Hints, tips, advice for townhouse development...

We are early days with our proposed development. Best scenario is that we get the DA approved and build four townhouses ourselves. We do have the option of getting the DA and selling the middle block with the DA. We will do well out of this, but not as much as if we go ahead with the build.

I've heard horror stories about "mum and dad developers" which is what we are. We know our way around a renovation, but developing and/or building from scratch is unknown, hence a bit (a lot) scary.

I'm doing my homework but am very keen to hear from those who have developed as to what sorts of things generally go wrong, cause delays, cause cost or time blowouts?

I know some of the "issues" of our particular block - extra cost to get footings through some fill, extra cost to make ceilings in the living area a little higher than normal to create a more spacious feeling, retaining walls required due to slope, having to move both existing houses to create a big enough middle block.

I've read MichaelW's Mona Vale thread, but will re-read again to brush up on what things popped up to create time slippage and stress. I keep thinking of that thread and I also know (via another friend) of someone who built townhouses behind their own house and had problem after problem. I don't know them personally, so cannot easily ask questions like "what went wrong?" or "what do I need to avoid"?

What should we look out for? What should we avoid?

Eg. When we first looked at this (under a different city plan) I was advised not to draw living areas under the house that will be shifted and raised, as that would take up valuable GFA that we need for the townhouses.

When I put this to the town planner, he said this is not the case (new city plan?) and that it comes down to density (or something else). I cannot remember the reason because I just was relieved to hear we could save money down the track and get the downstairs of the lifted house draw up now.

Our DA is to be lodged within a month. We are just waiting on a few things to be finalised. We have had a pre-lodgement meeting which indicated we should get approval, and if so, we will need all the hints and advice we can get.

Fire away :D
 
Hi Wylie,

I got 90% through a long post yesterday before my screen dropped out. Lets try again...

Here's some ideas to get you started:

1. Never use the HIA contract. Its weighted in favour of builders so when something goes wrong, which it will, you'll have limited recourse.

2. Ensure the contract has a robust Scope of Works, Schedule of Finishes and Specification. Ensure the Scope of Works is the precedent document in the pack even ahead of the contract itself. Call this out in the Scope of Works.

3. Get a good Architect. Use them for both the DA and the CC drawings. I skimped on CC drawings and the builder used these as their primary document, ignoring the Scope of Works in the contract which created all sorts of issues through the build. Spend the money to make sure your detailed CC drawings are comprehensive and detailed.

4. Get good engineers. Both structural and hydraulic, and ensure their design is integrated into your CC drawings. Don't wait until after CC.

5. Get a good Project Manager. You can use the Architect in this role if appropriate, but you need a Project Manager on your side to over see the build and hold the builder to account.

6. Get the project manager to check all weather claims. The builder will try and extend the timeframe through weather delays. You need to be all over this early. Once you're at lockup, these should largely cease as all work moves inside except hard landscaping.

7. Make sure you have decent liquidated damages (LDs) in the contract. You need penalties on the builder for late delivery.

8. Have a good cash buffer. My paltry $50K buffer was burnt in the first variation from the builder for site contamination. That was poorly handled by me allowing them to dump the entire excavation spill at a contaminated rate and recharge to me. There was virtually no asbestos on site and they never engaged a professional to quote its removal. They just dumped all the spill and charged me a $50K variation.

9. Spend the time up front getting the contract right. All the steps above will assist in this. If you have a weak contract with any ambiguity you will be in for a world of hurt.

10. Eliminate Provisional Sums and Prime Costs from your contract entirely. Include all design details in your Specification so you don't need a Prime Cost, right down to carpets and tiles and all your fittings and fixtures. PS and PC items are another avenue for the builder to stack their margin at your expense through the build. If the contract is even slightly ambiguous they will claim them as provisional and issue a variation.

11. Have a good banker. My personal banker saved my bacon. He leant me a $75K personal loan at his discretion at the tail of my project to get me across the line as there was nothing left in the valuation to allow any more variations. That bought me the time necessary to finalise with my lawyer the deed of settlement with my builder to get the keys.

