What will Santa bring you for 2010?

Christmas and New Year in NZ is always a great time to relax with family and friends – and to reflect on where we're heading.

Planning how our assets and buildings will serve our property needs in 2010 is something all businesses will be focused on as we trundle along the ups and downs of the economic cycle.

Finding better, smarter ways of doing things is now a given in almost every business. IBC has been focusing on simple things that make a difference in this respect; things that save our clients cash.

For example:-

• ‘iReports’ - we now issue reports almost exclusively as electronic files, we do not print them unless the client specifically requires it. The same thing goes for letters of instruction
• Dove-tailing Inspections - we plan our inspections and surveys so that we can attend more sites in one day to reduce travel costs.
• Fewer Emails – everyone is busier doing more with less, so we try to make contact by phone rather than mail or email.
• Partnering – we now have relationships with a number of allied service providers to whom we outsource non-core activity. Many of these providers are sole-operators with exceptional skills. We can continue to provide a one-stop solution and take all the consulting risk, but smaller overheads means we can also keep our fees lower.
• Priorities – unsurprisingly, consultants are being asked to provide advice on issues of compliance, rather than enhancement, as property owners seek to limit costs. (The forward thinkers are beginning to request advice on the latter which is a great sign!)
• Refurbishment - it's now becoming a much stronger strategy to optimize returns. The costs associated with demolishing buildings less than 50 years old and redeveloping a site are often greater.
• The rise of the Building Surveying profession in NZ continues, albeit that most are focused on weather-tight homes … People who can produce good working details are in high demand.

As we move into 2010, we are all hoping that the business environment gives us some slack …

While Santa’s sack may be a little lighter for all of us this year, we’ll certainly be entering the new year smarter and more conscious of where we focus our energy, our time and our hard earned cash!

Image: Ron Bird / FreeDigitalPhotos.net

Make Good Provisions : Avoiding The Pitfalls

In today’s market, maximising returns and reducing costs is a core component of a Landlord’s focus. Recently, this has seen Landlord’s becoming more assertive towards the make good provisions found within a Lease, and recovery of the costs associated with reinstatement of a property following a tenant’s departure.For tenants, this can be an expensive and unforeseen cost.
There are ways to handle the issue for tenants, the first and foremost being to ensure that when they enter into a lease, they have a clear understanding on what their liabilities will be on termination of their lease term. If they are moving into an existing building, a schedule of condition will act as a means of limiting any liability to the condition of the property on the day they take occupation. There are good and bad ways to have a schedule of condition drawn up. It has to be accurate and readily understandable to those who will pick it up and review it when the lease finally draws to an end.

In addition, there is a wealth of international case law associated with make good provisions and repairing obligations that underpins negotiations between a Landlord and Tenant in relation to make good / reinstatement provisions. This relates to a range of factors, from potential new / planned uses for a property through to what constitutes a ‘loss’ to the Landlord.

The area can be a minefield, if the issue is not handled strategically, and it is often reasonably simple to mitigate any loss through smart planning and forward thinking.

IBC have been providing advice and expert witness services on these issues to Landlords and Tenants for over 15 years and are one of only a few New Zealand based professional services firms with a track record in the area.

Property Condition Assessment

Recently we have been asked to undertake condition assessments for a number of commercial property portfolio owners. The reason for these varies from being able to accurately report on the property assets on their balance sheets through to ensuring that the maintenance budgets that they have allocated for the properties in the portfolio are accurate.

Forecasting maintenance expenditure is not a simple exercise and requires a good understanding of the way that a building has been constructed and maintained. In this day and age, when sustainability and life cycle costing is becoming more and more important, we are all beginning to grow our understanding on how buildings perform. The historic building stock in NZ is the property that most concerns - these buildings were constructed before the advent of sustainability and life cycle costing.

There are a few simple techniques available to address the issues of maintenance forecasting which we adopt on a regular basis -

1. Independent auditing is becoming more prevalent - helping to ensure that there are no conflicts of interest when it comes to inspecting and reporting on defects
2. Understanding how buildings perform over long periods of time enables us to accurately assess the effects and risks involved in deferring maintenance expenditure
3. It is all about facilitating better decision making and the combination of 1 and 2 above help in this regard

Auditing is not about being critical of another's work, it is about helping to raise standards and improve the performance of NZ property assets, and that has to be good for all.

