Regardless of Budget adjustments to capital gains tax and stamp duty reforms, there is a more far-reaching concern that many people overlook – whether the technical due diligence informing their decisions is actually fit for purpose, Keith Godsmark, Head of Professional Services, writes for Building Magazine.

Moving beyond the predictable

For years, technical due diligence (TDD) followed a predictable pattern. Surveyors inspected properties, produced lengthy narrative reports cataloguing every defect, and delivered documents that – while technically thorough – often failed to address the questions investors actually needed answers to.

Too many reports simply described what was found, rather than interpreting what it meant for the transaction. Risk was documented, but rarely quantified in ways that could inform pricing negotiations or post-acquisition planning.

The old approach was standardised, inflexible and fundamentally misaligned with what end users required: clear guidance on whether to proceed, how to price risk, and what to prioritise post-completion.

The four pillars of modern, risk-based TDD

The value of TDD lies not in the volume of narrative produced, but in the quality of commercial interpretation provided.

1. Risk appraisal that enables decisions: Not all risks are equal. Modern TDD distinguishes clearly between unquantifiable risks which might threaten a transaction, and material deficiencies which can be addressed through managed solutions post-acquisition. When properly appraised, risk becomes a negotiating tool. Uncertainty around building compliance or structural concerns can justify price adjustments. But only if the TDD process identifies and articulates these issues in commercial terms that both parties understand.
2. Alignment with investment strategy: A pension fund acquiring for long-term hold has different priorities from an opportunity fund planning a two-year exit. Yet traditional TDD often applied the same approach regardless. Effective modern TDD begins by understanding the purchaser’s specific investment strategy and risk appetite. The same building defect might be immaterial for one buyer’s plans, but critical for another’s.
3. Financial integration: Modern transactions require TDD which integrates seamlessly with financial modelling and funding requirements. This means translating technical findings into clear financial implications – capex schedules, operational cost projections, liability quantification. Where external funding is involved, clear communication becomes paramount. Lenders need to understand risk exposure. Financial models need reliable capex assumptions. Investment committees need confidence that technical risks have been properly assessed and priced.
4. Sustainability and regulatory foresight: The UK’s minimum energy efficiency standards continue to tighten, EPC requirements evolve. Forward-looking TDD does not just assess current compliance; it provides insight into future regulatory risk and improvement opportunities. Sustainability assessment has moved from optional add-on to core component of comprehensive TDD.

How to assess risk against actual requirements

TDD is not just for investors buying buildings; it is equally valuable for occupiers making property decisions. Yet occupiers rarely get pre-emptive advice when they need it most.

For leasehold acquisitions on full repairing and insuring (FRI) terms, early advice protects the occupier position at lease end, which means schedules of condition, clarity on landlord contributions, and an understanding of repair obligations must be in place well in advance of financial commitment.

For freehold acquisitions, the principles are similar to investment TDD, but the approach differs. What creates significant risk for an investor may matter less to an occupier if they can address it through their own development plans. Where occupation is likely to be longer term, then protecting short-term liquidity gives way to ensuring that the property fits the business needs over time.

Risk-based occupational TDD is therefore as important as investment TDD; the difference is how to assess risk against actual requirements.

Ask TDD advisors pointed questions

As an industry, we are in transition – moving from narrative-based TDD towards a more risk-focused, commercially integrated approach.

It is vital that investors and occupiers making significant property commitments ask pointed questions about their TDD adviser’s approach:

• Do they begin by understanding your specific strategy and risk appetite, or apply a standardised methodology?
• Can they clearly distinguish between transaction-threatening risks and manageable defects?
• Do they translate technical findings into financial implications that integrate with your deal modelling?
• Is sustainability assessment embedded in their core offering or treated as optional?
• For occupiers, do they consider dilapidations exposure proactively?

Combine technical and commercial skill

Property investment has always involved risk. The goal of TDD is not to eliminate that risk; it is to ensure that investors understand it clearly enough to price it accurately, negotiate effectively and manage it competently.

This was traditionally considered a technical exercise but it is really a commercial one which happens to require technical expertise.

As transactions become more sophisticated, investors who recognise this and select advisers accordingly position themselves to make well-informed decisions and thus achieve better outcomes.

This article originally appeared in Building Magazine.