An acquisition survey is usually carried out by a Building Surveyor as part of the due diligence process prior to the acquisition of a freehold or leasehold commercial premises.
Commercial premises are rarely found to be in full repair and potential purchasers need to be in no doubt as the extent of any disrepair existing, the suitability of the premises for the particular use under consideration and the ease with which the premises can be converted or otherwise adapted to suit their needs.
An acquisition survey is generally conducted as follows:
- The initial appraisal – the Building Surveyor will need to gather any information relating to the premises under consideration which might include plans, specifications, letting details, historic planning permissions and anything else of relevance.
- The inspection – commercial buildings are often complex and the Building Surveyor will need to ensure that a methodical approach is maintained throughout. The inspection will include the external fabric, structural elements, internal finishes, decorations and service installations. For premises which form part of a larger building in multi occupancy, then the survey may extend to an appraisal of the building as a whole in order to gauge the client’s likely common repairing liability.The inspection will also need to take account of the impact of statutory requirements on the building along with an appreciation of how lease covenants as to repair, redecoration and yielding up might also have an impact.
- The report – although there is no one standardised format, an Acquisition Survey Report is likely to contain elements of the following
- An executive summary – which will typically include confirmation of instructions, particulars and a summary of findings.
- Statutory requirements – there is a raft of statutory requirements applicable to commercial buildings such as the Electricity at Work Regulations, the Fire Reform Order, The Control of Asbestos at Work Regulations, The Disability Discrimination Act and many others. The impact of these statutory requirements needs to be carefully considered in the context of the building under consideration.
- Contractual requirements – by the time the inspection takes place a draft lease may already be in circulation between the respective legal advisors. The draft lease will include covenants as to repair, redecoration and yielding up at the end of the lease. The lease may also give a landlord the right to enter in default of lease covenants and undertake works at the tenants cost. It is extremely important that the report includes an appraisal of contractual requirements in order to make sure that no unduly onerous covenants remain unchallenged
- Building condition – the Acquisition Survey Report will contain a detailed and comprehensive appraisal of the condition of the building to include the external envelope, the structure, the interior parts, any fixtures and fittings and the service installations. Depending on the requirements of the client the report may include recommendations for necessary repairs together with an estimate of costs.
It is of paramount importance that any potential purchaser of a commercial property fully satisfies themselves as to it’s suitability prior to exchange of contracts and that the basis of any agreement to purchase can be modified if necessary, in accordance with the findings of the Acquisition Survey report.
In the event of potential problems being identified in the Report, then a potential purchaser may seek to renegotiate the purchase price, either by way of a capital contribution towards necessary works of repair or alteration or perhaps by means an enhanced rent free period to be granted. An alternative is to limit the scope of repairing and redecorating covenants contained within the lease so that a prospective tenant is not obliged to keep the building in any better condition than as found. Typically this will involve the drafting of a Schedule of Condition, to be attached to the Lease and which will serve as a reference point in any discussions around dilapidations either during the lease term, or at lease expiry
So to summarise, the Acquisition Survey and subsequent report must be considered the key tool in determining the suitability of any commercial property acquisition, without which a Purchaser proceeds at their peril.
