company may lift the constraints of a valuation report and that of the certificate in which it is synthesized when the event which gave rise to same has disappeared. The lifting of the constraint shall require the express and reasoned statement of the entity which signed the report which contained therein the statement that the disappearance of the event which gave rise to same has been verified.

HEADING II

Calculation of the appraised value

CHAPTER I

Technical valuation methods

Section 1. General Provisions Article 15. Methods. 1. The technical valuation methods used for the purposes of the present Order are as follows:

a) The Cost Method. b) The Comparison Method. c) The Discount Method. d) The Residual Method.

2. Said methods enables obtaining the market value, the mortgage value and the replacement value. Article 16. Applicability and procedures. 1. The scope of applicability of the methods described in the preceding article as well as the requirements and procedures for implementation thereof shall be as set out in the following sections of this chapter. 2. In either event, the implementation of said methods for the purpose specified in Article 2 a) (Scope of application) the speculative elements are deleted.

Section 2. Cost method Article 17. Applicability of the cost method. 1. The cost method shall be applicable in the valuation of all types of buildings and building elements under planned project, under construction or rehabilitation or finished.

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2. By means of this method a technical value which shall be called the replacement value is calculated. Said value may be gross or net. Article 18. Procedure for calculating the gross replacement value. 1. So as to calculate the gross replacement value the following investments shall be added:

a) The value of the land on which is building or the building to be rehabilitated is located. b) The cost of the construction or rehabilitation works. c) The expenses necessary so as to carry out the replacement.

So as to determine the values or amounts to which reference is made in the preceding paragraph that specified in the following numbers shall be taken into account. 2. The comparison method, either the residual method pursuant to that set forth in the present Order shall be used so as to determine the value of the land or the building to be rehabilitated. 3. The cost of the construction or rehabilitation works shall be the cost of the construction contract. The cost of contractor’s construction shall be considered as the sum of the physical construction costs of the work, the overhead costs thereof, where appropriate, and the industrial profits of the constructor. Shall not be included in said costs that of the non-essential elements of the building which are easily dismountable nor, except for properties connected to an economic exploitation, the costs of the finishes and non multipurpose facilities. In the case of buildings of historical or artistic nature , the particular value of the elements of a building which confer that character to same shall also be taken into account. 4. The necessary expenses shall be the market averages according to the characteristics of the property being valued, regardless of who can undertake the replacement. Said costs shall be calculated using the existing prices on the date of valuation. The following, inter alia, shall be included as necessary expenses: Non-recoverable taxes and fees required to execute the declaration of new building works of the property. The technical fees for projects and site and construction management or other necessary fees. The costs of licenses and construction fees. The amount of compulsory building insurance premiums and technical inspection fees so as to calculate said premiums, The administrative expenses of the developer. Those due for other necessary studies.

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Property developer profits, or any kind of marketing or financial expenses shall not be considered as necessary expenses. 5. In determining the gross replacement value of the property under construction or under rehabilitation shall address the situation of the work completed on the date of valuation, not including stockpiles or furniture. 6. When the gross replacement value of property under planned building, under construction or rehabilitation is calculated, for the to the finished building hypothesis, the prices of existing work units at the time of the valuation may be corrected, if necessary, using market developments up to the date of the upgrade. The amendment in the land value cannot be carried out until the work is finished and shall require the upgrading of the valuation. Article 19. Procedure for calculating the Net Replacement Value. 1. In order to calculate the Net Replacement Value the gross replacement value shall be subtracted from the physical and functional depreciation of the finished building. 2. The physical depreciation of the building shall be calculated by any one of three procedures:

a) According to the total and residual useful life estimated by the valuer who must property substantiate the procedure used in said estimate. In the event wherein different useful lives are attributed to the various facilities or construction elements of a building the substantiation shall be broken down in each. b) By using the linear amortisation technique, for whose purposes the VRB shall be multiplied using the VRB, excluding the market value of the land, by the quotient obtained by dividing the antiquity of the building between its total useful life. The latter shall be estimated by the valuer and, as a maximum:

For residential use buildings: 100 years. For office buildings: 75 years. For commercial buildings: 50 years. For industrial use buildings and properties connected to an economic exploitation: 35 years.

For buildings not intended for a particular use, the maximum useful life shall be obtained by weighting the maximum deadlines specified above according to the surface area intended for each use. c) Adding the costs and expenses necessary so as to transform the existing building into a new building with similar characteristics

3. The elements of a building shall follow the depreciation system corresponding to the building in which it is located.

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4. Functional depreciation is calculated as the value of the costs and expenses necessary so as to bring into line the building to the uses to which it is intended, or to correct design errors or obsolescence.

Section 3. Comparison Method Article 20. Applicability of the Comparison Method. 1. The Comparison Method shall apply to the valuation of all types of property provided that the requirements set forth in the following article are met. 2. Pursuant to the terms stipulated in Articles 53 (Valuation of property wherein there are surface rights) and 54 (Valuation of administrative concessions) of the present Order may be equally applied to the valuation of the surface rights and the administrative concessions. 3. By means of this method two technical values shall be determined wherein the values shall be called the comparison value, which enables the determination of the market value of a particular asset, and the adapted comparison value, which enables the determination of its mortgage value. Article 21. Requirements for the use of the Comparison Method. 1. In order to use the comparison method for the purposes of the present Order shall require that the following conditions are met:

a) The existence of a representative market of the comparable properties. b) To have available sufficient information as regards transactions or deals which enable, in the area in question, to identify suitable parameters for the standardisation of comparables. c) To have sufficient information on at least six comparable transactions or offers which adequately reflect the current situation of said market.

2. Furthermore, for the use of the Comparison Method for the purposes of that set forth in Article 2.a) (Scope of application) of the present Order the following requirements shall be necessary:

a) To have available appropriate data (transactions, offers etc.) in order to estimate the evolution of purchase prices in the local comparable properties market for at least two (2) years prior to the date of valuation. b) To have available appropriate information (own data, official or private publications, indexes on the evolution of prices etc.) as regards the historical trend of the determinant variables in the evolution of prices in the real estate market of the analogous use properties which are valued and as regards the trends of those prices in the relevant cycle for that purpose and on the current state of the real estate situation. c) To have appropriate procedures which, through the detection of transactions or offers with abnormal data in the local market, enable the identification and elimination of speculative elements.

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Article 22. Procedure for calculating the Comparison Value. 1. In order to calculate the Comparison Value the following general rules shall be complied with:

a) The qualities and characteristics of the appraised property which affects its value shall be set. In the case of buildings of historical or artistic nature , the particular value of the elements of a building which confer that character to same shall also be taken into account in order to set said qualities and characteristics. b) The comparables real estate market segment shall be analysed, based on specific information on actual transactions and firm offers properly corrected where appropriate, where the current cash sale and purchase of said properties shall be obtained. c) A representative sample of those prices corresponding to the comparable properties, wherein the necessary standardisation procedure shall be applied to, shall be selected from the prices obtained following the analysis stipulated in the preceding paragraph. In the specified selection shall, beforehand, compare those prices which are abnormal in order to identify and eliminate both those from the transactions and offers which do not meet the conditions stipulated in the definition of market value of the affected properties and, in the case of a valuation for the purposes specified in Article 2. a) of this Order, those which may include speculative elements. d) The standardisation of comparables shall be undertaken using criteria, coefficients and/or weightings which are appropriate for the property in question. e) The value of the property shall be assigned, net of selling expenses, according to standardised prices, after deduction of easements and limitations to ownership rights which fall on said property and which have not been taken into account when applying the preceding rules.

2. In addition to the general rules specified in the previous paragraph, in order to determine the value to which reference is made in that rule number, the following special rules, where appropriate, shall be taken into account:

a) In the case of planned building projects, under construction or rehabilitation, when the comparison value for the finished building hypothesis is determined, the existing market prices on the date of valuation for the sale of similar finished properties shall be used. This value can be rationally corrected according to the market trend for the planned construction completion date. b) In the case of valuation of rural properties, when using the comparison method, the standardisation contemplated therein is based on unit values per hectare existing in the market for different soil types, or crop types and/or use.

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Article 23. Adjustment of the Comparison Value. 1. The Comparison Value obtained pursuant to the preceding Article shall be adjusted by the valuation company so as to obtain an adjusted comparison value where all the requirements so as to be included in the specific warning to which reference is made in paragraph 3 of Article 12 coincide. 2. In order to correct the effects of the likelihood to which reference is made in Article 12.3 the valuation company, based on its technical capacity, shall apply to the comparison value the decrease it deems necessary. When the available data as regards market trends does not enable, in the opinion of the valuation company, estimates the decrease specified in the preceding paragraph, a decrease percentage of 10 percent shall be applied, and in either event 15 percent if a high volatility is discerned in the prices used to determine the comparison value. 3. Notwithstanding the information required in the calculation of the appraised value, the reference to the adjustment made and its justification shall be included in the specific warning to which reference is made to Article 12.3.

Section 4. The Discount Method. Article 24. Applicability of the The Discount Method. 1. The Discount Method shall apply, provided that the requirements set forth in the following article, to the valuation of all types of property susceptible to produce income and that of the in rem rights stipulated in Article 52.2 (Application) are complied with, except for purchase options. 2. Using this method a technical value which is to be called updating value, that enables to determine both the market value of a particular property as well as its mortgage value shall be calculated. Article 25. Requirements for the use of the Discount Method. 1. In order to use the Discount Method for the purposes of the present Order shall require that at least one of the following conditions are met:

a) The existence of a representative rental market of the comparable properties. In order to assume such an existence, it shall be necessary to have available, at least six rental income facts (data) as regards the comparable properties which adequately reflects the current situation of this market and have sufficient data on rental transactions or offers which enable to identify suitable parameters for the carrying out of the standardisation of income in comparable properties. b) The existence of a lease contract on the property being valued. c) The valued property is yielding or can yield income as a property connected to an economic activity and which furthermore there is sufficient financial accounting data of the use or appropriate information on the average structural ratios of the corresponding branch of activity.

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2. In order to use the rental updating method for the purposes of that set forth in Article 2.a) (Scope of application) of the present Order shall be necessary, whenever any of the cases contemplated in subparagraphs a) or b) of paragraph 1 coincide, that the company valuation has available:

a) Appropriate data (transactions or offers etc.) on the evolution of the rental income in the local comparable properties market for at least two (2) years prior to the date of valuation, and current situation thereof. b) Appropriate information (own data, official publications, price indices) as regards the historical trend of the determinant variables in the evolution of prices in the real estate market of the analogous use properties which are valued and as regards the inherent trend of those prices in the relevant cycle for that purpose and on the current state of the real estate situation. c) Appropriate procedures which, through the detection of offers or transactions with abnormal data in the local market, enable the identification and elimination of speculative elements.

