IGNITE Building Consultancy is committed to seeing New Zealand business and property owners and occupiers receive the best standard of advice.This is the first in a number of Guidance Notes that IBC is preparing on aspects of the services that we provide.
Due diligence has become very important recently, as the number of buildings with inherent construction shortcomings has risen, and properties without code compliance are fairly commonplace. Ensuring that a property is in good order before it is acquired ensures that it meets the needs of the occupier, and that is it not going to be difficult to dispose of. We regularly receive due diligence instructions from our national and international clients acquiring or disposing of property. Due diligence processes in New Zealand are developing, with a range of building surveyors appearing on the market. This is great news for the industry, but there are a number of pitfalls that clients need to be careful to avoid:
- Reporting standards – clients are seeking robust clear advice on whether or not they should be purchasing a property. This goes above and beyond statements that building elements ‘appear’ sound. Clients should expect their professional advisors to make clear judgements one way or the other with regard to a defect or shortcoming. If this requires specialist advice, the advisors should know how and where to obtain it and incorporate it within their reports, within a short timeframe.
- Timeliness – reporting within tight deadlines – often a matter of days – is always a challenge. The key to success is in your advisors turning away the instruction if they will struggle to meet your deadline to avoid disappointment!
- Professionalism – building surveyors come in many guises, and all with their specialisations. Clients are becoming more wary of who they use to complete their due diligence, and their specialist focus – the conclusions that can be drawn from a survey of a large commercial acquisition of a major property are different from those for a small development – it is all about understanding your client and their specific needs.
- Ensure that your advisors have a solutions focus – expect advice on solutions to defects and shortcomings, rather than a simple condition report.
- Inspection detail – ensure that your advisors limitations are reasonable, for example – roofs need to be inspected, wherever possible and code compliance matters checked off against a LIM – many issues arise and deals fall over as a result of insufficient attention to detail when considering the lack of code compliance – a lack does not mean that a property is automatically black balled!
- Limitations of Report and Professional Indemnity Cover - check these carefully! How far is the consultant going in providing advice and recommendations that are 'open' rather than 'limited' and does this relate to the level of their professional indemnity cover? How far is the consultant prepared to back themselves? Ask for a copy of the consultants 'Limitations / Terms and Conditions' and Professional Indemnity cover certificate before you appoint them and check that you are happy with the level of commitment they provide.
For those of you seeking acquisition opportunities, happy hunting!
