10 Most Common Mistakes Made by Property Developers
1. Assuming that the Architect will be practical when designing your building.
1. Assuming that the Architect will be practical when designing your building.
1. Assuming that the Architect will be practical when designing your building.
While architects excel in creating visually stunning buildings, a 20-year veteran in Facilities Management like myself has observed a crucial gap: many architects aren't involved in the day-to-day operations of the buildings they design, overlooking the significant impact experienced Facility Managers can have during the design phase.
This oversight can lead to costly long-term maintenance issues overlooked by those more focused on aesthetics or immediate sale prospects.
Key Oversights and Their Financial Implications:
Tiling: The choice between cheap and high-quality porcelain tiles has long-term cost implications, especially in high-traffic areas. Opting for quality not only increases durability but also reduces frequent, costly replacements.
Security: Balancing building codes with effective security measures like CCTV and access control can prevent costly retrofitting and reduce vulnerability to insurance claims through thorough surveillance.
Sanitaryware and Hygiene Equipment:
Replacing expensive toilet seats, Gerberit systems and hot air hand driers etc. are costly. Thought must go into the type of client or staff that will use the ablution facility.
Sometimes it is necessary to build a “bullet proof” ablution facility as you are serving a market in a high crime area.
We often find that the staff working in the building are those creating the most damage.
In essence, integrating practical, long-term maintenance considerations into the architectural design process, with input from experienced Facility Managers, can significantly reduce future operational costs and enhance building functionality."
2. Failure to read and understand the Professional Team’s appointment letters
1. Assuming that the Architect will be practical when designing your building.
1. Assuming that the Architect will be practical when designing your building.
You may be asking, why should I be reading the appointment letters.
You have appointed a Principal Agent on the project.
You need to for the following reasons:
- Principal Agents get fired by Developers more often than you think.
- They change jobs.
- It is often assumed that a consultant will do something in the course of his duties, only to find that it was not included in his fees.
An example could be that CAD drawings are not included in the documentation that’s handed to you. For that you must pay additional as the consultant has exclusivity.
- You want to know what the relationship will be after the project is complete.
- You want to know the rate charged for any extra work after completion of the initial project.
- It is common for consultants to work on more than one project at a time.
The closer a project comes to completion the more likely that the consultant will be concentrating on the next big job.
He must earn a living after all.
You need to confirm if the fee includes his full-time devotion to your project.
3. Utility Management
4. Guarantees and Warranties
4. Guarantees and Warranties
I have not worked on a project where a Utility management specialist has been appointed from the beginning. The electrical engineer is tasked with doing the design for the building.
They are not normally utility management experts and often the incorrect meters are installed. Later when the specialist is appointed, they specify different meters. Meters that work with their software and billing system. This cost eats into an already tight budget.
The importance of managing water, electricity and gas consumption in a building cannot be over emphasized.
There are several reasons for doing this:
- To ensure that all consumption is accounted for.
- To ensure that the supply equals what was consumed in the building.
- In drought-stricken areas, the local authority may impose fines on those using more water than what is allowed. If you are unsure who is wasting water the developer or owner will have to pay the fines.
- It prevents queries from tenants.
- It assists in recovering utility expenses where tenants are responsible in terms of the lease agreement for common area water, electricity or air-conditioning.
4. Guarantees and Warranties
4. Guarantees and Warranties
4. Guarantees and Warranties
Some contractors and suppliers tend to be vague about the guarantees and warranties. But this is where the problem arises. Let me tell you a quick story.
The story centers on a painting contractor and a renowned paint supplier involved in a large project where paint faded within six months of completion.
Despite the contractor's belief in a defective product the paint supplier inspected the area and took samples for analysis.
A few weeks later we received a reply. The supplier's analysis blamed incorrect application and unapproved application methods, refusing liability.
Unbeknownst to us, the contractor needed supplier approval, a fact omitted until after the issue arose.
Suddenly our guarantee and warranty was not worth the paper it was written on.
We had a building contract in place that made the main contractor liable for the defects for five years. They had to repaint a large portion of the building.
But what happens when the life expectancy of a product is more than five years and it fails in year six? I leave that thought with you.
It is important to understand upfront what the guarantees/warranties mean and cover.
5. Failure to read and understand tenders
6. Not compiling an Ops Budget based on the Architects drawings at the beginning of the project
6. Not compiling an Ops Budget based on the Architects drawings at the beginning of the project
For me to illustrate the importance of this I need to tell you a story about an experience I had on a large project a few years ago.
A full team of consultants were appointed which included a fire engineer. The engineer was responsible for the Rationale Fire Design. This included the design for the fire detection system.
I requested a copy of the tender from the QS. I received the lengthy document along with a set of drawings that was prepared by the fire engineer.
The document was standard except for one section that concerned me. I cannot remember the exact words, but it stated the Tenderer must “Design and Supply” the full system.
This meant that the engineer had worded the document in such a way that the responsibility for the design and functionality of the fire system now became the responsibility of the contractor.