Article 26. Procedure for calculating the Discount Value. The calculation of the Discount Value shall require:

a) The estimation of the future cash flows. b) The estimation of the reversion value. c) The choice od the discount rate. d) The application of the calculation formula.

Article 27. Cash flows in the Discount Method. 1. For the purposes of that set forth in the preceding article the cash flows may real estate and operating cash flows. 2. Cash flows shall be construed as real estate cash flows, future collections and payments which are due to the property being valued. 3. Operating cash flows shall be construed as the cash flows from the use which is made from the property being valued. These flows are calculated adding to the operating profit in the financial year after tax, the depreciation allowances made therein and subtracting from this sum the investments made in said financial year in fixed assets and, where appropriate, changes in working capital. When the appraised value is to be calculated for the purposes contemplated in Article 2.a) (Scope of application), the profits to be considered, exclusively, the ordinary profits of the corresponding financial year. Working capital shall be construed as the difference between the balance of the current assets and that of the short-term current liabilities of the balance sheet. The fixed assets, current assets and short-term current liabilities shall include the accounts stipulated in Articles 176, 177 and 180 of the revised text of the Law on Limited Liability Companies, approved by Royal Decree 1564/1989 of 22 December.

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4. The cash flows shall be estimated taking into account the regime of the property being valued and, in any either event, the most likely hypothesis shall be used to determine the amounts thereof and the dates wherein the collections and payments shall be made. Those cash flows shall be calculated in monetary units of the year to which reference is made to the appraised value without taking into account, therefore, the inflationary effect. Article 28. Cash flows of the rental market properties. 1. That set forth in this article shall apply whenever there exists, on the date of valuation, a rental market under the terms stipulated in Article 25.1.a) (Requirements for the use of the updating method) of this Order, regardless of the fact as to whether or not the property is rented, empty or directly used by the owner thereof. 2. The cash flow of the property being valued shall be estimated, over its useful life, taking into account all factors which may affect its amount and effective attainment, including, inter alia: The collections which are normally obtained in comparable properties. The current occupation and the likelihood of future occupancy of the property. The statutory provisions or contractual clauses (rent, revisions, term etc.) which affect only the cash flows of the property. Such provisions or clauses which affect flows attributable to elements connected to said property which are extraneous to same such as furniture, chattels etc. shall be excluded. The present or foreseeable late payments of the collections. The foreseeable market evolution, taking into account only when the valuation is carried out for the purpose specified in Article 2. a) (Scope of application) of this Order, those situations or circumstances which presumably may remain in the medium and long term. 3. Notwithstanding that set forth in the preceding paragraph, during the term of the lease contracts the amounts of the collections inherent to the cash flows are derivative from the contractual clauses. Nevertheless, if said amounts were higher than those of other comparable properties, may only be used when it is considered and warranted that the modification of said amounts is not foreseeable and when it is intended to calculate the appraised value for the purpose specified in Article 2.a) (Scope of application), provided that same cannot be attributed to speculative elements. 4. The calculation of the payments shall include any type of current or foreseeable necessary expense, even recoverable, which must be borne by the property, whether directly attributable to the property (maintenance, state of repair management, taxes, fees etc.), whether the result of its use or necessary for the renting thereof (rental management, marketing so on and so on). In recoverable amounts, the foreseeable deadline wherein the amounts that are to be effectively recovered shall be also taken into account.

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Article 29. Cash Flows deriving from other Real Estates under Lease. 1. That set forth in this Article shall apply where the property being valued is leased on the date of valuation. 2. The cash flows of the property being valued shall be estimated, whilst the lease contract is in force, taking into account the contractual clauses thereof. When the purpose of the valuation is that contemplated in Article 2. a) (Scope of application), the cash flows of the property being valued which are higher than those of other comparable properties shall be replaced by those of the latter whenever the difference can be attributed to the presence of speculative elements. Article 30. Cash Flows deriving from other Properties under Economic Exploitation. 1. That set forth in this Article shall apply where the property being valued is leased on the date of valuation is connected to an economic activity. 2. The cash flows of the use during the period of time wherein it is likely to continue same shall be estimated and those which are attributable to the property shall be taken. 3. The cash flows to which reference is made in the preceding paragraph shall be the average amounts of the activity sector in which said use is integrated. Said average amounts shall be rationally corrected when:

a) The location or the particular characteristics of the property which affect or may clearly affects the economic exploitation obtains higher income or lower income than the average for the activity sector in which it is integrated. When the purpose of the valuation is that contemplated in Article 2.a) (Scope of application) the correction shall only be carried out if it is expected that the income to which reference is made in the preceding paragraph, when said income is higher than the aforementioned average amounts, which are to be obtained long term for at least five years following the date of valuation. b) The economic prospects of said sector modify the likelihood of obtaining the expected net income for said use.

In order to carry out the correction to which reference is made in the first paragraph of this number, current or foreseeable data of the use which is used by the property being valued, which, in the reasoned opinion of the valuer, which are due factors fundamentally connected to the management of said use or others extraneous to the property. 4. In order to carry out the allocation to which reference is made in paragraph 2 of this article, certain operating cash flows shall be taken according to the preceding paragraph and the relative value of furniture and non real estate equipment shall be taken into account. 5. In the absence of the average amounts to which reference is made in paragraph 3 of this article, the proper amounts of the use in question subject always to the availability of data from at least, the last two

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years shall be used. In the event that it is an operation project, the provisional amounts furnished by the owners of the future operation, provided they are complete and attain at least three financial years shall be taken into account. In the event that the purpose of the valuation is that contemplated in Article 2.a) (Scope of application) the amounts to which reference is made in the preceding paragraph shall be decreased by at least 10 percent. Article 31. Reversal value (or Exit Value) 1. When the cash flows are calculated pursuant to that set forth in Article 28 (Cash flows from rental market properties) of this Order, the reversal value at the end of its useful life shall be the value on that date of the land on which it is built. To that end:

a) The value of the land at the date of valuation pursuant to the methods prescribed in this Order shall be calculated. b) Said value shall be gains or losses which are reasonable and duly substantiated, taking into consideration the location, use and market developments of the comparable properties.

2. When the cash flows are calculated pursuant to that set forth in Article 29 (Cash flows from other rented properties) of this Order, the reversal value shall be the foreseeable value of the property at the end of the contract. To that end, the value of the property free of tenants on the date of valuation shall be calculated by applying the corresponding valuation method and the land value shall be adjusted pursuant to subparagraph b) of paragraph 1 above and the physical and functional depreciation of the building shall be subtracted, calculated according to the cost method. 3. When the cash flows are calculated pursuant to that set forth in Article 30 (Cash flows from other economic exploitation properties) of this Order, in order to estimate the reversal value at the end of the period of time in which the use will foreseeably continue, its net replacement value shall be taken at that time. To that end that specified in the following points shall be taken into account:

a) The land value on the date of valuation shall be calculated and adjusted under the terms stipulated in subparagraphs a) and b) of paragraph 1 of this article. b) The depreciation of the buildings shall correspond to the aforementioned period.

Article 32. Discount Rate in the Discount Method. 1. In order to determine the discount rate the following procedure shall apply: A nominal interest rate appropriate to the risk of the investment project shall be adopted and which caters to, in particular, its volume and degree of liquidity, the type (industrial, commercial etc.) of property, its characteristics and physical location, the type of lease contract (existing or planned) and the foreseeable risk in obtaining income. The discount rate selected pursuant to the foregoing criteria must be similar to that being used by the market as regards comparable property operations.

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Said interest rate shall become actual correcting the inflationary effect by applying a price index which appropriately reflects the expected inflation during the period for which the existence of cash flows is envisaged. 2. The nominal interest rate to which reference is made to in the first indent of the preceding paragraph shall not be less than half the average annual return of the average type of government debt securities having a maturity date exceeding two years. This maturity period shall be equal to or greater than five years if the purpose of the valuation is that set forth in Article 2.a. In order to determine the average annual return: The average interest rate over a continuous period of not less than three months nor exceeding a year prior to the date of valuation shall be taken. The average interest rate must have been published by a public body or by an organised market. 3. The valuation company shall duly justify the type of interest rate selected, highlighting the positive differential applying as regards the average return specified in the preceding paragraph, and in particular, the expected inflation and other means of correction used to obtain an actual interest rate. Article 33. Formula for calculating the updating value. 1. The updating value of the property being valued shall be the actual value (VA) of the cash flows and the expected reversal value for the updating type selected. 2. The VA to which reference is made in the preceding paragraph shall be calculated according to the following mathematical formula:

Where:

VA = Actual value. Ej = Amount of the collections attributable to the property at moment J. Sk = Amount of the expected payments at moment K. tj = Number of periods of time which must elapse from the moment of valuation until the corresponding Ej occurs. tk = Number of periods of time from the moment of valuation until the corresponding Sk occurs. i = Selected updating type corresponding to the duration of each of the periods of time considered. n = Number of periods of time from the valuation until the end of the estimate period of the expected income. Reversion Value = Exit Value

3. The elapsed periods (time), and the updating type to be used shall be expressed in the units corresponding to the duration of each of the periods of time considered.

Reversión Value

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Section 5. Residual method Article 34. Applicability of the residual method. 1. The residual value method shall be calculated using one of the following procedures:

a) Investment analysis with expected values procedure ("Dynamic" calculation procedure). b) Investment analysis with current values procedure ("Static" calculation procedure).

2. The residual method may be applied using the dynamic procedure to the following properties:

a) Urban or developable land, whether or not built. b) Planned building projects, under construction or rehabilitation, even if the works are halted.

3. The residual method may only be applied only using the static procedure, to the plots of land and buildings under rehabilitation wherein the construction or rehabilitation may commence within a period not exceeding one year, as well as the constructed plots of land. 4. Using this method a technical value which is to be called updating value, that enables to determine both the market value of a particular property as well as its mortgage value shall be calculated. Article 35. Requirements for the use of the Residual Method. 1. In order to use the residual method for the purposes of the present Order shall require that the following conditions are met:

a) The existence of appropriate information in order to determine the most likely real estate property development to be undertaken pursuant to the applicable planning or, in the case of land with finished buildings so as to verify said regime is complied with. b) The existence of sufficient information as regards construction costs, necessary property development expenses, financial, where appropriate, and marketing which enables to the normal costs and expenses for an average property development type and for a property development of similar characteristics to those which are to be developed. c) The existence of market information which enables the calculation of the most probable sale prices of the elements which are to be included in the property development or in the building scheduled for its marketing. d) The existence of sufficient information as regards the returns of similar property developments.

