Commercial buildings must provide a safe and secure environment for both the tenants that occupy it and members of the public. Commercial inspections take place at various times. During the early stages of construction, building inspectors may examine the foundations and drainage to ensure that all legal regulatory standards have been complied with. Before being declared fit for occupancy, each commercial building receives a final inspection.
In addition, every time a commercial property changes ownership, the new owners will appoint a professional commercial property inspector to report on the property and highlight any potential problems that may affect its value.
Overview:
First things first: The purpose of due diligence reporting is to make sure that the property you believe you are purchasing is the property being received physically and conditionally.
Secondly, it’s important to remember that all commercial transactions have their own set of considerations. Therefore, there is not a one-for-all when it comes to commercial inspections. Rather, there are several types of commercial inspections to choose from depending on your specific due diligence needs as a buyer.
Types of Commercial Inspections:
• Building Inspection
• Property Inspection
• Property Condition Assessment
In this blog post, we will take a look at the key components of a commercial property condition assessment checklist, but before we jump right in, let’s see how the inspection process is executed.
A comprehensive commercial property condition assessment provides a complete narrative report which highlights items that require attention. This includes physical deficiencies of the material systems, components, and equipment within a commercial property.
Smart buyers require a property condition assessment when purchasing, with satisfactory results as a contingency for the sale to close. Without a professional inspection completed by a qualified commercial property inspector, you are essentially purchasing a property you know little to nothing about. In other words, while you can hope for the best, any issues that arise after the sale closes, are your responsibility to cure (ouch), so do your homework before signing on the dotted line.
Remember, commercial inspections are a key ingredient to proper due diligence – a comprehensive inspection will reduce your investment risk.
A commercial property condition assessment requires the inspector to go through three phases:
Observation, Research and Report. Let’s take a closer look into each of these areas:
Observation
The objective of the observation phase is to collect information through visual observation and document readily visible materials and building system defects which might significantly affect the value of the property. Any potential items of interest are noted by the inspector during the walk-through survey portion of the inspection.
Research
The objective of the research phase is to augment the observations made during the walk- through survey and to provide supporting documentation to the inspection report. This research may include reviewing documents such as previous inspection reports, building permits, code violation notices and environmental studies.
Report
The objective of the reporting phase is to share and describe through written communication, the issues discovered from observations made and research conducted by the inspector, that require attention and are likely to be of interest to their client. A report may contain photographs of observations made during the walk-through survey portion of the inspection and/or copies of documents reviewed during the research portion of the inspection.
Now that we know how the inspection process is conducted, let’s explore what a commercial property condition assessment checklist consists of.
Commercial Property Condition Assessment Checklist:
During a commercial inspection, all major components and systems are evaluated, including but not limited to the following:
Site Components:
✓ Topography
✓ Storm Water Drainage
✓ Paving and Parking
✓ Site Access
✓ Landscaping
✓ Pedestrian Walkways
✓ On-Site Utilities
✓ Specialized Amenities
Building Components:
✓ Structural Systems
✓ Roofing Systems
✓ Plumbing Systems
✓ Ventilation and Air Conditioning Systems
✓ Electrical Systems
✓ Vertical Transportation
✓ Fire Protection Systems
✓ Life Safety Systems
✓ General Interior
Costing Components:
✓ General Overview
✓ Immediate Remedial
✓ Short-Term Deferred
✓ Intermediate Maintenance
✓ Long-Term Planning and Budgeting
Additional (Optional) Components:
✓ ADA Accessibility compliance and requirements.
✓ Environmentally Specific considerations and climates.
✓ Communications and Technology Systems.
✓ Property Security and surveillance systems.
✓ Indoor Air Quality and mold conditions.
✓ Environmental Transaction Screen or Phase I Environmental Site Assessment (ESA).
Conclusion
The proper pre-purchase due diligence is essential to maximizing your return on investment, and your time and money, in any commercial real estate transaction. A quality commercial property condition assessment will provide in depth research and document review and look at the past, present and long- term conditions and costs associated with the property. It will also provide additional extended cost schedules for projected capital expenditures and offer additional information to aid in planning decisions.
The key takeaway: All inspections are not created equal. Your due diligence can only be as good as the professionals you engage to provide it, so be sure that you hire a professional and experienced commercial property inspector to ensure quality service. A poorly executed commercial property condition assessment will cost you greatly down the road.
Contact us now to find out how we can help during your due diligence and inspection periods. We are here to help you succeed!
