Property condition assessment

Property condition assessments (PCAs) are due diligence projects associated with commercial real estate. Commercial property and building inspections (also known as Property Condition Assessments or PCA's) are important for clients seeking to know the condition of a property or real estate they may be purchasing, leasing, financing or simply maintaining. Commercial Building Inspectors generally follow industry accepted guidelines of ASTM E2018, the only recognized standard of major lenders. These commercial inspection standards help both the commercial building inspector and the client to understand the scope agreed to for the inspection including the systems or ares to be inspected, and is used as a guide to develop said scopes and procedures. Often they are done as part of a property transfer and are done along with a Phase I Environmental Site Assessment.

Depending on client needs or accepted risks, and property types, some inspections can require the involvement of specialists and some can by a more generalist commercial building inspector or engineer. Of course each varying degree of review or assessment will incur various costs and time frames.

Once the inspection or Property Condition Assessment is completed, a written report (also known as the Property Condition Report or PCR) is compiled and delivered to the client within an acceptable time frame. The Property Condition Report may include such items as concerns observed, recommendations for repairs or further inspections, opinions of the likely cost of future capital project and Americans with Disabilities Act (ADA) compliance surveys.

Experienced commercial building owners, net lease occupants, commercial property investors and lenders know the importance and benefits of hiring a qualified team to perform a Property Condition Assessment.

PCAs are not to be confused with facility condition assessments, which are similar in nature but serve a different purpose.

The PCA process began to formalize in the early 1990s as a response to the Resolution Trust Corporation (RTC), and as more pension-fund type investors started to take an interest in commercial real estate. It became standard operating procedure to obtain a PCA at the time of purchase or refinancing of commercial properties. The process of performing PCAs began to become routine and formalized with the increased demand however there were still many inconsistencies. A 1995 Standard & Poor's Guide further defined the process and then in 1999 ASTM released a standard called 2018-99. Since 2000 tremendous growth in the securitized lending market, or commercial mortgage-backed securities, caused a spike in the completion of these reports as they were required to complete a deal. Further, this has led to advancements and convergence on the scope, methodology and cost. ASTM 2018-15 is generally accepted in the industry as the current guidance for content and practice.

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