Taking on a commercial property is a significant financial commitment, whether you’re planning on buying, leasing, refurbishing or investing in commercial premises. Property decisions are usually based on in-person viewings, valuation reports and property inspections, but even buildings that appear pristine on the surface can be hiding a number of issues.
Hidden building defects can be incredibly expensive to repair, and sometimes - depending on the defect - might not be fixable. A building condition survey is used to assess the actual condition of a property, uncovering potential risks before you commit to buying or leasing a property.
What is a building condition survey?
A building condition survey is a thorough, in-depth inspection of the structural integrity and physical condition of a property. Carried out by a qualified surveyor, it is used to identify structural defects and hazards. Without a survey, these hidden issues will become the responsibility of the new owner, occupier or investor, which can come at a significant cost, depending on the problems.
A building condition survey looks at:
Structural elements like the roof, walls and foundations.
Building fabric like windows, doors and stairs.
Building services like plumbing, heating and electrical systems.
External areas like site layout, car parks and security features.
Many commercial properties - particularly older buildings - will have hidden defects like roof deterioration, fire safety concerns or structural issues, which might not be picked up on a standard inspection. After the building condition survey has been carried out, the surveyor prepares a report that grades defects on a scale, alongside their recommendations, priorities, and cost estimates for repairs.
Building condition assessments are commonly used for capital planning to help organisations like schools or commercial landlords to manage estates and allocate funds. They are also key during the due diligence phase for buyers to uncover hidden costs, and as risk management to identify problems sooner. Ultimately, without a building condition survey, it is difficult to plan or budget for unexpected repairs and expenses.
Building condition surveys before buying a commercial property
Buying a commercial property is a major decision, so it’s crucial to be fully prepared before taking this step.
It’s important to remember that the asking price of a property doesn’t necessarily reflect its true condition - a higher figure doesn’t automatically mean the building is in a perfect state. Because of this, organising a building condition survey before you buy is a must. A survey will identify potential defects before you commit to buying, so you are aware of any future repair liabilities or immediate maintenance requirements after you have made the purchase.
Getting a condition report means that you can use it as leverage to renegotiate the purchase price, as you can adjust your offer to account for the work that will need carrying out. You could also use the findings to request that the seller fixes the problems before any contracts are exchanged. If the repair costs are too high, you can usually withdraw from a sale without any legal penalties.
Building condition surveys before signing a commercial lease
Although many occupiers think that they are only responsible for any damage that they cause after starting a commercial lease, repair obligations are frequently placed on tenants. Full repairing leases make the occupants liable, meaning that they bear the full responsibility of existing defects, which can lead to some very costly surprises.
A building condition survey establishes a record of conditions, which can identify expensive repairs and be used to re-negotiate the lease, either by requesting a rent reduction or asking that landlords fix the defects before you sign. It can limit repair liabilities, so that at the end of your lease, you won’t be expected to restore the building to a ‘better’ state than when you signed the lease agreement. Carrying out a building condition survey may be an upfront investment, but it can help to prevent significantly more expensive liabilities further down the line.
Building condition surveys before refurbishing or redeveloping a commercial property
It’s not uncommon to uncover unexpected defects like hidden water damage, structural issues or unsafe building materials once a refurbishment project commences. Although most redevelopment projects will budget for unexpected problems, it’s impossible to know exactly what you might be facing without a building condition survey.
Carrying out an assessment before construction starts makes the project lower risk, will allow for better planning and budgeting to reduce financial shocks along the way, and minimise potential delays. It will also help to ensure the building is legally compliant with regulations, particularly in older buildings, which often lack the modern safety measures that are needed to meet current building regulations.
Building condition surveys before making an investment
If you are an investor or portfolio owner buying a commercial property, it’s important to remember that the return on investment can be significantly impacted by unexpected maintenance costs. Having a property assessed by a professional will highlight short-term repair requirements, planned maintenance needs, and lifecycle replacement costs, so that you can more accurately predict future expenses.
If defects are uncovered, the estimated costs to repair them can be used as leverage to lower your offer. The subsequent report can also be used to create a multi-year forecast of expected costs and replacements, so that you can model cash flow more accurately. Additionally, a building condition survey can find potential compliance issues that might result in legal penalties, so you can factor upgrade costs into the investment yield. Essentially, understanding the future costs will allow investors to properly assess the true value of the asset, and avoid making an investment that can turn into a money pit.
Compliance and regulatory risks
As well as physical defects, condition surveys can highlight potential compliance issues that will need addressing. For example, a lack of fire safety features, accessibility concerns, and building safety risks. Regulations like the Health and Safety at Work Act 1974 and the Regulatory Reform (Fire Safety) Order 2005 were created to ensure that workplaces adhere to safety standards, but many buildings - especially older properties - will lack a lot of the basic safety infrastructure.
Failing to comply with health and safety regulations can quickly lead to legal liabilities, remediation costs and even legal penalties, so undergoing a building condition assessment will uncover hidden dangers and allow you to fix hazards before they escalate. The report will provide formal documentation of the building’s condition, to show that risks are being proactively managed.
Better planning and decision-making
As a building condition survey provides you with a prioritised maintenance plan, you won’t have to worry about figuring out the most important fixes yourself. The report is broken down into immediate actions that need to be taken urgently, followed by short, medium and long-term actions, which includes lifecycle replacements.
Having this plan means that you can plan your budget better over the span of 5 to 10 years, helping you to avoid unexpected emergency repairs. The more information that you have about the condition of the commercial property, the more confidently you can make decisions, using the evidence from the report to support your choices.
Make better commercial property decisions with Anderton Gables
A building condition survey should be one of the first steps in the process if you are buying or leasing a commercial property. Understanding its current condition, the maintenance needed and the risks involved will help you to make smarter, more informed decisions, based on evidence.
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.