2. In order to apply the residual method using the dynamic procedure shall be necessary in addition to the requirements stipulated in the preceding section, the existence of information as regards the deadlines for construction or rehabilitation, marketing of the property and, where appropriate, urban planning and the execution of the urbanisation.

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Article 36. "Dynamic" calculation procedure. 1. In order to calculate the residual value using the dynamic calculation procedure the following steps shall be followed:

a) Cash flows are estimated. b) The updating type is selected. c) The calculation formula is applied.

2. The adopted hypothesis and calculation parameters shall be expressly and reasonably substantiated. Article 37. Cash flows in the Dynamic Residual Method. 1. Cash flows shall be taken as: the collection and, where appropriate, the granting of credit which is deemed obtainable from the sale of the property to be promoted; and the payments which are deemed to be made by the various costs and expenses during the construction or rehabilitation, including payments for credits granted. Said collections and payments shall be applied on the dates scheduled for the marketing and construction of the property. 2. In order to estimate the collections to be obtained, from the envisaged sale values on the marketing dates on the finished building hypothesis, which shall be calculated based on the values obtained using the comparison and /or income updating methods on the date of valuation date, and the expected evolution of market prices. 3. The existence of sufficient information as regards construction costs, necessary property development expenses, financial, where appropriate, and marketing which enables to the normal costs and expenses for an average property development type and for a property development of similar characteristics to those which are to be developed. In the case of property under rehabilitation and in those lands which have a proposed new building project the construction costs budgeted in the corresponding project shall also be taken into account. 4. In order to determine the scheduled dates and deadlines to which reference is made in paragraph 1 of this Article shall be taken into account, in addition to the supplier payment systems, the most likely hypothesis based on the nature of the planned building project and, where appropriate, the degree of urban planning development, urban planning and that of the urbanisation. 5. In order to determine the property to promote as regards the property being valued, taking into account the principle of highest and best use. Nevertheless, when the use decided by the ownership of the property is known and which is not contrary to the urban planning regulations shall comply thereof. In either event, when it concerns the plots of land constructed pursuant to the applicable urban planning, and unless there is the possibility of materialising the principle of highest and best use, shall serve the existing building.

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Article 38. Discount Rate in the Dynamic Residual Method. 1. For the purpose of calculating the residual value using the dynamic procedure set forth in Article 36 ("Dynamic" calculation procedure) of the present Order, shall be used as the updating type which represents the average annual return of the project without taking into account extraneous financing which would be obtained by an average property developer in a property development of the characteristics of that analysed. It shall be calculated by adding to the risk-free rate, the risk premium. 2. The risk-free rate shall be the updating type set forth in Article 32 (Updating type in the updating method) of the present Order, taking same as the current or nominal type whether or not the cash flows estimate is constant or nominal. 3. The risk premium shall be determined by the valuation company, from the available property development, by the assessment of the property development risk taking into account the type of real estate asset to be constructed, its location, liquidity, execution deadline, as well as the volume of investment required. 4. When determining the cash flows the external financing shall be taken into account, the risk premiums specified in the preceding paragraph shall be increased by the percentage of said financing (leverage ratio) attributed to the project and the common interest rate types of the mortgage market. In either event, said increase must be duly substantiated. Article 39. Formula for calculating the Residual Value using the Dynamic Procedure. The residual value of the property being valued calculated by the dynamic procedure shall be the difference between the current value of the collections obtained from the sale of the finished property and the current value of the payments made as regards the various costs and expenses, for the set updating type, using the following formula:

Where:

F = Value of the land or building to be rehabilitated. Ej = Amount of the expected collections at moment J. Sk = Amount of the expected payments at moment K. tj = Number of envisaged periods of time from the moment of valuation until each of the collections occurs. tk = Number of envisaged periods of time from the moment of valuation until each of the payments occurs. i = Selected updating type corresponding to the duration of each of the periods of time considered.

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Article 40. "Static" Calculation Procedure. 1. In order to calculate the residual value using the static calculation procedure the following steps shall be followed:

a) The construction costs, the necessary expenses to which reference is made in Article 18.3 and 4 of the present Order, those as regards marketing and where appropriate, the normal financial expenses for an average property developer type and for a property development of similar characteristics to those analysed shall be estimated. In the case of property under rehabilitation and in those lands which have a proposed new building project the construction costs budgeted in the corresponding project shall also be taken into account. b) The sale value of the property to be promoted for the finished building hypothesis on the date of valuation shall be estimated. Said value shall be obtained by any of the methods set out in the preceding articles c) The profit margin of the property developer shall be set. d) The calculation formula shall be applied.

2. The adopted hypothesis and calculation parameters shall be expressly and reasonably substantiated. Article 41. Profit margin of the property developer. 1. The profit margin of the property developer shall be set by the valuation company, from the information available as regards property developments of a similar nature, and considering the most common in the property development promotions of similar characteristics and location, as well as the financial expenses and most frequent marketing. Article 42. Formula for calculating the Residual Value using the Static Procedure. The residual value using the static procedure for the property being valued shall be calculated using the following formula:

F = VM x (1 – b) – Σ Ci Where:

F = Value of the land or building to be rehabilitated. VM = Property value for the finished building hypothesis. b = Margin or net profit of the property developer expressed on a per unit basis. Ci = Each of the considered necessary payments.

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CHAPTER II

Valuation of real estate and rights

Section 1. General Provisions Article 43. Property valuation. 1. The valuations shall be expressed by separate registered properties. 2. In order to value a property integrated by several elements, shall proceed to the valuation of each element as contemplated in the present Order, thus obtaining the total value of the property as the sum of the calculated values for said elements. 3. Those properties which are the subject of any of the rights contemplated in Section Five of this chapter shall be valued taking into account the existence of said rights. 4. When the use of any of any technical methods stipulated in Article 15 were not possible, the corresponding value using a procedure accepted in professional practice for said purpose may be calculated. In addition to the warning to which reference is made in subparagraph d) of Article 11, said procedure must be explained with the appropriate details in the report, and its use duly substantiated therein, specifying furthermore when it comes to calculating the appraised value for the purpose specified in Article 2.a) (Scope of application) the procedure used to rule out the speculative elements of the calculation.

Section 2. Valuation of buildings and elements of a building Article 44. Application. 1. That set forth in this section shall apply to the valuation of buildings and elements of a building, whether or not finished. It shall likewise be applied to the buildings and building elements under planned building project, under construction or rehabilitation for the finished building hypothesis. 2. Notwithstanding that set forth in the preceding section, the buildings to be demolished, and those legally declared in ruins, shall be valued pursuant to that set forth for the valuation of land in Section Four of the said Chapter II, unless same are classified as rural properties. Article 45. Appraised value of buildings and elements of a building for the mortgage market. The appraised value of buildings and elements of a building for the purposes included in subparagraph a) of Article 2 of the present Order shall be the mortgage value; for the determination thereof the following rules shall be followed: 1. In the buildings under construction or under rehabilitation:

a) The appraised value shall be net replacement value; nevertheless, if the works were halted and is not expected to be resumed in the short term, the appraised value shall be taken as that of the

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lowest between the replacement value and residual value of the land and that of the construction carried out. b) The valuation of property under planned building project, under construction or rehabilitation for the finished building hypothesis shall be carried out, for the scheduled completion date of the works, following the rules laid down in subparagraphs a), b), c) below.

2. In finished properties:

a) In buildings connected to an economic activity, the comparison value, where appropriate adjusted, and whenever possible, the updating value and the net replacement value shall be calculated and the lowest of same shall be taken as the appraised value. In calculating the updating value that set forth in Article 30 of the present Order shall be taken into account, except when the property is leased on the date of valuation in which case that set forth in Article 28 or, if there is no rental market which meets the requirements set forth in Article 25.1.a) of the present Order, and that set forth in Article 29 thereof may be followed. b) In leased property or which are empty, its use is that of rental, with the exception of the dwellings, the updating value and comparison value, where appropriate adjusted, in the event that the properties where free of tenants shall be calculated, and the lowest of same shall be taken as the appraised value. In calculating the updating value that set forth in Article 28 of the present Order shall be taken into account, except in the case of a property where there is no rental market which meets the requirements set forth in Article 25.1.a) of the present Order, and in which case, is leased on the date of valuation, shall follow that set forth in Article 29. The preceding rules apply equally to all elements of a building which constitute a functional unit intended for use by the owner as a rental property. In the case of properties which are leased on the date of valuation, the updating value shall be taken into account, taking into account that set forth in Article 29, and the comparison value, where appropriate adjusted, in the event that the properties are free of tenants shall be calculated, and the lowest of same shall be taken as the appraised value. When the aforementioned values cannot be calculated, the appraised value shall be, as a maximum, the net replacement value of the property. c) In the remaining properties not specified in the foregoing subparagraphs, that is, buildings or elements of a buildings intended for own use or empty and are not connected to an economic activity, the appraised value shall be the comparison value, where appropriate adjusted, when the calculation is not possible the updating value shall be taken taking into account that set forth in Article 28, and if that calculation were not possible either, the appraised value shall be, as a maximum, the net replacement value.

3. In buildings under the aegis of a public protection system, the appraised value, under no circumstances whatsoever, shall exceed the maximum legal value.

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Article 46. Appraised value of buildings and elements of a building for insurance companies and pension funds. The appraised value of buildings and elements of a building for the purposes contemplated in subparagraphs b) and d) of Article 2 of the present Order shall be determined by following the rules listed below. 1. In the buildings under construction or under rehabilitation:

– The appraised value shall be the initial value plus the amount of work certificates to the extent in which said certificates are paid and meet the effective execution thereof. – The initial value to which reference is made in the preceding paragraph shall be the appraised value of the land in the case of new building works or the appraised value of the building or elements of a building prior to the commencement of the works in the case of buildings or elements of buildings under rehabilitation.

