What Is It?
A commercial property inspection is an inspection of a commercial property—building and/or land. Unlike the simplistic definition, such inspections are anything but simple, requiring years of experience and a thorough knowledge of building codes and industry standards on the part of inspectors and consisting of a multi-layered process that includes the application of scientific, engineering and sometimes even forensic principles.
Inspections of commercial buildings and commercial land occur most commonly when a building is first opened or during the construction process, when raw land is being purchased or sold or when commercial buildings are undergoing a change of ownership.
The objective of an inspection is to garner sufficient information to provide a written report to the client on the property in question. The report describes information compiled from direct observation and from research carried out by the inspector and his team, emphasizing areas of the property that the inspector and/or the client feels are of particular importance
The basic element of a commercial property inspection is a PCA (Property Condition Assessment). Baseline due diligence standards for this procedure have been set forth by The American Society for Testing and Materials (ASTM), a professional organization that works collaboratively with government entities like the EPA (Environmental Protection Agency) and private industry to periodically revise and update inspection protocols.
A property condition assessment consists of:
- A review of documents such as drawings, maintenance records, building or fire code violations, certificates of occupancy, maps, or blueprints.
- Interviews with former owners, neighbors, town officials, or construction workers as needed.
- A walk-through survey of the property to assess the physical soundness of the building. The inspector looks for structural defects, construction or materials flaws, property deterioration, maintenance issues, or system functionality.
- An estimate of expenses required to repair or remedy deficiencies and problems, and a projection of future maintenance and operating expenses.
Upon completion of the steps above, a written property condition report (PCR) is prepared for the client. The document contains the findings and the costs, both estimated and projected, for repairs and future replacements and delineates between problems that need to be addressed immediately and those that should be monitored. Depending on the specific areas of concern to the client, additional examination by a specialist may be required. Findings of the specialist are included in the PCR. The cost of a commercial inspection varies depending on the size and age of the building, the intricacy of the examination, and the areas of concern.
Beyond the basic property condition assessment, either the inspector or the client may suggest, based on observations made or records reviewed, that an environmental site assessment be part of the overall inspection process. Site assessments may be prompted either by a potential environmental concern or a recognized environmental condition. A commercial property inspector may conduct a limited due diligence inspection where there is a possibility that hazardous substances or petroleum products may have been released or constitute a threat of future release into any buildings on the property or into the ground, and/or the surface or ground water of the property. In the case of a recognized environmental condition, an environmental professional approved to do CERCLA (Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as Superfund) assessments must conduct the inspection.
Site assessments are generally broken down into phases:
- Phase I involves an extensive site visit and a document review.
- Phase II assessments are based on Phase I findings that testing of the site is indicated.
Both environmental assessment phases require highly trained professionals to carry out the complex tasks established by industry standards. For this reason, potential commercial property owners are advised not to skimp on any part of these phases and to hire the appropriate experts.
Who Does It?
A licensed, certified and insured commercial property specialist, his staff and/or a consultant hired by the primary inspector performs commercial property inspections. Commercial property inspectors are held to a minimum standard of compliance by state, federal and professional associations, but the amount of due diligence executed by an inspector above the minimum standard varies depending on the client’s budget, time constraints, the purpose of the inspection, the client’s tolerance for risk and the age of the property.
For the most part, commercial inspectors are knowledgeable in all the basic aspects of a commercial inspection; however, in certain circumstances, it may be necessary to augment the inspector’s skills with specialists that have greater expertise and experience in defined areas, such as in toxic waste properties or forensic situations.
Who Needs It?
Investors, owners, lenders (who hold mortgages on commercial properties), casualty and insurance underwriters, even government entities are some of the clients of a commercial inspection firm. These principals are interested in knowing if the property under consideration is solid, functional and safe for the purpose for which it is intended. Knowing as much as possible about a commercial structure and the land on which it is sited provides the client with the information he needs to make an informed decision with respect to buying, selling, maintaining, insuring or improving a property.
Benefits
A building inspection will provide you with all you need to know about the condition of a property which, in turn, allows you to make intelligent decisions. The benefits of commercial property inspections are:
- Identifying immediately needed repairs and the cost associated with making those repairs.
- Identifying long-term repairs and their associated costs in advance which affords sensible budgeting.
- Finding out what it will cost to maintain and operate a commercial property.
- Understanding the property’s systems (electrical, HVAC, plumbing) and the related costs of maintaining or replacing components.
- Identifying particular deficiencies that need to be replaced or upgraded such as a septic system that is too small to accommodate the number of proposed office workers.
- Finding deviations from blueprints or building specifications before such variances become expensive and difficult to correct by requesting “progress inspections” during construction.
- Assessing the feasibility and practicality of an addition to a existing building by requesting a review of design and building plans before construction begins to prevent costly overruns, poor construction or time delays caused by unanticipated events.
- Meeting the requirements of commercial lenders and insurers.
- Heading off deleterious environmental situations.
- Knowing that the building you own is safe, cost-effective and ready to be used for the purpose intended.
Risks
The only downside to a commercial property inspection is the cost; however, the money expended for the inspection is often recouped in short order when the information from the inspection is intelligently applied to budgeting, advance planning, cost-containment strategies like energy efficiency, and preventive measures.
The Bottom Line
The risk of not knowing what you are buying or leasing could be injurious to your health and your pocketbook, never mind stir up the EPA or other government entity. Further, if you have tenants or employees in your building, you have a direct responsibility to ensure their safety and well-being. Never buy a commercial property without the peace of mind that a commercial property inspection affords.
