As one of the top elevator consulting firms in the United States, we see a lot of “disasters” out there. Among them is a failure to conduct “due diligence” before buying a property. Here’s a blog post on the topic of just how important “buyer beware” can be in the vertical transportation industry.
When a buyer hires The Elevator Consultants to perform an elevator due diligence survey or an elevator audit on a property they are evaluating for purchase, there are several patterns and traps the buyer falls into.
In fact, we must disclose that in 100% of our engagements, we uncover deficiencies that empower our clients during this transaction to gain large financial benefits.
First, the seller will do everything within their power to show the buyer that the elevator, escalators, lifts, and other vertical transportation assets are in great condition. The seller should use every measure to demonstrate that the equipment is in excellent shape. Additionally, they will assure it will last its expected life cycle and is free of flaws. For this reason, we work closely with the sellers we represent. We want to ensure the elevators never become a problem during the sale of their buildings.
Now, let’s look at the situation from the buyer’s perspective. A seller may provide quotes, proposals, budget numbers, or capital plans from one or several elevator companies. These quotes may come without a consistent scope of work. It is similar to asking a car mechanic to fix a noise in your engine. But they do so without test driving the car, hearing the noise, or even looking under the hood.
Buyer and Seller Perspectives in Elevator Transactions
Elevator service providers operate as businesses to make money. Therefore, they sometimes use “creative techniques” regarding the quality of elevators and other vertical transportation assets. If a seller says, “the elevator service provider told me the cost to fix the equipment is X,” and we say it is Y, we question why the elevator service provider didn’t complete the work in the first place. Industry best practices, code, or the current contract should already cover it.
When an elevator service provider leaves deferred maintenance, they essentially admit, “we have not been maintaining the equipment.” In every one of our on-site due diligence surveys, the elevator service provider fails to deliver the proper maintenance. The required maintenance is necessary to keep equipment operating throughout its projected life cycle.
The bottom line: we can assist you as either the buyer or the seller—by getting the proper work done, or by evaluating the situation. This ensures that buyers know exactly what they are stepping into.
Larger Capital Expenses, such as Elevator Modernizations
If it is a larger capital expense like an elevator modernization or large repair, then the proposal from the elevator service provider should have a defined scope of work. However, the problem was that the seller, when obtaining these proposals budget etc., is never comparing “apples to apples.” We at TEC consistently get quotes back from the seller asking, “how does this compare to your report?” If it doesn’t, we give a full snapshot of the equipment vis-a-vis the shape of the current equipment. We assess how well it is being maintained, the deferred maintenance, as well as capital plans. This is done in order to protect our client, the buyer. The elevator service providers are not required to do this. As a matter of fact, it is very common for the elevator service providers to tell the current owner they are in great shape. This is very common for property assessment companies to gather elevator information from the elevator service provider and the owner. People think that because the elevators pass inspection and have the certificate in the elevator that it is fine. However, this is often not the case. These certificates are not going to tell you about upcoming code upgrades, life cycle, deferred maintenance, or performance issues. An investor is foolish to rely on this data!
Hiring an Elevator Consultant is a Smart Business Decision
Whether you are the potential building buyer or seller, remember it is a dog-eat-dog world. The current elevator service provider will provide ownership with whatever information they need to maintain the account. Elevator service providers are not consultants, as clearly stated in the fine print. Many building owners and managers overlook the importance of protecting their current or future investment through vertical transportation consulting. Indeed, if you’re selling your property, you can follow our proprietary methodology. Regardless of whether you are the buyer or seller, reach out to us today for an initial consultation on your vertical transportation consulting needs.