2. In finished properties:

a) In buildings connected to an economic activity, the comparison value, the updating value and the net replacement value shall be calculated and the lowest of same shall be taken as the appraised value. In calculating the updating value that set forth in Article 30 of the present Order shall be taken into account, except when the property is leased on the date of valuation in which case that set forth in Article 28 or, if there is no rental market which meets the requirements set forth in Article 25.1.a) of the present Order, and that set forth in Article 29 thereof may be followed. b) In leased premises, the updating value calculated pursuant to the procedure prescribed in Article 29. The appraised value thus identified may not exceed the comparison value of the property in the event that the property is free of tenants. When the aforementioned values cannot be calculated, the appraised value shall be, as a maximum, the net replacement value of the property. c) In the remaining properties not specified in the foregoing subparagraphs, that is, buildings or elements of a buildings intended for own use or empty and are not connected to an economic activity, the appraised value shall be the comparison value, when the calculation is not possible the updating value shall be taken taking into account that set forth in Article 28, and if that calculation were not possible either, the appraised value shall be, as a maximum, the net replacement value.

3. In buildings under the aegis of a public protection system, the appraised value, under no circumstances whatsoever, shall exceed the maximum legal value. Article 47. Appraised value of buildings and elements of a building for Real Estate Collective Investment Institutions. The appraised value of buildings and elements of a building for the purposes contemplated in Article 2.c) (Scope of application) of the present Order shall be determined by following the rules listed below.

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1. In the buildings under planned building project, under construction or under rehabilitation: The appraised value shall be the value that the property would have on the date of valuation for the finished building hypothesis, calculated according to the rules below. Said value may not included into upward adjustments in order to reflect the market trend within the time remaining until the completion of the works. 2. In completed buildings, in the event of being leased on the date of valuation, the value thereof shall be calculated using the comparison value in the event that the property is free of tenants and the updating value as prescribed in Article 29. The appraised value shall correspond to the lesser of both values. If the property was not leased the appraised value shall be the comparison value in the event that it is free of tenants. 3. In the event that the calculation of any of the values specified in the preceding paragraph were not possible, the value shall correspond to the updating value as prescribed in Article 28, and if it were not possible to calculate the latter, it shall correspond to the updating method prescribed in Article 30. Where the application of any of the aforementioned methods is not possible, that set forth in Article 43.4 of the present Order shall apply , using a procedure what is accepted in the professional practice for the calculation of the market value of the property in question. In the event of having used that set forth in Articles 30 and 43.4, the appraised value shall not exceed:

a) The net replacement value, in the event of carrying out a prior valuation. b) The acquisition cost of the property by the collective investment institution, in the event of carrying out a first valuation for the purposes of the calculation of net asset value, or c) The last appraised value assigned to the property, when said value could have been calculated using other procedures pursuant to that set forth in this article, in the event of carrying out the other regular valuations. .

4. When there is a maximum legal value for the property being valued, the appraised value may not exceed said maximum legal value, except in the case of public housing properties wherein at the end of the allocation period that remains is less than five years from the date of valuation. In the latter case, the appraised value may not exceed that resulting from the following equation:

VML + maximum [0,‹((60 – Tr)/60)*(VTL–VML)›]

Where:

VML: is the maximum legal value for sale. VTL: comparison value for the assumption that the property is free of tenants. Tr= number of months remaining until the expiration of the protection regime.

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Section 3. Valuation of rural properties

Article 48. Application. That set forth in this section shall apply to the valuation of rural properties including those with improvements, facilities or buildings. Article 49. Appraisal value of rural properties for all purposes. The appraisal value of rural properties is obtained by adding the following values:

a) The appraised value of the land, including different buildings and other related and necessary non removable facilities required for operation thereof. Said value shall be the lowest between the comparison value, if adjusted for the different kinds of soil, and the updating value of the holding. b) The appraised value of buildings or installations intended for uses other than those to which the different types of land are earmarked to. Said value shall be obtained as if it were properties connected to an economic exploitation and shall not, as maximum, exceed the net replacement value. c) The appraised value of other buildings or facilities (residential, recreational etc.). Said value shall be the appraised value calculated pursuant to Articles 45 (Appraised value of buildings and elements of a building for the mortgage market), 46 (Appraised value of buildings and elements of a building for insurance companies and pension funds) and 47 (Appraised value of buildings and elements of a building for real estate collective investment institutions) of the present Order pursuant to the valuation purpose.

Section 4. Valuation of Land and Plots Article 50. Application. 1. That set forth in this section shall apply to the valuation of land classified as urban and developable and non-developable which are not valued as rural properties. 2. Shall likewise apply, duly substantiated, to those buildings constructed wherein there is no legal impediment as regards its demolition and whose highest and best use is that of the land. Article 51. Appraisal value of land for all purposes. 1. The appraisal value of Urban Level I land shall be the comparison value, where appropriate, adjusted. Where the calculation thereof is not possible, the appraised value shall be the residual value. In both cases the demolition costs shall be deducted where appropriate. The existence of a construction project on a certain land does not enable that land to be valued in a different manner to that prescribed in this section.

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2. The appraisal value of the land subject to an economic exploitation other than that of agriculture shall be the updating value calculated using the procedure prescribed in Article 30. 3. The appraisal value in the remaining cases of land classified as urban level II shall be the comparison value without any regard whatsoever to their possible urban planning use. When the aforementioned value cannot be calculated, the appraised value shall be, as a maximum, the cadastral value of the land. 4. The values to which reference is made in paragraph 1 above shall be calculated taking into account the urban use susceptible to appropriation by its owner at the date of valuation

Section 5. Valuation of certain rights and properties subject thereof Article 52. Application. 1. That set forth in this section shall apply to the valuation of certain in rem rights or limitations that encumber a property being valued pursuant to the present Order. 2. The rights and limitation to which reference is made in the preceding paragraph are as follows:

a) The surface right. b) The administrative concession. c) The easement. d) The bare ownership, usufruct, use and occupancy. e) Limitations to ownership rights. f) Purchase options. g) Timeshare on property. h) Forward purchase commitments.

Article 53. Valuation of properties wherein there is a surface right. 1. In order to appraise a building or building element which is constructed or to be constructed for the finished building hypothesis in the exercise of a surface right on land owned by a third party, any of the procedures specified in the following points may be selected: Depending on the purposes of the valuation, Articles 45 (Appraised value of buildings and elements of a building for the mortgage market), 46 (Appraised value of buildings and elements of a building for insurance companies and pension funds) and 47 (Appraised value of buildings and elements of a building for real estate collective investment institutions) of the present Order as if said properties were freehold property shall apply herein.

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From the value thus obtained, the following shall be subtracted:

i) The current value of the payments to be made to the grantor. ii) The current value of the reversal value calculated pursuant to Article 31.3 on the extinguishment date of the surface right.

2. In order to appraise a surface right on a given land the residual method shall be applied using the dynamic procedure prescribed in Article 36 ("Dynamic" calculation procedure) of the present Order taking into account in particular the amounts payable by the surface rights during construction and, where appropriate, the remaining term of the right, as well as the receipts and payments generated by the economic activity related to the surface rights. 3. In order to appraise the ownership of land on the surface right is being constructed, the following shall be added:

a) The current value of the payments to be made to the grantor. b) The current value of the reversal value calculated pursuant to Article 31.3 (Reversal Value) on the extinguishment date of the surface right.

4. Capitalisation rates which are used to calculate the values specified in this article shall be determined pursuant to Articles 32 and 38, as the case may be, and shall take into account, furthermore, the conditions of the surface rights, especially as regards to the grounds and extinguishment or termination deadlines. 5. Notwithstanding that set forth in the preceding subparagraphs, whenever there is sufficient data as transactions of properties subject to surface rights, or that of surface rights or lands encumbered by surface rights in similar conditions to those subject to valuation, the comparison method may be used, provided that the requirements of Article 22 (Procedure for calculating the comparison value) of the present Order are met. Article 54. Valuation of administrative concessions. 1. In order to appraise a building or building element which is constructed or to be constructed for the finished building hypothesis over those properties wherein an administrative concession has been granted, any of the procedures specified in the following points may be selected:

a) Depending on the type of property and the purposes of the valuation, Articles 45 (Appraised value of buildings and elements of a building for the mortgage market), 46 (Appraised value of buildings and elements of a building for insurance companies and pension funds) and 47 (Appraised value of buildings and elements of a building for real estate collective investment institutions) and 49 (Appraised value of rural properties) of the present Order as if said properties were freehold property shall apply herein. From the value thus obtained, the following shall be subtracted:

i) The current value of the payments to be made to the grantor.

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ii) The current value of the reversal value calculated pursuant to Article 31.3 on the extinguishment date of the administrative concession.

2. In order to appraise an administrative concession on a given land, the land residual method shall be determined by the dynamic procedure prescribed in Article 36 (dynamic calculation procedure) of the present Order, taking into account in particular shall apply:

a) The amounts payable by the beneficiary of the concession during the construction and where appropriate during the remaining duration of the concession. b) The collections and payments generated by the economic activity related to the concession.

3. In order to appraise the ownership of land wherein there is a administrative concession granted, the following shall be added:

i) The current value of the payments to be made to the grantor. ii) The current value of the reversal value calculated pursuant to Article 31.3 on the extinguishment date of the administrative concession.

4. Updating rates which are used to calculate the current values specified in this article shall be determined pursuant to Articles 32 and 38, as the case may be, and shall take into consideration, furthermore, the terms and conditions of the administrative concession as regards to the grounds and extinguishment or termination deadlines, as well as the utility rates of the concession and its possible evolution. 5. Notwithstanding that set forth in the preceding subparagraphs, whenever there is sufficient data as transactions of properties subject to the administrative concession, or administrative concessions or lands encumbered by surface rights in similar conditions to those subject to valuation, the comparison method may be used, provided that the requirements of Article 22 (Procedure for calculating the comparison value) of the present Order are met. Article 55. Valuation of easement. 1. Easements contemplated under Heading II of the second book of the Civil Code, shall be are valued by subtracting the value of the property, on the assumption that it is free from the encumbrance imposed by the easement, the value of said property taking into account the effect of the easement which encumbers same. 2. The values to which reference is made in the preceding paragraph shall be calculated by applying the corresponding method contemplated in the present Order. Article 56. Valuation of the bare ownership, usufruct, use and occupancy. The value of the bare ownership, usufruct, use and occupancy shall be determined pursuant to the following rules:

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1.) The basis for the pro-rata shall be calculated and which shall be the updating value according to the procedure prescribed in Article 28 (Cash flows from rental market properties) of the present Order. 2.) The distribution of pro rata basis between the usufruct and bare ownership is as follows: Usufruct: current actuarial value of cash flows during the period in which the right is maintained. Bare ownership: is the difference between the pro-rata basis and the previous current value. Considerations for the calculation of the usufruct:

a) usufruct constituted in favour of a single person:

a.1) if the usufruct is temporary: the current actuarial value of an annuity whose term is the temporality which has not elapsed, per head of the age of the usufructuary shall be calculated a.2) if the usufruct is life usufruct: the current actuarial value of an lifetime annuity per head of the age of the usufructuary shall be calculated.

b) usufruct constituted in favour of a single person:

b.1) if the usufruct is temporary: the current actuarial value of an annuity whose term is the temporality which has not elapsed, for the head of the age of the usufructuary shall be calculated, considering the chances of survival of the group and its casuistry of extinction according to the orders of the death. b.2) if the usufruct is life usufruct: the current actuarial value of a lifetime annuity shall be calculated, considering the chances of survival of the group and its casuistry of extinction according to the orders of the death.

c) the formulas to be applied in each case are as follows:

A. Current actuarial value of an income for a single head: A.a Temporary annuity:

Ct: cash flow with due date at moment t. i: interest rate pursuant to Art. 32 of this Order. tp2: probability that a head aged x lives a further t years. x: age of the usufructuary at the time of calculation. n: temporality not elapsed of the usufruct.

