RICS Technical Due Diligence Doc

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RICS guideline notes

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  • Building surveys and technical duediligence of commercial property

    RICS Practice Standards, UK

    4th edition, guidance note

    Building surveys and technical duediligence of commercial property4th edition, guidance note

    The fourth edition of this guidance note aims to provide surveyors withinformation and guidance in respect of commercial property surveys.

    It covers:

    taking instructions; survey preparation; inspection; and reporting.

    Also included are appendices comprising:

    a summary of insurance issues; a summary of legal issues; and useful sources of information and further reading.

    GN 63/2010

    rics.org/standards rics.org/standards

  • Building surveys and technical due diligenceof commercial property

    RICS guidance note

    4th edition (GN 63/2010)

  • Published by the Royal Institution of Chartered Surveyors (RICS)

    Surveyor Court

    Westwood Business Park

    Coventry CV4 8JE

    UK

    www.ricsbooks.com

    No responsibility for loss or damage caused to any person acting or refraining from action as a result of the material included in this publication canbe accepted by the authors or RICS.

    Produced by the Building Surveying Professional Group of the Royal Institution of Chartered Surveyors.

    First edition published 1983 (previous title Guidance note on structural surveys of commercial and industrial property)Second edition published 1998 (previous title Building surveys and inspections of commercial and industrial property)Third edition published 2005 (previous title same as second edition)

    ISBN 978 1 84219 627 4

    Royal Institution of Chartered Surveyors (RICS) November 2010. Copyright in all or part of this publication rests with RICS, and save by priorconsent of RICS, no part or parts shall be reproduced by any means electronic, mechanical, photocopying or otherwise, now known or to bedevised.

    Typeset in Great Britain by Columns Design Ltd, Reading, Berks

    Printed in Great Britain by Annodata Print Services, Dunstable, Beds

  • Contents

    RICS guidance notes 1

    Acknowledgments 2

    1 Introduction 3

    2 Taking instructions 42.1 Key items 42.2 Vendor surveys 52.3 Client requirements 52.4 The premises 72.5 Confirming the instruction 82.6 Third party consultants and their appointment 82.7 Scope of services and RICS appointment forms 92.8 Working in Europe 9

    3 Preparing for the survey 113.1 General guidance 113.2 Administration 113.3 Equipment 123.4 Health and safety for the surveyor 12

    4 The inspection 144.1 General principles 144.2 Inspection, note taking and reflective thought 144.3 Main building elements 154.4 Building services 184.5 External areas, outbuildings and boundaries 184.6 Health and safety considerations 184.7 Fire precautions 194.8 Accessibility 194.9 Environmental considerations 194.10 Deleterious and hazardous materials 204.11 Sustainability issues 204.12 Cultural heritage 204.13 Matters for the legal advisers attention 20

    5 The report 225.1 General guidance 225.2 Report layout 225.3 Report contents 23

    Appendices 26

    A Insurance 26

    A1 Compulsory professional indemnity insurance regulations 26A2 Merrett v Babb 26A3 Professional indemnity insurance 26A4 Private work 26

    BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY | iii

  • A5 Subrogation 26A6 Third party rights 26A7 Third party liability insurance 27A8 Working outside of the UK and Ireland 27A9 New legislation and disciplines 27

    B Legislation and legal issues 28

    B1 Duty of care 28B2 Negligence 28B3 Contract and limitation 28B4 Legislation 29B5 Civil Procedure Rules 29

    C Useful information sources 30

    C1 Links 30C2 Further reading 30

    iv | BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY

  • RICS guidance notes

    This is a guidance note. It provides advice toRICS members on aspects of their practice.Where procedures are recommended forspecific professional tasks, these are intendedto embody best practice, i.e. procedures whichin the opinion of RICS meet a high standard ofprofessional competence.

    Members are not required to follow the advice andrecommendations contained in the note. Theyshould, however, note the following points.

    When an allegation of professional negligence ismade against a surveyor, the court is likely to takeaccount of the contents of any relevant guidancenotes published by RICS in deciding whether or notthe surveyor had acted with reasonablecompetence.

    In the opinion of RICS, a member conforming tothe practices recommended in this note shouldhave at least a partial defence to an allegation ofnegligence by virtue of having followed thosepractices. However, members have theresponsibility of deciding when it is appropriate tofollow the guidance.

