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What to Know When Ordering a Property Condition Assessment

Much like going to the doctor, a Property Condition Assessment (PCA) [video] during due diligence serves as an overall health report of what shape the property is in, especially when there’s no visible symptoms of poor health. 

Even if you’ve been ordering these for years for commercial properties, there’s always new regulations and safety standards for your prospective property to be put to the test, so don’t gloss over the items listed below before ordering your assessment.  

Property-Condition-Assessments

What is the report vendor’s history? 

Before selecting the vendor to conduct the investigation, ensure they have a positive track record and reputation in the market of your prospective property. Is the company known to customize reports more? Are there references that can vouch for a quick turnaround time?  

Tip: Partnering with a commercial preferred developer could increase your chances of having a more trustworthy, reputable contractor because they have been repeat-clients for years.

 

What extent of scope should you expect? 

Understand the full scope of the PCA that will be conducted, along with the budget and the time frame needed to be allotted. Some categories are field work, building systems evaluation, and site improvements. 

Specifics can include roofing systems, exterior enclosures, interior systems, parking garages/lots, walkways, curbs, plumbing, electrical systems, heating, ventilation, and air conditioning (HVAC), fire code, and accessibility compliance updates.

Tip: Within the scope should also be a Replacement Reserve Table, which  typically estimates the building’s capital replacement schedule over the  evaluation period.

 

How much could it cost you?

While the due diligence period allows for your money to be refunded if needed, the reports you order will, of course, not be. Within the determined scope, the PCA will provide any “recommendations for additional investigations,” which can also lead to additional costs. The PCA will also reveal deferred maintenance items and categorize them as either “Immediate Needs” or “Short Term Costs.”

Tip: Finalizing your commercial investment should always be contingent on the results of the property condition assessment.

 

Should an Environmental Site Assessment Report also be ordered? 

In addition to budgeting for the PCA, an Environmental Site Assessment (ESA) - Phase I is also necessary to complete the due diligence based on grounded assessments. The main purpose of this report is to ensure there is no soil or groundwater contamination from the previous use or neighboring sites. Any contamination found in these reports may impact the property’s value or limit its use. 

Tip: ESAs are especially important because some limitations may exist in the PCA including in-depth structural component evaluations, mold inspection, subsurface sewer pipe evaluations, foundation inspection, asbestos-containing materials, lead-based paint, lead in drinking water, and more.


As covered above, ordering a property condition assessment is a vital element in the due diligence period as it will evaluate the capital expenses that may be needed down the line to maintain an asset. So, keep this list top of mind when it comes to ordering your next report. 

Tags: Acquisition Due Diligence asset management

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