BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY

Uncategorised

1 Introduction
This guidance note has been prepared to provide surveyors and clients with a source of information and guidance in respect of commercial and industrial property surveys within the UK Industry. Such surveys may also include large residential apartment buildings.

This guidance is written to apply to England and Wales, although much of its content is equally applicable elsewhere. It is operative from October 2010 from which time the RICS publication Building surveys and inspections of commercial and industrial property, 3rd edition, ceases to be RICS guidance. General guidance of this nature cannot cover all circumstances and each property should be assessed on an individual basis having regard to the specific needs of the client. The guidance offered is considered adaptable for all types of commercial and industrial property.

It is accepted that surveyors may well have good reasons for not following all aspects of this guidance note. It is for
the surveyor to decide upon such issues depending on the individual circumstances, e.g. nature of construction or site conditions.

This is not intended to be an instruction manual or a guide detailing a step-by-step process which must be followed. It aims to set out the general principles which should be adopted when undertaking a building survey. RICS is concerned that members only hold themselves out to be competent in fields for which their training and background experience are appropriate and relevant. It is important that surveyors undertaking commercial and industrial
building surveys have relevant experience in this field, have appropriate knowledge of building construction and are sufficiently skilled to inspect and report on the particular property involved.

Surveyors providing commercial and industrial building surveys and associated services are advised to:
+ assess the needs of the client;
+ consider the extent of the investigations to be
made, advise on the limitations of the agreed
inspection and obtain instructions from the
client for any additional services required (the
life cycle flow chart on page 6 refers to typical
building survey types);
+ undertake an impartial and professional
assessment of the property and its condition,
and report to the client in the detail and style
necessary to provide a balanced professional
opinion to the extent required by the agreed
instructions; and
+ comply with the agreed instructions, which
should have been confirmed in writing, and
form the basis of the contract between the
client and the surveyor.
The benefits to the client of commissioning a
building survey, whether a prospective purchaser,
occupier or investor in property includes:
+ gaining an understanding of the condition and
design of the property;
+ establishing the suitability of the property for its
intended use;
+ understanding the need for, and quantifying,
future costs and other liabilities;
+ providing a level of protection for institutional
investors or funders; and
+ providing a basis for negotiation with the
vendor or landlord.
This guidance note has been prepared by a group
of experienced surveyors connected with the
commercial property industry. A full list of those
contributing to the guidance is shown in the
acknowledgments section.

 

BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY | 3

2 Taking instructions
2.1 Key items

It is important to remember that the client may not
be familiar with the range of services that the
surveyor is able to offer. When a client asks for a
survey, it is recommended that the surveyor asks
questions to ensure that the type of survey being
requested is the right one for the circumstances.
For example, if a client asks for a schedule of
condition, the client may mean a building
inspection report. The surveyor should assess the
needs of the client and advise on all of the services
that can be provided.
There are key items common to confirming
instructions no matter what the commission or
scope of work. These are recommended as basic
good administration and may include confirming:
+ precisely who the client/other parties are, i.e.
investors and occupiers;
+ precisely what service is to be provided;
+ precisely who the surveyor/surveying company
is;
+ what is not being provided (e.g. a valuation);
+ the detailed limitations on the scope of the
survey and report;
+ the date of the instruction;
+ involvement of other consultants or contractors
and the extent of their appointment (e.g. on
behalf of the client);
+ the timescales for completing the instruction
and any intermediate stages;
+ what the fee will be;
+ how variations to the instruction will be
assessed;
+ specialist access required, access restrictions
and health and safety;
+ how the fee will be claimed/become payable
and the charges for late payment;
+ how the fee will be calculated if the instructions
are aborted early;
+ whether disbursements are included or not, in
particular where access hoists are required;
+ include the surveyor’s standard terms of
business; and
+ are there any pre-qualifications required (non
disclosure agreement, Criminal Records Bureau
checks, Official Secrets Act 1989, rail track side
training, etc.).
Depending on the particulars of the arrangements,
the surveyor may also need to consider:
+ insurances (see also Appendix A, Insurance);
+ the client’s indemnification of the surveyor
against damage caused if opening up is
required as part of the survey;
+ the procedures to be followed in the event of a
dispute;
+ personal guarantees for payment from directors
of small companies;
+ advance payments;
+ additional charges for time spent attending post
survey meetings;
+ an agreement with the client on the level of
reliance (i.e. assignment); and
+ depth of document review the surveyor is to
carry out.
The surveyor may consider capping the time spent
reviewing the documentation and reserve the right
to charge additional fees. For example, the
documents may be held at a different location, or
the surveyor may be required to locate relevant
documents among boxes of associated property
information.
It is important to make the client aware of the
practical limitations of any inspection or survey
exercise. In any building, but particularly large
buildings or complexes of buildings, there are
literally hundreds of items that may need to be
checked. Many of them will be hidden and/or
inaccessible. Repetitive items (such as windows)
will normally only be checked on a sample basis.
However, a client will reasonably expect that all
major defects (or potential major defects) and
issues would be addressed.
In addition to what the surveyor considers to be a
priority for the specific exercise being undertaken,
4 | BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY
the client’s perception of what is important needs
to be addressed. The perceived priorities may not
be the same. For example, the priorities will change
where a client is purchasing a property for either
investment purposes, or for its own occupation.
It is also recommended that the surveyor deals with
the issue of liability for the report – whether or not
the surveyor is willing for the liability to be passed
to a third party. Therefore reference to, or exclusion
from, the Contracts (Rights of Third Parties) Act
1999 ought to be considered. The surveyor may
wish to limit assignments to one or two parties
only, subject to the surveyor’s insurance terms, with
a requirement for further assignments to be subject
to written consent (and not be unreasonably
withheld). Surveyors should refer to their
professional indemnity insurance (PII) cover for
specific conditions. Refer to Appendix A for
insurance information.
Similarly, the surveyor is recommended to clarify
the extent of liability for specialist sub-consultant
reports, whether or not the sub-consultants are
directly engaged. It would be appropriate to ensure
that the level of detail included in the agreement
with the client is at least replicated in any
agreement with a specialist sub-consultant or
contractor. In circumstances where a subconsultant
is appointed on behalf of the client, this
ought to be stated and that the surveyor is not
responsible for the content of the report.
Instructions may come from term commission
arrangements where contract details may have
been agreed at some time in the past. These need
to be reviewed, and in such cases care should be
taken to ensure that the formalisation of individual
instructions under a term commission is completed
in each and every case (for example, purchase/
works orders and pro forma approvals). The
surveyor should ensure that the instruction is
properly established and that a contract exists
before starting the identified task.
Beyond these basic principles, it is advised that
further areas of detail particular to industrial and
commercial premises are confirmed at instruction
stage. These generally relate to the client’s
intentions for the premises, the physical and
operational particulars of the premises, and health
and safety issues. The divisions between these
areas can be blurred, but all of these items ought
to be investigated and included within the
confirmation of instructions.
2.2 Vendor surveys
Vendor surveys are undertaken with a view to
collating all due diligence documentation before the
property goes to the market and benefit passes to
the purchaser. Vendor surveys avoid the need for
surveys by each purchaser’s team and enable
sellers to ‘put their house in order’ should the
reports identify issues. All potential purchasers will
therefore be basing their offers on the same
information and without the need for a ‘subject to
survey’ condition. With regard to vendor surveys, it
is worth considering the following.
The client’s report is likely to be assigned to the
purchaser following completion of the sale.
Readdressing the report is unlikely to maintain the
contractual links, as the report would have been
prepared for the seller, not the purchaser.
Subsequently, the surveyor is likely to be required
to enter a third party agreement with the potential
purchaser, which may also extend to the funders.
This is usually undertaken in excahnge for a
nominal payment.
The surveyor’s instructions ought to be varied to
include reference to the Contract (Rights of Third
Parties) Act and willingness for liability to be
passed to a third party. The surveyor may wish to
limit assignment to one or two parties only, subject
to the surveyor’s insurance terms, with a
requirement for further assignments to be subject
to written consent (and not to be unreasonably
withheld).
The third party agreement is sometimes called the
‘duty of care’ or ‘reliance’ letter. The wording can
be agreed at the time the surveyor is appointed to
undertake the survey, and the content ought to
comply with the surveyor’s PII conditions. For more
information on duty of care and other legal issues,
see Appendix B.
2.3 Client requirements
Having a clear understanding of the client’s
intentions for the premises is important, as there is
a range of survey types that could be undertaken.
The life cycle flow chart (Figure 1) will offer
direction for the surveyor in this regard.
BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY | 5
It is important to establish why the client requires
the information and possibly guide a client that is
not fully conversant with the options for various
types of survey and professional services available.
This may include specialist support from other
disciplines. Where such specialists are to be
appointed, their liability should be direct to the
client in order to secure privity of contract. Where
this is not the case and the appointment is as a
sub-consultant direct to the surveyor, the matter of
liability needs to be clearly identified and defined.
