Who pays for a commercial property inspection, buyer or seller?

The default: the buyer pays

Commercial purchase agreements almost never make the inspection a seller expense. The buyer conducts due diligence during the contingency period, at the buyer's cost, and the buyer owns the resulting report. That ownership matters: the report is prepared for the party who engaged us, and it carries reliance for that party only. A buyer who paid for the assessment can use it in negotiation, share it with a lender, and rely on it in an investment committee memo.

When the seller pays

• Pre-listing assessments. Sophisticated sellers order a condition assessment before going to market so surprises do not surface as a retrade three weeks into escrow. It costs a fraction of the price reduction a discovered roof failure produces.
• Seller-financed deals. A seller carrying paper often wants its own condition record of the collateral.
• Negotiated credits. A seller does not usually pay the inspection fee, but frequently ends up paying for repairs or granting a credit that dwarfs it.

Lender-required assessments

When a lender requires a Property Condition Assessment, the borrower pays, but the lender is typically named as the report's intended user. This is standard on SBA 504 and 7(a) loans, CMBS originations, life company loans and agency multifamily debt. The fee usually appears on the borrower's closing statement alongside the appraisal and environmental report. If you are refinancing, that same cost is yours as owner.

Tenants and landlords

In a build-to-suit or long-term NNN lease, the party taking on maintenance obligation should pay for a condition assessment before signing. A tenant accepting roof and HVAC responsibility on a twenty-year-old building is assuming a liability that a $2,500 assessment will quantify precisely.

Practical advice

Do not let the fee decide who orders the report. Whoever pays should be the party who needs to rely on it. If a seller offers you a report they commissioned, read it, but order your own if you are borrowing against the asset or making a nine-figure-per-square-foot decision on the strength of it.