A Property Condition Assessment is a very helpful reporting tool, but how will you know if it’s right for your commercial property? In this blog post, we will discuss the various uses of a PCA.
What is a Property Condition Assessment?
A Property Condition Assessment (PCA) highlights specific details of a commercial property and provides a clear picture of the current property condition, as well as a future projection of predicted capital expenses for that property.
The PCA identifies the immediate needs such as code violations, fire hazards and life safety concerns, as well as short term needs like deferred maintenance or repairs that should take place within 2 years. PCAs also include a Replacement Reserve Table that identifies anticipated repairs required during the evaluation period. This is based on the remaining useful life and estimated useful life of building elements. PCAs are used by various parties to support their financial modeling of a given property.
Who Uses Property Condition Assessments?
The following are a few examples of parties who utilize PCAs:
- Lenders – The PCA informs a lender of the actual condition of the property and if any deferred maintenance is required during loan origination. A lender can then protect the investment by holding dues in escrow to address the deferred maintenance identified during the study. It is also common for the PCA to be used in the refinancing process and provides a lender with insight on how the property is being maintained by providing a snapshot of current conditions. These snapshots can assist in the property evaluation.
- Buyers – If deferred maintenance or other capital expenditures are recommended, the PCA can be used as a tool to negotiate the purchase price of the property. Additionally, the inclusion of the Replacement Reserve Summary can help a buyer understand upcoming expenditures that might be required to appropriately maintain the property.
- Sellers – A PCA can illustrate low deferred maintenance and the cost per square foot to operate a property over an evaluation period, highlighting the selling points of a property.
- Lessees/Lessors – PCAs are very useful for Triple Net Lease situations and can be utilized to establish current conditions before a lease.
- Owners – A PCA can provide important property information for strategic or capital planning as well as in insurance evaluations.
Is a Property Condition Assessment Right for Me?
No matter which transaction party takes the responsibility, ordering a PCA is a smart choice. It provides a technical, unbiased opinion of current conditions that are useful during and after negotiations. A PCA will also reveal the replacement reserves, capital expenditures, or deferred maintenance needed to properly maintain a property over a given time period.
The ASTM2018-15 is currently the generally accepted industry standard, which provides guidance for the content and scope of a PCA. Are you interested in learning more about Property Condition Assessments? Request a quote today, or contact us for more information.