2.3.1 Tenure information
The surveyor’s ability to provide a definitive report
may be severely compromised without a full copy
of the lease and/or other title documents. They are
key to determining the client’s liabilities with regard
to the premises. Where documents are missing, the
surveyor ought to make reasonable assumptions or
appropriate exclusions and state what these are
within the report.
2.3.2 Proposed use
The surveyor is advised to try and determine the
client’s intention in acquiring the building and any
special requirements that the client may have. The
surveyor should also understand how the client’s
undertaking or operations will affect the premises
and surroundings. It may be appropriate to consult
an operational specialist in the field (possibly from
the client’s own staff) to assist in the survey and
report. If the client has intentions to physically alter
the building, this will affect the scope of the report
and will likely lead the surveyor to engage specialist
engineering assistance.
2.3.3 Report format
The surveyor may consider showing the client
examples of alternative report formats for
consideration, and the following questions could
also be included.
+ Should photographs be included?
+ To reduce waste, can electronic copies be
provided in PDF format only? If the client
requires paper copies, how many should be
provided?
+ Are any copies to be issued directly to other
parties authorised by the client, such as legal
advisers?
6 | BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY
+ How should the report be delivered, e.g. by
normal post to an office address or by secure
delivery to a named individual?
+ Are costs for works or repairs identified in a
report to be included? If so, how detailed do
they need to be and on what basis are they to
be assessed – the use of schedules of rates, for
example?
2.3.4 Coordination
Commercial surveys will typically involve a team of
individuals (surveyors, engineers, environmental
consultants, etc.) contributing to a single report.
Where these are appointed separately by the client,
it is important to clarify with the client who will be
taking the responsibility to coordinate these
individuals to ensure that the information they
produce is correct and delivered in a timely fashion.
Whoever takes on this responsibility should expect
that the client will make this clear to all the
members of the team.
2.3.5 Time
In agreeing a timetable with a client, the surveyor is
recommended to detail the time necessary to:
+ carry out the various surveys;
+ complete research and tests; and
+ prepare and submit the report.
If the surveyor feels insufficient time is being
allowed, he or she should notify the client.
The surveyor needs to be aware that responsibility
will remain with him or her when accepting
instructions for quick ‘walk round’ surveys which
do not allow sufficient time for a full evaluation.
When accepting such instructions, surveyors ought
to ensure that clients are fully aware that
compromising on the time allowed may result in a
limited report. Balancing time, cost and quality in
order to achieve the client’s objectives is frequently
difficult as they are often in conflict with one
another, hence the necessity to establish priorities
with the client when agreeing the brief. These can
be modified by agreement as the project proceeds.
2.4 The premises
2.4.1 Location and size
The importance of precisely identifying the areas to
be covered within the survey should not be
overlooked or underestimated. It should not be
seen as unreasonable to expect a client to provide
an accurate detailed address, including a postcode.
The extent of the survey may also need to be
confirmed for large premises, where not all of the
building or site is to be included. Properties in
multiple occupancy, ill-defined industrial sites,
outbuildings and yards are among those that can
pose problems in this area. It is recommended that
the surveyor asks the client to provide definitive
direction, usually by reference to a property title
document. However, the surveyor should bring any
obvious areas of inaccuracy or uncertainty to the
client’s attention. Confirmation of instruction to the
client should also include a marked up plan or
other written definition of the area to be surveyed.
2.4.2 Access
Confirmation that all areas of the building will be
accessible on the dates agreed for the survey(s) is
advisable. It is also important to check in advance
whether roof access is available from within the
building (i.e. roof hatches) for flat roof inspections,
or whether separate ladder or platform access is
required and needs to be organised, internally or
externally, via a caretaker or local contractor.
Tenant notice period or other access restrictions
also need to be ascertained. The fee arrangements
could detail the costs of return visits to sites if
access is not available as expected.
When arranging the inspection, consideration
should also be given to section 3 of the Health and
Safety at Work etc. Act 1974 regarding general
duties of employers and the self-employed to
persons other than their employees.
2.4.3 Occupation
The surveyor will benefit from knowing what parts
of the building will be occupied as this may restrict
the survey. For example, it may be that out-ofhours
inspections will be needed for noisy or
otherwise intrusive investigations. Similarly, the
operational processes or activities being
undertaken in the premises may bar the surveyor
from specific areas at certain times.
The surveyor may benefit from knowing if the
premises, or parts thereof, are vacant. It is also
BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY | 7
important to establish any requirements for privacy
of any party, or a need for a confidential
agreement.
The fact that the property may still be under
construction or subject to ongoing refurbishment
should also reported to the surveyor.
2.4.4 Documentation
If available, copies of current statutory and other
documentation should be requested as part of the
evaluation for the inspection or the report. It would
be prudent to request these at the outset if for no
other reason than it may take some time to locate
the required documents. The following is a list of
typical documents which may be available (along
with those listed in section 3.2.2):
+ health and safety file;
+ licences for alterations;
+ fire risk assessments/fire certificates;
+ planning approvals;
+ listed building or conservation area status;
+ building control approvals and completion
certificates;
+ asbestos documentation;
+ access audits;
+ Energy Performance Certificates (EPC) and
Display Energy Certificates (DEC); and
+ existing survey reports.
The Internet is an excellent source of information,
and a list of useful websites is included in
Appendix C of this guidance note.
2.5 Confirming the instruction
The client’s instructions are often given by
telephone, and it is important that the basis of the
contract is agreed before the survey is undertaken.
Whilst it is possible to establish a contract verbally,
the surveyor is strongly recommended to ensure
that any instruction is formalised in writing. Email or
letter is acceptable and should include all of the
points covered in this section.
Confirmation should be sent out as soon as
possible, confirming the client’s instructions
including the terms, conditions and limitations
which have been agreed, remembering that once
these ‘terms of engagement’ have been decided,
they cannot be amended without the client’s
approval. It is not essential that the client provides
confirmation of acceptance of the conditions;
however, it is advisable for the surveyor to request
that the client signs and returns a copy of the letter
of confirmation to show acceptance of the terms
and conditions of the engagement.
Typically, a client’s phone call or email/letter invites
the surveyor to undertake a survey but with no
mention of terms. The surveyor’s return letter,
setting out the terms, then constitutes the ‘offer’ in
legal terms, although the client may see it as an
acceptance of the initial invitation. The surveyor is
recommended to press for and obtain formal
acceptance of the offer. It may be easier if the
surveyor provides the client with a copy of the
terms that can be readily signed and returned by
way of acceptance.
Experience suggests that more often than not
disputes are based on there not being a clear
understanding of the terms at the outset. Therefore,
written confirmation of instructions is becoming
more of a requirement where court action is
necessary to recover debt. When instructions are
received through a third party, the surveyor is
recommended to take all reasonable steps to
ensure that the confirmation of instruction is
forwarded to the actual client in full.
In the absence of any clause to the contrary, there
is an implied term at common law in a contract
between a professional and a client, that work
should be carried out with the skill and care
reasonably to be expected of a competent person
exercising the particular calling and profession and
the particular skill in question.
2.6 Third party consultants and their
appointment
Given the complex nature of commercial property
inspections, appointing consultants from other
disciplines may be required to help prepare
technical due diligence investigations – for
instance, mechanical and electrical consultants.
Such specialists may be appointed in several ways,
including those discussed in the following lists.
1 Direct appointment by the surveyor
+ The surveyor should ensure the cost for the
consultant is covered within the surveyor’s
own appointment.
8 | BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY
+ The level of the consultant’s own PII should
be checked. There may be a shortfall
between the level agreed directly with the
client, which will leave the surveyor’s PII
exposed.
+ An agreement on a detailed scope of
service, timescales and requirements should
be made between the surveyor and the
consultant.
+ The surveyor will be responsible for
coordination and delivery, as well as content
of the consultants report. Therefore,
reviewing the report before delivering it to
the client is recommended.
2 Direct appointment by the client
+ In these circumstances, the client will be
responsible for payment of the consultant’s
fees and briefing, as the contract will be
directly between the client and consultant.
+ The surveyor may be asked to review the
consultant’s report.
3 Indirect appointment by the surveyor on behalf
of the client
+ In many cases, the client would prefer the
surveyor to coordinate and organise all subconsultants
and act as lead during the due
diligence process. As a result, the client
may require the appointment of subconsultants
on his or her behalf.
+ If the surveyor chooses the consultant, the
choice should be clarified with the client
before appointment.
+ The surveyor should establish the terms of
the sub-consultant’s appointment and
obtain client agreement, together with
confirmation that payment of the subconsultant’s
fees will be covered.
+ The surveyor should confirm with the client
that the former is not responsible for the
content of the sub-consultant report.
The surveyor ought to ensure that all PII conditions
have been met in all circumstances. The surveyor
may insert a copy of the consultant’s report into his
or her own report within the appendices, but it
must not be altered. Salient issues may be
extracted and used in the surveyor’s report, though
the source should be quoted and whether it was a
direct or indirect appointment should be made
clear. The surveyor may also consider stating that
he or she cannot be held responsible for the
report’s content.
