Property Condition Assessments – The Other Due Diligence

John Russell By: John Russell

As urban renewal and the renovation of existing buildings have become more popular lately, one aspect of due diligence that I feel is often overlooked is the completion of a Property Condition Assessment (or PCA). A PCA is completed in accordance with ASTM Standard E 2018-08 and qualitatively assesses the physical condition of real property improvements for a specific parcel of commercial real estate. The procedure primarily involves conducting a walk-through survey of the property to inspect structures, buildings and related improvements for deficiencies. The inspection usually focuses on the:

• Overall Site Conditions (including ADA accessibility)
• Pavements
• Exterior and Entry Doors
• Structure (including the roofing system)
• Exterior Walls
• Interior Improvements (including ADA accessibility)
• Life Safety System
• Plumbing System
• Elevators (as relevant)
• Electrical System, and
• HVAC System(s)

Once the walk-through survey is complete, a Property Condition Report (or PCR) is prepared which details the results of the PCA and presents an Opinion of Probable Costs to Remedy Physical Deficiencies. It should also be noted that the Opinion of Probable Costs can be extended to a five (5) or ten (10) year span to convey what future cost expectations might be for the property.

When purchasing a commercial property with existing improvements, the completion of a PCA/PCR should always be considered in addition to an ASTM Standard Phase I ESA to fully mitigate the risk of purchase.