Services

Building Condition Surveys

As part of the Due Diligence process, the nature, extent and condition of a property must be fully understood in order to assess its true value. Whether or not the use of a building by a certain user is precluded by either physical or legal issues must also be taken into account.

In respect of an Investor, we would concentrate on relating the condition of the building to the Tenants’ lease covenants (assuming that a tenant(s) is in occupation), identify whether or not the cost of works would be met by the tenant, under service charge or fall to the Landlord. In respect of an owner/occupier, we would again review the lease and the strength of the repairing covenants (if leasehold), and consider the cost of work likely to put the building into good condition, as well as consider any issues that may affect their use of the building. The cost of such a survey is often negligible; often less than 1% of the total acquisition, but the contents of the report may result in that cost being saved many times over where it raises a point for negotiation or ultimately highlights an issue that makes the acquisition unviable.

Chris Rainbow has acted on several high profile acquisitions, including a London mixed use site valued at £125Million. This site included a Theatre, multi-storey office buildings, a Shopping Centre, Multi-storey car park and circa 250 residential flats; all with a train line running through the middle.

With the benefit of years of experience and a good technical understanding of the varying construction types, we were able to provide focused advice to the client within a couple of days.

We understand that the Building Surveyor is often appointed when negotiations are at an advanced stage and therefore we would normally look to provide a verbal précis to our client on the day of inspection, an Executive Summary within 2-3 days and the full report within 7 working days.

Dilapidations

In essence the deterioration in condition of an element whereby repair/renewal is required and a subsequent claim for loss can be lodged.

When entering into a lease, clients often do not realise the implications of what they are signing up to. Particularly in the case of small businesses, the choice to not engage a surveyor can have significant implications further down the line and this may include:

• Inability to effectively exercise a Break Clause
• Inherit a dilapidations liability where the condition of the building has not been fully assessed
• A resultant claim for Dilapidations which jeopardises the viability of the business

We act for both Landlords and Tenants.

On behalf of the Landlord, we can prepare and issue:

• Interim Schedule of Dilapidations
• Terminal Schedule of Dilapidations (including Quantified Demand)
• Final Schedule of Dilapidations

On behalf of the Tenant, we are able to:

• Either respond to and/or defend a Schedule of Dilapidations, including advice on exit strategy.
• Prepare a Dilapidations Assessment to predict the likely quantum of any claim by a Landlord, as well as comply with accounting standards, making provision for contingent liability in respect of assets.

In the case of the Landlord, normally the Surveyor’s fees in respect of preparation and service of the various schedules are payable by the Tenant under the lease. In respect of the Tenant, the input of a professional advisor can save tens or hundreds of thousands of pounds, with the Surveyor’s fees being only a fraction of that amount. Clearly this depends on how reasonable the original claim is and to what extent, if any; the Tenant has complied with their obligations under the Lease.

Schedules of Condition (SoC)

This is simply either a Photographic or written and photographic record of condition of a building/demise either just prior to or at the commencement of a lease Term. The schedule is a statement of fact and if prepared correctly, should not be open to question.

A SoC is most commonly used to restrict or limit the extent of any future claim for Dilapidations; mainly benefiting an ingoing Tenant, but also leaving the process less open to question and so benefiting all parties. It can also be used to record the condition of a property prior to works commencing, in order to safeguard the interests of adjoining owners i.e. as part of a Party Wall Award/agreement.

The SoC is not to be confused with a Building Condition Survey Report, as they are completely different in nature and application, with the SoC potentially being a recommendation within the \Building Condition Survey Report.

Specification

Whether you are looking at new-build, refurbishment or maintenance and repair, one of the best ways to control Cost, Quality and Time, is the use of a specification for contractors to price against. By using a specification and/or schedule of work, competitive quotes can be obtained on a like-for-like basis. Due regard can also be given to Legislative requirements i.e. Building Regulations compliance. This helps to avoid significant variations which will inevitably affect Cost and Time, which are all too often encountered.

If a specification has been used to obtain competitive quotes, where the cost falls outside of the budget, it provides a basis for value engineering, whether this is by way of omitting work or simply changing the specification; engaging both the client (or their Surveyor), and contractor.

Project Management/Contract Administration

We act as lead consultant in respect of more complex projects, bringing together and coordinating the team. This can range from the smallest insurance claim to a large commercial refurbishment/fit-out. As part of that process, we would normally perform the role of Contract Administrator, putting in place the necessary documentation, dealing with and assessing valuations and issuing certification accordingly.