2.7 Scope of services and RICS
appointment forms
Many surveyors and surveying firms have adopted
their own specific scope of services. Alternatively,
the surveyor may wish to use standard
appointment documents provided by RICS. These
are available to RICS members to download from
the RICS website (www.rics.org/site/scripts/
documents.aspx?categoryID=454).
Surveyors may find it helpful to consult their PII for
specific conditions before any appointment.
2.8 Working in Europe
2.8.1 Key issues
The use of building surveyors within European
countries is gaining more popularity, so it is
important that RICS addresses some of the issues
arising from this trend in order to maintain a
consistent level of service across Europe, Middle
East and Africa (EMEA) region. Many clients
appoint building surveyors because they have
commercial awareness of what an investor, for
instance, is looking for and wants. Many clients
also think of Europe as a single entity.
Whilst building surveying as a profession is gaining
a reputation across EMEA, it is important for
surveyors to recognise that different countries have
different professions undertaking similar services.
Indeed, some countries have several professions
performing the same, or parts of the same, service
that a building surveyor may offer.
There are a number of key issues that need to be
established before taking instructions.
+ Clients require a consistent level of service in
both the UK and Europe. Surveyors should only
accept instructions if these can be adequately
resourced and standards maintained.
+ Surveyors should assess each instruction and
establish whether limited local knowledge will
be a barrier.
BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY | 9
+ Many countries have legal barriers to operation,
so it may be helpful to research these before
entering into a contract.
+ There are legal differences, not only in other
countries but also between federal states or
regions within countries, and surveyors ought to
acquaint themselves with each country’s
specific issues, preferably before accepting
instructions.
+ Some clients want their buildings compared to
UK standards and regulations to provide a
consistent benchmark.
+ Communication can be a clear barrier, and
whilst English is the accepted language of
business, there are many instances where it is
essential to communicate in the local language
in order to complete the instruction. For
instance, to undertake an acquisition survey it
is important to speak to local personnel or
facilities managers, as well as looking at local
documentation. Alternatively, some firms work
with local building experts to avoid the
problems of law and language.
+ Surveyors should be aware that local law and
EU legislation are liable to change and keep
themselves fully up to date.
+ Value added tax (VAT) issues are complex, and
UK VAT should always be considered according
to the specifics of a transaction.
For further information on working within
Continental Europe please refer to the RICS best
practice and guidance note for Technical due
diligence of commercial, industrial and residential
property in continental Europe, 1st edition, to be
published in 2011.
10 | BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY
3 Preparing for the survey
3.1 General guidance
Preparation for a survey starts with obtaining the
client’s clear instruction, and with the surveyor
understanding the client’s objectives in order to
provide useful advice that is targeted at addressing
the client’s future plans.
Industrial and commercial surveys usually involve a
team of surveyors and professionals from
associated disciplines, often from different
practices and/or businesses. Clear lines of
communication between members of the team
need to be established at the outset, in order for
everyone to understand the context of their own
contribution and to prevent errors or duplication in
data gathering.
3.2 Administration
3.2.1 Who, when and where
Getting the right person to the right place at the
right time requires planning and forethought if the
survey team is to be effective. Getting a
combination of maybe five, six or more skilled and
expensive individuals to the same place at relatively
the same time can be difficult, particularly when
they may be from different companies and
geographic regions and often are meeting at
relatively short notice. Furthermore, getting
everyone to produce the correct information and in
the correct format, in time for it to be reviewed,
collated and commented upon before the delivery
date expected by the client requires much effort
and planning.
The surveyor is recommended to clarify with the
client on who has the responsibility to coordinate
and instruct any specialist surveys and reports
associated with the surveyor’s survey. If neither
have been appointed as the coordinator, both the
surveyor and the client need to establish who the
specialists should report to with their contributions.
3.2.2 Occupiers – valuable sources of
information
It is recommended that surveyor establish good
relations with individuals at the premises as they
are often willing to share, or even identify,
background issues that might not be apparent from
spending a single day within the premises, but
which might be useful for inclusion within reports.
Advance contact by phone to arrange access and
perhaps escorted inspections is the time to try to
strike up a friendly rapport.
When arrangements are being made to carry out an
inspection of the property, especially when it is
occupied, it is important that these arrangements
are confirmed directly with the occupiers. Such
confirmation may include the following (pending the
client’s privacy requirements):
+ confirmation of the surveyor’s appointment;
+ purpose of the survey (subject to client
confidentiality);
+ dates and access arrangements and with whom
the arrangements have been made;
+ name(s) of the surveyor(s) and others who will
be involved;
+ an estimate of the time likely to be required for
the survey;
+ requirement of gaining access to all parts of the
premises, ensuring that keys and escorts, etc.
are available;
+ a request for a letter of authority for access to a
site where this is relevant;
+ a request for details of any known risks or
hazards; and
+ clarification of requirements for a site induction.
Drawings are of great benefit but are not always
available or, if they are, site staff may not know
their whereabouts. If none are forthcoming, a good
tip is to seek out a fire safety plan. This will often
be available on site, and the surveyor may be able
to borrow it to copy or even photograph it. It may
not be dimensionally accurate but will give a good
outline plan of the premises.
Any items of information that the client has not
been able to provide may be available from the
occupiers. The surveyor ought to review what he or
she has and seek to update it. Enquiries may be
made on such matters as:
BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY | 11
+ structural alterations or works for which
drawings may be available;
+ guarantees in respect of the premises or its
services;
+ local issues (e.g. flooding or boundary
disputes);
+ items of fixed equipment likely to be removed
by the occupiers;
+ records of service agreements on items of
plant;
+ records of statutory undertaker’s accounts over
a relevant period;
+ records of the testing of life safety systems;
+ health and safety matters;
+ water hygiene and Legionella reports;
+ planning and building control applications and
approvals;
+ operations and maintenance manuals;
+ asbestos registers;
+ access audits;
+ radon tests; and
+ high alumina cement (HAC) tests.
3.3 Equipment
Standard construction site personal protective
equipment (PPE), such as hard hats and boots,
may not be appropriate for survey work, but that is
dependent on the activities at the premises. Items
typically required for a survey include:
+ coveralls;
+ disposable class FFP2 face masks;
+ goggles;
+ gloves (latex and heavy duty); and
+ ear defenders/plugs.
If working in or around trafficked areas (goods
yards or loading bays, for example), wearing a high
visibility jacket and site boots will be required.
The surveyor is not expected to use cradles or
other fixed access equipment including safety
wires. However, if they are needed, the surveyor
should have proper training, be authorised to do
use them and wear an appropriate safety harness.
It would probably be more appropriate to engage a
specialist to undertake tasks requiring the use of
such equipment.
3.4 Health and safety for the surveyor
It is advisable to undertake a risk assessment and
to try to have a full understanding of the premises
and their current condition before embarking on the
task. The risk assessment can be in any form that
is appropriate for the task at hand, but it is strongly
recommended that it is recorded and filed.
A brief inspection prior to commencing the survey
should be performed in order to spot areas of
evident or potential danger. Familiarity with RICS
Surveying safely (2006) publication is advisable and
can be supplemented with information about the
particulars of the subject premises.
3.4.1 The premises
The size of the premises (including surrounding
areas and outbuildings), their height and extent can
all be assessed prior to the survey, and the tools
and other required preparations arranged.
The presence of fragile surfaces should be
identified, along with the adequacy of items such
as walkways, roof edge protecting and asbestos
encapsulation. A roof surface should always be
treated as fragile and not walked upon, unless
known to be otherwise (e.g. concrete slab).
If the premises, or parts thereof, have been vacant
for any length of time there may be a risk that
building elements have failed or may be failing.
Caution is recommended when entering such
areas.
3.4.2 Activities in and around the premises
The activities being undertaken in the premises (or
on adjacent and nearby premises) may pose risks
to the surveyor. Prior to the survey, the surveyor is
advised to find out the activities and any resultant
necessary precautions.
It is likely that heavy industrial, chemical,
petrochemical and other well established
manufacturing processes will have detailed
guidance for the surveyor to follow. In the absence
of such detailed guidance, the surveyor needs to
establish that the processes pose no risk.
Areas to be considered include:
+ working close to plant or machinery;
+ working at height;
12 | BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY
+ working in confined spaces;
+ traffic movements;
+ excessive noise;
+ excessive heat or cold;
+ vibration;
+ presence of microwaves, radiation and
electromagnetic field;
+ chemical emissions;
+ increased hygiene needs (e.g. food preparation
areas);
+ biohazards and asbestos containing areas;
+ time restrictions;
+ unoccupied areas and one-way opening doors;
and
+ security areas.
It is worth considering what risk the surveyor’s
presence may pose to the operation of the
premises. Will staff be aware of the surveyor’s
presence? Will the surveyor contaminate or
otherwise damage the process or its product?
