Property Condition Assessment

A Property Condition Assessment (PCA), also called a Property Condition Report, is an evaluation of the capital expenses that will likely be required to maintain an asset in the short- and long-term.

The standard scope of work for the Property Condition Assessment is defined by ASTM E2018 and includes a walk-through survey of the property to assess the condition of building systems, components and other property improvements, and interviews and documents review regarding the age and condition of property improvements. The Property Condition Report includes tables of the short-term capital expenses (Immediate Repairs Table) and long-term capital expenses (Replacement Reserves Table).

The ASTM E2018 Standard is the industry standard for baseline Property Condition Assessments. Updated to “ASTM E2018-24 Standard Guide for Property Condition Assessments: Baseline Property Condition Assessment Process” on Jan. 1, 2024, the Standard outlines the purpose and scope of the Property Condition Assessment including the walk-through survey, document reviews, and interviews, as well as the contents of the Property Condition Report. According to ASTM E2018, the goal of the Property Condition Assessment is to identify and communicate physical deficiencies of the subject property.

The Immediate Repairs Table is one of two tables included in a Property Condition Report, which identifies short-term capital needs (recommended within the next 90 days), deferred maintenance and all failing or damaged building systems and life safety issues, as well as opinions of probable costs to correct the items identified. The Immediate Repairs Table highlights items that require immediate action due to existing or potential unsafe conditions, building code or fire code violations, or conditions that if left uncorrected could result in critical failure or significant costs. Examples of immediate repairs include a lack of fire extinguishers, a failing roof system, or structural damage.

The Replacement Reserves Table is one of two tables included in a Property Condition Report, which identifies long-term capital expenses (typically within the next 12 years) that are typically based on the expected useful life of the building systems and components. Examples of replacement reserve items include pavement seal coating and striping, exterior painting, or HVAC system replacements.

PCAs can help operators, lenders, or buyers understand how the condition of the building and site improvements will impact the asset’s operational and financial performance.

 The PCA is typically used by the investor as a due diligence tool and by an operator as a capital planning tool. There are many reasons this type of report is critical. First and foremost, not all property owners disclose pertinent information and not all operators are aware of pending issues. It is important to know the true condition of the building before making a major financial decision and while operating the building. Not knowing can lead to unexpected expenses and additional out of pocket costs. Also, this report gives advance knowledge of any items that may need corrective work to remedy physical deficiencies now, and in the future.

Information is conveyed in a reserves table that can be utilized throughout the life of the building. Remember, that the buyer’s intended use of the property may differ from that of the current owner’s use, so understanding costs for corrective work as it pertains to the new owner is key. Last, when disposing of your asset, from a liability standpoint, you are responsible for

disclosing all issues related to the property.

GFB’s Property Condition Report consists of the scope of work defined by ASTM E2018 Standard Guide for Property Condition Assessments: Baseline Property Condition Assessment Process. This scope will identify conspicuous and material defects, deficiencies, items of deferred maintenance, and material building code violations (individually and collectively, physical deficiencies) as a result of a non-intrusive walk-around visual survey, review of available applicable documents, interviews and research. No destructive or intrusive testing of any equipment, systems, or materials is included in this scope of work, unless determined as necessary.