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A.b Annuities:

w: age ceiling of the mortality table used. B. Current actuarial value of an income for more than a single head: Formulas applicable to the case in which the group of usufructuaries is made up by two heads: B.a Extinction upon the first death: Temporary annuity:

tpxy: probability that the head (x) and the head (y) are both alive within t years. tpxy = tpx • tpy

Annuities:

t pxy: probability that the head (x) and the head (y) are both alive within t years. t pxy = tpx • tpy B.a Extinction upon the second death (last demise): Temporary annuity:

t pxy = t probability that the head (x) or either head (y) or both are both alive within t years. t pxy = tpx + tpy– t pxy

Annuities:

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d) The foregoing calculations shall be carried out using survival tables which meet the requirements set forth in Article 34.1, paragraphs a), b), c), e) and last paragraph of Regulation on the regulation and supervision of private insurance, approved by Royal Decree 2486/1998, of 20 November. Having identified the current values of the usufruct and bare ownership, which amount must be equal to a pro rata basis, shall determine the ratio that these values shall have.

3.) The value of usufruct and bare ownership shall be the result of applying the appraised value of the property pursuant to this ministerial order the corresponding ratio as determined in the preceding paragraph. 4.) The value of the right of use and occupancy shall be obtained by dividing the value of the calculated usufruct pursuant to the foregoing rules, by 1.12. Article 57. Valuation of the limitations to ownership rights. 1. The general or particular prohibitions and limitations of the freehold ownership or free use of property, other than those specified in Articles 53 (Valuation of property wherein there are surface rights), 54 (Valuation of administrative concessions), 55 (Valuation of easement) and 56 (Valuation of the bare ownership, usufruct, use and occupancy) of the present Order shall be taken into account the valuation thereof. 2. The valuation of the limitations shall be determined using the methods set out in Chapter I of this Heading, which correspond to the legal content of the limitation of ownership rights, applied to the amount in which the property is affected. 3. The value of the property shall be determined by the difference between that obtained as if there were no limitation of ownership rights and the value of the latter. Article 58. Valuation of call-options. The call-opctions on properties which are valued for the purposes of Article 2.c) (Scope of application) of the present Order, shall be carried out considering the value of the property, the terms and conditions of the execution of the option included in the documentation governing the right of option. The value of the option shall be determined pursuant to the following rules:

a) If the difference between the value of the property at the date of valuation calculated as set forth in Article 47 (Appraised value of buildings and elements of a building for real estate collective investment institutions) of the present Order and the exercise of the purchase option of the updated property is positive, the option value shall be equal to that difference. For the updating, the interest rate quoted in the secondary market for public debt with a maturity date closer to the remaining term for the exercise of the right shall be used as the discount rate. b) If the aforementioned difference is negative or zero the value of the option is zero.

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c) In either of the events where in that the option, its duration or the amount for which it may be executed, are subject to situations or deadlines which make its exercise unlikely, in the opinion of the valuation company, its value will be zero.

Article 59. Valuation of Time-sharing Property. 1. The properties which are fully or partially under the aegis of the right prescribed in Law 42/1998, of 15 December, on the rights of timeshare of tourist use real estate and tax regulations, shall be valued at the part subject to this right pursuant to the following rules:

a) The value of all periods susceptible to the assignment of all or part of the property subject to this right, whether or not assigned, by the income updating methods, using as interest that of the public debt of a duration closest to the number of years remaining to the end of the regime shall be determined. b) The value of each assigned period of each element of the property subject to this right by the income updating methods shall be determined, without regard to the reversal value and using as the interest that of the public debt interest of a duration closest to the number of remaining years for completion of the contract. c) In both cases the cash flows shall be calculated pursuant to that set forth in Article 28 taking into account the average income of comparable leased properties, considering the time of year to which reference is made and must be the same as the period whose value is intended to be sought.

2. In order to obtain the value of the property which is wholly or partially subject to this subject and which have been assigned for certain periods shall be subtracted from the value obtained in paragraph 1.a) the sum of values obtained in point 1.b) and the ratio of the value obtained in paragraph 1.a). shall be calculated. In order to obtain the value of one or more assigned periods the ratio that is represented on the value obtained in point 1.a) shall be determined. 3. Shall be multiplied, where appropriate, the proportion thus determined by the lower of the comparison value, the updating value calculated pursuant to the procedure prescribed in Article 28 and the and the net replacement value of the property, in the event that this right were nonexistent. Article 60. Valuation of forward purchase commitments. 1. The forward purchase commitments on properties which are valued for the purposes of Article 2.c) (Scope of application) of the present Order, shall be valued considering the value of the property, the terms and conditions of contract included in the documentation governing the forward purchase commitments. 2. The value of the commitment shall be determined as the difference between the value of the property at the date of valuation calculated as set forth in Article 47 (Appraised value of buildings and elements of a building for real estate collective investment institutions) of the present Order and the convened price in the updated forward purchase commitment contract price, using as updating rate the interest rate of public debt with a duration closest to the number of remaining years for the forward purchase commitment.

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HEADING III.

Drawing up of valuation reports and certificates

CHAPTER I

General provisions

Article 61. General principles and rules. 1. Credit institutions which have the valuation services and approved appraisal companies shall draw up the approved shall prepare the valuation reports and certificates pursuant to the following general rules:

a) To draw up same with veracity and transparency. b) To expressly state and in a clear and visible manner as to whether or not the valuation has been drawn up pursuant to that set forth in the present Order. In either event, said Order shall be referenced with their full name and shall specify the date of the Official State Gazette in which it was published.

2. When the report is drawn up for the purposes set out in Article 2 (Scope of application) of the present Order, its formal and structural aspects shall comply with that set out in the following articles. In all cases wherein the present Order stipulates for the adoption of a decision or certain opinion together with its reasoned justification, this justification shall be expressly stated in the explicitly in the valuation report and in the corresponding certificate where thus appropriate to be included therein the information to which the aforementioned decision or options has been applied to. When the standard stipulates an underlined justification, a different font or other procedures which draws the reader's attention shall be used. 3. The updating valuation report and certificate shall be drawn up with the same requirements as those of any other valuation and must likewise contain the identification of the previous valuation which is updated. Article 62. Issuance and Expiry of the valuations. 1. The date of issuance of a valuation report or certificate shall not be later than two months from the date it was drawn up, the last visual inspection of the valued property. 2. Nevertheless, in the case of land, or in other exceptional and specifically justified in the report, such as the valuation of assets, this period may be extended to six months. 3. For the purposes of the present Order the date of issuance shall be considered as the date of valuation. 4. The reports and certificates shall expire, necessarily, six months from the date on which the report was issued.

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CHAPTER II

Formal aspects

Section 1. Specific formal aspects of the certificate

Article 63. Certificate Requirements. 1. The valuation certificate shall be drawn up pursuant to the following minimum form and content:

a) The corporate name of the valuation company or financial institution which issued, and the registration number in the Register of the Bank of Spain shall be specified. Shall be drawn up on paper with the letterhead of the valuation company or financial institution which issued same, specifying the number of pages comprising same. Alternatively the certificates may also be grouped and filed by electronic means in a durable medium provided that the identity of the entity which issues and the conservation of its integrity is assured for subsequent reference. b) Shall identify the legal purpose of the valuation. c) Shall include a precise reference to the valuation report which summarises same. d) Shall contain the location and type of property, its registration identification, cadastral reference, the usable surface area in the case of buildings and is comparable, the surface area adopted in the calculation of technical values and status of occupancy status and except for the purposes of the intention of Article 2. a) (Scope of application), the registered owner at the moment of valuation. e) Shall include an express statement that the valuation has been undertaken pursuant to the requirements of the present Order or other applicable regulations according to the purpose of the valuation. f) Shall specify the method of valuation(s) used, as well as the values estimated for each method. g) Shall specify the appraised value of the property as well as limitations to ownership rights which are specifically mentioned and the value for the purposes of fire insurance and other damages insurance. When reference is made to several properties which comprise separate registry or functional properties must specify the appraised value that is assigned to each property. h) Shall specify, where appropriate, the provisos and caveats to which reference is made in Articles 10 (Provisos), 11 (General warnings) and 12 (Specific warnings) of the present Order. i) Shall specify its date of issuance, date of the last visit to the property and the expiry date. j) Shall be signed by a representative of the entity which issues thee certificate or the financial institution whose services the valuer belongs to. The signature shall be handwritten, machine

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written or electronic in which case shall comply with prevailing legislation on electronic signature, corresponding to the valuation firm to establish the procedures to ensure the unalterability of the documents on which it is printed. k) Shall contain any other information which is required by the specific regulations depending on the purpose of the valuation.

Section 2. Specific formal aspects of the report

Article 64. Formal requirements of the report. The report shall be drawn up pursuant to the following formal requirements:

a) The corporate name of the valuation company or financial institution which issued, and the registration number in the Register of the Bank of Spain shall be specified. It shall be drawn up on paper with the letterhead of the valuation company or financial institution which issued same, specifying the number of pages comprising same. Alternatively the reports may also be grouped and filed by electronic means in a durable medium provided that the identity of the entity which issues and the conservation of its integrity is assured for subsequent reference. b) Shall be drawn up according to the structure and content stipulated in Articles 65 (General Structure of Valuation Reports) et seq. c) all be signed by a representative of the valuation firm and by the competent professional who has drawn up the report pursuant to that set forth in Article 2.2 of Royal Decree 775/1997, of 30 May. Necessarily one of the two signatures shall be handwritten, machine written or electronic in which case shall comply with prevailing legislation on electronic signature, corresponding to the valuation company to establish the procedures to ensure the unalterability of the documents on which it is printed. When the competent professional who has drawn up the report is not the same who made the visit and visual inspection of the property being valued, the report shall also describe the professional and personal information of the competent professional who has drawn up same, specifying details such circumstances.

