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

Isn't That Capital!

 Sooner or later, every co-op or condo owner 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

 The Esplanade Club Association in Naples, an 18-story building with 167,000  square feet of surface, went through a recent concrete restoration. The  time-consuming project required multiple noisy jackhammers and, because of the  extensive dust particles flying through the air, part of the building needed to  be covered, leaving residents with limited access to their outdoor patios and  seating.  

 The noise, dust, disruption and general hassle of any such undertaking is  sometimes simply unavoidable. “In a facility with elevators, modernization of the equipment and controls is  always a challenge as a car will be down for an extended period of time,” says Charles R. Sheppard, president of Community Advisors LLC in Jacksonville. “Exterior wall renovations can also be a problem when large sections of the wall  need to be removed, structural members repaired and then the new surface,  brick, stucco, etc. are installed. In this case, access for owners is usually  not the issue, but the noise is.”  

 The noise, pollution and other impact on residents can be reduced if building  administrators play their cards right and prepare both themselves and their  residents adequately for an upcoming project.  

 Of course, the planning for any capital improvement project starts when an  association makes certain there are enough funds set aside for a project. “When you want to do a project, your first thought shouldn’t be “how are we going to pay for it?” says Donna Seidenberg, the director of the Fuoco Group, a full-service  accounting and business advisor consulting firm in Boca Raton. “The money should have been accumulated in a reserve fund.”  

 Sheppard agrees that for any project to go smoothly from start to finish, it’s important to prepare early, even before the project has begun. “Engage an owner's representative to assemble the investigative team of  consultants if needed, prepare the bid documents, obtain pricing and facilitate  the contract between contractors and owner,” he says. “Once this has been completed your representative can hold a town meeting and  present the project, cost and impact on the residents and answer any questions.”  

 Deborah Martins, the Esplanade Club general manager, says that the association  has been financially planning for this restoration project for several years,  but made sure to keep the residents in the loop from the very beginning so they  were prepared for when the project actually started.  

 “We sent out communication and even came up with a chart that broke it down to  what we were going to do and when,” she says. “We also briefed the board to let them know the benefits of what we were doing,  but there’s not much you can do to alleviate the discomfort and invasiveness of the  project, unless the residents go on vacation for a few weeks. However, it was  in the best interest of the building and association to get this done.”  

 If your building has rental tenants, it’s important to make sure they are notified too. “When a major project is conducted, the team does not treat anyone different,” says Sheppard. “For example, if there is a loss of services due to elevators down, water shut  off, etc. it is the responsibility of the owner to notify their tenant if the  unit is rented. With any other major shutdown, signs would be posted and, if  available, emails sent out. This goes back to the Town Hall meeting for  informing all parties of what will occur, when and any disruption that will  result.”  

 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.  

 “Unfortunately, these things do happen, but the best way to handle them is to  understand where and when risk may occur and have a plan to mitigate this risk,” says Sheppard. “If the unforeseen happens then the construction team will respond and fix the  problem and communication with management and the residents must be quick and  informative.”  

 Who handles the problem depends on the chain of command that’s been instituted. “If a general contractor is engaged then they would manage the day-to-day  operations of the project insuring compliance with construction documents of  his vendors and subcontractors, maintain water tightness of the exterior,  insure safety of all parties and execute the work,” says Sheppard. “The GC would report to the owner's representative who would advise the board and  managers of any issues. It is best if management notify residents of any  issues.”  

 While the project is going on, Sheppard says the representative will keep the  manager informed in advance so residents are always notified or closures and  disruptive work.  

 Legal Concerns

 Make sure your design team or owner's representative has the experience to  complete the project. Have the association attorney review all contracts and  understand the work to be completed and if any potential safety issues may  result, gain their guidance on how to proceed.  

 Legal considerations—soliciting vendors for this kind of project—have the necessary insurance—workman’s comp, not using undocumented workers, make sure you’re property is going to be protected and put back to how it was prior to  starting the project. The legal considerations, making sure that with the  scaffolding that walkways are protected, owners are not going to be in any  danger from falling debris when you’re chipping out concrete (protective scaffolding) property protection and  insurance—when you’re getting involved with something like this.  

 Oh Me, Oh My!

 Keep in mind that preparing residents for even the best laid plans doesn’t mean that the project will go off without the share of resident complaints.  

 Perhaps your building needs to turn off the water for a short period of time  each day while completing a project. Unfortunately, sweet Mrs. Branch in 3B had  been notified of the upcoming work and the fact that the water was going to be  shut off temporarily each day. She’s been okay with the interruptions, but now it’s been discovered that there is a pipe problem that needs to be repaired which  will lead to a water shutoff for yet another day. Mrs. Branch has been home  from work this week and the lack of water has been testing her patience. She’s quick to get on the phone and complain to anyone who will listen.  

 “Oh the residents complained all the time about the noise, dust, dirt and  inconvenience,” says Martins. “The best I could do was telling them it was only for a specific period of time  and have empathy and listen.”  

 Preparing for any potential problems that might arise is almost just as  important as planning for the project itself. Ask questions that might come up  before they are asked. For example, if the lobby is going to be cleaned, how  long will it take, who will it affect and how will they get out of the  building?  

 For example on water projects, choose a time that is the least impactful,  depending on the project. Shutting off the water to a laundry room might take  place overnight. Remember, it’s hard to pick a time that’s good for everyone.  

 Ask for Help

 Good communication with your residents is key but some problems can leave even  the most experienced property manager 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.  

 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 The South  Florida Cooperator.  

 

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