In this
case I will use the example of a retail strip shop. There are other matters to
consider when you are assessing industrial, medical, showroom and office
premises for example.
1. Streetscape.
Before I step inside I consider these issues:
Is the street busy or quiet?
What is the parking like?
Are the neighbours household names that stand out, are of good quality
and well presented or just average? Are there banks nearby? Retailers still
need to deal with cash.
What is unusual or attractive about the building I am inspecting such as
heritage features.
Does it have a wide frontage or is it on a corner?
Is it in the prime part of the street or on the fringe?
How well is it maintained and what is the overall impression? Is the
shop front, display, signage or seats out front clean, well maintained and
orderly?
Is it inviting for customers or
would you hesitate going inside?
2. Internal layout and condition.
How is the shop arranged and presented? Do I have a previous report to
refer to?
Is it clean, neat and orderly with reasonable stock levels or sparse and
untidy?
Are there exit lights and extinguishers? Are they on and working? If you
have an essential services report in your file then it is worth checking to see
that all is in order. Are there exit doors and do the locks appear to be compliant
rather than covered with illegal panic bolts or deadlocks? Are exits and paths
to exits clear? Are goods stored that may be flammable?
If the premises are suited for food, there may be supplementary fire
systems such as smoke detectors and fire blankets. Are these working? Are any
flues and fans present subject to regular cleaning and is this documented? If
you have a copy of the insurance renewal certificate, check if there are
conditions. It may prohibit deep frying yet before you on a bench is a deep
fryer! You may need to advise the tenant to remove it.
What is the electrical switchboard and wiring like? Sometimes the
switchboard can be hot or emit a burning smell. If so, the power usage is
probably at the limit and it should be checked further. Multiple extension
cords are an example of the power supply also being at its limit.
Take lots of photos.
3. Check the fixtures, fittings and
chattels in the lease.
Are they in good order and condition? Is the air conditioning being
maintained and is there a service
agreement? Are any items in the lease missing or damaged? If the floor
coverings are listed in the lease, are they clean?
4. The tenant.
Is the tenant the actual person you are meeting or an employee, friend
or relative? There can be occasions where the tenant is overseas allegedly or
has left and has sold the business without advising you, so ask if this is not
clear. You want to avoid any purported transfer of the lease by stealth.
Is the tenant using the property for the permitted use? In a small
shopping centre or arcade, if the tenant is a hairdresser for example and
offers a nail or makeup service, check the status of any exclusivity/prohibition
clause in the lease. Otherwise, disputes may occur if there is a nail salon or
beautician nearby. Check to see if the tenant is using or has sublet upstairs
or the rear of a property for residential use which is not a permitted use. The
insurance cover for the property may be invalidated and the building may change
from a Class 6 to a Class 4 building under the National Construction Code and
require additional fire safety compliance.
If the tenant is using the property for an unrelated use then they may
require a new or amended permit as the use may be a prohibited use. Again, it
may also void the insurance held. Are there any areas that you are not allowed
to access? If you are refused access you will need to demand access at another
time to ensure that there is no illegal activity. If the property is unclean,
the tenant has to schedule a cleanup and a follow up inspection is needed.
I always seek to engage with the tenant and ask how business is. If they
say great and the shop is empty, weigh that response up. Mostly it will only be
o.k. as they do not want an admission that it is going well to bring on a rent
review. It is always important and not just an issue of courtesy to have a chat
to the tenant if you can. It is a common complaint from tenants that they never
see the agent.
Whilst you are in discussion, try not to get into or start an argument
(to the uninitiated, this does happen) and keep the conversation cordial.
Otherwise your time spent on site will increase and likely be time wasted and
divert your attention.
Make sure you talk to the occupants about what is happening in the area
as you can obtain leads regarding other shops becoming vacant, owners wanting
to sell, tenants on the move or other useful information.
If there is a decision to be made such as renovation works or renewing
the lease, a face to face discussion is usually the best way to reach
agreement.
5. The property itself.
I like to make sure everything is maintained. If the roof leaks it has
to be fixed. Are there trip hazards or stairs and paths with inadequate steps
and rails? Are fences, gates, spouting and downpipes in good order? Is the
garden neat or overgrown?
Is this the highest and best use for the property? Is the tenant the
right fit in this location or are they on the way out and a better tenant could
be found? Can the building be developed or an extra floor added on? If so, you
may want a demolition clause in the lease if this action is contemplated in
future.
Have any works been done that you are not aware of such as the
installation of a satellite dish on the roof, other roof penetrations or
renovations without a permit or consent? Shortcuts taken will usually indicate
that renovations are not right or have not been undertaken by qualified
tradespeople.
6. Feedback to the client.
A report with photos, commentary and recommendations are always welcomed
by clients. It’s up to you how much information you wish to include. I try to
keep the inspection to 20 minutes for a property of this type but that can be
longer if there are issues to resolve.