Isn't That Capital! Planning for Capital Improvement Project Contingencies

Isn't That Capital!

 Sooner or later, every resident in a condo or HOA community will have to deal  with the inconvenience of living through a major capital improvement project—a roof replacement, an elevator rehab, serious exterior work, or something of  that nature. No matter how carefully the project is scheduled, inevitably it  will be disturbing someone. But with strategic planning and constant  communication among board members and trustees, residents, management and the  project crew, the hassle of the project can be significantly reduced.  

 Those Pesky Projects

 All capital improvement projects have their major inconveniences but industry  professionals note that some are definitely more disruptive than others.  

 “In terms of the projects themselves, any time you have to go inside of a  residence, that increases the coordination of a project significantly,” says Jules Lefcowitz, principal of Community Planners LLC, a project planning  company in Branford, Connecticut. The association is usually responsible for  maintaining or replacing common utilities and waterlines, which can be a big  project and require a lot of alignment between many parties, he adds.  

 Making improvements to the building’s exterior can also be a challenge. “The most disruptive types of construction projects that I have found are  building envelope projects, in particular where you have to remove and replace  windows as part of the project because you need access to the interior of the  unit owner's home. Then there is generally touch-up in some areas that needs to  be done on the inside of the unit,” explains David Barrett, PCAM, director of operations at Crowninshield  Management Corp. in Peabody, Massachusetts. “This all involves coordination with entering units and scheduling to have people  to be available, and that can be the most disruptive.”  

 Repaving parking lots has also proven to require tip-top organizational skills  from management. Michael Phillips, chief operating officer of The Copley Group, a management firm  in Boston, was recently involved in a parking project for one of his properties  that required residents to park in an alternative parking lot for a week. “The project lasted about a month but we were able to have the contractor do what  they needed to do with the spaces and have people back in while the project was  still underway,” he says.  

 Although some projects can be done without interfering with the lives of the  residents, the noise, dust, disruption and general hassle of some projects can  sometimes be unavoidable. “Any project has the ability to become an inconvenience for someone,” says Phillips.  

 Short and Long Term Preparation

 The impact of a capital improvement project can be reduced if building  administrators prepare both themselves and their residents adequately for an  upcoming project. When the board or management is initially planning to  undertake the project many months in advance, it is critical to keep everyone  informed about the potential schedule, costs and purpose. “I think the very first thing that boards need to do is demonstrate the necessity  of the project. So in our work, we'll do a meeting where we show PowerPoints  that set forth the physical condition of the community and why the project is  necessary. But you don’t talk about finances just yet at the first meeting. Then, you have a second  meeting where you do the same presentation. You talk about physical condition,  and at the end you talk about finances. Now in both meetings, you’re doing a Q&A so people can ask questions. At the second meeting, you should not only have a  discussion about the money from the project, but how that fits into a long  range capital plan,” says Lefcowitz.  

 For major capital improvement projects, communication is key. “From a logistical standpoint, you need to have as much communication as  possible,” says Barrett.  

 He explains that for many of the larger projects that he has been involved in,  his company has established communication committees to help in communicating  with residents on the progress of the project and what they can expect.  

 Notices, updates and scheduling regarding the project can be dispersed in many  different forms. “Written communication is very important and usually does the job. The question  is, how do you deliver it? Some properties have email group lists set up for  the entire community. If it is really important, we try to hand deliver the  notices either by sliding them under the door or putting them in the residents’ mailboxes. We try to do a combination of both,” says Phillips.  

 Barrett also suggests having frequent open meetings with owners so they can  come, express their concerns and ask any questions. “Generally, we bring in all the experts to those meetings so that residents can  physically sit and meet with the engineer, architect or contractor that is  doing the work. Oftentimes we bring in the accountant as well to talk about the  funding,” says Barrett.  

 Time of Year/Scheduling

 While there is no job that can be perfectly scheduled, certain actions can be  taken to help minimize the impact on residents.  

 “I usually like to schedule the work in manageable quantities for a couple of  reasons: The impact on transportation through the property, the impact on  disruption for the residents and the manageability of the project itself. If  you have too much construction going on at one time, it cannot be properly  supervised and you don’t want to lose quality control of the project,” Barrett says.  

