Should Commercial Properties Be Inspected?
Apr 06 2009The House Detective: by Barry Stone, Certified Home Inspector
Dear Barry: I’ve made a purchase offer on a four-unit commercial property. Do investors typically hire home inspectors for this kind of property? Don
Dear Don: The purchasers of commercial properties often overlook the importance of a professional inspection — a surprising omission for a major investment of this kind. Yet the same buyers would never purchase a home without a detailed physical evaluation. For some reason, there is a perceived difference between residential and commercial properties where defect disclosure is involved.
Commercial buildings are prone to all the same defects likely to be found in a residence: roof problems, issues with plumbing, electrical, and heating systems, faulty site drainage, foundation settlement, safety glass violations, trip hazards, and more.
The bottom line is clear: Commercial real estate is expensive. It pays to know what you’re buying before you buy it. Buying commercial property without a professional inspection a risky way to do business. A qualified inspector can provide valuable disclosure to prudent buyers of commercial real estate.
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Questions regarding home inspection please email Barry Stone at questions@housedetective.com
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I purchased a “Commercial” property from a trustee- after the owner died. After COE I discovered both of the buildings required earthquake retrofits @ $350K. The Trustee claims she “did not know for positive that the buildings required the retrofit”; same answer for sellers agents.
However, known to Seller by ‘fact’ these are 1925 URM buildings and code states if built before 1955 they fall under the current retrofit upgrade… All agents have R.E. experience in excess of 10-20 years each in this county.
Presumably they would all know the building need retrofit. There are 2 Real Estate ‘appraisals’ provided to the Trustee (and her Agents) 4 months before my purchase- An $80K ‘devaluation’ of the properties based on NO earthquake retrofit was noted on both appraisals… There was another written “Low-Ball” offer by a R.E. Broker stating the reason for his low offer is that the property requires an earthquake retrofit and used a $$ cost basis of $50/sf to justify his low offer presented to Sellers agents and Trustee…
There was a letter from the city in 1991 notified owner of the required retrofit- property Mgr. asked about the retrofit by phone (so NO positive I.D) only her name on the letter so Trustee claims she did not ‘personally’ get the letter… There are numerous examples of NON disclosure of NON permitted work discovered after COE … all known by the property MGR and on two occasions she advised the Trustee in writing of such problems- including the earthquake retrofit… Tenants also are privy to conversations by the Sellers agents that the buildings would require earthquake retrofits if any remodeling or change of use was requested.
Now the Trustee claims she is not required disclosure due to no ‘fiduciary’ responsibility to buyer, and didn’t know positively; her Agents claim it is a Commercial sale and they did not “know” for sure the property required a retrofit and not required to investigate further; the property manager says she is not a part of the contract even though she did the “Final” walk through and disclosed nothing… My agent says “My fault” I should have conducted inspections- but I relied on him- and he never said let’s go to the city and check for ‘anything’… Oh yeah, and my broker declared bankruptcy and my agent had let his “Errors and Omissions” Ins. expire!
Got any thoughts??
Thank You in advance for your advice!