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” or “perception”, 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 and an increasing “bare minimum” perspective, focused on reduced time and funding costs, often generates disputes over inclusions and quality. To address this, 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 will 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 changes are often difficult to identify as a “true variation” and this often leads to disputes. Purchasers, developers and funders all have an underlying level of positive expectation when they embark on a process, but “more often than not, they find out too late, that their idyllic perception is not going to materialise and the outcome is markedly different from expectation.”
Obtaining practical guidance and advice on quantifiable quality and future costs is paramount. The legal maxim, caveat emptor (let the buyer beware) is a guiding precedent in all property transactions and there can be no argument about quality of advice being an issue, as it is well known that not all advisers and consultants are created equal. Unless the seller explicitly promises something about the physical condition of a property, the party contracting to receive the improvements must take significant steps to present their requirements as clearly as possible. This extends to guiding and gaining an understanding of the conditions, design and suitability of the property and the full articulation of the requirements which are easily interpreted (unambiguously) by a third party.
A challenge can be to get advisers to think beyond their own discipline and become singularly focused on best property/development outcome for the owner. 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.
What is the “Cost” of good advice?
There is no cost – only net benefit for good advice. This is justified by offsetting advisory costs against overall delivery time, reduced aggravation, clarity of design, risk reduction, reduced contract adjustments, quality presentation and other less tangible benefits. More than ever before, 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. The benefits of good advice far outweigh any costs, particularly if your advisor is involved from the outset and the right parameters and framework are established initially to get the right advice and guidance at the right time to ‘partner’ in the process. It appears the old adage, “you reap what you sow” certainly maintains its relevance in seeking advice for a good development outcome.