Retaining Control of your Project in Development

It’s hard to overstate the importance of due diligence on a project. In a property market where finance is heavily constrained, corporate and individual investors are looking more closely at ways to leverage, and one of those ways involves buying land and contracting the delivery of the improvements.

This process should encompass a systematic review and analysis of “the promise” against the “reality”, to ensure a thoroughly informed assessment of the risks associated with such a transaction are covered.

The design and construct model in Australia is riddled with complications. The responsibility falls on the developer to establish the best brief and consistently check quality – while maintaining an understanding of the project requirements and changes. This is not often identified at the outset.

This can be problematic – if you spend a day in any administrative tribunal around Australia you’ll find the Court’s littered with these sorts of design and construct standard contract disputes.

Not only does the principal have less control over the design and outcome but the design development is often difficult to distinguish what is a true “variation” which may be the source of disputes.

Graham Upton, Principal at PEP, explains that purchasers, developers and funders all have an underlying level of positive expectation when they embark on a process, “More often than not, they find out “all too late” that their idyllic perception did not materialise and the outcome is markedly different from expectation.”

“There is no argument about quality of advice being an issue, as not all advisers and consultants are created equal.” Upton said.

Obtaining practical guidance and advice on quantifiable future costs is paramount. The legal maxim, caveat emptor (let the buyer beware) is a guiding precedent in all property transactions. Unless the seller explicitly promises something about the physical condition of a property, the party contracting to receive the improvements must take all reasonable steps to present their requirements as clearly as possible.

Gaining an understanding of the condition, design and suitability of the property requires good advice.

According to Upton, the benefits of advice far outweigh the costs, particularly if your advisor is on your side from the outset, “The secret is to establish the right parameters and framework to get the right advice at the right time and to have them as ‘partners’ in the process.

“The challenge is getting them to think beyond their own discipline and become singularly focused on best property/development outcome. Don’t corral advisers or treat them as a defined resource – find out how they see your project beyond their specific discipline and make sure they understand what the outcome has to be.”
So, what is the “cost” of good advice?
“Nothing” Upton says, “This is justified by offsetting advisory costs against saved delivery time, reduced aggravation, clarity of project design, heavily reduced contract adjustments and many other less tangible benefits.

“A good adviser/client relationship requires involvement from the outset and constant communication, so that the thoughts of everyone are considered early enough to achieve the best outcome – the collaborative process needs to take precedence.” Upton said.

“We are swamped with activities that can both confuse and distract us – focusing on what is needed for a good project outcome requires discipline, attention to detail and time.”

It appears the old adage, “you reap what you sow” certainly maintains its relevance in seeking advice for a good development outcome.

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