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CODE COMPLIANCE – RISK vs REWARD

by Nov 16, 2021Advice

In the advent of media obsession with home build, renovation and house flipping programmes we have seen the rise of a new breed of side hustler’s who refer to themselves as ‘Property Developers’. 

How do you define a ‘Property Developer’? From what I can see this is a broad church ranging from someone who buys a run-down house, paints a bit and throws new carpet down all the way through to those who buy larger sites whereby they knock down what was there and redevelop something completely different. 

I have, and continue to, work with individuals and businesses carrying out development work across the spectrum and, having read an article by another ‘property developer’ in the press this week I thought it was time to share some of the things that are really worth thinking about as you embark on your venture, dream project or build.

What do I want to achieve? Fools rush in…….

Ooh, exciting isn’t it? Hang on let’s pump the brakes a little, please! 

This isn’t about which walls you want to remove or what tiles you want in your bathroom – it really frustrates me that people approach such complicated matters in the same casual way as a child’s impromptu trip to the sweet shop. I get it, you are excited and that’s really cool but all too often spurred on by a designer or architect whose role is, principally, one of design and creativity. I believe this is exactly how it should be of course but there have to be some parameters set or this thing will end up in an uncontrollable mess very quickly – trust me I have rescued many a project over the years. 

Let’s think about this slightly differently – say you would like to buy a new car, something we have all done at some point. Now, what is a car? Think about it for a minute? A car to me is a small, fun sporty thing but to some, it’s a four-wheel-drive station wagon and to some, it’s a 5 door hatchback. Whilst the sporty car may be what you want it may not be what you need? Why, then, would you go into a dealership with a list of accessories and colours and let the car salesman (or woman) tell you ‘ah I have that colour over here, with that specification, but it’s a three-wheeled car and it only has one seat’? Would you buy it? Not unless it does what you need it to do (and hopefully has another wheel and possibly at least one more seat?).

All the time people get excited by the design, and that is great, but let’s just bottle that for now. It doesn’t mean you can’t go nuts at some point but it just means that you have to make a sensible list of requirements first.

A user requirements study is the starting point, what does the building need to do to perform? How many bedrooms, living rooms, bathrooms. Single storey, multi-storey – garage, terrace, and so on. Trust me to get this down on paper first its a really important part of the process, it stops people hijacking your project and delivering up something you aren’t happy with at the end.

What is my appetite for risk? No Pain No Gain, right?

A critical thing to understand about yourself, your finances and your capabilities. Arguably there is risk in everything we do and our appetite for the extent of this is generally governed by our feelings about the reward we will get from undertaking the project.

My experience tells me that attempts to eliminate this risk or park it on others is an impossible task regardless of what you may think or be told – truth is there are things you can do to minimise it but I often look at contract clauses created by procurement teams and solicitors and think ‘Why on earth would anyone in their right mind sign up to this?’ 

If you pick the right team, see below, there will be a focus on delivering the project satisfactorily, providing you approach everything in good faith. A contract is an important document to set out everyone’s responsibilities but try and resist the temptation to engage solicitors to amend or overdevelop unfair clauses. Those cynical experienced people have spotted that the only winners are the solicitors trying to unpick ambiguous or conflicting terms and conditions that have been introduced in the first place. New Zealand has some standard forms of contract that can be utilised and provide a written document that can be referred to in order to understand each party’s obligations, keep them simple and fair.

There is an argument to suggest that anyone willing to shoulder an unreasonable or disproportionate amount of risk is either inexperienced or desperate – neither of these qualities is high on the list of traits you would want to have on your ideal team.

Have a clear plan of headline objectives – Price, Quality, Time.

Have a clear path of how to get there in the most appropriate way to achieve the key headlines of key importance – in simplistic terms what is most important to you? You can only pick one out of ‘Price’, ‘Quality’ & ‘Time’? Which is it?

Quality of the finished product is most important? This will take time and cost more

Time to design and build most important? This means it may cost more and the quality won’t be the highest focus

If the cost of building is of key importance then time and quality will be a secondary consideration.

So which is it?

The team? Like herding kittens into a box.

Having given due consideration to the factors in the first three points will bring us to another key consideration, who do you need in your team? What skills and experience do you need and how do you pick them? What sort of people to do you want to work with?

I try and find collaborative people to work with, accepting the fact that good people will want to share their knowledge and experience in a challenging but professional manner. Something that should be encouraged but managed carefully.

Ask for testimonials from clients, view peoples work, get a feel for the person or people you are getting in to help – you are more than likely going to spend a lot of time with these people and whilst you don’t have to be ‘best of mates’ it’s important you get the right team, right skills and experience in your type of project and that they are ‘compatible’. You need to try and pick people with the right style and personality to complement the others within the team. So much time and money is wasted trying to deal with ego battles and ignorance its important to make sure this doesn’t happen with your project. Whilst a building is designed, constructed and finished by a huge team of disparate people you really shouldn’t care as the client – you just want a building that hangs together properly

Engaging the Team? Mind the Gap

Modern-day construction goes way beyond producing some drawings and engaging a contractor to build or refurbish according to your vision. In its drive to maximise profit from a competitive market place contractors come in many sizes and forms, the same can be said for all the professionals you have working on your scheme. Unless you are very clear about who is doing what you may find yourself saddled with some of the shovel work yourself – and I am not talking about digging holes, it’s much worse than that I am talking about the ‘gap’.

The gap appears in different places, for different reasons in different projects. It could be at the early stages and relate to the design or it could crop up during the project, that horrible moment where there is a sudden interest in shoe leather in a meeting. Shortly followed by the ‘I wasn’t engaged to do this’, ‘that’s not my job’ or ‘we didn’t include that in our price’! It always happens at the most critical times.

One of the real tests of how your team functions is how these kinds of gaps are avoided, and on occasion, how they work together to resolve things. Not that we are advocating the excessive engagement of consultants or labour either.

What works and what doesn’t comes from experience. That experience usually comes from having made that mistake before! No one is perfect but we can certainly help you spot and, most importantly, avoid them.

And all of this before you have even broken ground and dug the first shovel full of soil.

Failing to plan is planning to fail.

The article that I read makes a number of points that tell me very little consideration was given to the shortlist of key points above. When you are reading a report peppered with phrases like ‘When things go wrong, they can do so spectacularly’ and that things ‘spiralled out of control’ on a project that was budgeted at $200k for 4 months but took years and cost $400k I bet they had wished they had read this blog, planned things a little better and engaged the right team to work with?

You know what to do……