Building Inspections: Why They're Essential in Commercial Real Estate Transactions
Category News & Advice
Building Inspections: Why They're Essential in Commercial Real Estate Transactions
You've been looking for a space for your business and finally found one with all the right specifications. Perfect! It ticks all the boxes and you're ready to make it official as soon as possible - you don't want anyone else swooping in! However, you're putting your long-term success at stake if you don't pump the brakes a bit and get to know the property better in the form of a commercial building inspection.
Buying or renting a commercial property is a huge commitment. Owning a commercial property is an investment that can dictate much of your future financial life, and renting a space for your business is a long-term undertaking (a commercial real estate contract is often longer than its residential counterparts). This is why it's essential to do your due diligence to ensure that the building you've got your eye on isn't hiding any damage that could impact your business operations. Part of doing your homework is making sure that a building inspection takes place before you commit.
It's not just for tenants that inspections are essential; property owners benefit from knowing exactly what state that their buildings are in.
What is A Commercial Inspection?
A commercial inspection involves going through the property so that the landlord and tenant are aware of the state of the property. This inspection aims to uncover any potential hazards that could impact the running of a business as well as any health and safety concerns. You have ingoing inspections, mid-lease inspections, and outgoing inspections.
An ingoing inspection will bring to light the exact state that the property is in. The tenant can then say any fixes or changes they require before they enter into the lease agreement.
Important: A rental agreement must clearly outline the condition of the property and specify that the renter acknowledges and accepts its current state.
Brookes Attorneys advises landlords, "It is always important to be fully aware of the state that your commercial property is in. For this reason we recommend conducting an initial ingoing inspection, and regular inspections throughout the lease period, as well as an outgoing inspection."
During regular and outgoing inspections, normal wear and tear will come up, which is not normally the responsibility of the tenant. "It might include small scratches on the walls or paint, worn or slightly stained carpeting, broken hinges, or other insignificant damage. Having to repaint the property, clean the carpet and repair a few scuffs or nail holes on the walls after each tenant moves out are to be expected due to normal wear and tear, and not something a landlord can charge tenants for," explains All Business.
How Much Does A Commercial Building Inspection Cost?
First of all, it's important to get a property inspected by a qualified professional (such as someone certified by SAHITA).
This price of a building expectation varies according to the size of the property and what checks need to be done. Expect to pay over R500 an hour.
Commercial Buildings Inspection Checklist
During an inspection, the inspector will walk around the property - inside and out - and take photos for reference. They will assess:
- Documents related to the building, including any building/renovation plans, fire safety certificates, zoning etc. So, as the landlord, make sure you have these papers on hand.
- The external building structure is checked for any structural damage (this includes the roof if necessary).
- Internally, all rooms of the property are checked to assess whether there are any hazards or damage that could harm the property's value and safety.
- All systems of the building need to be assessed, too. "Things like electrical, plumbing, and HVAC all need to be inspected. If one fails, the value or safety of a property might fall dramatically," explains Property Inspect.
How Do You Do An Outgoing Inspection?
What happens when a rental contract ends? This is the time for an outgoing inspection.
This last inspection is done to see whether the tenant is owed their security deposit back, or whether the landlord keeps it to fix damages.
Anything above normal wear and tear would be the responsibility of the tenant to repair. This can include large wall holes, ripped up carpets, and even items left behind that the landlord would then have to dispose of - this is when tenants could lose their security deposit.
Conducting an outgoing inspection with the initial rental agreement in hand is a crucial step when vacating a property. It's also an opportunity for the landlord to see what needs to be done before putting the space back up for rent.
When you've found a seemingly perfect commercial space, we know the urge to jump straight in to avoid a missed opportunity. However, jumping in without setting an eagle eye on a building inspection (conducted by a professional!) can set you up for a less-than-ideal situation.
Inspections are also valuable for landlords! Remember, these inspections aren't just necessary for when the property changes tenants - they're a valuable aspect of maintenance! Falling behind on inspections can result in costly replacements and fixes down the line.
One of the best things you can do to future-proof your business is to get professional help to choose the right property. OfficePlace specialises in leasing, selling, and purchasing commercial property throughout Johannesburg, Pretoria, and Cape Town. Let one of our trusted and professional brokers find the right commercial property for you! Contact us today.
Author: OFFICEPLACE