It is a rewarding process and has now stood me in very good stead. But if you aren't made of the right stuff, or haven't invested the time "up front" getting yourself bullet proof with a strong team and contract, then you have set yourself up to be hurt.

You're doing the right thing spending the time NOW to make sure you're successful.

Wishing you all the best,
Michael
 
Hi Wylie,

I got 90% through a long post yesterday before my screen dropped out. Lets try again...

Here's some ideas to get you started:

1. Never use the HIA contract. Its weighted in favour of builders so when something goes wrong, which it will, you'll have limited recourse.

2. Ensure the contract has a robust Scope of Works, Schedule of Finishes and Specification. Ensure the Scope of Works is the precedent document in the pack even ahead of the contract itself. Call this out in the Scope of Works.

3. Get a good Architect. Use them for both the DA and the CC drawings. I skimped on CC drawings and the builder used these as their primary document, ignoring the Scope of Works in the contract which created all sorts of issues through the build. Spend the money to make sure your detailed CC drawings are comprehensive and detailed.

4. Get good engineers. Both structural and hydraulic, and ensure their design is integrated into your CC drawings. Don't wait until after CC.

5. Get a good Project Manager. You can use the Architect in this role if appropriate, but you need a Project Manager on your side to over see the build and hold the builder to account.

6. Get the project manager to check all weather claims. The builder will try and extend the timeframe through weather delays. You need to be all over this early. Once you're at lockup, these should largely cease as all work moves inside except hard landscaping.

7. Make sure you have decent liquidated damages (LDs) in the contract. You need penalties on the builder for late delivery.

8. Have a good cash buffer. My paltry $50K buffer was burnt in the first variation from the builder for site contamination. That was poorly handled by me allowing them to dump the entire excavation spill at a contaminated rate and recharge to me. There was virtually no asbestos on site and they never engaged a professional to quote its removal. They just dumped all the spill and charged me a $50K variation.

9. Spend the time up front getting the contract right. All the steps above will assist in this. If you have a weak contract with any ambiguity you will be in for a world of hurt.

10. Eliminate Provisional Sums and Prime Costs from your contract entirely. Include all design details in your Specification so you don't need a Prime Cost, right down to carpets and tiles and all your fittings and fixtures. PS and PC items are another avenue for the builder to stack their margin at your expense through the build. If the contract is even slightly ambiguous they will claim them as provisional and issue a variation.

11. Have a good banker. My personal banker saved my bacon. He leant me a $75K personal loan at his discretion at the tail of my project to get me across the line as there was nothing left in the valuation to allow any more variations. That bought me the time necessary to finalise with my lawyer the deed of settlement with my builder to get the keys.

It is a rewarding process and has now stood me in very good stead. But if you aren't made of the right stuff, or haven't invested the time "up front" getting yourself bullet proof with a strong team and contract, then you have set yourself up to be hurt.

You're doing the right thing spending the time NOW to make sure you're successful.

Wishing you all the best,
Michael

Yes, its very important to do the last part very well- get yourself a damn good team around you- lawyers, bankers, builders, project managers, etc etc.
 
Wow excellent post Michael. Thanks for taking the time and write it. I'm starting my development journey and this is great info.

Would you be able to PM sample of building contract (obviously you can take out any sensitive info).
 
Thanks Michael. That is a very well considered and helpful reply - just what I was hoping for. I skimmed it at work and will read again in depth to try to understand it better, and may have some further questions in a few days (working loooong days this week).

Cheers
 
Hands down the best post on developing Michael.

Just a couple of ?'s:

1. Re point 3 you mentioned the builder ignored the SoW but why and wouldn't this be in line with the CC drawings? What was missing from your CC drawings?

2. Re point 4 you mention integrating structural and hydraulics in the CC but you need to do this to ascertain the CC so what was done differently?

3. What does the SoW have that isn't covered in the schedule of finishes or specifications?
 
Hi Shahin,

My answers below, hope this helps clarify...

