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Buying a building is understandably a major investment. However, many buyers focus on the outside of the building and assess the value of the property based on the visible condition.
This approach is detrimental and increases risk because one of the most important hidden aspects of assessing a building’s value lies in its electrical installation.
If you think buying a building is expensive, then think again! A commercial electrical system can be expensive to repair, upgrade, or replace. After all, it is the main circulatory system of the building, without which the property is just a mashup of concrete and steel.
This is where an Electrical Installation Condition Report or EICR comes in. An electrical condition survey before purchasing a commercial property helps investors, landlords, and businesses understand the true condition of the property before committing financially.
Read below to learn more about electrical condition surveys, their importance during the sale/purchase of buildings, and common Electrical Installation Condition Report (EICR) failures that can affect your investment:
For investors, buying a building requires a lot of due diligence. It is important to peek under the hood to understand what you are getting into and the additional investment you will require for upgrades and/or repairs.
An electrical condition survey considers several factors that determine the overall feasibility of the investment and helps landlords and investors make an informed purchase decision.
The findings of the electrical condition survey can also allow investors to negotiate a better deal and figure out how much additional investment they will need on the electrical system in the next 10 years.
There are two aspects of the survey.
One looks at broad aspects of the building such as:
The other is the EICR or the Electrical Installation Condition Report.
As the name suggests, this report highlights the overall health of the current system and helps business owners make an informed decision.
The EICR is extremely important since most business owners look at the EICR when evaluating the investment. However, the EICR is just part of the valuation formula because this report doesn’t account for future upgrades or your plans with the building.
This is why we need to look at the electrical condition survey and EICR together to get a complete understanding of the electrical system.
The Electrical Installation Condition Report (EICR) is simply an investigation into the electrical system of a building, which is ideally done every few years by commercial and residential property owners.
The report is part of an inspection of the fixed electrical wiring and equipment in a commercial or residential property. It includes checking the electrical wires, sockets, switches, lights, and consumer units, at the end of which a detailed report is drafted that highlights the overall health of the electrical system.
EICRs are a requirement under the law in the UK, and a satisfactory EICR report is mandatory to ensure safety.
A commercial electrical condition report can be done for buildings that are used for offices, schools, care and nursing homes, restaurants, hotels, shopping centres, and other similar commercial properties.
The one thing common with these properties is that they are usually very old. Some of them can be up to 30 years old.
The EICR is done every 3 to 5 years for commercial buildings, depending on the type of business, with some businesses such as gas stations or public swimming pools requiring annual inspections.
EICRs in commercial buildings are done as periodic electrical inspections. The EICR adheres to:
When a professional electrical company, such as Calder Electrical, provides a satisfactory or “Pass” EICR, it shows that the property’s electrical infrastructure is safe and robust.
A pass EICR indicates that the property can be a good purchase decision provided that the investor’s intention with the use of the building aligns with its infrastructure.
For investment purposes, the EICR provides a good but incomplete view of the overall value of the building. This is why you need to combine the report with an electrical condition survey.
An electrical condition survey is a professional assessment of a property’s electrical installation to identify:
Unlike the EICR, which is focused on the health of the system, the survey provides a clearer picture of whether the electrical system is suitable for the building’s current and future needs.
Here are the reasons buyers should carry out an electrical survey before purchasing a commercial property:
For most people, no one can tell when electrical issues will happen until they do. This is why, when purchasing a property, appearances cannot be relied on because they can be deceiving.
A commercial property may appear ready for occupation but could have outdated distribution boards, damaged wiring, insufficient power capacity, and poor maintenance history.
The electrical condition survey aims to allow buyers to identify potential costs before negotiations are finalised.
The initial purchase cost is just half the picture. Keep in mind that a building requiring significant electrical upgrades may cost thousands more after purchase, especially if you plan to upgrade the system.
The survey findings can help buyers:
Electrical safety is of utmost importance. Commercial landlords and businesses have responsibilities to provide a safe environment for occupants, and failing to make the necessary repairs or failing to pass the EICR can result in severe penalties.
Electrical faults can create risks including:
By using the EICR and general survey, professional electrical companies can help buyers identify hazards well before employees, tenants, or customers occupy the building.
A typical commercial electrical inspection may involve the following surveys:
The survey assesses the EDE and determines its suitability against the future plans of the investor.
The EDE can be assessed for the following:
Like the EDE, the wiring is also assessed independently to ensure that the system is efficient, effective, and safe.
