On January 1, ASTM E2018-24, the Standard Guide for Property Condition Assessments: Baseline Property Condition Assessment Process was approved. The revised Guide was the result of several years of work by a committee composed of Users of Property Condition Assessments (PCA) and the Consultants that provide them. The changes reflect the evolution of assessments performed within the commercial real estate industry.

Although many of the changes are editorial and were implemented to achieve stylistic and formatting conformance with other standards, the changes below warrant mention.

Working with Consultants

The revised Guide suggests that PCA Users work with their Consultant to provide additional information and direction regarding the assessment objectives. Discussing the assessment beforehand will allow Consultants to provide more specific and relevant information to the User.

If the Consultant understands the objective and concerns of the User, they can often customize the PCA to better meet the User’s needs. For example, if a User plans to resell a property within a few years, the Consultant could adjust the term of the Long-Term Cost Opinion table to reflect the planned hold. Or, if the User is acquiring a property for inclusion in a “green” portfolio, the Consultant could include an energy audit scope and include recommendations for modifications that would improve energy efficiency. If the User plans a change of use for the property, that will warrant a much deeper dive than a generalist PCA provides, and the Consultant will likely recommend specialist evaluations in the scope.

Role and Use of Specialists

E2018-24 contains additional discussion regarding the role and usage of specialists to perform enhanced evaluations, including engineering analysis, of “high-cost or critical building systems such as structure, roofing, facades, elevators and mechanical, plumbing, electrical, and fire protection systems.”

A generalist will capture data sufficient to meet the baseline E2018-24 standard, which satisfies the risk tolerance of many Users, especially those in a debt position. However, if circumstances warrant a closer look, or the User is an equity investor who intends to hold the property, it may make sense to bring in specialists.

For example, an investor engages a Consultant to perform a PCA on a multi-story office building. In project discussions, it becomes apparent that the provided maintenance records were incomplete. In addition to a PCA generalist, the Consultant might recommend engaging specialists to do in-depth evaluations of the building envelope, elevators, and HVAC systems to provide the User with a better understanding of the condition of the asset.

Immediate Repair

The definition of “immediate repair” has been modified; E2018-24 includes conditions that “represent an imminent life-safety issue”, replacing “material existing or potentially unsafe conditions” in E2018-15. Additionally, both versions include reference to conditions that would contribute to future system or component failure or escalated remedial cost, but E2018-24 removes the one-year time frame contained in E2018-15. The revised language aligns better with the “moment in time” nature of the remaining sections of the Guide. Also, the new language states that Consultants identify an observed “imminent life-safety issue” in a PCA. We (Consultants) identify what we observe at the time of the site visit.

To illustrate the difference between observable and non-observable issues, consider this scenario: a building foundation that was not designed to withstand the corrosive effects of brackish water is now exposed to brackish water due to rising sea levels and/or ground subsidence and is potentially unsafe. In conducting a PCA, we don’t test the groundwater for salt content and may not have knowledge of the foundation design parameters. We may suspect but can’t identify the potentially unsafe condition. However, if indications of structural distress are observable, we can identify those in a PCA and recommend further evaluation.

Long-term Costs

Long-term costs, which were a footnoted item in the previous iteration of E2018, are now included in the guide definitions, along with discussion of the long-term cost format and intent. Long-term costs are opinions of costs for anticipated capital replacements that exceed $3,000, or a threshold value established by the User. Upgrades or enhancements to the subject property are not included unless requested by the User.

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Learn more about the updated PCA standard through a free upcoming webinar hosted by Partner Engineering and Science, Inc. A panel of architecture, engineering and due diligence experts will discuss what’s changed and how the new guidelines can help investors get more from their PCA reports. To participate, register here.