Devised amid market disruption, a new approach to technical due diligence (TDD) could enhance the sale or acquisition of your assets.

We believe two-stage TDD not only makes the best use of remote working capabilities today, but also provides greater efficiency to progress sales and acquisitions of built assets in times of future disruption.

Site visits and inspections, which are a key part of TDD work, are now subject to significant restrictions and are not able to proceed without being risk assessed. Where the risks are manageable, and where we can inspect in accordance with current government guidance, these inspections can go ahead. 

However, a different process is needed for sites where access restrictions apply and we are unable to prevent COVID-19 exposure risks for our teams and on-site contacts. We’ve found that surveyors can undertake significant remote work to progress transactions, using the sheer wealth of building knowledge available to us as commercial building surveyors today. This requires a different reporting structure than some clients may be used to, but it will ultimately make for a more efficient process at any time. 

We have trialled and seen success with a two-stage TDD solution led by a primary desk study, applicable to pre-acquisition and vendor’s surveys. The second stage is an on-site inspection which is closely informed by the desk work to make the best use of time and resources.

A key advantage of this approach is mitigating the risk of time lags should the follow-up process to investigate issues in the building delaythe issuing of a report. Building document research and further specialist inspections can add time to the transaction. Those risks are greater at a timeof COVD-19 travel restrictions but are also applicable in business as usualcircumstances.

In stage one, a commercial building surveyor and building services engineer (as relevant) review the technical documents including statutory consents, as-built drawings, specifications, construction contracts, warranties/TPRs, O&M/H&S files, maintenance records and other relevant items. While there are limitations to some documents, particularly for older buildings, this process is supplemented by interviews with property managers, facility managers and maintenance teams to raise queries relating to property condition and maintenance.

The outcome, a desk study report, would flag notable investment,health and safety, and continuity risks from the available documents andinterviews. Further input from our cost consultants would explain thecost/value of known issues such as combustible cladding, or where is it obviousthat major refurbishment/plant replacement is necessary.

Coordination with environmental consultants remains an essentialaspect of this work, and successful environmental desk studies and flood riskassessments can also be produced with remote working arrangements. However,site-specific requirements may need local authority input such as from thecontamination and petroleum officers.

This adjusted model for TDD reporting will help our clientsprogress with investments and disposals, but we advise that a site surveyshould follow in any case to establish the condition of the property andidentify defects that would not necessarily be captured by existingdocumentation. This will be achievable once the UK Government lifts travelrestrictions and should be a more efficient process as a result of the priorinvestigation work.

Meanwhile, clients might be able to address the risk with acondition precedent in the sale agreement, such that there are no other notablerisk (perhaps defined by a cost threshold and absence of life safety issues)identified in the final Stage Two report. Retentions might also be used (sayfor the cost of recladding) but a deal commitment prior to a site survey wouldbe high risk and should only be considered on the advice of a solicitor.

When travel restrictions are lifted, conducting TDD surveys inthis way has the merit of informing a full-team presence at site visits,directing time spent on key areas and running a more efficient inspectionprocess in terms of man days on site. This would also identify the need forspecialist input/laboratory analysis for things like deleterious materials inadvance.

We always consider the needs of building surveys on a case by case basis, so talk with us to discuss how we can help you progress your property transactions. To hear more about this, get in touch!