Commercial Building Inspection – PCA Due Diligence

Buyers of commercial real estate are concerned with the financing and economics of their acquisition. Until recently, the material condition of the building was only a relatively minor concern. That is changing with Property Condition Assessments (PCA) due diligence requirements.

The initial impetus for carefully evaluating the condition of the building were the failures and foreclosures at the start of the decade. Financial institutions were forced to deal with buildings that were not maintained and needed substantial work.

Next, regulations such as The Americans with Disabilities Act (ADA) created certain imperatives for building owners to upgrade facilities. Seismic codes were, and continue to be re-written. New environmental and ecological concerns surfaced.

Then, changes in the way buildings are financed created a need for a more formal and complete look at the condition of the building and the capital reserves required to maintain it. As more commercial mortgages are securitized, the rating agencies on Wall Street – Moody’s, Standard & Poor’s, etc. – now require that property condition surveys be part of the due diligence process.

Texas Valor offers Property Condition Assessments (PCAs) for commercial structures. Results of the PCA are documented in a Property Condition Report which is sent to the inspecting party. Texas Valor follows industry accepted guidelines of ASTM E2018-15 and the CCPIA SOP, the only recognized standards of major lenders

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Commercial Property Inspection: What To Expect

Triple Net Lease Inspections

A triple-net lease, also referred to as a net-net-net lease and NNN lease, is a lease agreement where the lessee (a single tenant) is responsible for paying the lessor (landlord) on a net-net-net basis for the following: real estate taxes; insurance; and property maintenance. This type of lease assigns building maintenance and repair responsibilities to the lessee, such as roof repairs, air conditioner replacement, and parking area maintenance. Technically, the lessor owns the building and land but assigns other expenses, in addition to the basic rent, to the lessee.

A triple-net lease inspection, also referred to as triple-NET or NNN lease inspection, is a type of inspection that is performed for a triple-net lease real estate transaction. It should be performed for both the lessor and lessee and can occur pre-lease, during the term of the lease, or post-lease. It’s more common for this type of inspection to be performed on older properties and for long-term leases. The most common types of buildings for this kind of transaction include retail, office, and industrial, and generally the term of the lease is at least five years. Pre-lease, during lease and post lease inspections are commonly performed.