6 Questions Every Homeowner Should Ask When Planning High-End Residential Construction – Construction & Planning

Despite rising inflation, rising material and construction costs, supply chain delays and general market uncertainty, the high-end residential construction market continues to experience record growth. According to recent statistics, the value of new private home construction projects in the United States is at a record high ($776 billion in 2021). Although we have written extensively about the market factors that are currently putting pressure on the construction industry, as well as some steps that can be taken to mitigate the impact, this article will look at additional questions that homeowners planning high-end residential construction should ask. arise.

Will permission issues delay the start of the project?

High-end owners can face substantial lag issues before the first blade hits the ground. For a variety of reasons, the permitting process in many desirable locations is long and frustrating. In an effort to curb what they see as runaway construction, some municipalities have gone so far as to enact moratoriums on permit applications for significant periods of time (Aspen, Colorado, for example). Other places, while not having moratoriums, have permitting processes that take many months or even more than a year for a variety of reasons, including understaffing and turnover.

While there may be little a property owner can do to avoid these problems, it will be helpful to have a team on the ground that is knowledgeable about local agency rules and procedures and has good relationships with the permitting authority. If applicable, a dispatcher can be hired. However, at a minimum, the owner should at least ensure that permitting delays are taken into account in determining the timing and feasibility of the project.

If I build it, will someone insure it?

Because luxury homes are often built in desirable locations near coastal areas, wooded areas, or mountains, obtaining finished home insurance can be incredibly expensive or unavailable. This is due in part to recent weather events that have caused significant damage to numerous towns and luxury homes. As a result of these catastrophic losses, the insurance industry has drastically tightened its underwriting criteria, resulting in higher premiums for homeowners or, in some cases, unavailable coverage.

To mitigate this issue, it is best to work with a broker or other risk management professional to engage an insurance company prior to construction. Insurers may be more willing to cover a home if certain construction guidelines regarding materials, design, or means of construction are followed and incorporated into the project. For example, an insurer may be willing to cover a home in a hurricane-prone area if a stronger structural system is designed for such events, better wind-resistant materials are used, or safeguards are implemented for high-water events.

Is my architect up to the challenge?

As we have mentioned before, having the right team is key to having a successful project. This is especially the case with the selection of the project architect. Having someone who is familiar with local permitting authorities, has completed similar projects, and has a good relationship with local entities in the area will not only help reduce delays with local authorities ultimately approving the design, but which will also reduce the risk of personnel problems due to the relationships your architect has established over the years with other design consultants and contractors. An owner should also try to assess the architect’s ability to work with local contractors.

Is my general contractor up to the challenge?

Likewise, it is equally essential to have a general contractor with the right experience. Consideration should be given to the previous projects your contractor has completed at your project site, the depth and experience of the team members who will actually be doing the work (i.e. working with your “A-team”), the contractor’s project proposed management and teamwork practices, and how many other projects are ongoing alongside yours. Additionally, it is important to understand what work they will be doing themselves and what will be completed through subcontractors, as local relationships with trades can affect the efficiency of work to the extent that it is outsourced.

Do I need a representative of owners?

In a previous article, we identified numerous reasons why a representative owner can add value. In short, having a local contact who can serve as the owner’s “eyes and ears” can keep the trades working together efficiently while identifying potential issues early on for owner involvement. Alternatively, if the owner is more involved with their construction project, the need for a separate owner representative may not be as critical or the scopes may be modified to address owner involvement as the project progresses. Hiring a scheduling consultant by the owner may also be considered to review the schedule as it progresses and offer suggestions for adhering to existing schedules or even speeding up schedules. Such consultants can also help ensure that multiple construction activities take place simultaneously without disrupting the critical path.

Is my contract enough?

Given this unique economic climate and how they impact the potential for cost changes. Last but not least, having a strong contract that provides adequate protections from the owner’s perspective and adequately transfers risk is essential to a successful project. Homeowners should understand the different pricing models that are available in the future (ie lump sum, job cost, job cost with a guaranteed maximum price, etc.). In addition, the force majeure provisions and language on delays need to be carefully reviewed. Given the recent pandemic restrictions and supply chain disruptions, we have seen provisions that are extremely broad and provide extensive protections to a general contractor, leaving the owner in the lurch not only from associated delays, but also from increased costs. resulting from these delays. Finally, supply chain issues should be reviewed and, if necessary, appropriate language inserted covering not only the potential for such delays, but also how costs will be shared and whether preliminary action can be taken by parties from the principle for addressing such issues (i.e. advance ordering of special materials, stocking of such materials, limiting increases in the costs of certain materials to a mutually agreed amount, etc.)

In this new normal, not only must homeowners be diligent in having the right protections in place from a contractual standpoint, but permitting and insurance considerations must also be discussed early on. In the past, permitting and insurance restrictions were not limiting factors in luxury projects. However, given recent moratoriums and weather events, we now need to take extra precautions to ensure not only that the project can actually start within a reasonable timeframe, but that the project, when complete, is insurable from a risk management perspective. . These are just some of the considerations to review when planning high-end residential construction.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought according to your specific circumstances.

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