3.4.3 The surveyor
Much is presumed about a surveyor’s competency
to complete a survey safely. When being retained, a
surveyor is often quizzed on technical and
professional matters but rarely on practical issues
surrounding surveys. The employer has a
responsibility to ensure that the surveyor is not put
at risk, but it is similarly the responsibility of the
surveyor to bring such limitations to the employer’s
attention so that they can be addressed.
A surveyor lacking understanding or confidence in
these areas is recommended to read various Health
and Safety Executive (HSE) publications regarding
the use of ladders and working on roofs, and
advice from the Suzy Lamplugh Trust, which deals
with lone working issues. Refer to Appendix C for
links to this Trust and other relevant organisations.
BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY | 13
4 The inspection
4.1 General principles
The degree of inspection will depend on the
purpose of the survey, the practical limitations in
undertaking it and the intent of the report. Areas
not inspected should be clearly identified within the
report. The client should also be made aware of the
practical limitations of any inspection or survey
exercise. Repetitive items (such as windows or
doors) will normally be checked only on a sample
basis. However, a client would reasonably expect
that all major defects (or potential major defects)
and issues would be addressed. The surveyor
should establish the priorities of the client, as they
may not be the same as those of the surveyor.
The inspection requires a methodical approach to
collecting the data in as great a depth as is
practicable and appropriate under the conditions
found on site. The surveyor should open unfixed
hatches to the roof, ceiling and floor voids and
service risers, together with screwed down access
hatches (where this can be done without causing
damage, expending excessive time or requiring
specialist tools). Manual handling also needs to be
considered – particularly in respect of heavy-duty
manhole covers. In large or complex properties, it
is often necessary to undertake a preliminary
survey in order to become familiar with the general
layout, form(s) of construction, means of access,
inaccessible areas, and health and safety issues.
It is not the purpose of this guidance note to
dictate to a surveyor how to undertake an
inspection, but whichever method is used, consider
the inter-relationship of building elements and try
not to treat them in isolation. This is particularly
important when inspecting a large building where
different surveyors are responsible for inspecting
different elements. Checklists may prove useful.
These may be based on general matters to inspect
and test, or may be developed for the particular
building(s) being surveyed. It is not necessary to
follow checklists slavishly, nor should they be
considered as comprehensive. Where used with
common sense, the survey will be seen to have
had a logical basis.
4.2 Inspection, note taking and
reflective thought
To comply with the terms and conditions of
engagement, the surveyor should inspect as much
of the property as is physically or safely accessible.
A full inspection is often prevented by physical
conditions or restrictions imposed by the occupant.
If so, it is recommended that an explanation for all
such limitations be provided within the report. The
surveyor should then make a professional
assessment based on what can be seen and advise
on the likelihood of a defect (or defects) being
present. In some situations, this may lead to a
recommendation for further opening up or
investigation works.
Where an area or location cannot be accessed or
inspected adequately, presenting ‘best and worst’
options can give the client a spectrum to consider,
rather than leaving the matter unresolved. The
client may appreciate an ‘educated guess’ rather
than complete uncertainty, but where this approach
is adopted, the surveyor should try to make it clear
that assumptions have been made and should
always separate fact from opinion when reporting.
The surveyor should keep in mind that conditions
on site may not be as previously remembered or
may have changed, and therefore should always
use caution whilst carrying out the survey. If there
are changes in circumstances, then it may be
appropriate to review and revise the risk
assessment for carrying out the survey.
It is recommended that the surveyor always takes
and keeps a permanent record of the site notes,
sketch plans and photographs made at the time of
the inspection. Dictating machines, if used
correctly, can provide an improved means of readily
collecting an increased amount of data compared
to written notes. It is advisable not to attempt to
write the final report during the inspection but to
prepare it from the notes after appropriate
consideration. A copy of the original, unedited,
dictated notes should be retained on file.
Because the building survey report is intended to
reflect the considered professional opinion of the
14 | BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY
surveyor, the edges of inspection, diagnosis and
reporting often overlap. Each element of the
property needs to be separately addressed and
described, the sequence depending upon the
logical format adopted. The following sections
provide a methodical approach for the collection of
data for the survey, or equally a means to present
the data within the report.
4.3 Main building elements
4.3.1 Roofs
The surveyor should inspect external roof areas as
closely as is feasible using the available equipment
and from safe vantage points. The interior of
accessible roof voids or the ceiling void of the top
floor should also be inspected as far as possible
with the equipment and access available.
Inaccessible voids can be noted and an opinion
given by inference, with recommendations for
further investigations if appropriate.
Timbers or steelwork should be checked for
damage and/or deterioration, alignment, etc. The
type and quantity of insulation provided should be
determined wherever possible. The condition of the
external surface, weathering details, poor
workmanship and/or detailing, and an assessment
of its age and life expectancy should be noted,
along with the presence of fragile roof coverings
and asbestos cement sheeting. Subject to the
findings of the survey, further testing such as
thermography or earth leakage testing may be
deemed appropriate. Any recommendations for a
proposed renewal should ensure compliance with
current Building Regulations.
Rainwater goods may be considered as integral to
the roof, or as a separate heading (see 4.3.2), as
can elements such as roof windows, smoke vents,
services extracts, parapets, flashings, fascias,
soffits and barge boards. Depending on their size
and form of construction, each roof requires
individual inspection but may be reported upon
separately, in groups or as a whole. Balconies, roof
terraces and external plant areas may also be
considered separately or as part of the roof.
4.3.2 Rainwater goods
Rainwater goods should be inspected as closely as
practicable using the available equipment and
vantage points including the inside of gutters.
Usually, the condition of downpipes can only be
confirmed by inspection if they are externally
mounted or within accessible risers; otherwise their
internal location should be checked for signs of
damp. Comment should be made on the general
standards of maintenance of the system. The
surveyor should distinguish between gravity and
syphonic systems of rainwater disposal and
identify, from visual inspection, whether they appear
to be working efficiently.
4.3.3 Walls and cladding
The exposed elements of all walls should be
visually inspected externally and internally where
unobstructed by heavy plant growth, fixed linings or
furniture. Flues and wall cavities cannot ordinarily
be inspected except from pre-formed access
points. Foundations are not normally exposed
during a building survey, unless there is a specific
reason or instruction to do so. An assessment of
the foundation is then usually undertaken by a
structural engineer.
The effectiveness of damp-proof courses, cills,
copings, cornices, brise soleil, flashings and similar
components require attention to confirm their
protection against dampness and weather
conditions. External cladding should be inspected
for degradation, movement, cold bridging, defective
sealants and coatings, fire stopping, cracking or
corrosion.
The surveyor should comment on the condition,
extent and type of insulation where possible.
Composite panel construction should be
highlighted to the client, and advice from the
client’s insurers may be required. Evidence of
alterations or repairs can be noted and reviewed for
legal or structural implications.
Subject to the findings of the investigation, it may
be necessary to undertake invasive examination,
e.g. opening up the structure or using an
endoscope. This is over and above the scope of a
normal survey, with a further visit and additional
cost being incurred, subject to the client and
building owner’s approval.
The need for specialist cladding or fenestration
consultants should be considered and suitable
recommendations made for their appointment
where appropriate.
BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY | 15
4.3.4 Windows, doors and joinery
Where accessible, these elements should be
checked from ground level externally and through
open windows to upper floors where feasible; this
is to examine vulnerable areas at close quarters. In
large or complex buildings, it may be acceptable to
inspect a representative sample of these elements,
particularly when they are of similar construction
and design. Doors and windows should be
checked for timber decay, plastic creep or metal
corrosion. Opening lights and doors should be
tested for distortion or difficulties in opening and
closing. It is worth noting adequate detailing to
ensure the prevention of water ingress and
sufficient drainage.
Failed double glazed units, gaskets and seals, or
poor insulation standards can be identified where
reasonably possible, but it may not be possible to
identify every individual case of a defect in typical
sample surveying procedures. Evidence of high
humidity levels can be noted where water or mould
is evident on internal cills and around the window.
Where reasonably feasible to determine, glazing in
vulnerable locations and any shortfalls in health and
safety requirements should be advised. The
surveyor should make reference to the provision,
condition and adequacy of ironmongery, particularly
in respect of means of escape, security and ease of
use by the disabled. External decoration has
particular relevance in recommendations on the
longevity of elements and protection against
weathering and decay. Redecoration clauses in the
lease may need to be noted.
4.3.5 Structural frame
The surveyor should inspect the effectiveness and
condition of the structural frame where reasonably
accessible. A description, recording visible
fractures, decay, corrosion, spalling concrete,
exposed reinforcement and distortion should be
provided, along with areas which have been altered
or damaged. The surveyor should also note the
presence of fire protection materials and, where
possible, the likely fire resistance periods.
Further investigations may be required for
identifying causes of subsidence or failures of
concrete, timber frames or steelwork. Client
approval will be needed for the additional time and
cost, which may include the assistance of a
structural engineer. An assessment of the building’s
age and form of construction is essential, as this
often provides an insight into typical defects
common during a particular period or associated
with a construction method.
