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Value of a Professional Property Condition Assessment

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Value of a Professional Property Condition Assessment

If you are planning to purchase a property or lease a building long term, it makes financial sense to assess any problems and deficiencies that need to be replaced or repaired. Some issues require specific maintenance procedures that might be ongoing and expensive. If you don’t know what these are you can end up with an investment that costs you money rather than one that is financially worthwhile.

Professional property condition assessments are designed to identify faults so that the implications of these can be considered by potential buyers or those planning to lease a building. They reveal the condition of the building in terms of the site, the structural frame and thermal envelope including the roof, plumbing, heating, ventilation, and air-conditioning (HVAC), electrics, and any other equipment from escalators and elevators, to safety and fire protection devices and systems.

Conducted by professional engineers and other professionals, a professional property condition assessment (PCA) also provides the ideal opportunity for an energy audit to ascertain opportunities to reduce or manage energy consumption and make the building more energy-efficient. Resulting in a property condition report, it provides key information together with the costs associated with any issues that are identified.

Ultimately, a PCA will provide you with reliable information about the condition of the property and you will be able to assess your investment in terms of additional costs you are likely to incur in terms of repairs, refurbishment, and/or maintenance.

While the reasons for, and general parameters of, PCAs are common in a global context, there are codes and standards that must be followed in some countries.

Standards & Guidelines for Property Condition Assessments

1. ASTM

In the U.S., the American Society for Testing and Materials (ASTM) E2018 standard provides strict guidelines that relate to a:

  • Review of documentation including construction plans, technical specifications, data sheets that relate to equipment on site, reports from consultants, and reports relating to maintenance.
  • Walk-through survey that examines the topography of the site, storm water drainage, paving and parking areas, landscaping, boundary walls and fences, signage, lighting and anything else on the outside, as well as inspecting all the key building systems.
  • Cost analysis that relates to every problem area detected so that the buyer or lessee will know what expenses will be required for restoration, renovation, and/or ongoing maintenance.

 

The resultant PCA is commonly undertaken by multi-disciplinary engineers who offer plumbing, electrical, HVAC, fire sprinkler, or mechanical engineering services or by a certified engineering agency that offers professional property condition assessment reports for building owners and managers, investors, and insurance companies.

While not mandatory, an ASTM PCA and it’s resulting report will reduce many of the most telling risks that are associated with property investment and leasing.

2. RICS

In the UK, the need for critical PCAs was originally established by the Royal Institution of Chartered Surveyors (RICS) in the mid-19th century long before the idea was propounded in the U.S. Nevertheless, the assessments are similar and include a mix of architectural, structural engineering, and mechanical, electrical, and plumbing (MEP) systems.

Today, RICS provides professional standards and guidelines for surveying assets in the built environment in the UK and is actively involved in developing and improving international standards.

Currently there are two sets of mandatory regulations applicable in the UK:

  1. An international standard developed in collaboration with other relevant organizations and bodies.
  2. A professional RICS statement that incorporates Red Book professional statements, RICS Rules of Conduct, global valuation practice statements, and various government codes of practice.

Guidance and information documents include the RICS professional standards and guidance, UK: Surveying assets in the built environment 1st edition, March 2017. This covers different types of surveys that discuss items including building assets and specialist surveys. There are, of course, different asset types including commercial and residential buildings, buildings for agricultural and industrial activities, for healthcare, and for education, and specifics will be a bit different.

3. CIC

The British Construction Industry Council (CIC), which represents more than 500,000 construction professionals and in excess of 25,000 construction firms in England and Wales, also deals with inspections and surveys.

The Council emphasizes the importance of professionals involved in property condition investigations, appraisals, and assessments including RICS and Building Cost Information Services (BCIS).

CIC definitions of the various inspections and assessments include:

  • Valuations when buildings are for sale or to let. This won’t usually involve looking for defects or suggesting remedies. For this reason, a valuation would be in addition to any other type of survey report.
  • Property purchase surveys and valuations that combine the valuation with factual information about the condition of the property. This is often required before letting so that there is a schedule of the property condition in the lease.
  • Building surveys that investigate and assess the property in terms of construction and condition but don’t include a valuation. These reports might recommend additional elemental or specialist investigations.
  • Elemental or specialist investigations are normally called for when there is concern about significant defects. These might include cracking, timber decay, or might relate to heating, drainage, or electric wiring or plumbing.
  • Investigations required prior to alterations will look at structural and service elements and will usually involve multi specialists, including engineers.
  • Reinstated cost assessments for insurance purposes that consider the anticipated costs of rebuilding in the event of damage. This type of assessment usually references RICS or BCIS.
  • Stock condition surveys assess the condition or state of repair of building stock before a maintenance program is initiated.
  • Schedules of condition that literally record the condition of buildings, supporting the investigation with photographs and possibly drawings. These are often required before adjacent construction work begins or if there is litigation of some sort.
  • Schedules of dilapidations that identify what is required to repair leased premises in terms of the lease agreement. This type of schedule may be prepared for either the tenant or the landlord, depending on circumstances.
  • Measured surveys, also known as dimensional surveys, involve the preparation of accurate drawings, to scale. They often include levels as well as measurements.
  • Inspection of buildings that are under construction.

 

Even though the CIC is really only concerned with England and Wales, these definitions are useful globally and may be adapted for individual use.

Professional PCA Reports

While the exact content of any property condition reports will vary, depending on its focus, a relatively straightforward PCA report will include:

  • A detailed summary of the condition of the property
  • Identification of deficiencies and faults
  • Prioritization of the deficiencies in terms of their significance and urgency
  • Recommended action including cost
  • Information on any capital needs as well as a replacement schedule
  • Photographs of deficiencies (where possible) and the systems they relate to

 

If you are planning to have a professional property condition assessment done, make sure you deal with a company that has the experience and qualifications required. It stands to reason that it should be based in the city where your building is, for instance, a mechanical, electrical, and plumbing (MEP) engineering firm in Chicago, New York, London, Birmingham, Manchester, or Leeds.

A little money spent on a professional PCA now could save you an enormous amount of money in the future or long term.

Michael Tobias is the founder and principal of New York Engineers, an Inc 5000 Fastest Growing Company in America. He leads a team of more than 30 mechanical, electrical, plumbing, and fire protection engineers from the company headquarters in New York City, and has led numerous projects in New York, New Jersey, Chicago, Pennsylvania, Connecticut, Florida, Maryland, and California, as well as Singapore and Malaysia. He specializes in sustainable building technology and is a member of the U.S. Green Building Council.

Copyscape picks up the name of the RICS publication Michael mentioned. He did not access either of the sites quoted (ie LinkedIn or doyenland.com)

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