Purpose of Building Due Diligence
Building due diligence is the systematic investigation of a building's physical condition, regulatory compliance, safety systems, environmental performance, and documentation — conducted before committing to a lease, acquisition, or investment. Its purpose is to identify risks, quantify costs, and inform decisions with evidence rather than assumptions.
Due diligence answers three fundamental questions:
- Is the building safe? — Structural adequacy, fire protection, electrical safety, seismic and wind design.
- Is the building compliant? — Regulatory approvals, certificates, licences, environmental clearance.
- What will it cost? — Deferred maintenance, capital needs, operating costs, remediation requirements.
Scope: What Due Diligence Covers
| Domain | Key Assessments | Primary Standard |
|---|---|---|
| Legal & Title | Ownership verification, encumbrances, liens, zoning compliance | Local land registry, legal counsel |
| Regulatory | Construction permit, occupancy certificate, fire licence, environmental clearance, trade licence | RAJUK, FSCD, DoE, City Corporation |
| Structural | Structural adequacy, seismic design, load capacity, condition assessment | ACI 318, BNBC 2020, ASCE 7 |
| Fire & Life Safety | Fire alarm, sprinklers, exits, compartmentation, fire pump, emergency lighting | NFPA 101/13/72, BNBC Fire Chapter |
| Electrical | Power supply, distribution, earthing, lightning protection, generator, UPS | IEC 60364, BS 7671, NFPA 70 |
| Mechanical (HVAC) | Cooling/heating capacity, ventilation, IAQ, BMS, equipment condition | ASHRAE 62.1/55/90.1 |
| Vertical Transport | Lifts — capacity, condition, safety testing, modernisation needs | EN 81, ASME A17.1 |
| Plumbing & Drainage | Water supply, drainage, water quality, storage, pumping | Local plumbing codes, WHO water quality |
| Building Envelope | Roof, facade, windows — condition, waterproofing, thermal performance | ASHRAE 90.1 |
| Environmental | Contamination, hazardous materials (asbestos, lead), environmental clearance | DoE, ASTM E1527 (Phase I ESA) |
| Energy & ESG | EUI, carbon emissions, green certification, ESG reporting capability | GHG Protocol, LEED, EDGE |
| Documentation | Drawings (approved, as-built), certificates, maintenance records, warranties | ASTM E2018 |
The Due Diligence Process
Phase 1: Document Review (Week 1-2)
- Request all building documents via a structured document request list
- Review: title documents, regulatory approvals, drawings, certificates, maintenance records
- Score document confidence (Level 1-5) for each category
- Identify gaps — missing documents that require investigation or independent assessment
Phase 2: Site Assessment (Week 2-3)
- Visual inspection of all building systems following ASTM E2018 methodology
- Walk every floor, every staircase, every plant room, rooftop, basement
- Compare documents to site reality — identify discrepancies
- Interview building management and FM staff
- Photograph all findings — date-stamped evidence
Phase 3: Specialist Assessments (Week 3-5, as needed)
- Structural assessment — if drawings are missing, building is old, or visual concerns exist
- Fire safety audit — if fire systems appear incomplete or fire licence is missing
- Electrical safety audit — if SLD is missing or electrical systems appear dated
- Environmental assessment — if contamination is suspected or environmental clearance is absent
Phase 4: Reporting & Decision (Week 5-6)
- Due diligence report: findings, risk classification, cost estimates, recommendations
- Red/Amber/Green scoring for each domain
- Go/No-Go recommendation with conditions
- Remediation plan and timeline for Amber items
Critical Red Flags (Deal-Breakers)
| Red Flag | Why It's Critical | Action |
|---|---|---|
| Extra floors beyond approved drawings | Structural overload risk, regulatory violation, potential demolition order | Walk away or require structural assessment before proceeding |
| No occupancy certificate | Building not authorised for use — regulatory enforcement possible | Require OC as lease condition, or accept documented risk |
| No fire detection/alarm system | No early warning of fire — life safety risk | Require installation before occupation |
| Single exit staircase (multi-storey) | Egress failure risk during fire — NFPA 101 violation | May be uncorrectable — walk away |
| Visible structural distress (wide cracks, exposed rebar, settlement) | Potential structural failure | Immediate structural engineer assessment |
| No generator or inadequate generator | Business disruption during load-shedding (daily in Dhaka) | Require adequate backup power |
| Asbestos confirmed without management plan | Health hazard, legal liability | Require asbestos management plan before occupation |
Key Due Diligence Metrics
| Metric | Good | Acceptable | Red Flag |
|---|---|---|---|
| Document confidence (overall) | Level 4-5 | Level 3 | Level 1-2 |
| FCI (Facility Condition Index) | < 5% | 5-15% | > 15% |
| CAPEX need (5-year) | < 3% of replacement cost | 3-8% | > 10% |
| EUI (office) | 100-150 kWh/m²/yr | 150-250 | > 300 |
| Fire system coverage | 100% with current certificates | Partial with remediation plan | No fire system or expired certificates |
| Lift availability | ≥ 98% | 95-98% | < 95% (frequent breakdowns) |
| PPM compliance | ≥ 95% | 80-95% | < 80% or no records |
Lease DD vs Acquisition DD
| Aspect | Pre-Lease DD | Pre-Acquisition DD |
|---|---|---|
| Timeline | 2-4 weeks | 4-8 weeks |
| Depth | Focus on safety, compliance, operational adequacy | Full investigation including legal, financial, environmental |
| Title review | Verify landlord ownership | Full title search, encumbrance check, lien search |
| Structural | Visual assessment + document review | May require full structural assessment + NDT testing |
| Environmental | Verify environmental clearance | Phase I ESA minimum, Phase II if contamination suspected |