Checks may include:
The electrical capacity is perhaps the most important aspect of the survey, which is not covered in the EICR.
For growing businesses, it is important to assess whether the building you intend to purchase has enough headroom or spare capacity to support your future endeavours.
The survey aims to check whether the system can support the following changes:
For investors, skipping an electrical inspection may save money upfront, but it can expose buyers to a whole range of problems in the future.
The truth is, professional installation companies can charge a relatively nominal fee to survey the building, especially if the footprint of the building is larger.
The survey costs between £900 and £2,000+ for smaller buildings, while very complex or multi-level industrial and commercial facilities often exceed £3,000 to £5,000+.
Sure, you can choose to skip the survey, but the overall costs that it saves just make it logical to pay for a professional opinion.
The survey is especially useful in highlighting the following:
For investors and landlords, the survey can highlight electrical problems that can potentially reduce rental appeal and increase maintenance costs over time.
Now that you know all about the electrical condition survey, let’s take a look at how to quickly view a typical Electrical Installation Condition Report.
An EICR is a summary that is presented to the property owner with various codes that mean different things. For the uninitiated, the report may appear as hieroglyphics because technicians use codes to label failures and passes.
When the report indicates a pass, you will clearly see the word “pass” in front of the electrical components being examined in the report.
For failures, there are four categories that you need to know:
C1 and C2 faults are severe and require the most attention. If the report has even one of these codes, then the EICR report will be marked unsatisfactory or reported as “fail”. For investors, this is a red flag which should be discussed with the seller before the negotiation phase.
However, a report with C3, which highlights improvements for efficiency, is common but isn’t grounds for failure. Typically, a C3 is commonly listed in most reports, and the building is deemed satisfactory.
A C3 should be taken into consideration because it too can allow the buyer to negotiate on upgrades. Furthermore, if you plan to extensively add to the electrical system, then the C3 recommendations must be central when planning any expansion.
Finally, the FI code requires further investigation until it is classified. In simple terms, an FI is a question mark on the report that requires another look.
It can be thought of as a wild card because although it was not deemed severely important, with further testing it can result in a C1 or C2. On average, a FI is usually a C3 unless advanced testing reveals fundamental faults.
If the building’s EICR has FI findings, the technician will diagnose the issue and come up with a suitable classification that will affect the final EICR result. This is why we recommend that you wait until you get the final report instead of making decisions on the preliminary EICR.
The survey and EICR take different times.
The survey itself requires input from the investors and landlords because it accounts for future upgrades. This is why the survey tends to take longer. However, if the investor shares their plan and expectations with the building with a professional, then the survey can be done within a month of the EICR.
Similarly, the reporting time for an EICR depends on the size, complexity, and even the accessibility of the electrical system. Typically, you can expect the inspection to take around 1 to 4 hours to complete.
You can get a preliminary report within 3 hours if everything goes as planned. However, if there are FI findings, then the report can take a few days or up to a week to be finalised.
Patience is key, and every good investor knows that waiting for all the information is much better than making irrational decisions based on incomplete information.
Never rush the report and avoid making any negotiations based on the preliminary report. We recommend that you go with a professional electrical company like Calder Electrical and allow the inspector(s) to take their time to identify issues clearly.
If you are looking for a registered electrician for the installation, maintenance, and testing of your property’s electrical system, look no further.
We offer a wide range of services to meet the demands of our clients. All our work is fully insured, and we work to meet the standards set by the NICEIC to make sure all your electrical installations meet the current regulations and that all the notifiable work is signed off by the local authorities.
We have been undertaking electrical work since 1976 and are specialists in the field. If you have unplanned issues within your home or business, we can provide a call-out service to rectify and solve any problems.
Anything from circuits tripping to loss of power, broken items that need repairing, or checking if you feel something is unsafe or a potential hazard.
Our team can generate a Visual Inspection Report (VIR) to identify anything visual that does not comply with the standards or looks unsafe, as well as a full Electrical Installation Condition Report (EICR), where we will identify and test all the circuits to make sure they are not deteriorating and are safe for use within the current standards and regulations set by the BS 7671.
We can also provide PAT testing of appliances to make sure that any items such as kettles, computers, and microwaves are safe for use in the home and workplace.
Contact us here or call us at 0800 612 3001 for more information on electrical installation condition reports (EICRs) and electrical condition surveys before buying a commercial property.
Photo by Étienne Beauregard-Riverin on Unsplash