Why would the engineer have shifted the responsibility from himself to the contractor? I could only think of one reason and that was to negate any responsibility in the event the systems failed.
If the building was damaged due to a fire the engineer could turn around and say that it was a design and supply tender. He is therefore not responsible even though his design and drawings were approved by the local authority.
The Developer has no claim against the engineer’s professional indemnity insurance.
He can claim only against the contractor.
6. Not compiling an Ops Budget based on the Architects drawings at the beginning of the project
6. Not compiling an Ops Budget based on the Architects drawings at the beginning of the project
6. Not compiling an Ops Budget based on the Architects drawings at the beginning of the project
The Architect has produced a design.
The Quantity Surveyor has the responsibility to obtain several quotes from reputable contractors based on the drawings given to him.
At this early stage of the project there is insufficient information about the equipment, finishes, fittings that will be supplied and installed.
Without this information it is difficult to compile an operational budget. It is common for this budget to be understated.
The developer or property owner lands up paying more for repairs and maintenance than what has been budgeted.
This miscalculation affects the bottom line, and this could affect the viability of the project.
I have worked on two projects where the roofing material supplier would only guarantee the roof sheeting if the roof was washed twice a year. Cleaning just one of the two roofs would have cost the developer R240 000.00 ($16000.00) per year.
This requirement was not mentioned at the time of providing the quote. To maintain the guarantee for ten years would cost R2 400 000.00 ($160 000.00).
Depending on the type of roof and location, it may be cost effective to replace as opposed to a simple wash down.
7. Ensuring that you get what you paid for
7. Ensuring that you get what you paid for
7. Ensuring that you get what you paid for
Tenders are completed before the work is carried out. As a project progresses changes may become necessary due to various factors.
Unfortunately, these changes are not always recorded correctly, and the developer may pay for something that is not received.
When the changes cost more than what was tendered you can be assured that the cost difference will be highlighted.
A few examples are listed below:
- Lighting: A certain fitting was specified but was changed due to availability. A cheaper unit is supplied.
- Furniture: You pay for leather but receive a cheaper alternative.
- Electrical: Circuit breakers or other items my be replaced with an alternative cheaper product.
- Fire detection: You pay for an installation with a Class A loop, but the contractor changes it to a Class B.
- Airconditioning: Certain components may be removed as the contractor does not believe it will affect the unit. Controllers may be downgraded from what was quoted on.
It is important that the professional team specify materials to be used at tender stage.
Also, important to ensure that they are aware of their obligation to report changes where there may be a cost implication on the project. Accountability is key.
8. Asset Registers
7. Ensuring that you get what you paid for
7. Ensuring that you get what you paid for
An asset register, a crucial yet frequently disregarded document, serves as an essential tool for managing and maintaining a comprehensive inventory of a project's assets.
This document, ideally, is a collaborative effort where each professional from their respective discipline, including architects, engineers, and contractors, contributes detailed information about the assets for which they are responsible.
The role of compiling these individual contributions into a cohesive, singular document falls upon the Principal Agent, who then presents the final asset register to the Developer upon the completion of the project.
Despite its significance, it's not uncommon to encounter situations where the creation of an asset register is omitted from the project scope, often due to oversight or misunderstanding of its importance. To ensure its inclusion and comprehensive execution, the requirement for an asset register should be explicitly stated in the appointment agreements of the professional team.
The asset register is indispensable for several reasons:
1. Insurance Purposes: It provides a detailed inventory of the project's assets.
2. Comprehensive Equipment Listing: The register should include a thorough list of all significant equipment acquired during the project.
3. Maintenance and Replacement: By documenting the specific details of each asset, the register aids in planning for routine maintenance and eventual replacement.
9. Not asking for all the building related documents
10. Failing to ensure adequate storage areas and onsite facilities
10. Failing to ensure adequate storage areas and onsite facilities
One will never understand how important it is to have the buildings documents on hand until you need it. You may need them for the following reasons:
- If the building will be sold
- If the building will be renovated or added on
- Inspections by local authority
- Tenants requiring certain information prior to concluding a lease
- When there is a dispute between owners and contractor
- Insurance
I have said it more than once already, relationships change. You do not want to be the person having to ask for information from someone you no longer wish to work with.
Always make sure you receive the documents both in a “hard copy” and electronic format.
10. Failing to ensure adequate storage areas and onsite facilities
10. Failing to ensure adequate storage areas and onsite facilities
10. Failing to ensure adequate storage areas and onsite facilities
This is another aspect that is often overlooked. The reason is because it is not rentable area. But where will you store attic stock of tiles, or accommodate on site cleaning and security staff
So there you have it - "10 Most Common Mistakes Made by Property Developers".
This document really delivered the goods when it comes to answering these important questions and challenges every Property Developer faces.
BUT, as you can also see, this is just the TIP of the iceberg when it comes to How to save costs and ensure a fully functional building with a low maintenance budget!
So, if you're serious about wanting to know how to save costs on your development, contact us and we would be happy to assist you.