Buying a commercial property is a big commitment, so you need to be sure of what kind of condition it’s in before you take the plunge. The physical state of a property can have a real impact on its true value, affecting everything from maintenance budgets to its future value. Naturally, factors like location and market conditions are the main priority for most buyers, but overlooking building defects can land you with unplanned repair bills and reduced returns.
When viewing a property, some defects will be clear straight away, but a lot of problems - and often the most significant ones - can be much harder to spot until they have been discovered by an inspector. The problem is that by this point, if the contracts have already been exchanged, the responsibility to fix these issues usually lies with the new property owner. Because of this, understanding the condition of a property before completion means that buyers can negotiate from a much stronger position, plan their maintenance budget better and, ultimately, decide if the property is worth it.
Why building condition is important
The upfront purchase price - unfortunately - only represents the initial investment that you’ll have to make. Even if the property is ready to move in, there will still be long-term costs to think about, to maintain, repair and manage the condition of the property. Problems that might seem minor at first can also quickly escalate, especially if they have been left unresolved for a few years. Buildings that look immaculate on the surface can hide all manner of sins, no matter how recently it’s been redecorated - there could be significant structural or maintenance issues that have yet to be discovered.
With this in mind, investors need to be confident that these repair costs won’t end up eroding rental yields, whilst owners and occupiers need to know that their day-to-day operations won’t be impacted, and that they aren’t going to have to unexpectedly fork out for expensive repairs.
Finding defects before completion gives greater certainty over how much the commercial property will really cost, and can minimise the risk of inheriting existing liabilities that they didn’t plan for.
Common building issues to be aware of
Whilst every building will have its own issues, there are some more common problems that we come across.
Roof condition
Roof defects are one of the main reasons that commercial property owners end up getting stung with unexpected costs. Older buildings are particularly susceptible to roof issues, such as ageing roof coverings, loose flashings and blocked drains, all of which can let water in over time.
Buildings with a flat roof should be inspected for signs of ponding water, failed waterproofing and deterioration, whilst pitched roofs can come with issues like slipped coverings and deteriorating timber. Defects that allow water ingress can cause even more damage than just the roof, as it can affect ceilings, insulation, electrical systems and internal finishes - frustratingly, it can cause these problems before the leaks are even obvious.
The lifespan of the roof should also be taken into account, as if it’s nearing the end of its life, it might need replacing in the near future. Knowing how likely you are to need work to the roof, including when, and how much it might cost, allows buyers to budget more realistically.
Structural defects
Structural movement might not be immediately apparent during a standard property viewing, which is why a surveyor needs to inspect a property. It can have a massive impact on the property value, as well as future repair costs. A qualified surveyor knows what to look out for, including evidence of cracking, distortion, uneven floors and settlement.
Whilst a certain amount of cracking can just be a result of normal building movement, it can also point towards more serious problems like subsidence or structural failure. If walls have been removed inappropriately from a property, they might not have been replaced with adequate structural support, whilst corrosion of structural materials can also impact the integrity of a building. Early identification is key, as major defects in a building’s structure can affect mortgage lending and insurance.
Damp and water ingress
We know damp doesn’t look good, but it can also point to other problems in the building. Damp can be a sign of damaged roofs and brickwork, failed pointing and leaking gutters, and condensation can quickly develop in areas with poor insulation and ventilation. Ongoing moisture can cause mould growth, and cause damage to internal finishes, insulation and structural timber.
Knowing what is causing the damp is crucial - painting over it might seem like a quick fix, but without identifying the root of the issue, the damage (and cost of repairing the damage) can be significant.
Compliance problems
It may not be a structural problem, but compliance issues can arise from a poorly maintained building. Buying a property makes it your responsibility, and as a commercial property, there will be legal and safety requirements that you will be expected to adhere to.
Fire safety provisions will need to be assessed to make sure it’s fit for purpose, as will accessibility features like entrances and facilities. If these don’t match up with the required standards, costs for upgrading them will need to be factored in. Some properties might have had alterations carried out that haven’t been approved, or aren’t in line with the most current standards. Older buildings in particular might come with outdated elements that need modernising, so it’s important to know how many improvements will need to be made first.
Access and layout
A property could be in immaculate condition, but from a practical standpoint, might not be up to scratch. As a business, you need a building that works effectively and efficiently. You’ll need to consider factors like vehicle access, access routes and rights of way to make sure they work for your business needs.
As well as considering current business operations, site layout should also be reviewed in relation to future development. Factors like neighbouring buildings and boundaries can hinder redevelopment opportunities, so you will need to determine if the property will work for your needs in the future.
Hidden repair liabilities
Standard property inspections are unlikely to spot hidden defects, especially ones that have deteriorated over the years. To the untrained eye, a property might look in good shape, but it might be hiding a litany of repair liabilities. Fixing deteriorating external masonry, render and cladding can be incredibly costly, as can replacing windows, doors and external joinery.
Issues with drainage might not be visible until excessive rainfall makes it apparent, whilst problems with mechanical and electrical installations might go unnoticed until it’s time to use them. Because of this, buyers need to think not only about the immediate fixes, but what might pose a problem over the next few years.
It’s not uncommon for commercial property owners to postpone fixing maintenance concerns before they sell, to limit expenditure when they know the property will soon be in someone else’s hands. Whilst quick fixes like cosmetic improvements can make a building look like it’s in better condition than it is, buyers should seek professional assessments that will look past the surface. Knowing the long-term liabilities of a commercial property allows buyers to plan their maintenance budget and lifecycle cost forecasts more accurately.
Leasehold and shared repair responsibilities
If a commercial property is a leasehold, or is part of a larger property development, you’ll need to know which repair obligations will be yours after buying. Properties that come with service charges usually direct some of this to fund structural repairs, roof replacements and maintenance of shared areas, but some major works might not be covered by this. Buyers should check the terms carefully to see what the service charge includes, and if there are any planned works on the horizon that might be an additional cost before proceeding.
How building defects can impact price negotiations
Knowing the exact defects a building has gives you a better grounding for price negotiations, as it’s based on evidence, not assumptions. The results from the survey might be used to request a reduction in the purchase price, as they can point to repairs that will need to be carried out shortly after buying. Sometimes, buyers can ask for specific works to be carried out before completion, or ask for financial allowances to reflect the expenditure they are anticipating.
If a survey uncovers extensive problems, buyers can withdraw before they are legally committed, as they might discover that the property is no longer a good investment. Ultimately, having property survey results puts buyers in a stronger position to negotiate, and prevents them from finding these problems after completion.
A building survey also puts buyers in a stronger position for making informed decisions. It outlines which problems need immediate attention, which you’ll need to keep an eye on, and which ones are likely to be the most expensive to address. The findings can help to support budgeting and financial planning, which reduces uncertainty and lets decisions be made based on solid evidence.
Getting a professional commercial building survey can help to avoid expensive surprises, and navigate the buying process with a lot more confidence. As an RICS-regulated firm, Anderton Gables’ building surveyors are here to offer no-nonsense advice and support, so before you make your next property decision, talk to our team.