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CHAPTER III

Structural Aspects Article 65. General structure of valuation reports. 1. The valuation reports shall be drawn up and submitted in accordance with the structure specified in this article. Said structure shall include at least the following sections:

a) Applicant of the valuation and purpose. b) Identification and location. c) Verifications and documentation. d) Location and environment. e) Land description and surface area. f) Building description and surface area. g) Urban planning description. h) Protection, possession and occupation regime. i) Market analysis. j) Data and calculation of the technical values. k) Appraised values. l) Provisos and Caveats m) Remarks. n) Date of issuance, expiry date and signatures. o) Documentation attached to the report.

2. The sections mentioned in the preceding paragraph shall be completed taking into account the principle of proportionality, according to the type of property that is being valued and shall stipulate therein at least the contents which are specified in the following articles. Article 66. Applicant and purpose. 1. In this section of the report shall specify:

a) The client of the valuation company. b) The purpose for which the valuation has been made. c) If the valuation was carried out following the provisions contained in the present Order, said Order shall be referenced with their full name and shall specify the date of the Official State Gazette in which it was published.

2. When the purpose of the valuation is that set forth in Article 2. a) (Scope of application) of the present Order, shall likewise specify the entity that has been mandated by the client for its commission. Article 67. Identification and location. In this section of the report shall specify:

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a) If a single building or building element or several grouped into a single complex, or in the same building is valued. b) In the case of a completed property, under planned building project, under construction or under rehabilitation. c) The data corresponding to the location of the property being valued, as well as their registration identification and cadastral reference. d) When the object of valuation is a rustic property or non-developable land shall specify, in addition to that stipulated in the preceding paragraph, the payment or place, municipality, district and province in which said property is located, as well as the name listed in the Property Register and, where different, that for which it is commonly referred to.

Article 68. Verifications and documentation. In this section of the report shall specify the list of verifications made by the valuation company to draw up the report and the list of documents used. Article 69. Location and Setting (environment). 1. The location and environment section shall specify the basic characteristics of both which may influence the valuation, for example, the type of nucleus, its predominant occupation, the population of right and recent developments, as well as the basic characteristics of the municipality wherein it depends where available. 2. When the subject of the valuation is a building, an element of a building or land, from among the basic characteristics of the environment shall be specified, for example: the rental level, uniformity of architectural features and uses of ownership rights, prevailing uses, infrastructure, equipment and services, communications thereof, parking, building development of the environment, its antiquity characteristic, the recently undergone renewal etc. 3. Where the subject of the valuation is a rural property, from among the basic characteristics of the environment shall be specified, for example: the installation characteristics, its population density, its equipment and services, particularly those which enable or facilitate the farm, its infrastructure etc Article 70. Land description and surface area. 1. When the subject being valued is a building or a plot of land of an urban character, in this section of the report shall specify:

a) The land surface area verified by the valuer, the cadastral surface area and that included in the registration documentation used. b) The exterior infrastructure works of the land of which it is furnished, as well as those pending execution at the time of valuation, stating the estimated percentage of the works completed and the pending investment.

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2. When the subject being valued is an element of a building, it shall not be necessary to specify the information stipulated in this article, except that due to its importance on the value of the property is considered relevant. 3. When the subject being valued is a rural property, shall specify:

a) The land surface area verified by the valuer, specifying the type of verifications undertaken, the cadastral surface area and that included in the registration documentation used. b) The approximate surface intended for various agricultural uses and, where appropriate, that intended for other purposes (residential, recreational, other economic activities etc.). c) The interior infrastructures available (water, roads, electricity etc.). d) In relation to the land, the factors of texture, depth, stoniness, salinity and gradient, specifying the agrological classes. e) On rural properties where there are irrigated farms, the source of the water, flows, quality, extraction and distribution system in the farm according to the irrigation system. f) In the event that there are those special characteristics wherein which influence their value, such as its special location, landscape, ecological and hunting circumstances shall be specified. g) The alternatives followed for crop rotations and characteristics thereof.

Article 71. Building description and surface area. 1. When the subject being valued is a building, shall specify:

a) The distribution of the buildings and services in the plot of land , the type of building, the total surface area, specifying as to whether or not it is useful or built with or without common elements, the number of floors, basic distribution, uses and surface area of each floor, the existence of common elements, internal general services, and serving their purposes, the most relevant specific circumstances for each one of them. Whenever it is verifiable, the useful floor space shall be specified. b) The fundamental elements of the building (foundation, structure, roof, exterior walls, exterior carpentry etc.), the relevant installations (plumbing, heating, air conditioning, gas, electricity, elevators, fire prevention etc., as well as relevant workmanship and finishes. c) In the case of buildings under construction or rehabilitation, the characteristics of the preceding paragraphs shall refer, in that part of the work as yet not executed, to the project which has served as a basis for granting of the municipal license. It shall likewise be specified in what stage the works are at, specifying an estimate of the percentage of work executed.

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d) In the case of buildings intended for commercial or industrial use shall likewise specify the characteristics and construction elements which limit or hinder uses other than those existing uses, the finishes, fixtures or recoverable constructive elements, relevant and likely to be used by a third party or multipurpose use. Shall likewise be specified if it is unfinished (structure and connection of installations) or if it is conditioned for the corresponding activity.

2. When the subject being valued is an element of a building, shall specify:

a) Its surface area, specifying as to whether or not it is useful or built with or without common parts, distribution and outbuildings, relative situation and basic characteristics of the building of which is comprises, the specific characteristics which are relevant to each of the uses thereof and when existent, its annexes to the surface area. b) Its constructive characteristics and relevant installations or those affecting the value.

3. When the subject is being valued is a land of urban planning character, shall specify as to whether or not there are buildings on it and in the event that there are buildings and it is not contemplated the demolition thereof, shall described its use, surface area and main construction characteristics. 4. When the subject being valued is a rural property, shall specify:

a) The existing buildings, facilities and permanent improvements, distinguishing those required for farming and/or livestock and forestry uses, which produce yield in themselves to be connected to economic exploitation other than the agricultural exploitation and other buildings not included in the foregoing types, for example, dwellings. b) For each of the buildings, the use, distribution, surface area and main constructive characteristics shall be described, stating the adequacy and sufficiency.

5. For all types of buildings and agricultural facilities or otherwise, its antiquity and estimated useful life, the condition and existing state of repair and apparent existing deterioration shall be specified. Article 72. Urban planning description. 1. When the subject being valued is a building or an element of a building, shall specify:

a) The degree of adequacy of its physical characteristics and uses to which it is intended, to the prevailing urban planning regulations, as well as if it is subject to any certain type of individual urban or historical protection. b) In particular, in the case of buildings, it shall as to whether or not they are in conformity with the urban planning.

2. When the subject being valued is a land of an urban planning character, shall specify:

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a) The current overall urban and land use planning and, if necessary, the development planning required by applicable urban planning laws, the approval stage wherein it is at, the foreseeable deadlines for final approval thereof, taking into account, where appropriate, its inclusion within a management ambit. b) The urban planning classification corresponding to the land: urban, developable or non-developable, or where appropriate, equivalent classes regulated by the urban planning legislation. When the land being valued is classified as urban, it shall be specified furthermore as to whether or not it is of a plot of land nature. c) The urban classification, the authorised and prohibited uses, building types and intensity and conditions thereof (utilisation rates and net and/o gross building, permitted heights, maximum occupancy, setbacks etc.). d) The urban planning use according to its area of distribution and management and implementation ambit. In this regards, shall specify:

– The surface area actually constructed by the landowner. – The subject to whom the management initiative corresponds (any of the various administrations, individuals etc.). – The management system and method pursuant to the applicable urban planning legislation. – The urban planning encumbrances (assignments, urban planning costs, acquired obligations etc.) which affect the land, taking account, where appropriate, the management ambit wherein it is found. In this case, the ratio that the surface area of the land represents on the total surface area of the management ambit to which it belongs shall likewise be specified. When the urban planning works have been commenced, its status shall be specified. – The planning and/or management instruments and procedures thereof, required for the land to be considered as a plot of land. – In the case of being established, the contemplated deadlines for the urban planning development of the land set out in the relevant programming document pursuant to the applicable legislation and in particular the consequences that may affect the value of the land in case of breach. – In the event that the land is within an area subject to expropriation, the legal criteria applicable for its valuation and the status of the expropriation procedure shall be specified.

3. Where the subject of the valuation is a rural property, the classification of the land and where appropriate, the special protection regime shall be specified. Article 73. Protection, Tenancy and Occupation Regime.

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In this section, shall be specified for the property which is valued:

a) The status of occupancy and, in the event of being occupied, the title under which it is under, as well as the characteristics and term thereof. b) When the property has or is intended for an economic exploitation the characteristics of the activity or economic exploitation under the aegis of or contemplated by the property shall be specified. c) Where there is any existing right or obligation which affects the content of the in rem rights of the property, its characteristics and effect on the value shall be described. d) When a building which any legal, urban planning or public protection limitation that directly or indirectly restricting its sales sale price is being assessed, shall clearly specify the fact and the effect on value.

Article 74. Market Analysis. Shall describe in this section the characteristics of the real estate market segment relative to comparable properties which are the subject being valued, whenever existing. The perceived differences between the market value and mortgage value in this market segment shall likewise be specified. Where appropriate, shall contain data on the supply, demand, at intervals of current cash sale or rental and expectations of supply and demand and revaluation. Article 75. Data and calculation of the technical values. 1. In this section shall be described the valuation methods and criteria used, as well as calculations carried out to determine the value. Furthermore those data necessary for the undertaking of such calculation and which were not included in the preceding paragraphs shall be notified. Said criteria and data shall depend on the valuation method used and shall be, at least those specified in the following subparagraphs of this article. 2. When the comparison method is used, the minimum data to which reference is made to the preceding paragraph shall be:

a) The data of at least six comparable properties used to implement the method, specifying for each of them, at least the province, municipality and, where applicable, the postal code, street and, for buildings which are not single family dwellings, their number. b) For each property the parameters, coefficients and/or weights and/or statistical development used for the carrying out of the homogenisation of prices.

3. When the update method is used, the minimum information to which reference is made in paragraph 1 of this article shall be, where appropriate:

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a) Information used to set the expected income. In the case when addressing specific comparable data shall be indicated for each of them, at least the data used to carry out the homogenisation of income. b) The average ratios used in the case of properties connected to the economic exploitation and sources used. c) Details of the cash flows used in the calculation, of the useful life and the updating rate selected and the residual value.