Where it is appropriate for the report, the surveyor
should record the clear floor to eaves height to a
steel portal frame for racking within a distribution
warehouse, as well as the required minimum floor
loadings for a particular usage. If HAC (pre-1975) or
calcium chloride concrete additive (pre-1978) is
suspected, the surveyor should caution the client
accordingly and, if appropriate, recommend
additional testing to verify the existence of these
materials. The surveyor should also beware of the
risk of chloride attack by virtue of environmental
exposure to de-icing salts (buildings of any age)
and, where attack is possible or suspected,
recommend additional chloride and carbonation
tests.
Multi-storey car parks demand special attention
because of their exposure to harsh environments
and, particularly in older buildings, poor
construction standards. In some cases, additional
engineering advice may be appropriate.
4.3.6 Substructure/basements
The surveyor should comment on the levels of
ventilation, the presence of dampness and flooding,
any drainage or plumbing arrangements, and the
likelihood of tanking (original or subsequent) being
present. Further investigations may be required by
forming trial holes to confirm the presence of a
damp proof membrane (DPM) to verify the
construction of the walls below ground level and to
establish the height of the water table. Chemical
analysis may also be used to establish the origin of
salts in any water present.
4.3.7 Floors
The surface of floors not covered by floor coverings
can be inspected. In the case of timber floorboards,
where possible and permitted to do so, loose
boards should be raised to enable the construction
to be identified. The surveyor should check for
damage due to infestation, dampness or service
installations. On timber floors, a heel drop test is
desirable. The surveyor should also comment on
16 | BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY
excessive deflections, as well as general levels as
an indication of whether joists are likely to be
undersized or defective.
In the case of solid floors (particularly in industrial
buildings), the degree of ‘flatness’ should be
assessed along with any significant surface defects
and the capacity of the floor finish or surface to
withstand the anticipated traffic. Comments on the
serviceability of the floor should be included, in
particular the existence of significant cracking and
slab edge deterioration or visual evidence of
curling. Where floor loadings are important or
suspected as being insufficient, details of the
structure can be taken to enable a suitable briefing
to be given to an engineer for assessment. Unless
otherwise agreed, calculations of possible floor
loading are outside the scope of a normal building
inspection. However, the surveyor should seek to
determine data by referring to building operating
manuals and similar documents.
The provision and condition of a raised access floor
should be confirmed, the depth of void established
and the adequacy of fire barriers and
compartmentation checked, where possible. The
surveyor should inspect floor trunking or service
ducts where accessible to determine the condition
and the space available for services installations.
The fire resistance of elements of structure or
compartment floors, especially where suspended
ceilings are used, should be considered. Sufficient
details of the finishes, such as intumescent paints,
may be necessary to recommend or obtain
specialist advice. Any problems with sound
transmission and/or vibration in composite floors
can also be noted.
4.3.8 Internal walls, partitions and doors
The constructional detail of the internal walls and
partitions can be established as far as possible by
surface inspection. If previous load-bearing walls
have been removed or altered, the surveyor can
comment on the apparent adequacy of the
alternative support measures. Compartment walls
can be checked for fire separation, particularly
within ceiling or floor voids where breaches may
have been formed by services penetrations and not
correctly fire stopped. Internal doors can be
checked for compliance with current legislation,
including fire resistance, passage of smoke,
adequate widths, ironmongery, self-closing
mechanisms, correct glazing, etc.
Comments may be made on the general extent,
type and condition of demountable partitions or
subsequent alterations undertaken by tenants. This
may have a bearing upon dilapidations advice,
such as reinstatement upon termination of the
lease, or relevance in respect of statutory
compliance, such as means of escape and travel
distances.
4.3.9 Finishes
The surveyor should note the general condition of
internal finishes and decorations. Any defective
floor screeds or finishes should be recorded, and
poor detailing and inadequate design for movement
in floor and wall tiles highlighted. The ceiling height
should be checked and the availability of voids
above suspended ceilings examined to expose
defects in, or damage to, fire protection and
compartmentation. The void size for the
accommodation of services should be noted,
particularly if the installation of air conditioning is
being considered.
Internal circulation space may need comment,
including flexibility of use, subdivision,
cellularisation or returning to open plan. Joinery,
kitchen cupboards and other fitted units require
general comment, as do disability considerations,
such as different textures to wall finishes.
4.3.10 Staircases
Where possible, checks can be carried out on
staircase width, the number and measure of goings
and risers, height of handrails and guardrails, and
general compliance with Building Regulations.
Disability considerations will include contrasting
colour to nosings and different texture to floors
adjoining stairs.
4.3.11 Sanitary fittings
Where reasonably possible, sanitary fittings,
associated taps, traps, waste pipes and valves
should be visually inspected and tested by normal
operation only. Similarly and where reasonably
possible, checks should be carried out on common
waste pipes and single stack plumbing
arrangements for fall and efficiency, as well as
signs of any obvious blockage or leaks. Sanitary
BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY | 17
accommodation can be noted to enable the
capacity to be checked with relevant space
standards and population densities. Where relevant,
the review should include an assessment of the
number and size of accessible toilets, their location
and the suitability of specialist fittings.
4.4 Building services
Under normal circumstances, the surveyor would
not be expected to carry out a detailed assessment
of the building services, as most of these would
require a specialist. However, the surveyor should
perform a visual appraisal of the services sufficient
to form an overall opinion of the apparent visible
condition and age and the need for further
investigation. A disclaimer stating that only a
building surveyor’s visual inspection has been
undertaken ought to be included in the surveyor’s
report. Specialist engineers will provide a more
detailed report on the condition of the services, and
recommendations for their appointment can be
given when appropriate.
4.5 External areas, outbuildings and
boundaries
A brief general description of these features is
usually required and visible defects should be
noted. Matters such as safety and disabled access
require comment, as do those concerning the
adequacy of car parking provision, lighting,
signage, traffic calming, vehicle and pedestrian
separation, and surfacing. Vehicular and pedestrian
access to the site should be reviewed, including
any estate roads, pavements, hardstandings,
service yards, turning areas, etc. The drainage to
such areas should also be assessed.
The general shape and form of the grounds and
extent of trees should be identified. Where
identifiable, a general description of boundary
fences, gates and other accesses, walls and other
structures can be given. It is recommended that
particular care is taken to identifying the presence
of Japanese Knotweed and Giant Hogweed, as well
as trees that on certain types of substrata could
cause subsidence or direct root damage. Where
appropriate, the surveyor can comment on the
biodiversity of the site and note the existence
(where known) of protected species.
It is worth considering adjoining properties for party
wall matters, unadopted road, shared or common
areas, easements, way leaves, nuisance,
contaminative uses and potential conflicts (see
section 4.13). The existence of overhead power
lines or sources of electromagnetic radiation such
as telephone masts, communications systems, etc.,
should be identified.
4.6 Health and safety considerations
The surveyor should be aware of relevant legislation
that might affect general health and safety within
the building. Detailed compliance checking and
auditing, or the preparation of risk assessments,
are beyond the scope of a normal building
inspection; however, it may help to give a qualified
opinion on the most obvious points, such as:
+ slips, trips and fall hazards;
+ low head heights;
+ overloading, including crowd loading
requirements (e.g. stadiums);
+ instability;
+ demolition hazards, presence of potential
asbestos containing materials (ACMs);
+ maintenance and other safe access issues;
+ confined spaces;
+ excavations;
+ falls, falling objects and fragile materials;
+ edge and barrier protection;
+ glazing;
+ fresh air, temperature and weather protection;
+ fire, fire detection and firefighting;
+ emergency routes;
+ welfare facilities;
+ vehicular hazards, traffic routes and workplace
transport hazards, issues around the perimeter
of the building, vehicular access, deliveries, and
loading and unloading operations;
+ hazardous operations or materials;
+ lighting levels; and
+ electrical installations.
When dealing with buildings constructed or
refurbished after 1994, where available, a copy of
the health and safety file under the Construction
(Design and Management) Regulations 1994 should
be requested for information and comment. If not
18 | BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY
available on site, the surveyor should give a
recommendation for further enquiries.
A request to review any asbestos register should be
made. If none is available, the surveyors should
make a note of this along with the likely risk of any
ACMs being present within the property and the
need for a specialist survey, if appropriate.
4.7 Fire precautions
The surveyor should aim to inspect any available
fire risk assessments and statutory approvals,
particularly when alterations have been made. Any
discrepancies with the fire certificate or noncompliance
with fire safety regulations, building
regulations and the Fire Precautions Act 1971
should be noted. Consideration of fire precautions
falls into three main categories:
+ fire resistance, separation, smoke ventilation
and compartmentation;
+ means of escape, escape routes, signage and
emergency lighting; and
+ protection including detection, alarms,
sprinklers and extinguishers.
