The Recipe for the Perfect Major Works Project

Before we attempt to give away the perfect recipe for a major works project, a word of warning: No two major works projects are alike and that is because every block of flats is different and has unique requirements, then there’s the tenure of the building (RMC/freeholder/RTM) to consider, also the ability of the managing agent, and how ‘on board’ the service charge payers are. 

In theory, all stakeholders want the same thing: a safe and well-restored building achieved at a reasonable price. In practice, there are competing objectives, hence it’s important to prepare for and mitigate against the risks of something going awry. 

This is a blog aimed principally at the residential (block) property manager, as they tend to be at the sharp end of any major works project. The importance of the property manager’s role shouldn’t be underestimated. 

Who are the stakeholders?

We have established there are several stakeholders that a major works project involves. The RMC/RTM/head-leaseholder/freeholder (your client) has an obligation under the terms of the lease to maintain the building and usually to repair/redecorate on a cyclical basis. Usually the managing agent serves the ‘section 20’ notices, and they select a building surveyor to become contract administrator and principle designer, they’ll raise funds for the project and do the accounting for the project through to the end of the defects liability period. And there’s the contractor too. 

Keeping all these stakeholders happy and on track needs a recipe to follow. Here it is: 

1. Give yourself time

Time is one thing you can’t retrospectively get back or re-do, so start early, perhaps as far as one year in advance of when you expect the project to start. Our major works wheel (ask us for one to be sent to you) are very popular, helping property managers demonstrate to their clients just how far ahead you need to prepare. 

2. Check the lease

A good property manager will know when each of their properties are due for cyclical major works, as they will have checked the lease. The lease will also tell you what your client’s obligations are (e.g. – the landlord has responsibility for painting the external surfaces of the building but the leaseholders are responsible for repairs to their own window frames. Or perhaps a large area of flat roof is actually demised to a penthouse apartment owner and isn’t for the building as a whole to pay for). Don’t assume, check. 

The lease will also inform you if you can request their financial contribution to the major works whenever you wish or that you may need to hang on until the next quarter day. This is important, as it may affect when you can start the works.

3. Funding and Capital Expenditure Planning

Look at your reserve fund – if you have one. How much is in the account? Is this going to be enough? Is a call for more cash going to be necessary? Is there a planned maintenance programme or capital expenditure plan that will give you a good indication of what is scheduled to be done and how much it’s going to cost? If there isn’t such a plan in place, perhaps this is a good time to commission one. Communicate the funding situation clearly and concisely to your client and get their views. 

4. Scoping document

The lease may or may not expressly specify a frequency for the cyclical works. If it doesn’t, then the necessity for the works may drive the agenda. So ascertain from a building surveyor what needs to be done by commissioning a survey, resulting in a Scoping Document to show to your client. This document will summary the works recommended and crucially give an estimated cost range to compare against the funds you hold. It will also help you to get an agreement from your client as to what should be in the specification of works so that the tendering process can proceed unhindered. 

All too frequently, major works projects are specified and tendered, the results of which shock the client and the leaseholders. A scoping document helps to manage expectations and if necessary, tailor the scope of the works to the budget or suggest phasing of the works over a number of years.

If there are areas of the building (e.g. roofs) which are difficult to survey from the ground or from a neighbouring building, then a drone survey may be a good idea. 

You may wish to share a copy of the scoping document with the leaseholders to keep them fully informed and, hopefully, on side. 

5. Communicate

By starting the process early, you’ll have plenty of time to communicate effectively with the landlord and to the leaseholders. If they are given the relevant facts about the lease, funding, the works needed and so forth, they are far more likely to be on side. And they’ll have more time to raise the necessary funds to pay their contribution when the demand arrives. Keep the surveyor up to date with how well funds are coming in, so they in turn can manage the expectations of the contractor earmarked for the project. 

Keep the landlord abreast of progress, before and during the works. They’ll appreciate the effort you are showing to ensure a smooth-running project. 

When there are updates for the leaseholders – particularly when they may be inconvenienced access wise or privacy wise – let them know via the building’s online portal or through email. Don’t forget tenanted flats still contain residents who need to know what’s happening around them so consider the methods of communication that reach all owners and occupiers.

Be good neighbours, so if there is a block of flats adjacent or a private house, let them know well in advance of the possibility of major works next door and how they may impact them.

6. Section 20 and other consultation

Get the section 20 notice of intention drafted with care and attention. It goes without saying that you’ll ensure it is compliant and sufficiently detailed. A notice that doesn’t comply with the legislation may mean starting the consultation process again, which may cause confusion and resentment. Some clients are sufficiently worried about the process that they appoint a solicitor to serve the notices!

Talk to the appointed surveyor about building-in contingency sums sufficient to overcome any maintenance requirements once the extent of the works can be seen at close quarters from the scaffold. The second stage section 20 notices will then list the tendered prices, including the continency. A nice buffer to have.

Go a stage further and break down the entire cost of the works for the leaseholders, including your own administration fees, those fees of the surveyor and of course, VAT. Explain what the roles are so leaseholders are clear who to contact (surveyor or managing agent) depending on the circumstances.

Share draft section 20 notices and with the surveyor and any other pertinent correspondence. The surveyor may have some useful input. 

7. Your key partner – the Building Surveyor

Involve the surveyor early!

