Technical Due Diligence – What did you miss?

There can be three levels of Technical Due Diligence inspection and reporting:

Routine Maintenance Inspection;
Condition Inspection;
Detailed and invasive inspection.

The focus of this article is in regards to a limited high level report.

A limited high level report may typically include a review of core components such as the building, structure, fabric, external areas and building services following a review of available documentation and a visit to site. It would not include other options such as an environmental report or hazardous materials register inspection, a town planning review, or a building certification review.

The focus is on the visible and accessible elements of the building, fabric, and external areas. It does not involve an intrusive investigation.

With regards to the building services, this would usually include a review of any available documentation, and servicing records to identify:

a) The age of the building and its services,

b) If there has been regular scheduled maintenance, and

c) If there are any issues with any of the building services.

It does not include opening up and assessing componentry or performance testing.

In opting to obtain a limited high level report, there are potential risks that can be missed. They can include but are not necessarily limited to:

a) Inground tanks (eg fuel, fuel leaks);

b) Contaminated ground from a previous site use which can date back many years);

c) Asbestos / lead paint / chemicals that have been used in a process by a previous owner or tenant;

d) What is part of the sale (Fixtures, Fittings, and Equipment);

e) Perimeter fence locations may not necessarily be the actual survey boundaries that define the site;

f) The current use of the development may contravene the zoning and town planning regulations that the original development was approved under.
There is the risk that a potential purchaser assumes they can follow in the footsteps of the current vendor or tenant’s use of the site.
The potential purchaser could make assumptions about what use they intend for the site that may be either in line with or outside the recommended uses of the site / zone. This may prevent the activity or require a rezoning application process to be followed;

g) Outstanding approvals from various authorities;

h) Concrete cancer;

i) Mould.

While a detailed and invasive inspection and reporting process conducted through a myriad of consultants can be costly and time consuming, the risk of “What did you miss?” can be minimised, or rather, what risks are you potentially purchasing (or on-sell) that could have ramifications over time.

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