Where specialist and/or proprietary systems of fire
protection are used, the surveyor should consider
whether to recommend specialist advice, especially
if inadequacies are noted. In complex buildings
such as shopping centres or sports stadiums, it
may be necessary to involve a fire engineer to
comment fully. The fire log or records of the regular
testing and servicing of fire alarms, emergency
lighting, fire extinguishers, sprinklers, smoke vents,
fire curtains or shutters, etc., can also be reviewed.
Testing does not usually form part of a standard
building survey unless requested by the client.
4.8 Accessibility
The Disability Discrimination Act 1995 and 2005
duties have been incorporated into the Equality Act
2010, which came into force on 1 October 2010.
This aims to protect aims to protect disabled
people from discrimination in all aspects of
everyday life, particularly in employment, access to
good and services, and buying, letting and
managing premises. In addition, as part of any
development work, Part M of the Building
Regulations requires reasonable provision to be
made for people to gain access to, and use, the
building and its facilities.
Many factors contribute to accessibility, but the
most obvious is the built environment, which
includes fixtures, fittings, furniture and
equipment. Although it should be made clear that
an access audit is not being undertaken, it is
prudent to identify barriers to access that become
apparent during the course of an inspection, as
they may have an impact upon the commercial
value of the premises.
4.9 Environmental consideration
4.9.1 Orientation and exposure
The surveyor should consider the orientation of the
building to identify the possible effects of exposure
to the prevailing winds or sunlight, as these could
affect the performance and durability of the fabric
of a building. Exposure to other factors, such as
salt spray in a coastal location or industrial
pollution, may also have a profound influence on
the life or performance of the fabric and should be
identified where particular risks exist.
4.9.2 Thermal insulation and energy
efficiency
The surveyor should describe the thermal shell of
the building including external walls, windows,
roofs, exposed floors and ground floors, and take
into consideration the layout, location and
orientation of the property. The nature of the
heating and cooling systems and controls should
be considered and recommendations made in
conjunction with a services engineer (if appointed)
for suitable improvements. The surveyor should
provide advice on practical and relevant methods
of upgrading insulation, and on measures to reduce
any associated risk of condensation.
4.9.3 Noise and disturbance
It is worth considering the effect of noise from
external sources on activities within the subject
property and its grounds. Noise (e.g. from aircraft,
rail, traffic, adjoining properties and other sources)
can be noted if it is significant at the time of
inspection or could, from inspection, reasonably be
anticipated. The sound insulation qualities of party
structures may also need to be considered.
Provisions and facilities that could cause occupier
annoyance, e.g. heat rejection fans, should be
BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY | 19
considered. Noise from the subject property to the
outside may also be noted as a potential nuisance
to adjoining properties and sites. This is particularly
relevant to industrial premises. Any other possible
nuisances (e.g. smells that are known to exist or
have become apparent whilst carrying out the
inspection) should also be reported.
4.9.4 Land contamination and
environmental controls
The surveyor should consider whether an
environmental consultant is needed and advise
accordingly. Where appropriate, the following
should be also considered and the client advised
on these matters:
+ whether a remediation certificate exists for the
site (e.g. newbuild on a previously
contaminated site);
+ through local authority searches, whether the
property is likely to be affected by significant
adjacent public or private developments;
+ whether a mining search is required;
+ risk of flooding or erosion;
+ gases, such as methane or radon;
+ electromagnetic fields due to proximity to
electrical substations or pylons, mobile phone
masts or satellite transmitters;
+ radiation;
+ activities of site that may involve or generate
potentially contaminative materials;
+ buried or above-ground fuel oil tanks, vehicle
refuelling stations and vehicle washes;
+ waste management on site;
+ fly-tipping;
+ chemical and other storage including bunded
enclosures;
+ pest control;
+ invasive vegetation;
+ protected species;
+ risk of arson and vandalism or terrorism; and
+ occupier housekeeping.
4.10 Deleterious and hazardous
materials
The surveyor should identify, from visual inspection,
materials that are generally considered in the
property and construction industries to be
hazardous or deleterious and, where appropriate,
make recommendations for further inspection or
testing. A balanced opinion should always be given
as to the severity or otherwise of the use of these
materials in the building.
4.11 Sustainability issues
Bearing in mind the Sustainability and the RICS
property lifecycle (2009), the surveyor should review
the various aspects of the building in the light of its
position in the property life cycle and make
recommendations based upon sustainable practice.
Sustainability issues are likely to become more
stringently applied as new legislation is introduced
to action carbon reduction commitments and to
reflect specific client requirements.
4.12 Cultural heritage
The surveyor should identify whether the building is
of historic importance, is listed or is located within
a conservation area or other controlled estate.
Attention should also be drawn to restrictions on
repair or redevelopment, extension or
refurbishment; the need for sympathetic repair; and
non-interventional or reversible alterations.
4.13 Matters for the legal adviser’s
attention
The client’s legal adviser (if known, or otherwise the
client) should be alerted to issues that could affect
the property that may need investigation or
clarification. Where the inspection reveals areas of
particular concern or relevance, these ought to be
highlighted as early as possible. The following
paragraphs give examples of matters that might be
referred to the legal adviser for consideration and
further enquiry, though the lists are not exhaustive.
4.13.1 Statutory
Examples of statutory matters applicable in
England and Wales might include:
+ buildings which might be listed or situated
within a conservation area;
+ where trees are present that might be the
subject of tree preservation orders;
+ planning consents and Building Regulation
approvals, i.e. original compliance and/or
20 | BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY
consent for conversions, extensions, alterations
or change of use, and any particular works
evident on inspection for which planning
permission may have been required;
+ Party Wall etc. Act 1996, that is, any known
proposed works, extensions or repairs to the
subject property; works in progress on adjacent
land; and the need for the legal adviser to
establish the existence of any party wall
agreements and/or schedules of condition,
where appropriate, referring back to the
surveyor as appropriate; and
+ accessibility inclusion.
4.13.2 Rights of way, easements and
shared services
Examples of issues to be described might include:
+ tenure;
+ flying or submerged freeholds;
+ evidence of multiple occupation, tenancies or
sublettings;
+ indication of possible trespass;
+ suggestion of possible rights of way;
+ arrangements in respect of private services;
+ adoption status of all abutting roads and
footpaths;
+ status of the rights of way and all maintenance
and repairing liabilities, where private access
roads or footways are present;
+ common or shared areas and services that may
be the landlord’s responsibilities, but are
subject to a service charge or management fee;
+ availability and status of all service connections;
+ rights of light; and
+ restrictions to occupation.
4.13.3 Boundaries
Boundary matters might include:
+ evidence of poorly defined site boundaries;
+ riparian rights (relating to banks of rivers or
waterways); and
+ responsibility for maintenance.
4.13.4 Guarantees and warranties
Examples of the content might include:
+ the availability and transferability of guarantees,
e.g. in respect of:
– underpinning, timber and/or damp treatment
works;
– cavity wall tie replacement works;
– double glazing;
– cavity wall insulation;
– flat roofing;
– remedial works to service installations,
including re-lined drains, recent rewiring,
replacement boilers, etc.; and
– recent significant building repairs;
+ collateral warranties from the original
construction and design teams; and
+ previous technical reports that may be
assignable to the purchaser, i.e. site
investigations, environmental assessments,
defects diagnosis, asbestos surveys/registers.
4.13.5 Leasehold and repairing liabilities
The level of detail reported in this section will
depend on what has been agreed with the client on
that particular transaction. Although the client’s
legal team will most likely be reporting on the
lease(s) and liabilities of the parties, this section
might include:
+ confirmation (or otherwise) that the repairing,
redecorating and yielding up obligations are
drafted in standard terms;
+ comments on the implications of any nonstandard
repairing and related obligations;
+ whether there are any explicit exclusions on
repairing liability, e.g. inherent defects;
+ existence and effectiveness of any schedules of
condition;
+ whether there are unlicensed alterations or any
particularly onerous reinstatement provisions;
+ the landlord’s ability to recover repair costs, or
to enforce repairs and recover costs (as a debt
or otherwise); and
+ if the lease is considered to be a ‘green lease’
guidance as to the practical implications of the
various obligations, e.g. in relation to carbon
reduction, energy management and other
sustainability issues.
BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY | 21
5 The report
5.1 General guidance
It is recommended that the surveyor clearly locates
and describes all the defects found during the
survey, as well as highlights any compliance issues
that may affect the client’s interest in the property.
A summary of the client’s instruction can be
included within the report, providing a useful
reminder to the surveyor and client of the legal
obligation to provide a specific survey type as
agreed in the instruction.
It is helpful to cross-reference photographs with the
list of defects for ease of reference and prepare the
report layout in a concise, accurate and simple
manner. All verbal or executive summary reports
given prior to publication of the full report may have
legal implications. Such reports can be given on the
clear proviso that the preliminary opinions are
provided subject to the opinions expressed in the
final report. The report ought to present a balanced
view of the property’s condition and differentiate
between fact and the surveyor’s opinion.
