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Retrofitting risks need managing properly

Many property owners are now faced with improving undesirable real estate assets that are ‘below code’.

The issue is particularly important for commercial premises, where corporate tenants will be keen to reap energy efficiency savings and meet green credentials.

Retrofitting refers to the fitting of climate adaptation measures to existing premises, and is often carried out as part of a wider refurbishment project. We anticipate an increase in both retrofit and refurbishment as the sector continues to back the green agenda.

Such projects have a greater risk profile than an equivalent new-build project, and it is equally important to manage appropriately.

The condition of existing structures will have a significant impact. Where services are upgraded, but the building’s structure is not being stripped out, risks can lie undetected until refit starts. Detailed condition surveys will help, but undertaking intrusive surveys can often be difficult.

Owners may need to take a more flexible approach to transferring cost in relation to existing structures where incomplete information is available. A contractor may need to be engaged in two phases, the first being investigative, before a fixed price can be secured.

Design integrity is also critical, particularly when the works involve connections to legacy systems. Owners will generally want to ensure that one contractor is responsible for the design to ensure energy efficiencies and accountability. Owners will still have to pass on the long term design and workmanship liability to designers and contractors.

Retrofit projects are often undertaken in occupied premises and timing can be paramount - the asset may never recover if under-investment drives vacancy levels beyond a tipping point. This presents a series of challenges and work needs to be carefully planned. Both need to be managed contractually.

It is vital owners seek some form of legal counsel to avoid hidden pitfalls and extra costs.

Ed Cooke is a partner in the construction and engineering group at DLA Piper UK