Would you still buy a building if you knew a six-figure capital replacement programme was waiting for you after settlement?
One of our clients was close to committing to a commercial property, when due diligence uncovered several issues that would have materially changed the deal. None of these were visible on the initial property walkthrough, but our structured technical due diligence process revealed them. The review identified ageing building services approaching end of life, alongside compliance gaps and future capital costs that had not been factored into the acquisition.
The outcome for our client was a list of defects as part of our TDD report, and also, and most importantly; clarity. The TDD clarified what required attention, what it would cost, and what could be deferred. This then enabled the client to negotiate the purchase price, and move forward with confidence.
What is Technical Due Diligence?
Technical Due Diligence is a systematic review of a property’s condition, services and compliance, but more importantly, it’s how risk is understood, before it becomes liability.
In practice, we’re seeking to answer three questions:
- What’s likely to go wrong?
- What will it cost?
- What does it mean for your decision?
Obviously, we know that most issues aren’t deal-breakers, but they do influence decision making.
Hiding spots for issues
The risks that matter are rarely the obvious ones, and they are often located in places that are easy to miss without a structured review:
- Deferred maintenance, that compounds quickly.
- Compliance gaps, particularly fire and accessibility.
- Services approaching end-of-life.
- Unconsented or undocumented works.
- Unclear responsibility under lease or ownership arrangements.
While individually these types of issues are manageable, when unidentified, they tend to turn up later in a much uglier form as a cost, dispute or constraint. For example, a rooftop HVAC system may appear operational today, yet require major replacement within two years which is a cost that could materially affect investment returns.
What a comprehensive TDD provides
A good TDD is a lot more than a detailed description of a building. TDD gives you a basis for action, and at minimum, it should:
- Identify defects and compliance risks.
- Prioritise what matters and what doesn’t.
- Quantify likely future capital expenditure.
- Provide a clear set of recommended actions.
- Incorporate input from specialists, such as engineers where required, particularly for building. services, and lifecycle planning.
Done properly, it reduces uncertainty and supports informed decision-making. A TDD may determine whether you proceed, renegotiate, or walk away.
Timing Matters
The value of TDD is highest before you commit. It informs acquisition decisions, supports lease negotiations, and provides a clear view of future liability. If you commit to a purchase before you understand true condition, you’re no longer in a position to manage the risk, you’re simply inheriting it. In many cases, technical due diligence is completed alongside active negotiations and therefore under tight timeframes. This makes early scoping and access to information critical.
What makes it useful (and what often gets missed)
The value of TDD comes down to how it’s set up.
In our experience, the difference between a useful report and a generic one is usually clarity at the start: what you need the process to answer, what information is available, and how the findings will be used.
A few simple things make a difference, for example agreeing scope early (plus identifying what’s out of scope), having access to key property and agreement documents upfront and then allowing enough time for proper review. Without this clarity, due diligence can become overly broad, and/or lacking the depth needed to support decision-making.
At Maynard Marks, our approach to TDD is informed by recognised industry best practice (RICS guidance ) and is then tailored in practice to focus on what is most relevant to that particular asset, and decision at hand. For example, rather than covering every possible factor, the assessment may focus on building condition and key services, where these are the most likely drivers of cost and risk.
Key takeaways
Most property decisions aren’t about whether a building is ‘good’ or ‘bad’ and we can never fully eliminate risk. However, through the TDD process, you are able to move away from assumptions to facts. You will understand the risks better, have them quantified and managed before commitments are made. With this level of understanding and clarity, you can then decide whether to proceed, negotiate or to walk away.
Considering a property acquisition or lease commitment?
Technical Due Diligence provides a clear understanding of building condition, compliance risks and future capital requirements before decisions are made.
Contact our Commercial Surveying team to discuss how a tailored TDD assessment can support your next property transaction.
Read more about our range of Commercial Property Services.
