RICS draft guidance note - Technical due diligence of commercial property, 5th edition

5 The inspection

5.1 General principles

The extent of the inspection will depend on the purpose of the survey, the practical limitations in undertaking it and the intent of the report (see section 3). Significant areas not inspected should be clearly identified within the report, together with the related risks of the area not being inspected.

The inspection requires a methodical approach to collecting the data in as great a depth as is practicable and appropriate under the conditions found on site.

Consider the inter-relationship of building elements and do not treat them in isolation. This is particularly important when inspecting a large and/or complex property where different RICS members or RICS regulated firms and engineers are responsible for inspecting different elements.

Checklists can be used as they establish a logical basis for data gathering, however, RICS member or RICS regulated firms should use professional judgement as, being generic documents, they may not cover all eventualities.

Likewise, the use of standardised data capture software needs to be used in conjunction with the RICS member's or RICS regulated firm's own professional judgement.

5.2 Inspection, note-taking and reflective thought

Where an area or location cannot be accessed or inspected adequately, presenting 'best and worst' options can at least enable the client to consider the risk rather than leaving the matter unresolved. The client may appreciate an 'educated guess' rather than complete uncertainty, but where this approach is adopted, the RICS member or RICS regulated firm should make it clear that assumptions have been made and should always separate fact from opinion when reporting.

The RICS member or RICS regulated firm should take and keep a record of the site notes, sketch plans and photographs made at the time of the inspection. It is advisable not to attempt to write or dictate the final report during the inspection but to prepare it from the notes taken after appropriate consideration (reflective thought).

5.3 Health and safety considerations

The RICS member or RICS regulated firm should conduct the inspection with due regard to the protection of their own safety and the safety of others, in particular the RICS member or RICS regulated firm should take into account during the inspection the safety of the general public and any occupiers who will be accessing and using the building or will be in close proximity.

Upon identifying a risk to health and safety the RICS member or RICS regulated firm should, as soon as practicable, report this to their client, building owner, manager and to a suitable person on site (or someone connected with the site) who may reasonably be expected to act on the information. An RICS member or RICS regulated firm will be expected to exercise their professional judgement as to the severity and likelihood for harm and to act proportionately based on the information available at the time of the inspection.

5.4 Enquiries to be made on site

The RICS member or RICS regulated firm should ask to see copies of all documents held on site and on a data site. Such records may include:

  • asbestos/hazardous materials register and management plan
  • fire risk assessment, fire safety strategy and relevant permits
  • accessibility audit and
  • statutory test certificates.

RICS members or RICS regulated firms should make enquiries with the on-site operations team or occupier to establish if they are aware of any issues with the building and engineering services. Relevant anecdotal information gained while on site should be corroborated by the client's legal team via the disclosure process following inspection if such information forms the basis of any conclusions drawn by the RICS member or RICS regulated firm.

5.5 Building fabric

The elements of the building fabric that an RICS member or RICS regulated firm inspects will be dependent upon the type and complexity of the property. A typical elemental breakdown should include:

  • roofs
  • rainwater goods
  • walls and cladding/facades
  • windows, doors and joinery
  • structural frame
  • substructure/basement
  • floors
  • internal walls, ceilings, partitions and doors, including compartmentation for fire safety
  • finishes
  • internal and external staircases and
  • sanitary and welfare facilities.

5.6 Building services

Under normal circumstances, the RICS member or RICS regulated firm would not be expected to carry out a detailed assessment of the building services installations, as most of these would require a specialist. However, the RICS member or RICS regulated firm should perform a visual appraisal of the services sufficient to form an overall opinion of the apparent visible condition and age and the need for further investigation. The RICS member or RICS regulated firm should comment on the presence or otherwise of fire detection and fire suppression systems.

A disclaimer stating that only an RICS member's or RICS regulated firm's visual inspection has been undertaken should be included in the report. Specialist engineers will provide a more detailed report on the condition of the services, and recommendations for their appointment should be given when appropriate.

Testing services does not usually form part of a standard technical due diligence report unless specifically requested by the client.

5.7 External areas

A brief general description of external areas and associated features is usually required, and visible defects should be noted. Matters such as safety and disabled access require comment, as do those concerning the adequacy of car parking provision, lighting, signage, traffic calming, vehicle and pedestrian separation, and surfacing. Vehicular and pedestrian access to the site should be reviewed, including any estate roads, pavements, hardstandings, service yards, turning areas, etc. including fire and rescue services access. The drainage provision to external areas should also be considered where possible from the visual inspection undertaken, but again it should be stressed that underground services will not be subject to specialist inspection and/or testing unless specifically instructed by the client.

The general shape and form of the grounds and extent of trees should be identified. Where identifiable, a general description of boundary fences, gates and other accesses, walls and other structures can be given. Particular care is taken to identify the presence of invasive plants, such as Japanese knotweed and giant hogweed, as well as trees that on certain type of substrata could cause subsidence or direct root damage. Where appropriate, the RICS member or RICS regulated firm should comment on the biodiversity of the site and note the existence (where known) of protected species.

