By Juan Poleo, Project Executive
Just about everyone knows someone in a condominium who has complained about the “disaster construction project” in their building. From critical problems like budget overruns and schedule delays to daily aggravations such as dust, noise, it is poor planning that leads to these common issues.
South Florida has one of the highest concentrations of condominium buildings in the country. Many need maintenance or upgrades to improve or retain property values. With new, modern buildings regularly creating more supply, it is increasingly important for associations to remain competitive within the market. Each project type, commonly ranging between 40-year certifications, façade restorations, waterproofing of pool decks and roofs, lobby and corridor renovations among others has its own unique complexities and challenges.
All of these projects start with well-intentioned residents seeking to improve their community. Board members and property managers dedicate time and try their best. Yet, so few of these projects are completed successfully within budget and initial expectations.
With nearly 30 years of construction experience in the condominium association industry, Amicon’s team of experts specializes in representing condominium associations through these capital improvement projects. Our team has unparalleled expertise in guiding condo boards through the many complexities of the construction process ranging from financial assessment strategies to resident communication to detailed construction management with the quality of resident life always at top of mind.
We have seen just about everything that can happen on a condo capital improvement project, mostly due to a condo board trying to take on project management without professional consultation. Below are the 5 most common reasons we see these types of projects fail:
1. Lack of Construction Experience on Condo Boards
Condominium projects are very different than private development projects. In private development, owners and clients evaluate information and make decisions towards their individual goals. Condominium associations are usually led by elected board members or appointed committees with the goal of operating as fiduciaries for the best interests of their neighbors.
Large projects are often led by volunteers who do not have the local experience or time to manage a large construction project. Some board members may have goals and interests which are not aligned with other board members or their fellow residents. Strategic presentations are required to achieve the necessary consensus. Not unlike U.S. politics, differing opinions lead to indecisiveness, inaction and blame.
One would never let an inexperienced volunteer fly an airplane, run our business, or manage our finances, yet somehow condominium boards are too often tasked with managing large budget projects. So, it isn’t surprising if these projects do not go well.
Boards have regular turnover. The goals of a new board can be different than a prior board. This can cause changes in course leading to delays and additional expenses. Board members may not be local to the South Florida market and may bring a set of experiences which is less relevant. They may also have a limited local professional network.
A professional third party manager can create a continuity between boards and a consistency for all professionals involved.
2. Inaccurate or incomplete budgeting
Condominium capital improvement projects can be funded in several ways: Reserve accounts, outside financing, property assessments or insurance proceeds are just a few. Preliminary budgets must be provided to gain approval on project funding. Our team often finds that presented budgets end up being insufficient for the project costs.
Without the input of a seasoned professional with extensive relevant experience in the local construction market, it is virtually impossible for a board to prepare an accurate budget for a future project which, in many cases, does not have final designs completed. Many budgets lack required expenses for contingencies, soft costs and expenses outside of a contractor’s estimate. Certain types of projects require larger contingencies for unknowns. These projects are set up to fail before they even start.
While boards are usually able to identify the work that needs to be done, they struggle with identifying complete costs for these projects and gaining necessary support for project approval.
In a typical scenario, a well-meaning board member will attempt to get pricing from local contractors and then present those numbers to residents for approval. Because the scopes of work are often incomplete, contractors will provide low estimates to remain competitive and end up issuing change orders that create serious budgeting issues later on. For projects with many elements of unknowns like concrete remediation and waterproofing, contingencies can be triple the requirements of the initial budget.
3. Wrong project team selection
Condo projects are unique in that the “jobsites” are fully occupied by residents. This fact alone makes the team selection critical. After a budget is properly established, the selection of a team of professionals is a pivotal decision.
A typical project team could include the architect, general contractor, engineers, interior designer, and specialty vendors. Each firm should be selected based on their capabilities and local experience in the specific type of project. All members of the project team should have extensive experience in phasing, logistics and overall management of large projects within fully occupied buildings creating the least possible impact to residents. Due to the difficulties and complexities of working in condominium buildings, there are limited professional firms that can execute these types of projects successfully.
It is critical to perform a thorough analysis of the project team, current workload and recent references. The quality of the client’s experience with a given firm will largely depend on the quality of the team members that will staff the project.
Even the best contractor will need to be carefully managed. Clear expectations established at the onset including regularly scheduled meetings and deliverables will help create a structure of effective project communication. In the absence of qualified leadership, many project teams can become frustrated by a lack of a clear point person, decision (or indecision) by committee and providing timely information.
Projects tend to experience scheduling issues right at the end. Understanding how to complete final project exercises such as punch lists, final inspections and payment closeout can be the significant difference between a successful and a failed project.
While most condo boards have legal representation, someone with complete knowledge of the construction deal points is essential in preparing and completing contracts. A qualified Owner’s Representative should work alongside the attorney in determining the best contract structure, scope and all terms and conditions specific to the project. Understanding how to structure terms like liquidated damages, extended general conditions and change order management are critical to creating a structure to protect the Association.
4. Reliance on Property Management for Project Management
Project management and property management are completely different roles. Many boards make the mistake of tasking their property managers with the responsibilities of being a project manager. The role of a property manager should be dedicated towards the successful management of the resident experience as well as the property condition. Property managers know their residents, and are key to project success as a liaison between the construction project team and the rest of the community. If set up properly, a positive relationship between the property and project teams can be a great recipe for success. If the project doesn’t have an Owner’s Representative, many property managers, already stretched thin with their responsibilities, become unfairly tasked with an additional workload which limits their ability to do their primary job.
A lack of a true understanding of construction accounting including tracking releases of lien can create major problems as well. While associations generally have good operational accounting, a command of construction project accounting is required for accurate budget management so that current financial status can be provided in real time.
There are many points during a capital improvement project in which there are controversial decisions to be made which can be misjudged by residents who may not have all of the information. Most condo board members do not want to have to discuss their recent decisions and project status with their neighbors every time they get in the elevator to walk their dog. It gets even more complicated if the project is not running smoothly. A professional project manager can provide an additional layer of separation for board members and property managers to shield them from these issues and communicate on their behalf. It is far better to rely on an informed, qualified professional to provide clear, transparent information to residents rather than a board member taking the heat.
Organized, regular communication outlining the project goals as well as regular updates and adjustments are greatly appreciated by residents and can change the tone of how a project is viewed.
In summary, condominium projects have the potential to increase property values and improve quality of life for residents. However, if poorly executed, the experience can have the reverse effect causing buildings to become devalued as drawn out, mismanaged projects will scare prospective buyers and reduce sales. Residents can face ongoing disruption as well as continual budget overruns. To achieve project success, it is critical that condo boards have an experienced, qualified professional at their side to manage the successful completion of their project.
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