In determining the limitation of the inspection, the
surveyor should bear in mind the final report, which
aims to inform the client inter alia of the following:
+ what, if anything, is wrong;
+ why it is wrong;
+ what damage has occurred;
+ how serious this is;
+ what is needed to put it right;
+ how much this is likely to cost;
+ when the remedial work should be carried out;
+ who is responsible for rectification works; and
+ what further action is to be taken by the client.
5.1.1 Time frame
It is generally accepted in the property industry that
time periods are identified as follows:
+ Immediate: within one year
+ Short term: one to two years
+ Medium term: three to five years
+ Long term: six to ten years.
Definitions of the time frames used in the report
need to be identified to avoid any doubt.
When providing advice for remedial works, their
cost and the anticipated period of expenditure, the
surveyor should take into account the purchaser’s
intention for the property, as established at the brief
stage.
5.1.2 Risk ratings
Risk ratings involve balancing liabilities and
opportunities, both in terms of capital and life
costs, and hence are an integral part of technical
due diligence. A risk can be defined as the chance
of something happening that will have an impact
upon the objectives for the building’s use or
investment profile. Risks and response to them can
be classified as follows:
+ Extreme: immediate action required
+ High: senior management attention needed
+ Moderate: management responsibility must be
specified
+ Low: management by routine procedures.
Risk management can be qualitative and/or
quantitative, enabling the client to better identify,
analyse, monitor, report on and respond to risks.
For technical due diligence, this can assist in
determining what responses the surveyor should
recommend to the client and which risks to avoid,
transfer, mitigate or accept. Such decisions are
linked to the future management of the building.
5.2 Report layout
An executive summary of principal considerations
is often provided at the start of the report. The
main body includes a description, with comments
on the condition of all building elements, plus any
findings, a conclusion and recommendations.
Photographs and/or plans may be required and
supporting specialist reports would normally be
appended to the report. Section 5.3 includes a
typical list of main headings included in the
contents page, with commentary. Different types of
survey and individual surveyors may give rise to
deviations from the suggested list.
22 | BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY
When carrying out due diligence of a property
outside the UK, it is worth considering local statute
and compliance issues. When instructed by a UK
based client, the surveyor should consider
highlighting where UK and local construction and/or
compliance issues differ. Further guidance is
provided in section 2.8.
5.3 Report contents
5.3.1 Contents page
Reports on commercial and industrial premises may
contain several specialist reports, along with
photographs, leases, plans, etc. The inclusion of an
index would be beneficial.
5.3.2 Executive summary
The executive summary provides the main findings,
including recommendation for further tests,
budgets, programming future repairs and any
issues pertinent to the client’s investment in the
property. Reference should be made to the main
body of the report, any appended specialist
reports, costings and additional analysis as
necessary.
The summary provides clear, logical, simple and
readable advice to the client, with reference to
detailed information within the main body of the
report. The principal considerations may include:
+ the nature of the property, its construction age
and design;
+ the adequacy of the structural framework and
fabric;
+ the adequacy of services;
+ a comparison of the condition of the subject
property with others of similar age and style;
+ conformity with modern requirements, including
statute, civil and lease obligations;
+ special client requirements;
+ main areas of concern;
+ reference to any repairs, further investigations
or statutory inspections; and
+ estimated costs of remedial works or
recommended actions.
The summary should highlight any further tests or
inspections to be undertaken before legal
commitment is made by the client.
5.3.3 Introduction
The client’s instruction should be repeated in the
report alongside, details of the date of inspection;
surveyor(s)/specialists involved in the survey;
weather conditions; occupancy at the time of
inspection and names of persons providing
information during the inspection.
Limitations, including copyright and conditions
noted in the terms of engagement, are repeated. It
may be helpful to list those parts of the building not
accessed during the inspection and provide
recommendations for future access (including the
risk of not gaining access). Restrictions caused by
finishes, fitted or heavy furniture, etc., should be
noted.
It should be made clear in the introduction that in
view of the complexity of most buildings, the
surveyor does not guarantee to have seen each
and every defect/deficiency that may exist in the
property. However, the surveyor expects to have
seen all the major items relating to the brief and
many/most of the lesser ones.
All areas of the building need to be clearly
identified and illustrated by photographs, plans or
grid references, or alphabetical or numerical
systems, as applicable. Location and/or lease plans
can be included, indicating the extent of the
demise. It is also prudent to include the full postal
property address and client details on each page of
the report.
Other points that may be included are:
+ whether all photographs taken are included in
the report, or if others exist, how long they will
be retained on the surveyor’s files;
+ any limitations by the surveyor for the transfer
of liability to third parties; and
+ whether any discussions were held with the
client, owner(s), tenant(s) or others at the time
of the visit and/or immediately afterwards, as
well as cooperation received from those parties
in facilitating the survey.
5.3.4 Description of the property
An adequate description of the property is provided
here, including type, general design, principal
elements of construction, age, date of substantial
modifications, listed status and current use. A
BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY | 23
general description of the building installation
services may also be provided.
Accommodation should be briefly described to
include current use of the building, broken down
into specific areas as necessary. A list of
approximate floor areas may be included as
appropriate. Reference may be made to the current
edition of RICS Code of Measuring Practice.
For leasehold property, the tenure should be
described, including the extent of the term, any
passing rental figure, service charge and repairing
obligations.
The location of the property within the road,
shopping centre, industrial estate, etc., should be
noted, including comment on any conservation or
regeneration areas; main physical features of the
site; and outbuildings, landscaping and boundaries.
The description should include the full address of
the property.
5.3.5 Elemental condition
This is the main section of the report and details
the condition and significant defects. A description
of condition and extent of defects may be
supplemented with photographs and sketches.
Technical language is used to express the findings
clearly.
The surveyor should consider formatting the
sections in the same sequence as the inspection,
previously detailed in sections 4.3–4.5 and
summarised below:
+ roofs
+ rainwater goods;
+ walls and cladding;
+ windows, doors and joinery;
+ structural frame;
+ substructure/basements;
+ floors;
+ internal walls, partitions and doors;
+ finishes;
+ staircases;
+ sanitary fittings;
+ building services; and
+ external areas, outbuildings and boundaries.
An assessment of the building type may be
included, as well as the construction and materials
of the property. Materials and building practices
specific to the locality of the property may be
reported.
The structure may be described in detail, including
type of frame (reinforced concrete, steel or timber)
as applicable, a description of main supporting
members from roof to foundations and how the
load is transferred through the building to the
ground. Comment may include the effect of
alterations on the structure, any movement and
future risks.
Each element (e.g. floors, walls, doors) is separately
discussed, including a description, current
condition and explanatory note of the cause of
defect. Legislation, health and safety, fire
precautions, energy conservation, fitness for
purpose, insurance, security and other pertinent
issues may be listed. Questions for the client’s legal
advisers may be highlighted, for example
clarification of demise, construction warranties
available and other matters.
5.3.6 Conclusion and recommendations
The conclusion provides a balanced assessment of
the property ascertained as from the survey,
including a list of recommended repairs and actions
taken from the main body of the report.
Recommendations may be shown under a separate
heading, where the conclusions are extensive, and
budget costs may be included within them or as
separate appendices.
5.3.7 Certification/quality assurance
The report should be signed and dated by the
surveyor who undertook the survey and completed
the report. It is also recommended that a record of
third party (internal peer) checking has been
undertaken. All appended specialist reports should
be certified.
5.3.8 The appendices
The appendices may form a significant part of the
report, subject to the client’s requirements.
Photographs are generally included. The
appendices may also comprise other
supplementary information, such as:
+ schedule of defects and/or repairs with budget
costs;
24 | BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY
+ reinstatement cost assessment;
+ specialist reports, including material testing,
structural engineer’s report and report on the
installations of services;
+ phase one environmental assessment;
+ copies of previous reports;
+ fire risk assessment;
+ schedule of accommodation or tenants;
+ asbestos survey;
+ extracts from leases, covenants, etc.;
+ agent’s details;
+ maps, drawings and layout plans; and
+ maintenance records.
BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY | 25
Appendix A: Insurance
RICS requires its members to maintain professional
indemnity insurance (PII) for claims arising from
breaches of contract and professional duties.
Surveyors should ensure that adequate protection
is in place to cover the work they are undertaking.
A1 Compulsory professional indemnity
insurance regulations
Compulsory professional indemnity insurance
regulations (CPIIR) require principals and
consultants in private practice in the UK and Ireland
to carry PII, in accordance with RICS regulation.
Evidence that this obligation is being adhered to is
required during the time the member is in practice.
When a firm winds up it must maintain run-off
cover for a period of at least six years, although
this cover may not be possible in some cases due
to financial circumstances. Where run-off cover is
not maintained, this could lead to former
employees being exposed to claims.
A2 Merrett v Babb
In the case of Merrett v Babb (2001) EGLR 145, an
RICS member was personally sued following the
bankruptcy of the firm for work he undertook whilst
employed. The firm had cancelled the PII cover and
left the surveyor exposed to claims.
