The purpose of all Commercial Property Condition Assessments (PCAs), ASTM Standard E2018, is to ensure that the property and building you believe you are buying or renting is actually the property received. You will have reached that decision, in part, based on information obtained through a professional inspection and a Property Condition Report (PCR). Every real estate transaction is different and every transaction has its own unique set of considerations and conditions to validate before finalizing. Utilizing professional third-party experts in the physical property due diligence process is critical to the overall accuracy and profitability of your property transaction.

The purchase or lease of commercial real estate, whether it is a basic commercial net lease, a triple commercial net lease, the purchase of a church facility, a retail store, or the purchase of a million square foot office/warehouse, The prospective buyer or lessee absolutely must carry out an adequate level of due diligence when investigating the physical quality of the commercial real estate in which they are investing.

You need to know not only the physical characteristics of the real estate and buildings being purchased, but also the approximate condition and age, to assess the good and the bad, so that you can properly balance the risks and rewards offered alongside with his royal Dealing with Assets The most important part of the real estate transaction process, aside from the purchase price and profitability statement, is a well-documented review of the actual physical condition of the real estate. Otherwise, you could become the not-so-proud owner of a commercial property that doesn’t suit your needs, costs more than you can afford to maintain, or the ultimate investor’s regret: capital expenditures are tanking. on property on a regular basis that someone else is using and making money from, and you are not. Suddenly, that long-term lease with a solid anchor doesn’t seem so appealing anymore.

The commercial real estate inspection process begins before the real estate purchase offer is written or signed, by visiting the site and discussing the physical condition of the property with the Owner and real estate brokers. This process should be considered invaluable in establishing the relationships required to obtain the information that will be necessary to complete your due diligence with a Commercial Property Condition Assessment (PCA).

During the negotiations and drafting of the real estate sale/lease agreement, it is important to recognize the seller’s or lessor’s reluctance on points such as the existence and availability of important documents such as warranties, maintenance contracts, architectural and engineering drawings and/or o Local municipal reviews and reviews. inspections Negative reaction to the seller’s or landlord’s request to release these documents may imply possible deferred maintenance and/or inattention related to property and building conditions and inspection issues.

Once the commercial real estate sales contract is signed, the due diligence period begins, focus on maximizing time and cost efficiency and prioritizing concerns to start checking expensive and expensive items from top to bottom. Assuming the vendor provides adequate documentation for your review, adequate time should be allotted to verify the information provided. The additional effort and money that will need to be spent to make up for a deficiency in available documentation through additional property condition assessment and field inspections and/or additional experts should be considered essential and calculated in the cost of the transaction. of the property. Ask the seller for all documents and contacts that he received during his due diligence process when he purchased the property to expedite fact finding.

Review of existing ownership documents, when available, may include:

Accessibility Studies, Architectural Plans of Buildings, Certificates of Habitability, Citations of Competent Authorities, Emergency Evacuation Plans, Environmental Studies, Electrical System Construction Plans, Fire Detection and Maintenance Test Records, Fire Door Inspection Reports , Fire Protection System Construction Drawings, Fire and Restoration Records, Maintenance Records, Mechanical System, Building Plans, Notices of Violation from Competent Authorities, Building Permits, Plumbing System Construction Plans, Construction Reports Pre-Inspection, Roofing System Construction Plans and Warranties, Safety Inspection Records, Vendor Condition Disclosure, Sprinkler System Testing Records, System and Material Warranties, Current Tenant Information, Current Title Insurance Policy , notices of any condition to environmental, notices of any new or special assessments or taxes, copies of all current property bills, service contracts, evidence of current zoning, built plans and specifications, all documents related to construction, including warranties, All the past and present uses of the property, Reports or inspections by third parties, Any inspections of the land and improvements in the seller’s possession.

One of the best tools available to the commercial property due diligence team is the interview process which can unlock a wealth of potentially useful information about the property in question.

Interviewing any available key personnel with specific knowledge of property conditions may include:

Owner, tenants, maintenance foreman, contracted maintenance service personnel, or other contracted businesses that routinely work on the property and/or building.

Property Inspection, Real Estate Inspection, Building Inspection, Due Diligence Survey, as they may be labeled on the due diligence report, is essential to ensure the adequacy of the building considering the intended use of the occupants and the surrounding geography and climate. Providing the available plans and specifications should be helpful here, but will not end the investigation. A qualified third-party inspection company experienced in the type of property to be inspected should perform a current assessment of the condition of the commercial property. A previously completed property condition assessment or inspection is almost always provided for the use of only one party in a single transaction and is protected by law and is not reusable or transferable to any other party. The focus of the inspection should be primarily on the condition of the site and building components, such as site drainage, parking, building structure, mechanical and electrical systems, and the general accessibility and usability of the property. Various climates and geographic regions will require more specific inspection knowledge, so hiring a local inspector is always a good idea, if possible, rather than hiring a company outside of Wisconsin to perform due diligence on a high-rise building. of California on a fault line.

Site inspection and walk-through to observe existing conditions may include:

Land and Topography, Parking Lots, Paving, Accesses, Building Facades and Exteriors, Building Interiors, Roofing Systems, Structural Systems, Mechanical Systems, Electrical Systems, Plumbing Systems, Fire Protection Systems, Vertical Transportation Systems and any number of other specialized systems.

The Americans with Disabilities Act of 2010 is the current guideline for accessibility standards across the country and is a federal law, therefore non-negotiable and to some extent, yes, it is retroactive even for older commercial and public buildings . Many states also have additional and/or more stringent or specific accessibility standards. Most professional property assessment and inspection companies can also perform both short and full accessibility surveys as part of a real estate transaction.

Abbreviated and full compliance basic accessibility surveys may include:

The abbreviated survey that looks for only the basic ADA accessibility components visible during the tour and documented according to the abbreviated survey form and ASTM checklist provides a quick check of overall compliance status. The full compliance survey involves physical measurements of distances, slopes, and push/pull forces required within accessibility standards to enable a certain level of physical disability to successfully navigate a property, site, and building.

The Environmental Due Diligence known as Environmental Site Assessment (ESA) is the most widely used Environmental Inspection Report. The typical level of reporting preferred by lenders to demonstrate adequate due diligence is called ASTM E1528 Limited Phase I Environmental Transaction Assessment. This explores the past use of the property and surrounding properties to identify potential on-site or adjacent environmental issues or future liabilities. These reports typically require a significant monetary investment and take several weeks to complete, so they should be completed as soon as you have determined that you will be moving forward with your due diligence. The purpose of this inspection is to determine if the property contains hazardous materials or otherwise poses a threat to its surroundings. This could be caused by underground storage tanks located on the property or runoff from the property into the water table or any number of other hazards listed by the Environmental Protection Agency. While reporting is expensive, the cost of cleaning up an environmental hazard can be astronomical. While not all deals will require you to obtain an environmental assessment of the Phase I site, many lenders will require one as part of their lending guidelines. For a fairly new development with a clean environmental record and no neighbors of an industrial nature, a simpler, less expensive, and much faster Environmental Transaction Assessment, ASTM E1528 may satisfy lender and legal requirements.

Any basic environmental due diligence report may include:

Investigation of historical site use, aerial photo records, property transaction records, construction records, building records, EPA mapping data, local municipality topographic mapping, and a walk-through of the site to visually identify potential problem indicators environmental.

The information contained in this document is purely a professional opinion and is provided solely as a reference for the general real estate inspection and is not intended in any way to be a definitive guide, nor a guarantee of past, present or federal legal, state or federal requirements. futures, nor a measure of performance of any professional services company. Best of luck to you in all your future property, real estate and construction dealings!