“Give me six hours to chop down a tree, and I will spend the first four sharpening the ax.” – Abe Lincoln
Considering Western North Carolina’s affinity for new residents, as well as the sheer number of folks in the region buying and building homes, either for themselves or for sale, an overview of some basic procedures and pitfalls might be in order.
[dropcap]F[/dropcap]or an owner, conceiving, planning, and funding the construction of a unique, custom residence can be a challenging but rewarding process. It might even take up several years of decision making, planning, monitoring, and managing such a project, no small investment in terms of your time, energy, and, of course, money.
As a practicing construction lawyer for the past 13 years, I’ve been involved with hundreds of different projects and seen the process and outcome through the eyes of all of the major players, including owners, designers, lenders, Realtors, subcontractors, and suppliers. Given the complexity presented by a construction project, it should not be surprising that problems routinely occur in the process and outcome of the project, which affect the time, cost, and quality of the project. As construction lawyers, we are routinely called in to mitigate and resolve these types of problems either midstream or after completion of a project. All too often, such problems could have been minimized by thorough, appropriate planning on the front end of a project, to prevent the “dream home” from turning into a nightmare.
The sheer number of considerations necessary to successfully complete a project makes planning challenging, even for experienced, worldly, and savvy folks. In my experience, it’s not that owners don’t plan at all, it’s just that they often lack the context and experience to do so effectively. This should not be surprising since the owner is typically the only member of an extensive cast of characters who is not involved in construction on a day-to-day basis.
In addition, building a custom home is not simple negotiating like buying a model off a car lot. There is no single, routine, or standard process, for construction takes all types, and the particulars (or idiosyncrasies) employed by one builder or designer may not reflect the more common practices throughout the market. This article is intended to provide an overview of some of the items that an owner might consider in planning their “dream home” to minimize the risk of the undesirable results.
What undesirable results? How about:
— The owner who contracted with a thinly capitalized builder, who underbid the project to land it, lacked the resources to timely complete the project per the agreed price, and abandoned the project leaving the owner to pay twice for many aspects of the construction;
— The owner who never left the design table, because they could never get the design they loved to match their available project funds;
— The overly trusting owner who overlooked obvious and serious problems over the course of the project based on the builder’s representations that the problems would be fixed in the end—and weren’t;
— The owner who relied on a project cost being in line with the cost estimates provided up front by the contractor, which matched the available bank loan, despite language otherwise in the agreement;
— The owner left with significant construction problems after having paid the final draws to the contractor;
— This will include a discussion of the players involved, various contracting practices, project finance, and general risk management concepts;
— Who is in charge, or leading the charge?
Owners looking to kick off a project have a lot of different places to start, but there are several common starting points. Traditionally, projects were “designed” by a designer, usually an architect, and then “bid” and “built” by the contractor. This suggests that the project commences with the architect, who plays an important role in translating the owner’s “program” or “wish list” into a schematic design which is refined through an iterative process until the final design, reflects the owners’ desires in terms of features and, hopefully, price.[quote float=”right”]The architect can also be engaged to monitor and manage the construction process on behalf of the owner, including conducting site visits, reviewing project changes and payment applications submitted by the contractor, and determining substantial completion, punch lists, and the final completion of the project. The architect acting as an owner’s representative and carrying out these tasks can provide strong protection to an inexperienced owner.[/quote]
The design work will likely require work by other designers. This may include civil engineers for site work, structural engineers for the foundations and structural components, environmental scientists for septic issues, landscape architects for land planning and landscaping, and geotechnical engineers to evaluate site soils for suitability purposes. Whether these disciplines are included as “sub-consultants” to the architect or are contracted directly by the owner is a matter to be considered. Generally speaking, the owner benefits from the coordination of these services by the architect under a single design agreement.
On the other hand, contractor led projects are more and more common, where the contractor furnishes “design-build” services where the owner contracts for the design and construction through the contractor, and the contractor then engages the designer for the plan. A variation on this method involves the purchase of “stock” or pre-drawn plans, which the owner then works to fill in or customize to their liking. Other contractors may have their own portfolio of plans, which they have built in the past that may be available for use.
Do your due diligence when selecting team members for the project. A track record of success on similar projects is useful to know, and investigation, interviews, and references are incredibly important. I encourage my clients to speak with two or three recent and past owner/customers on other projects, and to speak with more than one builder and designer. What do you want to know? Outcome—was the project delivered on time, within the budget, and to a quality level as promised? Process—was the process orderly, steady, and productive? Personality fits are important as well, since you may be spending several years with these folks. Effective communication plays a huge role in the success of any complicated endeavor, so it’s important to evaluate communication styles and manners on the front end.
Next month, in part two of this column, I will dig a bit deeper into the insurance and finance side of the discussion.
James Johnson Leads the Van Winkle Law Firm’s Construction & Professional Design group.
He is licensed in North & South Carolina.