4. When the residual method is used, the minimum information required to which to reference is made to paragraph 1 shall be:

a) The values in the corresponding sale of real estate products. b) Construction costs used. c) The execution deadlines and sale in the case of the residual method by the dynamic procedure. d) The updating rate selected in the case of dynamic method or the margin in the case of the static method. c) Details of the cash flows used in the calculation in the case of the residual method by dynamic procedure.

5. In cases where the value is calculated using a method related to the cost method and when the value of properties under construction is calculated, the data to which reference is made in paragraph 1 shall be:

a) The construction costs used. b) The information corresponding to the method selected to calculate the value of the land.

Article 76. Appraised values, provisos and caveats. In this section shall be specified:

a) The resulting technical values for each property being valued. b) The resulting appraised taking into consideration the subject and purpose of the valuation. c) The provisos or caveats which may exist pursuant to that set forth in Chapter III of Heading I of the present Order. d) The limitations to the values, if any. e) The minimum amount of the fire and other damages insurance to that of the structure set forth in the First Additional Provision.

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Article 77. Date of issuance, expiry date and signatures. In this section shall include:

a) Date of the last visit to the property. b) The issuance date of the report. c) The expiry date of the report. d) Name, signatures and qualification or job position of those who sign the report and the name and qualifications of the remaining technicians who have directly participated in the valuation.

Article 78. Documentation attached to the report. 1. In this section shall include at least the following graphic documentation:

a) Document with the graphical cadastral information of the property obtained directly through the Virtual Office of Cadastre, provided that it reflects the material reality of that property, in cases contemplated in paragraph 1 of Article 8. b) In the absence of the foregoing, the drawings to scale or layout drawings and location of the property in the municipality. c) Drawings to scale or dimensional drawings of the property. d) Any other that, in the opinion of the valuer, enables to sufficiently define and identify the characteristics of the property (sections, photographs etc.).

2. Shall likewise include at least the following non-graphic documentation:

a) Document used for cadastral registration and identification. b) Copy of the building permit in buildings under construction or rehabilitation. c) In buildings under planned building project, under construction or rehabilitation, a summary of the material execution budget. d) A copy of the qualification certificate or document which determines or enables to determine the maximum legal value in buildings under construction subject to public protection. e) Copy of the ownership and encumbrance certificate, when the document is of compulsory use for valuation. f) In leased properties, a copy of the lease contract or in the absence thereof, the occupancy title and except for the purpose set forth in Article 2. a) (Scope of application) of the present Order, the certificate from the owner of the occupancy situation, current income and payment status, and the expenses attributable to the property in the last year.

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g) Copy of balance sheet and results account for the last three years in the case of properties connected to the economic explotation.

3. The content of the preceding points may be wholly or partly integrated in the different sections of the valuation report, if it improves readability thereof. 4. In cases of deeds or comprehensive technical documents, the identification cover thereof, or its representative information may be enclosed.

HEADING IV

Special provisions

CHAPTER I

Property valuation of insurance companies for the purposes of determining its fair value. Article 79. Scope of application of this Chapter. The special provisions under this Chapter shall be as the exclusive scope of application of the valuation for the purposes set forth in Article 2.b) (Scope of application) of the present Order. The property shall be valued by an approved valuation company for the valuation of real estate in the mortgage market (hereinafter the approved valuation company) pursuant to the rules for that purpose set out in the present Order, notwithstanding the verifications and revisions which may be carried out by the Directorate General for Insurance and Pension Funds of the valuations made by the aforementioned approved valuation companies. Article 80. Documentation which the insurance companies must make available to the Directorate General for Insurance and Pension Funds. 1. The insurance company owner of the property or in rem property right must have available a valuation report with the requirements to which reference is made in paragraph 2 of this article. Said report shall be made available to the Directorate General for Insurance and Pension Funds and may be required at any given moment for the purposes of supervising the valuations made. 2. The report and certificate issued by an approved valuation company shall comply with that set forth in the present Order, with the requirements specified below:

a) The report shall expressly specify the date and the acquisition price of the property or the in rem property right and the amounts of the works which had been undertaken since the previous valuation, if any. b) As appendices to the valuation report must include the documents listed in Article 81 of the present Order.

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e) The report shall include the minimum value to be covered by a fire and other damages insurance policy to that of the structure.

Article 81. Documents incorporated to be the valuation report. The valuation report shall include the documents listed below:

a) Public document certifying the acquisition of the property, price thereof and the method of payment, in the event that it is the first time the property is valued. If the public deed corresponded to the acquisition of several properties and included is the price as a whole thereof, the company must submit a certificate issued by its legal representation wherein it is stated the individual price of each property. b) Original or certified copy of the registration certificate to which reference is made in Article 8.1 (Required documents) of the present Order. Said certification, in the valuations following the initial valuations and whenever there is no new registration on the property being valued, may be replaced by an original copy of the simple registry (unregistered) note or equivalent document issued by telematic means by the Property Registry, issued within the three months preceding the date of the valuation and comprehensive of the ownership, the encumbrances and complete description of the property and, where appropriate, of the in rem rights and limitations of ownership which may lie over same. c) Documentation to which reference is made to in paragraphs 1 and 2(a) of Article 78 (Documents attached to the report) of the present Order. d) Certificate of the improvement or refurbishment works, if said works had been carried out following the acquisition of the property, including details and valuation thereof, signed by the contractor who carried out same. e) A certificate issued by the legal representative of the insurance company, wherein it is stated the status of occupancy and possession of the property, that is, if it is occupied or unoccupied, intended for own use or lease. If the property is fully or partially leased shall specify: the surface area and location of the leased area, the annual net income produced in total, and, where applicable, that produced by each of the parties, the duration of the contract, if there is an existing preferential purchase in favour of the lessee and the convened clauses and other special conditions if any. If the property is occupied without title, assigned in precarium, or any other situation which entails the occupation thereof, in such certification shall state therein as to whether the occupancy has been executed by means of a certain type of contract or property that has been verbally agreed and under what terms and conditions, in any case shall be implemented in detail the existing situation with the occupant so as to be acquainted with the current occupancy title of the property. f) In the case of properties under construction or rehabilitation shall include the certificate issued by the insurance company of the resolution adopted by the competent corporate body undertaking to execute the construction within a period of five years and certification from the insurance company itself of the payments made.

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g) The documents mentioned in points c), f), g), h) and i) of paragraph 2 of Article 8 (Required documents) of the present Order, in cases which are applicable, and any other document which the company has valued as deemed necessary for the carrying out of the valuation. h) A certificate issued by the insurance company which insures the property, wherein shall be included the number of the taken out under contract policy, which the property is insured against the risk of fire and other damage to the structure, location, details for the structure insured for each registered property and that the policy is up to date in the payment of the premium. In the case of immovable in rem property rights, the company shall make available, in addition to the registration certificate specified in letter b) of this article, wherein the in rem right is registered in his/her favour, those documents required by the present Order for the valuation of the real estate.

Article 82. Supplementary rules or norms. 1. Insurance companies shall notify the Directorate General for Insurance and Pension Funds of any incident whatsoever which could produce a significant change in the value of the real estate and in rem real estate rights, or in the circumstances which may affect same. 2. The Directorate General for Insurance and Pension Funds may require, both from the insurance company owner of the property rights and the in rem real estate rights as well as the approved valuation company which has issued the report, the necessary clarifications and submission of documents other than those expressly specified in the present Order if it were necessary to verify or review the circumstances, calculations and values incorporated into the report. 3. If the property were subject to the horizontal property regime, the sum insured in the insurance policy against the risk of fire and other damages shall included individually. If in light of the value of construction included in the valuation report shall be appreciated in the insurance an underinsurance situation, the insurance company shall immediately proceed to amend same. Once amended, the property by the value set in the valuation report may be calculated. Article 83. Verification by the Directorate General for Insurance and Pension Funds of the valuations made by the approved valuation companies. When the Directorate General for Insurance and Pension Funds of the valuations convenes to verify the valuation made by the approved valuation companies, shall be notified in writing to the insurance company owner of the property or the in rem real estate right. Both companies shall submit the documents required therefrom and to confer maximum facilities in order to carry out the aforementioned verification; otherwise, the acting technician shall proceed to draw up proceedings as regards the placing of facts on record. Article 84. Valuations subsequent to the initial valuation. 1. Insurance companies shall request from an approved valuation company the revision of the valuations of properties owned by said insurance companies and the in rem real estate rights registered in their favour, prior to the lapsing of two years from the previous valuation and, regardless of the antiquity of the previous valuation, provided that a significant alteration in the value thereof may have taken place. As an exception, the Directorate General for Insurance and Pension Funds may shorten the period of two years,

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with general character or specific class of buildings and in rem real estate property rights, when special circumstances which would affect the real estate market were necessary in order to avoid overvaluation of the real estate. 2. Revisions to the values of the real estate properties and the in rem real estate rights may be made ex officio or at the request of the insurance companies. 3. The Directorate General for Insurance and Pension Funds may decide ex oficio, at any given moment, the revision of the valuations attributed to the property and in rem real estate rights when it is considered that the amount thereof exceeds the value resulting from the application of the present Order. 4. In the valuations subsequent to that of the initial valuation that set forth in Article 80 (Documentation which the insurance companies must make available to the Directorate General for Insurance and Pension Funds) of the present Order shall apply. 5. In the case of buildings under construction or rehabilitation, the insurance company may incorporate to the initial valuation the amount of the certificates to the origin of the works executed and paid, not including stockpiles or fittings in which case the documentation specified in point f) of Article 81 (Documents incorporated to be the valuation report.) of the present Order in order to justify the increase in value shall be made available. Once the works are completed a new valuation corresponding to the completed property shall be carried out. Article 85. Supplementary valuation rules or Complementary Standards. (Repealed) Article 86. Interim constraint value to the technical provision coverage. (Repealed) Article 87. Mortgage Loans. (Repealed)

CHAPTER II

Determination of the assets of the real estate collective investment institutions Article 88. Special provisions. For the purposes of the purposes contemplated in Article 2.c of the present Order:

a) That set forth in the present Order shall likewise be required any other documentation necessary in terms of the specific regulations. b) If there are provisos to the appraised value, the management company or the investment company shall furnish to the valuation company, in the shortest time possible without exceeding

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the validity period of the valuation, the necessary information and the undertaking of the minimum verifications which enable the deletion of the provisos and constraints. c) When the preliminary valuations to that of the acquisition of buildings by the real estate collective investment institutions specify a conditional value, the institution may not purchase the property in question as long as they have not resolved the causes which led to such circumstances and thus has certified the valuation company.

