APC: The lowdown on inspection

In this latest APC Series article, we take a look at the core commercial real estate technical competency: inspection. This is a requirement to level 3, requiring candidates to be able to provide reasoned advice based on their inspections, as well as having sufficient breadth and depth of knowledge to base this on. Specifically, we will be considering the process of inspection from the surveyor’s perspective. This goes from the initial requirement to inspect through to the provision of advice or a report based on the inspection. Inspections are required for a wide variety of purposes, including valuation, property management and agency instructions. Each inspection purpose will require a slightly different approach and methodology to the inspection, eg when inspecting for valuation purposes candidates will need to consider factors affecting value. In contrast, for a management inspection of a vacant property, candidates will need to consider insurance and security requirements. Following the process Before inspecting, candidates must carry out a health and safety risk assessment in line with RICS Surveying Safely (2nd edition). This should include whether the inspection should be carried out with another person or if safe lone working can be carried out. Candidates should consider company policy, eg logging the inspection in a shared diary, and any requirements for personal protective equipment, eg hard hat, high visibility jacket or safety boots. During Covid-19, additional PPE, such as a mask, may be required. Candidates should ideally complete a checklist which is held on file and a copy should be taken to site and updated with details of any unforeseen issues. This means that the next individual who inspects the same site is aware of what to expect on the ground. On site, candidates must continue to consider the health and safety of themselves and others (eg clients or colleagues), by dynamically assessing risk. This could include being aware of signs of vandalism or trespass or of unforeseen hazards or defects. Candidates will need to make appropriate access arrangements, which will differ if the property is occupied or vacant. If a property is occupied by a tenant, then the lease will set out the procedure and notice requirements for inspections and access arrangements. Disruption should be avoided at all costs, eg not inspecting a retail shop during peak Christmas trading hours. Research and due diligence Prior to inspecting, candidates will need to carry out their desktop research and due diligence. This could include collating and reviewing any lease documentation, title, flood risk, radon, asbestos, location and historic site notes (and so on). If the inspection is for valuation purposes, then candidates should collate and analyse relevant comparable evidence beforehand. This will help to inform the inspection and enable additional time for verification of evidence. Furthermore, candidates will want to bear in mind the requirements of VPS 2 and VPGA 8 of RICS Valuation – Global Standards (Red Book) when inspecting for valuation purposes. This includes ensuring that the inspection is “carried out to the extent necessary to produce a valuation that is professionally adequate for its purpose”. This will include verifying the information relied on and clarifying any assumptions to be relied on with the client. Full records must be kept of the inspection, including use of a checklist proforma or inspection template on site. Full photographic evidence and site notes should be kept, backed up by video if appropriate. Candidates may need to consider confidentiality of building users if inspecting a sensitive or public building, eg health centre or a supermarket. Candidates will also find it helpful to speak with the client, tenant or site manager, for example, about the property and any issues or opportunities encountered. Discussions often reveal additional information that will inform the candidate’s subsequent advice following the inspection. On-site best practice On site, candidates will want to take a logical approach to inspection. This will include a general drive or walk around the surrounding area initially to familiarise the candidate with the locality and situation of the property in question. Candidates may also note marketing boards or nearby vacancies that can be used to inform their advice and further investigations back in the office. Next, candidates will want to inspect externally and then internally, perhaps working top down or undertaking a general walk through to familiarise themselves with the property initially. All elements and accommodation should be inspected, if it is safe to do so. This will include any external grounds or outbuildings. In line with VPGA 8, candidates should consider factors affecting value when inspecting, such as the following (note this is not an exhaustive list): surrounding area; use; accommodation; age; construction; accessibility; services; fixtures, fittings and improvements; repair and condition; contamination and environmental issues, eg flooding, ground contamination and historic uses; hazardous materials, eg asbestos, lead piping, wood wool slabs; deleterious materials – high alumina cement, aluminium composite material (ACM) cladding and fire risk and mundic; and development potential. For other purposes, candidates may need to be aware of various other issues, such as: letting purposes: identifying ways to make the property more marketable such as cleaning, redecorating or internal sub-division or opening up works; sale purposes: identifying development potential and issues relating to marketability, such as condition and adaptations to the current use; management purposes: considering the lease and any breaches or non-compliance, together with advising on management issues such as health and safety hazards and security; acquisition purposes: during a viewing tour, candidates will need to keep accurate notes on the strengths, weaknesses, threats and opportunities that the property presents; and redevelopment: considering potential to redevelop, extend or improve the property, taking into account any planning requirements or permitted uses. Post site visit Candidates may also encounter defects or disrepair on site. This is a point where it is important to appreciate the remit of a commercial property surveyor. This will not extend to the remit of a building surveyor and this depth of knowledge is not required of commercial real estate candidates. Instead, if a candidate encounters a defect, eg a roof leak, then they should photograph and accurately record site notes of the defect. Back in the office, they should then notify their client of the defect and recommend appropriate further advice or investigations. This could include instructing a building surveyor or a competent contractor to advise on the cause of the defect and remedial options. Finally, after inspecting and returning to the candidate’s desk, they will want to collate and analyse their desktop research and inspection findings. They may find they need to follow up with further investigations, enquiries or research, eg discussions with the client, online research or comparable analysis. The candidate’s findings should be summarised in an appropriate report format, with recommendations and reasoned advice based on the inspection and investigations clearly stated. As always, the final step is to “stand back and look”. Candidates should reflect on their findings and, if possible, discuss their report with their peers or line manager. This helps to ensure that the advice is clearly justified and based on the evidence, in addition to the findings being clearly communicated to the client. Top assessor tips Roy Albert, chartered surveyor, VOA: Use various revision platforms to consolidate your reading (YouTube, podcasts and webinars). Get out of your comfort zone when having mock interviews. Practise your case study using mirrors, friends, family and colleagues and video yourself to get an overview of your body language Top candidate tip Conor Watt, graduate trainee, development, Sanctuary Homes: As a candidate I try to take pleasure in the process. I don’t (or at least try not to) see the APC as a goal but a process of learning more about you, the RICS and my sector. It’s a chance to explore and test. The quick quiz 1. What does ARP stand for in the context of professional indemnity insurance? Assigned risks pool Alternative risk pool Additional revenue pool 2. What is the maxim of the RICS in relation to regulatory support and quality assurance? Lead by example, not by error It is better to lead a firm into compliance than to force it Sanctions and disciplinary action are key to compliance 3. What does section 40 of the Landlord and Tenant Act 1954 relate to? Landlord’s notice for request for information about occupation and sub-tenancies Tenant’s notice for request for information about ownership Compensation for improvements 1. Assigned risks pool   2. It is better to lead a firm into compliance than to force it   3. Landlord’s notice for request for information about occupation and sub-tenancies Professional guidance alert RICS Guidance Note Technical Due Diligence of Commercial Property (1st ed, 2020)  RICS Guidance Note Assessing Viability in Planning Under the National Planning Policy Framework 2019 for England  RICS PII in the UK (April 2021 update)  Further reading and resources RICS Valuation – Global Standards (Red Book) RICS Surveying Safely (2nd edition)  Jen Lemen BSc (Hons) FRICS is a partner at Property Elite Picture © Tumisu/Pixabay