What is a Property Condition Assessment?
A property condition assessment (also referred to as a PCA inspection or property condition report) is an inspection that covers the entirety of a commercial property. PCAs provide clear and comprehensive communication of their state before or during purchase.
Like a home inspection, a property condition assessment helps a prospective owner assess a commercial building instead of a residential one. PCAs are more robust and detailed than a standard residential home inspection, covering the multiple systems, equipment, and spaces in a commercial property. In this way, a property condition assessment provides a comprehensive list of immediate and near-future needs by delving into the exhaustive details of a commercially-zoned property from edge to edge and top to bottom. This PCA inspection provides future property owners with a deep understanding of potential risks, allowing them to make an educated purchase decision. The right PCA can also help assess an already-purchased commercial building for refinancings, loans, or reselling. Read this comprehensive guide to PCA real estate to learn more about the process.
What is a property condition report?
As stated above, a property condition report provides a complete breakdown of the physical condition of a commercial property. Because so much more exists in commercial property — including pavement, courtyards, elevators, or security access points, it’s essential to have a specialized report performed by skilled and licensed inspectors. A commercially-licensed inspector can assess the building with a deep understanding of the federal and local regulations required for commercial spaces. While it sounds just like a home inspection, PCAs are on a much larger scale. Commercial buildings typically include far more extras than a standard residential property — like parking lots, stairwells, escalators, complex HVAC systems, fire suppression installations, signage, crawl spaces, NFPA hazards, pests, ADA access requirements, and even seismic and natural disaster considerations — depending on the region. These are all crucial factors that, when left unchecked, can lead to substantial costs in repairs, unsafe conditions, and an overall unsound investment with the potential to lead to financial disaster. A property condition report documents property reviews, interviews with previous owners, residents, or maintenance staff, walkthrough surveys, and cost estimates for necessary and recommended repairs. This file provides a complex and fully comprehensive understanding of the state of a commercial building before purchase — not only for the purchaser but for banks, loan agencies, and insurance companies.
The best PCAs involve Certificates of Occupancy, accessibility surveys, Fire Code compliance checks, and architectural drawings covering the entirety of the property. These nuances help buyers protect themselves and potential customers, residents, or workers. The reasons for a property condition report show why these assessments require different skills and knowledge than a residential inspection. When looking for the right inspector, search for someone certified in PCA assessments. And remember — even if an inspection company claims to be PCA qualified, it’s essential to ensure they have professional licenses, a proven track record, and references. This upfront check can save you from bad purchases, inaccurate appraisals, and costly repairs or damage.
What’s included in a property condition report?
A property condition assessment covers every aspect of commercial property — from the roof to the pipes below the ground. As previously mentioned, a proper PCA involves interviews, inspections, and municipal agency reports. The object of these reports is to provide the potential buyer with the exact condition of the property. That’s why PCA real estate inspectors must scrutinize everything thoroughly. Several commercial properties have multiple buildings, systems, and spaces that all require an expert level of attention.
Property condition assessment checklist
A general property condition report includes the following information. Please note this list is generalized, as different buildings may have specialized aspects to report. When getting a PCA on your next commercial property, ask for a list of what will be covered, so you understand the assessment beforehand. This process will help you navigate conversations, ask the right questions, and get the most benefit out of the report. The following list covers many basics:
- Full site assessment
- Interviews or pre-survey questionnaires
- City department documents — including Certificates of Occupancy, fire code compliances, accessibility reviews, and publicly available documents
- Age and power source for HVAC system
- Visibility of street address
- Properly-striped parking lot
- Clearly marked unloading zones
- Wheelchair ramps and handrails
- Unobstructed fire hydrants
- Clearly marked emergency exits
- Clean gutters, free of nests and debris
- State of windows, including broken seals, water damage, and weather stripping
- Irrigation system status
- Elevator status
- Plumbing — including the type of pipes and water pressure
- Telephone and data connection status
- Boilers and boiler room status
- Electrical state — including amperage, wiring, damage, double taps, and grounding
- Fire suppression system status
- State of foundation, including cracks, slippage, trip hazards, and settling
- State of structure, including cracks, moisture intrusion, and staining
- Roof status
- Existing interior finishes status
- Type and density of insulation
- Building envelope status
- Pavement status
- Drainage status, including water draining away from the building and pools of standing water
- State of existing signage
- Lighting status
- ADA access requirements met without hazard or safety concerns
- Proper storage of flammable or combustible chemicals
- Sate of additional interior elements
PCA vs. FCA
An FCA, or Facility Condition Assessment, is often confused with a PCA but serves separate functions in purchasing a commercial property. Facility Condition Assessments are helpful for real estate portfolio owners — such as facility or asset managers. FCAs help assess the overall physical condition of a facility with a focus on supporting capital investment decisions. This system includes capital budgeting and planning, long-term reserves prioritization, and occasionally pre-purchase due diligence. An FCA can also be used to secure additional funding for purchases or refinancing. From time to time, Federal and State Government agencies may do periodic reporting to comply with annual funding regulations. The primary difference between an FCA and PCA is that a Facility Condition Assessment aids financing. In contrast, a property condition assessment surveys the physical condition of a space. While both are relevant to negotiating financial decisions, an FCA identifies different needs. These needs include routine maintenance, systemic deficiencies, the remaining useful life or RUL of any buildings on a property, and capital replacement needs. Make sure to clarify with any agencies involved in a purchase or assessment which report is suitable for the commercial property.
I’ve got my property condition report, what’s next?
There are many options based on what you want to do with it and how it can benefit your purchase and new property. Reports can help you negotiate the purchase price of a property, capital, or strategic planning. You can also use them to ensure loan approval and triple net lease. Furthermore, a comprehensive PCA allows you to plan properly for the future while considering predictive and preventative maintenance and insurance evaluations. Share it with relevant parties to ensure you are free of complications or missing information. Use your property condition assessment to protect your investment, plan for your future, and avoid unforeseen hassles.
Who should get a property condition report?
PCA real estate reports cover the full extent of a commercial property, making them helpful to buyers, lenders, investors, and owners alike. If you’re an owner or insurance agency requiring a pre-purchase evaluation, you’ll need a PCA. Property condition assessments outline immediate maintenance needs for owners while informing you of your capital. A lender can use either of these points for loan approval, and buyers can use PCAs to negotiate prices. Of course, the primary reason to get a property condition report is to have peace of mind when purchasing a commercial building. PCAs ensure there are no surprises on either side, and the buyers know what they’re getting into. Once you own a commercial property, a PCA can help you understand your property’s state and apply for additional loans while keeping your investment safe and sound.
A PCA is an invaluable tool if you own a commercial property, intend to purchase one in the future or work with clients who buy or own commercial buildings. Designed to provide everyone with a straightforward understanding of a commercial property, property condition assessments work to prevent loss, tragedy, and unmanageable costs down the road. A certified property condition report gives you the utmost peace of mind during your next commercial property purchase.