1. Re point 3 you mentioned the builder ignored the SoW but why and wouldn't this be in line with the CC drawings? What was missing from your CC drawings?

The builder was contractually obligated to deliver the Scope of Works. It specifically calls out that I am under no obligation to award Practical Completion until the full Scope of Works is delivered inclusive of all certifications and warranty documentation being handed over. Nonetheless, the builder argued that the CC drawings were the basis of the design and if something wasn't clearly shown on the CC drawings then it wasn't in scope regardless what the Scope of Works stated. For example, my Scope of Works called out the need for mechanical louvre blinds to the top floor balcony in unit 2. These were not shown on the CC drawings so the builder argued they weren't required. Because there was ambiguity between the CC drawings and he SoW this created a point of contention which would need to be argued. In the end I had to settle with the builder under a binding Deed of Settlement and this is one item I conceded to get the keys. Eliminate any ambiguity. Make sure all the documents are "aligned".

2. Re point 4 you mention integrating structural and hydraulics in the CC but you need to do this to ascertain the CC so what was done differently?

Because I dropped my principal architect at CC to try and save some money (about $30K) we ended up going with a much reduced fee company at the builder's suggestion for CC drawings. This architect did up about 6 pages of drawings and that was it. The hydraulic engineer and structural engineer were involved and their certifications were required for CC, but the lack of integration with the architect taking the lead meant there were some problems in the design. For example, the hydraulic engineer hadn't interacted with the structural engineer so the floor penetrations through the ground floor slab above the basement carpark clashed with the structural engineering reinforced concrete beams. This meant a complete rework of the downstairs bathroom in the townhouse to accommodate moving the floor penetrations due to the slab already being poured with thick structural concrete beams where the penetration should have been.

3. What does the SoW have that isn't covered in the schedule of finishes or specifications?

The Scope of Works articulates WHAT is to be done. The Specification articulates more clearly HOW it is to be done and what products are to be used. The Schedule of Finishes is a list of specific products to be used in the build.

The Scope of Works is just that, everything the builder has to deliver for me to agree the scope is complete and award Practical Completion.

The Specification says how it is to be done. i.e. Double glazing to the North and West facing windows. Fly screens to all windows and doors. etc.

The Schedule of Finishes says things like tapware to be Ram Luka blah blah blah. Tiles to be light travertine, honed and filled, 300x300. Carpets to be...

Hope that helps,
Michael
 
That's amazing Michael. I am just builder shopping for a townhouse builder so this is really useful right now. Thanks for spending to time to write up.
 
Thanks for such a comprehensive reply. I have a few questions when you have time to answer. We heard today our engineering reports are being done and we also were emailed the final drawings, and it seems we will be lodging to council in January. That means we have time to get ourselves au fait with the things we need to know because it will take at least three months (up to twelve months?) to go through council.

Excuse my ignorance, but this is very new to me.

Hi Wylie,

I got 90% through a long post yesterday before my screen dropped out. Lets try again...

Here's some ideas to get you started:

1. Never use the HIA contract. Its weighted in favour of builders so when something goes wrong, which it will, you'll have limited recourse.
Who do we get to draw up a contract... solicitor?

2. Ensure the contract has a robust Scope of Works, Schedule of Finishes and Specification. Ensure the Scope of Works is the precedent document in the pack even ahead of the contract itself. Call this out in the Scope of Works.
What do you mean by this last sentence? Do you mean we need to point out somehow that the SoW is the document that the quotes are worked out from?

3. Get a good Architect. Use them for both the DA and the CC drawings. I skimped on CC drawings and the builder used these as their primary document, ignoring the Scope of Works in the contract which created all sorts of issues through the build. Spend the money to make sure your detailed CC drawings are comprehensive and detailed.
We started ar$e about really. We called a builder whose work we saw and liked. We hope to use him if his quote is acceptable (will get other quotes of course). He was most helpful and steered us to his designer. He said his designer and he worked together a fair bit on his own developments plus others and that his designer designs for good looks without losing sight of build costs, ie. nothing too fancy that will blow out the cost. We also met and engaged the certifier they both have used before to make sure what is designed can be built and certified. This certifier brought on board the town planner he works with, so our team is inter-related in ways, but have not all worked together or met before. We are comfortable with this team.