    On the other hand, it does not follow that memberswill be adjudged negligent if they have not followedthe practices recommended in this note. It is foreach surveyor to decide on the appropriateprocedure to follow in any professional task.However, where members depart from the practicerecommended in this note, they should do so onlyfor a good reason. In the event of litigation, thecourt may require them to explain why theydecided not to adopt the recommended practice.Also, if you have not followed this guidance, andyour actions are called into question in an RICSdisciplinary case, you will be asked to justify thesteps you did take and this may be taken intoaccount.

    In addition, guidance notes are relevant toprofessional competence in that each surveyorshould be up-to-date and should have informedhim or herself of guidance notes within areasonable time of their promulgation.

    BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY | 1

  • Acknowledgments

    This guidance note was produced by the RICS Building Surveying Professional Group under the direction ofa working group. RICS would like to express its thanks to the following who contributed to its development.

    Working group

    Ian Bragg, BSc MRICS, GVA Grimley Ltd

    Laura Brazil, RICS

    Alex Charlesworth, BSc (Hons) MRICS, Cushman & Wakefield LLP

    Nevin Hutchinson, BSc (Hons) MRICS, King Sturge LLP

    David Mann (Chair), BSc (Hons) MRICS, Tuffin Ferraby Taylor LLP

    Trevor Rushton, FRICS ACIArb FBEng, Watts Group plc

    The working group expresses its thanks in particular to the following contributors:

    Pat Coleman, Faber Maunsell | AECOM

    Michael Earp, FINEX Global, Willis Limited

    Jason Juden, SJ Berwin LLP

    Glyn Thomas, Land Securities Properties Ltd

    2 | BUILDING SURVEYS AND TECHNICAL DUE DILIGENCE OF COMMERCIAL PROPERTY

  • 1 Introduction

    This guidance note has been prepared to providesurveyors and clients with a source of informationand guidance in respect of commercial andindustrial property surveys. Such surveys may alsoinclude large residential apartment buildings.

    This guidance is written to apply to England andWales, although much of its content is equallyapplicable elsewhere. It is operative from October2010 from which time the RICS publication Buildingsurveys and inspections of commercial andindustrial property, 3rd edition, ceases to be RICSguidance.

    General guidance of this nature cannot cover allcircumstances and each property should beassessed on an individual basis having regard tothe specific needs of the client. The guidanceoffered is considered adaptable for all types ofcommercial and industrial property. It is acceptedthat surveyors may well have good reasons for notfollowing all aspects of this guidance note. It is forthe surveyor to decide upon such issues dependingon the individual circumstances, e.g. nature ofconstruction or site conditions.

    This is not intended to be an instruction manual ora guide detailing a step-by-step process whichmust be followed. It aims to set out the generalprinciples which should be adopted whenundertaking a building survey.

    RICS is concerned that members only holdthemselves out to be competent in fields for whichtheir training and background experience areappropriate and relevant. It is important thatsurveyors undertaking commercial and industrialbuilding surveys have relevant experience in thisfield, have appropriate knowledge of buildingconstruction and are sufficiently skilled to inspectand report on the particular property involved.

    Surveyors providing commercial and industrialbuilding surveys and associated services areadvised to:

    + assess the needs of the client;

    + consider the extent of the investigations to bemade, advise on the limitations of the agreedinspection and obtain instructions from theclient for any additional services required (thelife cycle flow chart on page 6 refers to typicalbuilding survey types);

    + undertake an impartial and professionalassessment of the property and its condition,and report to the client in the detail and stylenecessary to provide a balanced professionalopinion to the extent required by the agreedinstructions; and

    + comply with the agreed instructions, whichshould have been confirmed in writing, andform the basis of the contract between theclient and the surveyor.

    The benefits to the client of commissioning abuilding survey, whether a prospective purchaser,occupier or investor in property includes:

    + gaining an understanding of the condition anddesign of the property;

    + establishing the suitability of the property for itsintended use;

    + understanding the need for, and quantifying,future costs and other liabilities;

    + providing a level of protection for institutionalinvestors or funders; and

    + providing a basis for negotiation with thevendor or landlord.

    This guidance note has been prepared by a