 When he was involved in multimillion dollar building envelope projects, Barrett  says that his company would schedule to work on only two to four buildings at a  time. “If we had an 18-building project, we wouldn't start on all the buildings at the  same time because they couldn’t be properly supervised; you would have dumpsters in parking spots, you have to  block off certain spots for safety,” he says.  

 Most professionals agree that work should not extend into the evening hours for  the safety of the workers and the convenience of residents, but there may be  exceptions. “One example I can think of is elevator work. If an elevator is down sometimes  you can pay extra and have the workers cover longer shifts to repair them. You  can’t really have elevators down for a long period of time,” says Barrett.  

 Phillips agrees that most projects are best completed during the day, “but the most important thing is to establish a schedule and make sure that the  contractor stays on schedule. If you establish a working schedule of nine to  five, some contractors might show up at seven in the morning and try to get  started. The management company needs to step in at that point and make sure  that doesn't happen,” he says.  

 A lot of times the project dictates when you will be able to do the work.  Obviously, it would be very difficult to revamp the facade or redo the parking  lot in the winter, but it might be equally as challenging in a summer heat  wave. “In most communities that we manage, one season versus another in terms of  convenience for the unit owners doesn’t make a difference. I think that for them, the most important thing is to keep  the project as short as you can, have a schedule, communicate, and stick to  what you decide. The worst thing in the world is to tell unit owners a project  will last two weeks but then it lasts six. Then you are really inconveniencing  people and losing credibility,” says Phillips.  

 Chain of Command

 But even under the best of circumstances, preparing residents, including rental  tenants, as much as possible doesn’t mean that the project will go off without a hitch and without complaints.  

 Remember the famous line in the movie, Apollo 13: “Houston, we have a problem.” No matter the project, there’s always a chance something can go awry. Water lines can break, roofs can leak,  the project can take twice as long when something is uncovered and you may find  that your formerly calm residents are now suddenly irritated. To make sure that this doesn’t happen, it’s important to make sure all your T’s are crossed and your I’s are dotted before the project even begins.  

 Phillips stresses that it is important to establish a chain of command early on  and determine who will be responsible for what part of the project.  

 “The property manager generally takes the lead in communications and you  generally have several people involved in the process. If it is a really big  project, sometimes the association will hire a clerk of the works, who will  coordinate between the contractors, the architect or engineer and the  management company. If you don't have a clerk of the works, the manager will  fill in that role and is the centerpiece for the communication with the owners,  the board and the vendors,” says Barrett.  

 Bigger projects might also have weekly construction meetings on site, giving the  manager and board members the opportunity to be updated on the schedule, talk  about problems and then communicate this information to the rest of the board  and owners, he adds.  

 There May Be Problems

 Unfortunately, no matter how meticulous the organization and how prepped the  residents and team are for the project, problems may arise.  

 “It’s pretty typical that issues come up during construction. You have to be able to  have the flexibility to adapt your plan and make sure that that is adequately  communicated to the residents. A lot of people who have experience with  construction projects know that there will be contingencies early on and they  account for that. A lot of experienced architects and engineers try to prepare  you for that,” says Barrett.  

 Often there will be unforeseen circumstances. You will pull off siding to  discover mold or a pipe might burst in the middle of a waterline project. “When we find a structural issue that we did not anticipate being there, if you  have proper contingencies you are okay. A lot of the times we will call the  engineer for a special visit to review and modify the scope and give  instructions on how to deal with it,” says Barrett.  

 Ask for Help

 Good communication with your residents is key, but some problems can leave even  more experienced property managers baffled. Turn to higher-ups in the company  first. They may have experienced the same problem or may have another property  manager who has gone through something similar and can offer first-hand advice  or experience.  

 If the project causes any legal glitches, get advice from an attorney. He or she  can also make sure to address any legal considerations before, after and during  the project. “Consult your attorney about the contracts. You want to make sure the contracts  are properly written, with proper protections for the association,” says Barrett.  

 If the manager is a member of any trade organization, such as the Institute of  Real Estate Management (IREM) or Community Associations Institute (CAI), these  organizations have resources, including back issues of their published  articles, which are available to members on their websites. There might be a  particular problem with capital improvement projects that someone has either  experienced or can help your association with. These organizations also offer  online services to make your job easier.   

 Lisa Iannucci is a freelance writer and a frequent contributor to New England  Condominium. Editorial Assistant Maggie Puniewska contributed to this article.


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