4. Get good engineers. Both structural and hydraulic, and ensure their design is integrated into your CC drawings. Don't wait until after CC.
We are relying on the town planner (ex-BCC town planner) for his choice of engineers. If we didn't have this lead, we would have to pick one out of the phone book, so we are comfortable to go with the recommendations of the town planner.

5. Get a good Project Manager. You can use the Architect in this role if appropriate, but you need a Project Manager on your side to over see the build and hold the builder to account.
This is something that confuses me. We are not using an architect but a designer. I'm not sure if he would project manage it. I have the name from this forum of one that was recommended. But we also know a developer (lives nearby) who uses his architect to project manage. I'm thinking the designer who knows the builder well is not the best choice as his loyalties may be tested if there are issues.

Also, our developer friend says he locks things down so tight with his contracts that he sighs with relief once the ink is dry and then relaxes whilst things move along. He will be a good sounding board, but we don't know him terribly well, though he is happy to help us.

I believe we could project manage this ourselves if there are no hiccups, but we just don't know what we don't know... so different to renovating, which we could do with our eyes closed.

Another developer who I spoke with told me that if we pay a project manager, we should not pay more than 3%. Does that sound about right?


6. Get the project manager to check all weather claims. The builder will try and extend the timeframe through weather delays. You need to be all over this early. Once you're at lockup, these should largely cease as all work moves inside except hard landscaping.

7. Make sure you have decent liquidated damages (LDs) in the contract. You need penalties on the builder for late delivery.

8. Have a good cash buffer. My paltry $50K buffer was burnt in the first variation from the builder for site contamination. That was poorly handled by me allowing them to dump the entire excavation spill at a contaminated rate and recharge to me. There was virtually no asbestos on site and they never engaged a professional to quote its removal. They just dumped all the spill and charged me a $50K variation.


9. Spend the time up front getting the contract right. All the steps above will assist in this. If you have a weak contract with any ambiguity you will be in for a world of hurt.
I will ask our developer friend who does his contracts, but I'm guessing perhaps a solicitor? If we don't want to use a HIA contract, is a solicitor the best person to do this?

10. Eliminate Provisional Sums and Prime Costs from your contract entirely. Include all design details in your Specification so you don't need a Prime Cost, right down to carpets and tiles and all your fittings and fixtures. PS and PC items are another avenue for the builder to stack their margin at your expense through the build. If the contract is even slightly ambiguous they will claim them as provisional and issue a variation.
Can you give some examples of what sorts of things would be PS and what would PC?

11. Have a good banker. My personal banker saved my bacon. He leant me a $75K personal loan at his discretion at the tail of my project to get me across the line as there was nothing left in the valuation to allow any more variations. That bought me the time necessary to finalise with my lawyer the deed of settlement with my builder to get the keys.

It is a rewarding process and has now stood me in very good stead. But if you aren't made of the right stuff, or haven't invested the time "up front" getting yourself bullet proof with a strong team and contract, then you have set yourself up to be hurt.

You're doing the right thing spending the time NOW to make sure you're successful.

Wishing you all the best,
Michael

One thing I am concerned about is that we are building to one side of our block and one neighbour has openly told us that they will oppose anything we do. They told us this after we refused to pay half of a very expensive fence and only contributed half of a "standard" fence. We could have refused payment as they ripped out a functioning fence but we paid what we would have, had they gone about it the right way.

These neighbours have cut down probably two metres and there is a huge sandstone wall near to where we will be building. I want to ensure that should there be any issues with their retaining wall, that we don't have to cough up to fix it, and I guess that means making sure there is some sort of insurance for this possibility. What sort of insurance is this? Would it be something we have to take out, or would the builder be covered by their own insurance?

I know (and fully expect) that we will get objections. That doesn't worry me.

I hope you don't mind, but I think I may have lots of questions as we get closer to actually building (assuming we get approval of course.)
 
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