CHAPTER III

Determination of the real estate assets of the pension funds Article 89. Special provisions. For the purposes of the purposes contemplated in subparagraph d) of Article 2 of the present Order, shall be applicable to pension funds pursuant to that set forth in Chapter I of Header IV of the present Order with the following specialties:

a) All references which are made to the title to or ownership of real estate by the insurance companies shall be construed as references to the pension funds. The obligations set out in relation to insurance companies shall be construed as references to the pension funds management companies pursuant to their inherent functions or those functions commissioned to same. b) The frequency to which reference is made in Article 84.1 in the case of pension funds shall be at least annually. c) Shall not apply to paragraphs 2 and 3 of Article 85. d) Interim condition requirements contemplated in Article 86 shall apply for the purposes of being considered suitable to the investment in pension funds.

First additional provision. Fire and other damages insurance to the structure. 1. The sum insured for the purposes of Article 50.10.g) of Royal Decree 2486/1998, of 20 November, shall not be less than:

a) In the case of complete buildings, the lower between the gross replacement value of the building and the appraised value, excluding in both cases the land value. b) In the case of building elements, the appraised value of the element excluding the value of the land.

2. The sum insured for the purposes of Article 30 of Royal Decree 685/1982, of 17 November, shall not be less than the amount resulting from subtracting the gross replacement value of the building or building element being valued the value of the land where it is found. Second additional provision. Internal control mechanisms. In order to comply with the objectives set forth in Article 3.1.e) (Internal control mechanisms) of Royal Decree 775/1997, of 30 May, on the legal framework for the official approval and standardisation of

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appraisal services and companies, said companies and services must have available procedures which ensure: 1. An adequate knowledge of the real estate property market in which they operate, for which shall make available, at least:

a) A database of information as regards costs and prices (for sale and for rent) and property characteristics, sufficient in number, type and location properly distributed within the geographic area in which the entity intends to operate. b) Updated statistical information or other information (auctions, prices of materials etc.) which are used for valuation. c) Procedures for updating the data compiled in the preceding two subparagraphs. d) The specific sources of the foregoing data. e) The methodology used in the treatment of the foregoing data. f) The channels of transmission of said data to the professionals thereof and the system of use thereof in the valuations.

2. The uniform compliance with the applicable valuation rules, wherein there must be available a procedure manual, duly updated, in which at least must be complied:

a) The specific criteria for the application of said standards, specifying among others: the measurement criteria and use attributions of the surface areas; the parameters and systems used in homogenisation of comparables; the form of validation of witnesses; the interpretation of the registration documentation; the criteria for applying the provisos and caveats where appropriate; the manner of determining the useful life, and the types which the entity uses to apply the updating and residual methods; the manner to obtain the value of the net taxes and expenses of the properties; the forecast of future market trend; the justification of capital gains and losses to be applied to the value of land and reversal criteria for identifying speculative elements in transactions. b) The quality control system of valuations and the method of intervention therein of the professionals involved, as well as the criteria set by the entity for the intervention of the professionals specialists in the valuation of properties dedicated to particular uses. c) The system of training and refresher courses for its professionals, specifying as to whether or not those professionals perform valuations.

3. The uniform compliance of the obligations and incompatibilities regime contemplated in Royal Decree 775/1997 for the purposes of the minimum information available shall include the list of natural and legal persons, for which the valuation company or services cannot undertake valuations on the grounds of not having reasonably maintained a position of independence without prejudice to the objectivity of the valuation, as well as the criteria used for the drawing up of said list.

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It shall likewise include the information requested by the entity to its professionals to ensure compliance with said incompatibilities thereof and the frequency with which it is compiled. Third additional provision. Information to be submitted to the Bank of Spain. The valuation companies and services shall notify to the Bank of Spain, in the manner and the frequency stipulated therein, information on risk premiums and profit margins to which reference is made in Articles 38.3 and 41 of the present Order which are being used in its activity as well as any other general technical parameter which is used regularly used in its professional practice for the application of different methods of valuation, and that the Bank of Spain considers relevant in order to ensure the uniform compliance of the valuation regulations. The aggregate information derived from the information received from the valuation companies shall be notified to the Directorate General for Insurance and Pension Funds and the National Securities Market Commission and shall be distributed between the inherent valuation companies. Any provision issued by the Bank of Spain pursuant to that set forth in the preceding paragraph shall be subject to a preliminary report of the Directorate General for Insurance and Pension Funds and the National Securities Market Commission. Fourth additional provision. Conservation of the valuations. The valuations of the last 5 financial years, the valuation companies must retain on file pursuant to that set forth in Article 12.1 of Royal Decree 775/1997, of 30 May, shall include a complete copy of the valuation reports and annexes thereof. as well as the certificate or certificates that, where appropriate, has been summarised and, in the case of lifting of a proviso, that of the expressed and reasonably justified statement of the company which signed the report that contained in the terms prescribed under Article 14.2. Shall likewise contain the documentation used for its drafting or documentary reference to same or a public file where it is found. The conservation to which reference is made in the preceding paragraph may be undertaken on paper or electronic means in a durable medium provided that the identity of the entity which issues same is assured and its accessibility and integrity is for subsequent reference. Fifth additional provision. Periodic reviews. The interest rate and the actuarial tables used in the calculations to determine the value of the right of use and occupancy shall be periodically reviewed by the Directorate General for Insurance and Pension Funds. Sixth additional provision. Risk premiums and profit margins. Risk premiums to which reference is made in Article 38.3 and the profit margins of the property developer specified in Article 41 shall not be less to those laid down in the tables which, for each, which are specified below, or as a result of its review pursuant to that contemplated in the last paragraph of this provision:

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Type of building Risk premium without financing on Corporate Income (IRS) Residential use buildings 8 Primary residence dwellings 12 Second residence dwellings 10 Office buildings 12 Industrial buildings 14 Parking spots 9 Hotels 11 Student residences and retirement homes 12 Others 12

For buildings intended for a various uses, the minimum risk premium shall be obtained by weighting the aforementioned minimum risk depending on the surface area intended to each of the uses.

Type of building Margin without funding or taxes on corporate income (IRS) Residential use buildings 18 Primary residence dwellings 24 Second residence dwellings 21 Office buildings 24 Industrial buildings 27 Parking spots 20 Hotels 22 Student residences and retirement homes 24 Others 24

When taking into account external financing, the specified non financial margins must be amended depending on the percentage of said financing (leverage ratio) attributed to the project and the common interest rate types of the mortgage market. The Directorate General of the Treasury and Financial Policy, preliminary report of the Directorate General for Insurance and Pension Funds, the Bank of Spain and the National Securities Market Commission, may revise the risk premiums and margins contained in said tables, taking as basic criteria the evolution of the property market, interest rates of the long term public debt, the consumer price index or any other factor which is considered by said bodies to influence its value. Seventh additional provision. Application of the principle of prudence (or prudent person rule) in relation with the expropriation option. 1. For the purposes of the application of the principle of prudence (or prudent person rule) to which reference is made in Article 3.1.f), the option of the expropriation of a property shall only be considered as one of the equally likely scenarios or options election in the following cases:

a) When the expropriation process of a property has commenced. b) When it has approved an instrument of territorial or urban planning, plan or project of any kind whatsoever, which entails the declaration of public utility and necessity of occupancy of the

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properties and corresponding royalties, if said instruments, plans or projects enable for execution thereof and this must ensue from the expropriation. c) When it has been declared by the competent authority, by means of administrative decision following a hearing of the parties concerned, the failure to meet deadlines or other duties inherent to the urbanisation or building of land process and, pursuant to that set forth in the legislation on territorial and urban planning, which may lead to the expropriation of the corresponding property. d) When the date of the valuation was initiated by a file as regards the failure to meet deadlines or other duties inherent to the urbanisation or building of land process and, pursuant to that set forth in the legislation on territorial and urban planning, which may lead to the expropriation of the corresponding property, but had not yet issued any administrative ruling whatsoever.

2. In the cases stipulated in the preceding previous section, the valuation shall correspond to the lesser of the result of applying the criteria set forth in Law 8/2007 of 28 May, on land and those of the present Order. In these cases, an alleged warning pursuant to Article 11. c) of the present Order shall be considered to exist. 3. When expiry of the deadlines for the compliance of the urbanisation or building of the land duties:

a) In the event that the proceedings for a declaration of breach of said duties has not been initiated, the valuation pursuant to the criteria of the present Order shall include a warning which specifies that, in the event of an administrative declaration of non compliance and subsequent expropriation of land, the latter shall be justified pursuant to the criteria set forth in Law 8/2007, of 28 May, on land. b) In the event that it has not been able to verify the existence of the declaration of dereliction of duty procedure, the valuation shall be conditioned on the justification of the absence of said procedure in addition to the warning to which reference is made in the foregoing subparagraph.

Single transitional provision. Risk premiums and profit margins. (Repealed) Sole repealing provision. Repeal provision. The Ministry of Economy Order of 30 November 1994 on standards of valuation of real property for certain financial institutions is repealed. First final provision. Authorisation of the National Securities Market Commission. The National Securities Market Commission is authorised to hand down the necessary provisions for the development of the present Order, for the purposes of its application for the purposes contemplated in Article 2.c). The CNMV is empowered to specify the manner of submission which is requested from the valuation companies, pursuant to that set forth in Section 3 of Article 15 of Royal Decree 15, of 775/1997 May, on the legal regime of the homologation of the services and valuation companies.

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Second final provision. Authorisation of the Directorate General of the Treasury and Financial Policy. The Directorate General of the Treasury and Financial Policy, for reasons of valuation prudence and comparability and preliminary report of the Directorate General for Insurance and Pension Funds, the Bank of Spain and the National Securities Market Commission may establish a quantitative limit of the annual surplus useable for the purposes of adjustment stipulated in Article 31 of the present Order. Third final provision. Entry into force. The present Order shall enter into force six months following its publication in its entirety in the Official State Gazette. Nevertheless, from its publication and up to its entry into force, the valuations may also be undertaken pursuant to the present Order. Madrid, 27 March 2003.

DE RATO Y FIGAREDO

His Excellency, Governor of the Bank of Spain. Hon. Chairman of the National Securities Market Commission. Hon. Director General for the Insurance and Pension Funds. Hon. General Director for the Treasury and Financial Policy.