| Financial | Service charge review, utility cost analysis | Full financial analysis — NOI, CAPEX plan, valuation |
| Remediation | Negotiate as lease conditions | Factor into purchase price or require pre-completion |
MNC Requirements vs Local Norms
The gap between what multinational corporations expect and what typical Bangladesh buildings provide is significant:
| Requirement | MNC Expectation | Typical Dhaka Reality | Professional Response |
|---|---|---|---|
| Structural verification | Structural assessment report with PE certification | No structural records, building "looks fine" | Commission independent structural assessment |
| Fire safety | Full fire system per NFPA, current fire licence | Partial system, expired or no fire licence | Fire audit → remediation plan → landlord commitment |
| Documentation | Complete data room with all categories | Folder of photocopies, many items missing | Gap analysis → prioritised document collection |
| ESG data | EUI, carbon, water, waste data for reporting | No metering, no tracking | Install metering → baseline → reporting capability |
| Backup power | Generator covering 100% critical loads, tested monthly | Generator exists but untested, fuel management poor | Load bank test → maintenance programme → fuel SLA |
Bangladesh-Specific DD Checklist
- ☐ RAJUK construction permit (stamped approved drawings)
- ☐ Occupancy certificate from RAJUK
- ☐ Fire licence from FSCD (annual renewal)
- ☐ Environmental clearance from DoE (if applicable)
- ☐ Trade licence from City Corporation (annual renewal)
- ☐ Lift registration with DIFE
- ☐ Generator fuel storage approval
- ☐ Building plan vs actual — floor count, setbacks, FAR
- ☐ Structural drawings or structural assessment
- ☐ Seismic design code used (BNBC version)
- ☐ Fire alarm and detection system — type, coverage, last test
- ☐ Sprinkler system — coverage, water supply, fire pump test
- ☐ Exit staircases — count, width, clear access, signage
- ☐ Generator — capacity, fuel, load bank test date, ATS
- ☐ Transformer — ownership, capacity, oil analysis date
- ☐ Earthing resistance — test date, values
- ☐ Water supply — source, quality test, storage capacity
- ☐ Lift condition — age, modernisation, safety test date
- ☐ Maintenance records — PPM schedule and compliance
- ☐ Flood history — has the site/basement flooded?
References
- ASTM E2018 — Standard Guide for Property Condition Assessments
- RICS — Building Survey and Due Diligence Standards
- ISO 31000 — Risk Management Principles and Guidelines
- NFPA 101 — Life Safety Code
- ASHRAE — HVAC Standards (62.1, 55, 90.1)
- ACI 318 — Building Code Requirements for Structural Concrete
- ASCE 7 — Minimum Design Loads for Buildings
- GHG Protocol — Corporate Standard
- RAJUK — Rajdhani Unnayan Kartripakkha
- BNBC 2020 — Bangladesh National Building Code
Insights & Guidance
- Due diligence answers three questions: Is it safe? Is it compliant? What will it cost?
- 12 domains to assess: Legal, Regulatory, Structural, Fire, Electrical, HVAC, Lifts, Plumbing, Envelope, Environmental, ESG, Documentation.
- 4-phase process: Document Review → Site Assessment → Specialist Assessments → Reporting (4-8 weeks for acquisition, 2-4 weeks for lease).
- Critical red flags: extra floors, no occupancy certificate, no fire system, single exit staircase, visible structural distress.
- Key metrics: FCI (<5% good), EUI (100-150 good), Document confidence (Level 4-5 good), PPM compliance (≥95%).
- Bangladesh: expect 30-50% documentation gaps vs MNC expectations — manage professionally, don't hide.
Due diligence is the difference between an informed decision and a gamble. Without it, organisations commit to buildings based on appearance and assurances rather than evidence. The cost of due diligence (typically 0.1-0.5% of transaction value) is insignificant compared to the cost of discovering critical issues after commitment — structural remediation, fire system installation, regulatory penalties, or worst of all, a safety incident. In Bangladesh, where documentation gaps and compliance variations are common, due diligence is not optional — it is essential.
- Structural failure — occupying a building with structural inadequacy not identified during DD.
- Fire safety gap — no fire system or inadequate fire system leads to fatalities.
- Regulatory enforcement — RAJUK demolition order, FSCD closure, DoE penalty discovered after lease signing.
- Cost surprise — significant CAPEX needs (chiller replacement, lift modernisation) not identified or budgeted.
- Reputational damage — MNC occupying a non-compliant building makes headlines after an incident.
- Due diligence report covering all 12 domains
- Red/Amber/Green risk scoring matrix
- Specialist assessment reports (if commissioned)
- Document confidence assessment
- Remediation plan with costed items and timeline
- Go/No-Go recommendation with conditions
- Walk every floor — does the building match the drawings?
- Count floors — does it match the RAJUK approval?
- Check fire exits — unlocked, unblocked, properly signed?
- Visit plant rooms — equipment condition, housekeeping, maintenance evidence
- Check basement — flooding evidence, electrical panel locations
- Look at the roof — condition, drainage, equipment
- Can you provide the RAJUK-approved drawings and occupancy certificate?
- Is the fire licence current? When was the fire system last tested?
- Are structural drawings and calculations available?
- What is the EUI? Is energy consumption tracked?
- Can you provide 3 years of maintenance records?
- Has the building ever flooded? Has the generator ever been load-tested?
- Property Condition Assessment — ASTM E2018 qualified assessor.
- Structural assessment — licensed structural engineer (PE/CEng).
- Fire safety audit — fire protection engineer (NFPA/IFE qualified).
- Environmental assessment — environmental consultant for Phase I ESA.
- Legal due diligence — property lawyer for title and regulatory review.