Often production of the specification/schedule of work and obtaining competitive quotes/tenders is treated as part and parcel of Contract Administration, even though the two roles are separate and can be undertaken by independent parties.

By managing the process and ensuring that the necessary documentation is in place, the rights of all parties involved are clearly defined, as well as the process for dealing with any disputes, providing protection all around.

Should Collateral Warrantees or Bonds be required, then we have a good working relationship with Solicitors working in this area and can arrange for their drafting accordingly.

Building Reinstatement Cost Assessments (for insurance purposes) (BRCAs)

We are all aware that insurance is not cheap and therefore it is important that your property has the correct level of cover. Where the reinstatement cost is too high the premium may be higher than it should be and where the assessment is too low, there is a risk that you will be underinsured; with any claimed being reduced accordingly by a Loss Adjuster/Insurer.

The market value in no way reflects the cost of reinstatement. An RCA must take into account the size, location, nature of construction and use. It must also factor in special provisions such as air conditioning, specialist electrical and mechanical installations, lifts etc. The access to and from the site and any demolition must also be taken into account, as well as professional fees likely to be incurred.

Simply increasing any previous assessment in line with inflation is unlikely to prove accurate. Similarly, simply following the Tender Price Index is unlikely to lead to an accurate assessment; especially where alterations to the building and/or service installations may have been undertaken in the interim.

In order to generate the most accurate report possible, we undertake a site inspection, take any necessary site measurements and, in conjunction with our own experience and costing information, use the Building Cost Information Service (BCIS).

In respect of one-off premises, often an assessment every two years will suffice. However, with larger portfolios and where the premiums can be high, many clients prefer an annual review. Either can be reviewed on a rolling basis.

Planned Preventative Maintenance (PPM)

By assessing the nature and condition of a building we can reasonably predict the work that will be required over a set period i.e. 5-10 years. This allows budgets to be set aside and work packages to be planned accordingly. This information can lead to economies of scale as well as avoiding additional cost where lack of maintenance results in more extensive repair and/or replacement. It can also be considered as part of a wider strategy for either the building or as part of a portfolio.

If you are a Landlord and apply a service charge, a PPM can be used to set or update the future or current contributions accordingly. This can be of value to both existing and prospective tenants.

By employing a well-structured PPM, the cost of reactive maintenance should reduce over time, as well as provide more financial control over routine and cyclical maintenance.

Party Wall

The Party Wall etc. Act 1996 sets out parameters by which development either on, or, close to boundaries, can be undertaken. Subject to the extent of work proposed, a relevant Notice may need to be served on an Adjoining Owner(s) by the Building Owner (the party instigating the work).

If you are proposing work which falls under the Act and fail to serve the requisite Notice(s), any affected Adjoining Owner(s) may seek to impose an Injunction, causing both delay and likely additional cost.

Should you receive a Notice, you will be given either the option to agree to the work or to dissent (disagree), at which point you may appoint your own Surveyor; the fees for which are to be met by the Building Owner (other than in exceptional cases i.e. where the Adjoining Owner has failed to maintain their element of a Party Structure and where benefit will be derived by both parties).

Where you are the Building Owner, it is imperative that the full extent of the work is understood from the outset and the relevant Notices issued and in the correct format. Should the Notice(s) be found to be invalid, the Building Owner may face additional cost and delay.

Schedules of Condition

A Schedule of Condition (SoC), records the condition of a property at a point in time. This is normally immediately prior to a new tenancy commencing or, at before the commencement of work in relation to a Party Wall Award. The SoC is a statement of fact, with no facility to speculate or comment on the cause of any defect identified, but simply state the nature and extent of that defect. For the Tenant, the SoC acts as a point of reference to establish what (if any), work is required to be undertaken by the Tenant prior to or, at the end of the fixed Term. The same can be said for the Landlord, when considering a claim for Dilapidations. The more detailed the better.

The SoC can be set out as Photographic only (slightly cheaper in terms of fees), but potentially offers less protection against a claim for Dilapidations or, a Full SoC, which includes more detailed text to support the portfolio of photos.

Should you require further information, then please feel free to call us or refer to https://www.gov.uk/party-wall-etc-act-1996-guidance where you can download a guidance booklet.