Property Repair and Renovation Options
by Fred Nolta, Nolta Consulting
As time marches on, property improvements wear out and deteriorate. Major repairs and renovations are inevitable and often required when least expected. When at this point a review of the options to address the issues is appropriate. Property Owners and Managers may want to consider the following as an initial first step action plan to deal with property improvement issues.
Existing Warrantees: First check for manufacturer’s and contractor’s warrantees. Review your operational and maintenance manuals and other files. Talk to them and request a site inspection. Gather information and their recommendations. California State law holds providers of property improvements responsible for some construction defects for up to ten years.
Insurance: Check to see if you have insurance coverage. Talk to your agent and request an adjuster do a site inspection. Additionally check on what premium savings are available with property improvements such as adding fire sprinklers.
Damage by Others: Consider if the deterioration was caused and/or exacerbated by detrimental events under the control or responsibility of others.
Incentives and taxes: Look into energy, water or other cash incentives or savings programs. Review tax ramifications and additional deductions and/or credits.
Government Mandated Changes: Investigate if the government is requiring implementation of current building codes now or in the near future. Code upgrades may be required to obtain a building permit determined by the scope of work.
Risk Assessment: Evaluate the property for unsafe, noncompliant code conditions. Are there any accidents waiting to happen? Consider deteriorated components that are allowing additional damage that will cost more to fix later.
Property Revenue: Consider if the property has lost its market appeal with income revenue falling off. Calculate what kind of pay back improvements would yield.
Experts: Consult with an expert(s) and possibly an attorney specializing in the appropriate area regarding the issues and results of the items above. Exhaust all reimbursement options.
Ballpark Budget: Develop a first pass budget and business plan.
At this point a realistic review of your available time; resources; level of design and construction expertise; and adversity to risk should be evaluated. You have several options as far as performing the repairs and renovation work. Perhaps as the song says “the thrill is gone” and it is time to liquidate the property. This evaluation is key to making the right choice for you. The following second step options include pros and cons are available to consider:
Hire a Design Professional: Retain an architect, engineer, and/or other design professional(s) to investigate the issues and restraints, develop recommendations, and incorporate your desires into a scope of work. A set of preliminary plans with notes are the usual deliverable. Then you, the design professional, or others solicit pricing on the preliminary plans from contractors to develop a detailed project estimate. The design is analyzed for cost efficiency with input from the contractor(s), a process often referred to as value engineering (VE). Plans are revised and re-priced several times until an acceptable scope and estimated cost is reached. Next the plans are fully developed with specifications (collectively known as the construction documents, CDs) and are submitted to plan check for a building permit. You then select a contractor (in most cases by bidding out the documents), execute an agreement with the contractor(s) and start work once a permit, financing, and other issues are resolved.
Pros: You have direct control of the design professional(s) and contractor(s). If you have the time, expertise, and adversity to risk this could potentially be your most cost effective approach.
Cons: Design professional(s) are not experts at construction cost, means/methods, schedule, and contractor administration. The VE and budget alignment process can be a very painful and slow. In most cases rework of the preliminary plans and CDs are extra services for the design professional(s). Any shortcomings in the CDs are usually additive change orders to the contractor(s). A considerable amount of time and effort is required to manage both the design professional(s) and contractor(s). This is a higher risk option.
Hire a Design/Build Contractor: Retain a design/build contractor (DB contractor) who in turn retains the design professional(s). The DB contractor follows the similar scope of work development steps noted above except he/she checks cost, constructability and schedule as the plans are being developed. Plans and pricing are then submitted to you for review. A cycle or two of revisions usually follow. The building permit is obtained with the work starting when all the other requirements are completed.
Pros: The alignment of CDs, budget and schedule is expedited. Since the design professionals are the responsibility of the contractor(s), design errors are not automatically your liability. The contractor(s) is on board at the start allowing materials to be finalized, “bought-out” and incorporated into the CDs. This is a major advantage when dealing with equipment sizes, “rough-in” locations and “finishes”. Long lead time materials can be purchased before or during plan check to meet schedule. There are fewer number of “players” to manage. Design build concept works very well with restore to previous condition repairs; equipment replacement; and non architectural issues.
Cons: Designers are under contract and control of the contractor(s) therefore their loyalty is to them first. Additional consulting design experts may need to be retained to represent your best interests. Contractor(s) will place an additional mark-up on the design fees. When a high degree of design creativity is required you may prefer to have the designer(s) under your direct control.
Hire a Construction Manager: Retain a construction manager (CM) who can also assist you starting with step one noted above. CMs can cover the entire process going beyond the actual building portion. They facilitate the hiring and management of the design professional(s) and contractor(s) plus inspection/testing services. CMs can interface with property occupants, adjoining properties, utility services, permitting agencies, etc. As the plans are being developed the CM monitors and manages the budget, schedule and the incorporation of your directives.
Pros: CMs can bring a high level of expertise and experience, minimizing risk, cost and time. Their services consist of a very small percentage of the project, which usually pays off. The number of players you are required to manage is greatly reduced.
Cons: There is no certification or license required to call yourself a CM. In most cases a contractor license is not required. Therefore the range of abilities and fees is enormous. When hiring, focus on the actual individual and their expertise, not on the company resume.
In closing, the vast majority of renovations and repairs are unique circumstances requiring custom solutions. Hopefully this article will assist you in to begin in your decision process and generate a positive outcome.
This article appeared in the November 2010 issue of Rental Owner.
All photos on this website are from Fred Nolta's experience performing a significant role in their construction or forensic analysis.