A third of surveys undertaken as part of the transaction process on commercial property in Manchester and the North West are now being instructed by the vendors, compared to just over one in ten five years ago.
Traditionally, technical due diligence building surveys have been commissioned by the purchaser once the first phase of negotiations was undertaken and initial terms agreed. However, Manchester based commercial property consultancy Malcolm Hollis has found that there is a growing trend for vendors to take control of the process to speed up deals and reduce the risk of valuation challenges.
Malcolm Hollis, which carries out a high volume of transaction led surveys every year and is the largest independent surveying firm in the UK, studied the pre-acquisition surveys undertaken on £1.7bn of commercial property transactions coordinated from Manchester between June 2017 and January 2019. It found that 34 per cent were vendor led instructions, compared to just 14 per cent in 2012-13.
David McBride, partner at Malcolm Hollis, said: “Vendor led surveys are growing in popularity as the market in Manchester becomes increasingly competitive. Sellers are seeking an edge to speed up transactions by retaining control of the process, which facilitates the early identification of any issues with the building and the associated documentation, so they can be mitigated or placed in the appropriate context before going to market.”
According to McBride: “Investors now expect quality technical due diligence information before committing their own resources and capital to a sale”. He also warns that whilst it is a growing trend, the quality of many reports being produced by sellers fall below a standard that many investors require, saying: “Broad-brush vendor due diligence is likely to be more detrimental to the process than leaving the purchaser to commission their own. Purchasers want to see evidence that an asset has received a thorough health check that can just be rubber stamped by their professional team and funders, usually via a reliance letter. Too often though vendors don’t take the steps to make further detailed investigations and mitigate any red flags prior to going to market. We are regularly asked by investors acquiring assets to validate vendor reports and the range and consistency of quality is shocking. The accuracy of the vendor report is fundamental to developing trust between the parties and streamlining the transaction process.”
