Commercial Property Buyers and Lessees - Do This At Your Own Peril
Robert S. Michaud, P.E.
10/1/20
Your company is looking to move into a new building. Perhaps you
have outgrown your existing facility, or maybe it doesn’t have the
features or location you need. You have found just what you are
looking for, the deal looks good and you are ready to execute the
purchase (or lease). Your accountant has looked over the numbers,
and your lawyer has looked over the contract, so you have done your
due diligence, right?
Not so fast. Commercial facilities can be complex assets, and
whether you are purchasing it outright, or leasing it (triple net
with much of the capital costs landing squarely in your lap), if you
don’t have a qualified commercial building inspector look conduct a
thorough inspection of the building and its equipment, you really
don’t know what you are getting into. You wouldn’t buy a home
without a home inspection, so why would you buy or lease a property
that is far more complex than a residential building?
There is more to consider when purchasing or leasing a commercial
property, and there are significant benefits for all parties – the
buyer, the seller and the real estate agents involved. Let’s
consider each from their unique perspective.
From the buyer /
lessee perspective:
This is the most obvious perspective. As a buyer, you need to make
sure that you know what you are buying / leasing. A trained,
qualified commercial building inspector can find those hidden
concerns that could end costing your company down the road if not
addressed, and the best time to address them is during the
negotiation process.
There are other considerations too. Instead of just a one-time
inspection to find any potential surprises, why not take this
opportunity to build a maintenance program for this new asset so that
you can stay on top of the capital and maintenance related issues
that are part of owning any asset. By establishing a good
maintenance program from the start, you will minimize surprises and
the overall cost of ownership of your new asset.
From the seller /
lessor perspective:
Savvy
building owners and managers know the value of properly maintaining
their properties, but even the best and most conscientious
maintenance programs are more focused on the day to day maintenance
and may not be as in tuned to the expected lifespan of various
building systems and the effect they may have on the sale of a
property. For instance, you may be diligent in your roof or boiler
maintenance procedures, and your efforts may have even extended the
expected life spans of those systems but eventually all things reach
their end of life. You may be entirely comfortable with the current
operating condition of the systems in question, but a qualified and
experienced independent third party inspector may shed light on how
much more time could reasonably be expected and provide you the cost
information that you need to either upgrade the system before selling
or leasing the property, or to
negotiate with during the sale / lease process. Knowledge is power,
and in this case, knowing ahead of the sale or lease process gives
you options and the opportunity to address them before they come up
in sales or lease negotiations.
From the Realtor
perspective:
Whether
you are the buyer’s agent or the seller’s agent, the goal is to
get to “YES”. Using the reasons mentioned above, you owe it to
your clients to encourage them to engage with a qualified third party
expert to remove any surprises ahead of time. No one likes surprises
of this nature, and by helping your clients thoroughly throughout the
process, you demonstrate your commitment to their satisfaction and
increase your chances for referrals and repeat sales.
There
are some real estate agents that appear to be wary of building
inspections. They seem to be concerned that if problems are
discovered they will jeopardize the sale process. This is short
sighted and if you are working with the right inspection
professional, the opposite could be true. A qualified professional
can see beyond the problems and offer solutions. If the inspectors
you recommend perform a superficial inspection and miss key issues,
or alternatively find problems but do not offer remedies and cost
estimates when appropriate, they are not serving your client well,
nor are they serving the sales process well. Ultimately,
you want your client to be well served so that they have a positive
experience and either refer you to other and / or return themselves
for future property needs. Commercial properties are potentially far
more complex than residential properties which is all the more reason
to engage a qualified, experienced inspector to be part of the
process.
©
Michaud Engineering Inc. 2020