22/11/21 – Make sure you get the survey you need

It’s relatively easy for a domestic home buyer to find out the types of surveys available to them – and they will range from a ‘drive-by’ to a full structural investigation. Commercial property surveys aren’t that straight forward. Which is good news because at Aitchison Raffety we tailor our surveys to the clients’ particular needs. The focus of our survey and the resulting advice will differ depending on the arrangement our client is looking to undertake.

For example, we recently completed a survey for a client who was taking on a 10 year lease of an office building in Milton Keynes. They wanted to understand their repairing obligations in that building, what they would have to do at the end of the lease and what the landlord should do before they agreed a lease. Our report contained all this information.

But that report would have looked quite different if our client had been buying the building for investment. We make it our business to understand fully the reasons behind wanting a survey in the first place.

For a tenant, our instruction would naturally include a survey of the building, but we would also review the schedule of condition that had been prepared by the landlord. This document would determine the repairing obligations on our client both throughout the term and at the end of their lease. All of this matters because it changes our advice about something as simple as a hole in the roof.

For a tenant client, if the landlord’s schedule of condition didn’t mention the hole in the roof, then our client would likely be responsible for repairing the roof during or at the end of their term. Our report would advise that the schedule of condition required updating to record this preexisting defect and we would recommend that the landlord undertake the necessary repair before the tenancy commenced.

For an investor client, if there was a tenant in place with full repairing obligations, we would obviously record the condition of the roof, but the report’s focus for an investor wouldn’t be on the technical building fabric but more focused on the financial impact. If the tenant is responsible for repairing it before the lease is up, or earlier, it’s not a cost consideration for the investor and we would just recommend that they ensure this is captured in a dilapidations schedule.

Same hole – two different pieces of advice, depending on whether our client was a potential tenant or investor.

It’s worth mentioning sale and leaseback arrangements in this context. Right now, this is prevalent with owner occupiers using the process to free up some capital in their business by selling their building to an investor and then leasing it back. Getting the correct survey in this instance means they can set up their lease in a way that is beneficial to them, particularly with respect to the building fabric and condition and ultimately dilapidations.

Leaseback was very common for high street banks. The result is that when those banks finally left the high streets, some of the buildings became restaurants or ‘trendy wine bars’. However, banks invariably have a strong room that is integral to the fabric of the building. The cost of removing these would have been prohibitive so the banks will have accounted for this in the dilapidation conditions of their leaseback agreements, leaving the landlords liable for removing them at the end of tenancy. Which is why many of these bars still have the strong room in the building, either as a feature or as an overly zealous storage room!

To discuss your survey requirements contact Stephen Seeney on Stephen.Seeney@argroup.co.uk.