Vendor surveys/vendor technical due diligence

This section outlines the process, limitations and key information surrounding vendor surveys.

The term ‘vendor survey’ is commonly used to describe a technical due diligence (TDD) survey (or pre-acquisition survey) commissioned by a vendor for an asset that is being considered for disposal. Such surveys are sometimes referred to as divestment surveys. For consistency, the term vendor technical due diligence (VTDD) is used throughout this section.

VTDD is commissioned and funded by the owner of an asset for the benefit of an eventual purchaser. It is also commonly used to inform the sales team about the technical aspects of a property. This is particularly the case where a property has been in ownership for a number of years with little or no day-to-day involvement from the vendor/owner, e.g. in the case where a property is occupied on a long lease (ten years or more). VTDD is sometimes also obtained to help an owner understand the condition of a portfolio to select suitable buildings for sale. In such circumstances, the eventual reporting may never be passed to a third party.

One significant advantage of VTDD is that it takes the building survey off the transaction critical path, where they are prepared before the property is marketed. Sale heads of terms can be entered into without being subject to survey.

VTDD reports are quite usual in commercial property transactions, but have not been widely accepted in the residential property market. Therefore, the information covered in this section relates to commercial property vendor surveys only, or multi-unit residential property types in institutional ownership, including:

• build to rent (BTR)
• private rented sector (PRS), and
• purpose-built student accommodation (PBSA).

This section is maintained by Chris Gibbons of Tuffin Ferraby Taylor LLP.

RICS standard: Technical due diligence of commercial property

Feature: TDD: vendor surveys