A3 Professional indemnity insurance
PII is provided on a claims-made basis, which
means that the member will be protected only if
cover is in place at the time a claim is made, rather
than when the relevant advice was given. This is
why RICS regulations require run-off cover to be
provided where a member ceases to trade as a
principal or consultant in private practice.
The amount of cover depends on the size of the
firm’s income; however, there are minimum
amounts of cover required under RICS rules. RICS
have introduced a low fee-earners scheme to help
provide cover.
Where an employee is not a principal of a firm (i.e.
a partner, director or consultant), then it is
advisable to find out what arrangements have been
made by the employer to protect the employee
against claims.
An RICS policy automatically covers employees as
part of the ‘insured’, whilst other PII policies (not in
accordance with RICS rules) may not provide
automatic cover.
A4 Private work
Work undertaken in a private capacity is subject to
CPIIR, and so insurance cover will be required. A
surveyor may be asked to provide advice to local
charities, schools, churches and other non-profit
organisations for no charge. It is unlikely that the
insurance a surveyor has for normal course of
employment will have adequate protection, so
separate arrangements will need to be made by the
individual.
If it is not possible to obtain written confirmation
from an employer that work of this nature falls
within the scope of the surveyor’s employment, it
may be possible to obtain an undertaking from the
‘client’ that the latter will not take any action in
relation to the advice given. The surveyor must also
obtain from RICS a waiver exempting the need to
maintain PII.
A5 Subrogation
Having paid a claim, insurers have the right to
recover the amount paid if the surveyor who
caused the claim was not insured under the policy.
This is known as subrogation.
RICS minimum cover includes all employees as
insured, but where members are not covered by an
RICS policy they should ensure that their employers
have negotiated a waiver of the right of subrogation
with the insurer.
A6 Third party rights
The law states that a contract is an agreement
entered into by two parties, where consideration
has passed between the parties and where the
terms of the contract are enforceable. The surveyor
26 | BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY
and firms entering into the contract with a client will
be liable to the client for breaches of the contract.
It is not unusual for surveyors and their firms to be
liable to third parties for breaches of contract.
The Contract (Rights of Third Parties) Act, brought
onto the statute books in 1999 and updated in
2001, confers third party rights in some cases,
namely where the contract contains an express
term to that effect, or where it is apparent that the
contracting parties intended to confer such a
benefit. Surveyors should be aware, however, that
many contracts – including most professional
indemnity policies – are amended to exempt them
from the provisions of this act.
It should be noted that where advice is being given
by an employee on behalf of the employer, then the
contract will generally be between the employer
and client. It is therefore advisable to sign reports
or letters ‘for and on behalf of’ the employer rather
than in a personal capacity.
A7 Third party liability insurance
It is also recommended that insurance cover is
taken out to provide against third party claims for
physical loss ‘caused by damage or injury to
persons or their property’, which could occur when
undertaking a survey or inspection of a property.
These are also known as public liability or general
liability policies. Surveyors are advised to check
that the necessary insurance is in place and that
they are covered by the policy.
A8 Working outside of the UK and
Ireland
When working outside the UK and Ireland,
surveyors are advised to check with their insurance
providers that they are covered. Certain overseas
territories may require locally arranged cover, thus
surveyors may not be able to rely solely upon a
policy placed in the UK or Ireland – even though
the territorial limits may be ‘worldwide’.
RICS regulations do not apply to work overseas,
but RICS members should replicate their cover
overseas to the same extent as available in the UK
and Ireland. For example, it is very difficult to
obtain cover on a ‘civil liability’ basis, and certain
exclusions (i.e. toxic mould) may be applied by
insurers. In summary, an insurance policy for work
overseas is often not as broad as required by
regulations in the UK.
A9 New legislation and disciplines
The introduction of new property legislation has
created opportunities for surveyors to assist clients
in fulfilling their obligations (i.e. Financial Services
and Markets Act 2000, Housing Act 2004, Control
of Asbestos Regulations and the Disability
Discrimination Act). It is recommended surveyors
seek specialist knowledge and review the PII
provisions with their insurance provider prior to
undertaking new types of appointments.
There are also developments in the area of dispute
resolution and expert witnesses, whereby barristers
can be appointed by professions other than
solicitors, which could confer new disciplines upon
surveyors. Lay advocacy is another area which
could attract surveyors, but it is important that any
such advice is qualified to ensure it is being given
in their capacity as surveyors, and not as lawyers.
Again, surveyors need to seek specialist knowledge
and review the PII provisions with their insurance
provider prior to undertaking this work.
For further information please refer to RICS
Professional Regulation and Consumer Protection.
August 2002.Chartered surveyors in employment,
Professional liability guidance for members.
BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY | 27
Appendix B: Legislation and legal issues
B1 Duty of care
The surveyor not only owes a duty of care to the
client under the terms of engagement, but may also
owe a common law duty to the client and other
parties. The surveyor’s report may be relied upon
by another party close to the contract (Hedley
Byrne & Co Ltd v Heller & Partners Ltd [1964]
AC 465).
The surveyor’s actions during the survey may cause
damage or injury to the client or another party. In
order for the duty of care to exist, the client or third
party must be able to show that the surveyor
should have reasonably foreseen that a person
could have suffered an injury or damage as a
consequence of the surveyor’s report. Either must
also exhibit that the surveyor was aware that the
report would be relied upon, and that it is just and
reasonable to impose a duty of care in the
particular circumstances.
It would be unreasonable for a claim to be made by
a party that the surveyor has no knowledge of at
the time of the inspection and preparation of the
report. The surveyor will be expected to undertake
all duties to a reasonable standard recognised for
the profession.
B2 Negligence
The surveyor need to be aware of the significant
amount of legislation now applicable to property
and may refer the client to the relevant expert
where the surveyor has been able to establish
through inspection that a legal point needs to be
reviewed. The surveyor may be restricted by the
information made available during the inspection.
A surveyor will be negligent if a client or third party
can establish that a duty of care was owed to
either, that the surveyor breached that duty and
that the breach has resulted in the client or third
party suffering harm. For example, where a defect
was in existence and visible at the time of the
inspection but was not reported to the client, this
would be described as an omission on the part of
the surveyor. It is recommended that the surveyor
not only note the defect but also advise on the
likely future consequences of failure. Likewise, it is
unreasonable for a surveyor to be found negligent if
the latter could not have reasonably foreseen a
consequence at the time of the inspection.
The surveyor needs to ensure that he or she has
adequate experience and knowledge to undertake
the survey. Equally, the client needs to determine
that the surveyor being appointed has suitable
knowledge and experience, reflected by the level of
fee incurred for the survey. The survey should be
thorough and should concentrate on the client’s
requirements.
The report should be expressive and should focus
on all matters that may cause injury or damage to
the client or another party close to the contract.
Evaluation of the findings should be undertaken
and all considered issues identified to the client.
The surveyor should clearly specify any limitations
of the report due to poor access, lack of
documentary evidence or the need to undertake
specialist investigations, but should not use this as
justification for an omission or failure to spend
adequate time on the inspection.
The surveyor should not provide legal or specialist
advice if unqualified to give this, but can
recommend that further enquiries be made with
suitably qualified specialists. It is recommended
that the surveyor understands the framework of the
legal liabilities which surround this type of work.
B3 Contract and limitation
The terms of engagement should be agreed with
the client prior to undertaking the survey to clarify
the scope of the professional duties owed to the
client. The surveyor should clearly state the client’s
requirements, the extent of the survey and type of
report to be prepared.
The terms of the contract can be both express and
implied. For example, in contracts for services
where a professional is acting in the course of a
business, it will be implied that the service will be
carried out with reasonable care and skill. Such
implied duties can be excluded or limited by the
terms of engagement, in accordance with the Unfair
Contract Terms Act 1977.
28 | BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY
Limitations may also be put into the terms of
engagement to cover high-level access or exposure
of the structure where damage may be caused, or
unreasonable costs may be incurred by the
surveyor. Unfair terms would not be accepted
without evidence that such a term had been agreed
by the parties, or if the term had a detrimental
effect on the rights of one of the parties to the
contract. The Contracts (Rights of Third Parties) Act
1999 should also be noted as excluded from the
terms of engagement to avoid the surveyor owing
any contractual liability to a third party. The terms
of engagement should always be appended to the
report.
It is recommended that the surveyor endeavours to
ensure adequate planning of the survey and
sufficient allocation of time for:
+ the survey;
+ a detailed recording of the findings; and
+ a review prior to preparing a clear and precise
report.
B4 Legislation
The surveyor may find it helpful to consider the
implications of property-related legislation during
the inspection. Any issue noted during the
inspection can be advised to the client, which can
be referred to a specialist or legal expert.
B5 Civil Procedure Rules
The Civil Procedure Rules will be particularly
relevant to inspections and subsequent reports
when a surveyor is acting for one party claiming
compensation for damages against another. For
more information on the Civil Procedure Rules, see
www.dca.gov.uk/civil/procrules_fin/index.htm.

Leave a Reply

Your email address will not be published. Required fields are marked *