Adjoining properties should be reviewed for neighbourly matters such as unadopted roads, shared or common areas, easements, way leaves, nuisance, contaminative uses and potential conflicts. The existence of overhead power lines or other evident sources of electromagnetic radiation such as telephone masts, communications systems, etc. should be identified.

5.8 Fire precautions

Where specialist and/or proprietary systems of fire protection are used, the RICS member or RICS regulated firm should consider whether to recommend the procurement of specialist advice, especially if inadequacies are noted. In complex buildings such as shopping centres or sports stadiums, it may be necessary to involve a fire engineer to comment fully. The fire log or records of the regular testing and servicing of fire alarms, emergency lighting, fire extinguishers, sprinklers, smoke vents, fire curtains or shutters, etc. can also be reviewed.

Testing does not usually form part of a standard technical due diligence report unless requested by the client, but the RICS member or RICS regulated firm should comment on the presence or otherwise of these measures.

5.9 Accessibility/inclusiveness

Many factors contribute to accessibility and inclusivity, but the most obvious is the built environment, which includes fixtures, fittings, furniture and equipment. Although a detailed access audit is not usually expected to be undertaken, it is helpful for the RICS member or RICS regulated firm to identify significant barriers to access that become apparent during the course of an inspection, as they could have an impact upon the commercial value of the premises or suitability for occupation without alteration.

5.10 Environmental considerations

5.10.1 Orientation and exposure

The RICS member or RICS regulated firm should consider the orientation of the building to identify the possible effects of exposure to the prevailing wind or sunlight, as these could affect the performance and durability of the building fabric. Exposure to other factors, such as salt spray in a coastal location or industrial pollution, may also have a profound influence on the life or performance of the fabric and should be identified where particular risks exist.

5.10.2 Noise and disturbance

It is worth considering the effect of noise from external sources on activities within the subject property and its grounds. Noise (e.g. from aircraft, rail, traffic, adjoining properties and other sources) should be noted if it is significant at the time of inspection or could, from inspection, reasonably be anticipated. The sound insulation qualities of party (conjoining) structures may also need to be considered.

Installations that could cause occupier annoyance, e.g. heat rejection fans, should be considered. Noise from the subject property to the outside may also be noted as a potential nuisance to adjoining properties and sites. This is particularly relevant to, for example, industrial premises. Any other possible nuisances (e.g. smells that are known to exist or have become apparent while carrying out the inspection) should also be reported.

5.10.3 Land contamination and environmental controls

The RICS member or RICS regulated firm should consider whether an environmental or other specialist consultant is needed and advise accordingly. Where no environmental or other specialist consultant is appointed, the RICS member or RICS regulated firm would normally be expected to provide general comment and recommend further advice be sought from a specialist upon the following:

  • risk of fluvial and/or pluvial flooding, tsunami, tropical storm or erosion
  • gases, such as methane or radon, where physical evidence is apparent
  • electromagnetic fields due to proximity to electrical substations or pylons, mobile phone masts or satellite transmitters
  • activities on site that may involve or generate potentially contaminative materials
  • buried or above-ground fuel/oil storage tanks, vehicle refuelling stations and vehicle washes
  • waste management on site
  • risk of seismic activity
  • illegal waste disposal
  • mining activities, where physical evidence is apparent
  • chemical and other storage including bunded enclosures
  • pest control and
  • invasive vegetation.

5.11 Deleterious and hazardous materials

The RICS member or RICS regulated firm is expected to identify, from visual inspection or by reference to documents provided by the vendor, materials relevant to the jurisdiction that are generally considered in the property and construction industries to be hazardous or deleterious and, where appropriate, make recommendations for further inspection or testing.

5.12 Sustainability issues

When assessing the building, the RICS member or RICS regulated firm will be expected to have due regard to sustainability including (but not limited to) environmental labelling and energy performance as dictated by the brief.

5.13 Cultural heritage

The RICS member or RICS regulated firm should identify whether the building and its surroundings are of historic importance or subject to statutory protection.

5.14 Legal and title issues

Where the inspection reveals areas of particular concern or relevance, these should be highlighted as early as possible. The RICS member or RICS regulated firm should consider protected structures and/or natural features, antiquities, trees, etc. together with planning/building consents, permits or approvals, and neighbourly matters, etc. where information is available for review, and to make appropriate recommendations for further investigations or referral to the client's legal team.

5.14.1 Guarantees and warranties

If, during an inspection, there is reasonable evidence to suggest that the client could derive benefit from a guarantee, warranty, or collateral warranty (or 3rd party rights), the RICS member or RICS regulated firm should bring this to the attention of the client for referral to the client's legal team.

5.14.2 Rights of way, easements and shared services

The RICS member or RICS regulated firm is expected to consider matters that are reasonably apparent from site inspection that could affect the use, ownership or occupation of the land or property such as boundary issues, shared services, rights of access, common areas, rights of way, etc.

5.14.3 Leasehold and repairing liabilities

Unless otherwise agreed, the RICS member or RICS regulated firm is not expected to undertake a detailed review of the lease(s) or leasehold structure. However, the RICS member or RICS regulated firm should state any assumptions that have been made as to recoverability of costs or other relevant matters.

It may also be appropriate to comment upon the landlord's or tenant's compliance with repairing obligations and reinstatement provisions at lease end.