Whether you are a lender or a property owner, a thorough understanding of the property is needed. A professional inspection company with prior experience can help. The Property Condition Assessment (PCA) and Facility Condition Assessment are very similar, but they are not the same. The objective nor the content of the two reports are not the same.
A Property Condition Assessment, sometimes called Building Condition Assessment or Commercial Building Inspection, is carried out to know the property’s overall condition, the amount of repair or replacement cost required, and the building’s remaining useful life. The standard guide for carrying out the Building Condition Assessment is ASTME_2018-15.
Most lenders require a Building Condition Assessment to finalize the commercial loan, especially older buildings. The assessment gives the bank valuable information about the cost of ownership and the building’s remaining useful life. When severe problems are identified in BCA, the bank may not approve the loan, or the buyer may not go ahead with the purchase.
Most lenders require a Building Condition Assessment to finalize the commercial loan, especially older buildings. The assessment gives the bank valuable information about the cost of ownership and the building’s remaining useful life. When severe problems are identified in BCA, the bank may not approve the loan, or the buyer may not go ahead with the purchase.
Based on the client’s requirement, some Property Condition Assessment requires only a single Building Inspector, or it may need a separate inspector for mechanical and electrical components.
The two most important parts of the property and facility condition assessment report are the immediate cost and the short-term cost.
As per ASTM E_2018_15 opinions of costs that require immediate action as a result of any of the following: (1) material existing or potentially unsafe conditions, (2) material building or fire code violations, or (3) physical deficiencies that if left uncorrected would be expected to result in or contribute to the critical element or system failure within one year or will result most probably in a significant escalation of its remedial cost.
Short term costs—opinions of costs to remedy physical deficiencies, such as deferred maintenance, that may not warrant immediate attention but require repairs or replacements that should be undertaken on a priority basis in addition to routine preventive maintenance.
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Although the Facility Condition Assessment (FCA) is similar to PCA, it is carried out for a different purpose. FCAs help owners understand the value of their assets and develop a capital budget for long-term repair and replacements. Based on the Capital Budget requirement, the owner can then decide whether to secure additional funding. The facility condition assessment also helps the owner make a financial decision as to how many years of remaining useful life remaining and whether to carry out major renovation or altogether remove the existing and build new.
Also Read: How are Property Condition Assessments Essential to Buying Commercial Property?
FCA involves a thorough inspection by a team of one or more specialists,
depending on the requirement. The goal of the FCA is to identify:
- Prepare a detailed inventory of all equipment and significant component of the property.
- Prepare a detailed immediate and long term repair and replacement cost. Depending on the client’s requirement, it may be for the next twenty years.
- Calculate the capital improvement cost of the building
- Evaluate the remaining useful life of each component and the overall RUL of the building. Compare the total replacement cost against the repair and replacement cost.
In general, FCA is a more detailed approach than PCA. The FCA becomes a functional tool for the property owner to maintain the property over a long time. In general, the PCA and FCA are similar, but FCA provides a more detailed cost over a more extended period. PCA is carried out for real estate purchases and is mostly required by a financial institution that is lending the money. Whereas FCA is needed by the property owner to know the long term capital planning needs.
Also Read: What is a Building Condition Assessment and When Do You Need One?
In either case, a professional company with experience in carrying out this type of work will help. It is recommended that whether the lender requires it or not, the buyer should always get a PCA done before purchasing the property to avoid any surprises after the purchase.
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Patrick Buffalo
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