When a financing deal needs a valuation in Spain, the conversation usually starts on the wrong foot: one party asks for “an ECO appraisal” and the other replies that their valuer works “under the Red Book”, as if these were two versions of the same thing. They are not. Order ECO/805/2003 is a Spanish regulation triggered by the purpose of the valuation, and it reaches only real property; the RICS Red Book is an international professional standard triggered by who signs the report, and it covers every asset class. This article explains what each one does, when it is mandatory, and how to decide which your deal needs.
Why are ECO 805/2003 and the RICS Red Book confused?
The confusion has a simple root: in the Spanish market, “tasación” has become shorthand for residential mortgage appraisal, which is the most visible use case of ECO 805. From there people jump to the conclusion that any valuation destined for a bank must follow that Order.
But the two references answer different questions. ECO 805 answers “what will this value be used for?”. The Red Book answers “who performed this valuation, and under what professional discipline?”. A deal may need both answers, only one, or neither in mandatory form.
What is Order ECO/805/2003 and what exactly does it apply to?
Order ECO/805/2003, of 27 March, published in the Spanish Official Gazette on 9 April 2003, governs how the appraisal value of real property and certain rights is calculated, and how the reports and certificates recording that calculation are prepared. Its Article 1 draws the boundary without ambiguity: the Order applies whenever the calculation is carried out for one of the purposes within its scope.
The four purposes that trigger the regulation
Article 2, in the wording currently in force in the consolidated text, lists four purposes: mortgage collateral for loans that form or will form part of the cover pool of mortgage-backed securities issued by credit institutions; determination of fair value for the purposes of the accounting plan for insurance and reinsurance undertakings and the asset valuation under Article 68 of Law 20/2015; determination of the net asset value of real estate collective investment schemes; and determination of the real estate holdings of pension funds.
If the valuation does not pursue any of those four purposes, ECO 805 is not mandatory. It is worth reading that list slowly before assuming a deal falls within the Order’s scope merely because real estate collateral is involved.
Which assets are in scope and which are not
The subject matter of the Order is real property and certain rights: buildings and parts of buildings, land, rural holdings and the rights in rem attaching to them. Machinery, capital equipment, production lines, fleets and intangibles are not within the scope of ECO 805. There is no such thing as an “ECO appraisal of machinery”, because the regulation simply does not contemplate it.
What it requires when it does apply
Where the purpose triggers the Order, it imposes valuation principles — among them anticipation, purpose, and highest and best use — prescribed methods, and a demanding documentary regime: a land registry certificate evidencing title and encumbrances issued within the three months preceding the valuation date, descriptive and graphical cadastral information from the same period and, for completed buildings, a duly registered energy performance certificate.
One nuance often overlooked: the preamble itself clarifies that the Order contains no provision of a subjective nature regarding who is competent to appraise or who appoints the appraiser, a matter governed by the corresponding regulations according to the purpose. Who may sign is not decided by ECO 805, but by the authorisation regime for appraisal services and companies to which the wider framework refers.
What is the RICS Red Book and who is bound by it?
The RICS valuation standards — known as the Red Book — are the professional standard that RICS members and RICS-regulated firms must apply worldwide. They incorporate the IVSC international valuation standards, so a Red Book report is also aligned with IVS.
Its trigger works the other way round from ECO 805: it does not depend on what the value will be used for, but on who signs it. A professional subject to RICS discipline applies the Red Book to every valuation within scope, whether the asset is a logistics warehouse, a packaging line or an equipment portfolio spread across four countries.
The standard requires written terms of engagement before work begins, an explicit basis of value, a valuation date, disclosure of assumptions and special assumptions, demonstrated independence and competence of the valuer, and a minimum report content. The full treatment is in our article on what the RICS Red Book is.
How do they differ? Five axes that settle the decision
The first is nature: ECO 805 is a Spanish legal instrument of regulatory rank; the Red Book is a professional standard of international reach, binding on those subject to RICS discipline.
The second is the trigger: the declared purpose of the valuation against the identity of the valuer who signs it.
The third is asset scope: real property and rights against any asset class, including capital equipment, going concerns and intangibles.
The fourth is geography: a national regulation against a standard that a credit committee, an auditor or a fund recognises equally in Madrid, Frankfurt or Milan.
The fifth is oversight: an administrative authorisation and supervision regime against professional regulation, with its own valuer registration, file review and disciplinary framework.
Which standard does your deal need?
Three questions settle most cases.
First: is the asset real property or a right over it? If it is not — machinery, equipment, inventory, a going concern — ECO 805 is ruled out by definition and the applicable reference is a professional standard such as the Red Book.
Second: is the valuation intended for one of the four purposes in Article 2? If so, the deal needs an ECO 805 appraisal issued by whoever the regulations authorise for that purpose, and no other reference substitutes for it.
Third: who will read the report and what do they need to see? A credit committee, an auditor, an international fund or an M&A counterparty expect a declared basis of value, explicit assumptions and traceable evidence. That is where the Red Book adds value even when no regulation imposes it.
Can both coexist in the same file?
Yes, and that is the norm in mixed industrial deals. A facility secured on a plant may require an ECO 805 appraisal of the real estate for a specific purpose and, in parallel, a Red Book valuation of the machinery and of the installations not incorporated into the building.
What must not coexist is ambiguity. When a file combines two references, each report must state which standard applies, over which assets and on which basis of value, so that nobody ends up comparing figures built on different premises. The bases of value and their implicit timeframes are developed in our article on OLV, FMV and FLV.
What about machinery and capital equipment?
Here the question in the title does not even arise: not being real property, capital equipment falls outside the scope of ECO 805 and its valuation is governed by professional standards. This is the natural territory of the Red Book and IVS, with its own bases of value — market value, orderly liquidation, forced liquidation, replacement — and a method built on an identified inventory, inspection and secondary market evidence.
That is the work covered by our industrial asset valuation line, and what underpins the financing files described on our banking and finance page.
Common mistakes that delay a file
The most expensive one is commissioning the wrong reference and finding out at the end: ordering an appraisal under a standard that does not cover the asset forces the work to be repeated with the deal clock already running.
The second is failing to declare the purpose at the outset. Because ECO 805 is triggered by purpose, an engagement that does not fix it in writing leaves open the question of whether the report will serve what is needed later.
The third is treating a report as interchangeable over time. Every valuation has a date, and both the Spanish framework and the professional one provide for periodic review: a value from two years ago is not the same data point, even if the asset has not changed.
How Capital Appraisal approaches it
As a RICS-regulated firm, we value industrial assets under the RICS Red Book — machinery, installations, complete plants and special valuations — always declaring the basis of value, the date and the assumptions applied. When a deal combines real estate and capital equipment, the first thing we do is delimit which asset is valued under which reference, before issuing any figure.
The practical conclusion is short: the right question is not “ECO 805 or Red Book”, but “which asset, for what purpose, and who will read the report”. Answer those three and the applicable standard follows on its own.