Building

Difficult times call for drastic measures and as the COVID-19 pandemic sweeps across our nation, both building contractors and prospective homeowners alike have found themselves considering building contracts on a project management basis for a whole host of reasons. There is an obvious benefit for the building contractor in that this option eases the strain on his cashflow and the prospective homeowner thinks he or she is “scoring” by virtue of the fact that they are now purchasing materials and paying sub-contractors directly. Becoming an owner-builder who employs a project manager is a decision you should not make without giving due consideration to the following:

• PURCHASING MATERIALS AND PAYING SUB-CONTRACTORS DIRECTLY RELIEVES YOUR BUILDER OF ALL RESPONSIBILITY

Under normal circumstances, your building contractor is responsible for the quality of both the materials used and the workmanship delivered. You inadvertently take ownership of these two critical items by paying for materials and settling sub-contractors directly and so if there is a defect at any stage the onus will be on you to rectify the same. 

• WHAT IS THE PROJECT MANAGER’S INCENTIVE TO COMPLETE THE BUILD TIMEOUSLY?

The answer to this question is simply NONE. The longer the contract goes on for the more the project manager stands to make and so it cannot possibly be in the employer’s best interest to build on this basis.  

• IS THERE A CEILING ON THE OVERALL CONTRACT PRICE?

The overall contract price very often gets overlooked when the parties concerned are considering a project management type transaction. The owner-builder is under the impression that the savings he or she will realise by going down this road somehow negate the need to keep tight controls on the financial aspects of the project leading to unexpected overruns. The project manager’s financial obligations to the project are limited at best and the overall contract price has little bearing on his or her involvement. 

• DO YOU HAVE SUFFICIENT RESOURCES TO BE AN OWNER-BUILDER?

Prospective owner-builders totally underestimate the level of involvement that a project management type contract requires of them, both in terms of time and financial resources. This coupled with the fact that they generally have day jobs of their own to attend to creates untold pressure and makes for a very unpleasant building experience.

A reputable building contractor brings a wealth of experience in dealing with suppliers and sub-contractors and knows how to get the best out of the various role players. By paying them directly, you not only affect the builder’s ability to get them to perform but you relieve him of all responsibility if something goes wrong. With little or no incentive to complete the build as quickly as possible, together with a lack of focus and clarity on the overall cost throughout the project, the financial consequences of this type of contract can be dire. The journey to building your dream home is supposed to be an enjoyable one. This simply cannot happen if your level of involvement in the project is such that you are required to become an integral part of the daily operations, notwithstanding the fact you have important decisions to make as far as the selection of your finishes is concerned.

With an ever increasing number of builds going out to tender and then being put on ice because the results are simply out of the clients affordability range, one can’t help but wonder whether the following three simple questions were asked and answered during the planning and design stages:

1. WHAT IS YOUR BUDGET?

You need to have a clear and definitive answer to this question before you embark on this journey because it is ultimately what drives the process and will not only determine whether or not your project reaches its  successful conclusion, but may prevent it from even starting

2. WHAT IS THE COST TO BUILD PER SQUARE METER?

It is critical that you consult with your preferred builder to establish what the going rate to build in your area is as this will determine the size of the home, office or factory you can afford. This should form the backbone of the design process going forward

3. WHAT HIDDEN COSTS ARE YOU LIKELY TO ENCOUNTER?

Transfer fees, utility connection fees, professional fees, verge deposits, security and maintenance levies among others are all hidden costs that often catch people unawares so it is critical that you get a firm grasp on these before pressing the GO button

Irrespective of which professional you choose to engage with from the outset, if they do not ask or offer assistance in answering these three simple questions then they cannot serve you well. If you need help putting a feasibility together please don’t hesitate to contact us.

This has become a very contentious issue in the building industry with more and more suppliers and service providers asking for deposits before they will lift a finger. On one hand it could be argued that the sub-contractor’s initial outlay is such that the return simply does not justify the risk and in some instances this is completely valid. And on the other, one cannot help but feel taken advantage of by paying for a service before it is rendered. What exacerbates the situation is that the financial institutions do NOT pay deposits, they only pay on progress.

Deposits paid to unscrupulous vendors essentially tie you to that vendor until such time as he or she delivers goods to the value of the deposit paid and if the correct checks and balances are not put in place before-hand, then there is a real risk of them not only delaying the project but ultimately delivering a finished product that does not measure up to your expectations.

If you are going to pay a deposit you MUST take cognisance of the following:

• The advice of your building contractor who should not only be in a position to vouch for the quality of workmanship and integrity of the respective sub-contractor but should also be able to assist with the implementation of performance milestones
• The track record of the supplier or service provider which should be verified by consulting with their most recent clients and, if possible, also engaging with their main suppliers
• The willingness of the service-provider to negotiate the deposit structure and to consider direct payments to their suppliers for materials required under your mandate
• The terms and conditions which form the basis of the supplier’s contract with you that, if suspect, generally are indicative of bad intentions

At the end of the day you will find that you HAVE to part with some money upfront, the key is knowing which service providers you can do this with which is why it is so important that you engage with a reputable building contractor from the outset.

Are you considering asking a builder to construct the “shell” of your new house only, with a view to you being responsible for taking the project through its finishing stages to completion? Whilst there aren’t many builders out there that WOULD prefer to finish your home for you, here are our top five reasons why you shouldn’t go down this road:

1. The “shell” is the easy part

The majority of building contractors today will admit that the construction of the “shell” is the easy part of the process and that the finishing is where the challenges are most often encountered. Do you have the knowledge and expertise to deal with these challenges?

2. The finishes reveal mistakes made in the structure

Mistakes made during the construction of the “shell” often only come to light during the finishing stages of the build. By this time, the building contractor you engaged with would have moved off site and may not be willing or able to assist with their rectification

3. The execution of the finishes requires constant supervision and attention to detail

Even the best finishing sub-contractors require constant guidance and supervision and it’s often a collaboration between building contractor and finishing specialist that produces the best results. Do you have the time and are you in a position to play the builder’s role?

4. Who do you point the finger at when mistakes are made?

When mistakes are made on a building site, one always looks for somebody to blame and when you have relieved your building contractor of his obligation to execute the finishes you lose all sense of accountability on the project. There will be good arguments for both sides as to how the mistake came about and what could have, or should have, been done to avoid it with neither side taking responsibility leaving you the client somewhere in the middle with little or no form of recourse

5. Mistakes will cost you big time

The amount of money you stand to lose if you make a mistake far outweighs the profit and attendance your building contractor makes using tried and tested sub-contractors to execute the finishes. Not only would you have to re-do the work with a suitable finishing sub-contractor but you would have to replace the materials used doing it incorrectly the first time round