The earlier in the process you can involve a building surveyor, the better it’ll be for the project’s smooth running. If the client is neutral when it comes to surveyors, select one you trust or set up a beauty parade of say two surveyors for your client to meet/interview. Remember that a major works project can make or break a managing agent so the more in sync you are with the surveyor, the more you can demonstrate to the landlord a collaborative, thoughtful and organised approach.

Planned maintenance programme

A good surveyor will recommend they produce a planned maintenance programme for the building, so that the forthcoming works and any other capital expenditure is anticipated and planned for. It could be that with an investment in such a long-term maintenance plan, the next cycle of major works can be postponed or phased (if the lease allows). 

The specification

Assuming the works are needed and the lease is quite clear that they need to be done, then the chosen surveyor will produce a specification of works. This is where the plan becomes a project. A clear specification avoids ambiguity, ensures tenders are robust and provides a good control document to be used on site when the post contract phase begins. 

Tendering

Then comes the stage where attention turns to the selection of who will carry out the work itself, which means the creation of tender documents and the subsequent selection of the right contractors for the job. 

A good surveyor will appreciate the requirements of section 20 in terms of the leaseholders nominating a contractor, and will ensure the process is as objective as possible. Every leaseholder and many landlords will know builders but it’s important not to select contractors for the wrong reasons. The key is to make the right selection based on a range of criteria – including financial strength, management structure, health and safety competence – plus evidence from previous, similar projects. 

Managing a tender process effectively means doing so under a sealed bid ensuring a formal tendering procedure with the surveyor administering queries along the way. Bids will be opened at an opening event, recorded and reviewed, with the intention of looking for anomalies. You would hope to go for the least expensive tender but if one comes in dramatically under the rest, then questions need to be asked. 

The surveyor will then produce a tender report with a recommendation for appointment. You’ll need this to produce your second stage consultation notice. If the least expensive option isn’t recommended by the surveyor, the surveyor will set out why, and you may need to serve a third section 20 notice. 

JCT and the surveyor’s role as ‘contract administrator’

JCT stands for Joint Contracts Tribunal and the surveyor’s role within the JCT Contract is formally described as ‘Contract Administrator’. The CA is responsible for administering the contract which is between the ‘employer’ (the landlord, RMC or RTM) and the ‘contractor’. 

Once the major works have the green light, the funds are in, a start date agreed, the scaffolding can be erected. The more experienced property manager will know that once the scaffolding is up, the surveyor and contractor are able to see the extent of previously inaccessible areas. You would hope that the scoping document (including drone survey) would have prevented any nasty surprises, but they do happen from time to time, and there may be implications for the section 20 notices served and the funds raised. With any luck, you will have pre-empted these extra works and the contingency you have allowed for (your buffer) will cover them. 

There is a common misconception that the surveyor’s role is to manage the site. The surveyor actually has specific obligations under the terms of the JCT, including:

• Chairing meetings
• Periodically inspecting the works
• Giving instructions to the contractor, including variation of change orders
• Determining any applications for extensions of time by the contractor
• Authorising interim payments to the contractor
• Certifying the completion of the works
• Settling the adjusted contract sum (otherwise known as the final account).
   

The Construction (Design & Management) Regulations 2015

And don’t forget about CDM. It’s your client’s responsibility as they have specific duties before and during a major works project, including the provision of welfare facilities and responsibility for health and safety. So gather all recent H&S related reports – general H&S risk assessments, fire risk assessments, asbestos management plans and any other H&S files that may be relevant – and pass them to the surveyor helping to fulfil the client’s CDM responsibilities. 

8. Your role as the property manager

A successful major works project clearly relies heavily on the building surveyor, yet it’s your role as the property manager (with the support of your accounts department) to ensure that communication with all stakeholders is fluid, the section 20 notices are correctly served, that the necessary funds are raised/chased in advance of the works starting on site, that you are paying the contractor correctly as per the surveyor’s valuation certificates, and that you’re ensuring the cost of the works are fully accounted for as the works progress and in the year-end certified service charge accounts. (Make sure the major works contractor is set up on your systems so they can be paid. The surveyor’s job is to vet them). 

The fees that you charge for your admin role ought to reflect the extra time you need to put in, for instance, for site visits with the surveyor and client, and to ensure you are up to speed with how the planned maintenance programme needs to be updated post major works. 

The recipe for the perfect major works project in part relies on you not overstepping your mark. Your role is vital, but it is by and large limited to admin and communication tasks. Do discuss with the surveyor at an early stage what he/she can do to take some of your burden away – perhaps doing some of the written communication directly with the client and leaseholders or attending key residents’ meetings. 

After the project is over, there is the defects liability period to see through – also known as the rectification period. Not all problems that arise during this period (often six months post completion) are major works related, so it’s not always appropriate to blame the contractor!

If like many of our clients you choose Earl Kendrick for many or most of your major works projects, you will benefit from monthly meetings (which we call ‘tracker meetings’) for the property managers and surveyors to meet, discuss each project and together decide on the best course of action for the client and the leaseholders. At your offices or ours, the time is well spent in nurturing the relationship – all part and parcel of the perfect recipe. 

How we can help

Earl Kendrick specialises in contract administration of major works projects for residential schemes throughout the UK. We are au fait with reading complex leases, the section 20 requirements and managing the expectations of RMC directors and leaseholders. Contact the author at Andrew.Banister@earlkendrick.com or 07764 788405 to see how we can help you prepare for your major works projects.