Project Governance

Projects are like businesses, they need the right mix of talent and people to achieve the goals set. Traditionally the Project Director has been responsible for project delivery. However, with public private partnerships and increased multi team projects coming to the fore - the role of Project Director takes on a new meaning, and requires a particular skill set.

Having been involved in the management of a wide variety of businesses and construction projects over the years, all have had their challenges and hurdles to overcome. One of the roles that seem to have fallen my way is that of facilitator, arbiter or mediator when things weren't quite going quite right. Take for example a major $15M IT intensive construction project that I was involved with recently - a world leading initiative with multiple teams and numerous project managers (over 150 people in all). The client knew what had to happen, and what was needed to make it happen, they had excellent people, a project team structure and a clear plan.... so you'd have thought 'hey no problem' ...

The issue was that the project had an aggressive timetable to meet the client’s business objectives, and there was growing concern within the team on whether they were able to deliver on time despite the fact that the team were doing their best to manage. The client identified that the structure of the project team had a gap, and one which was becoming fairly significant over quite a short period of time.

As an independent Director and consultant to Boards through Westlake Consulting, the ‘gap’ issue reminds me of my role as a Director and the split that exists between those running a business and those governing a business.

Within a business, one group of people (the management) are focused on delivering a business plan. A second (the Directors) are, amongst other things, responsible for providing strategic direction that leads to that plan, supporting the CEO and his team to resolve issues. Non-executive Directors provide independent advice and direction when a change is required that affects the business 'outcome' or profitability.

Projects are no different from businesses and the issues that arose on the Air New Zealand project were a result of the way that the project teams were structured - there was indeed a gap. The gap was plugged through the introduction of an independent Project Director (similar to the role of a non-executive Director on the Board of a Company), with an understanding of governance and the associated skillsets. Having someone involved between the delivery team and the client in a 'governance' role added value by keeping the project managers and their teams focused on delivery. By providing an independent single point of accountability, the client had someone who wasn't caught up within the client organisations' structure, totally focused on the delivery of the project outcomes. The role ensured the following;

(1) risks were addressed and issues spotted early
(2) responsibility to resolve issues was transferred to the right people within the project teams
(3) an overview was maintained, without getting bogged down in day to day management issues
(4)an impartial independent view away from the project manager and their delivery team that drove the clients’ interests
(5) a mediator existed, when relationships become strained and tensions rose - through chairing meetings to resolve conflicting opinion
(6) accountability, a single point of responsibility and the associated leadership

Finally, the role provided everyone with a point of contact to discuss sensitive matters in a confidential fashion, and to ‘be heard’.

As a team, we achieved the primary objective on the $15M project – the client's ‘go live’ date in October last year, without any major disruption to any of the airlines’ services. Like many Boards of Directors around the world who require non-executive governance input, more and more projects require the appointment of an independent Project Director, a governance specialist, to achieve increasingly challenging goals and objectives.

Next time you have a major project or undertaking coming up - give your project the best governance possible, treat it like a business and you'll have done all you can to guarantee success. Please feel free to give me a call if you're interested in learning more about this specialist service.

Peter Harris

Bucking the Trend & Staying Close to Your Friends!

Everyone in the property sector is affected by the economic situation, and as time rolls on, there are some interesting ways that we and other New Zealanders are trying to ‘buck the trend’ to kick start and maintain business activity:

• Diversification – firms are looking at different ways to earn fees and add value. Working with a number of clients, for example, and using our networks to help them secure funding and get client projects ‘off the ground’
  
• Property funds – there are a number of players in the market establishing new property funds and this is resulting in property changing hands. When these funds purchase property they tend to be more risk averse and hence physical due diligence becomes more important, especially as in tight times property maintenance expenditure takes a beating!
  
• Getting more from less – improving asset efficiency through re-tendering maintenance contracts; now is a good time!
  
• Joint ventures – are a win/win and businesses are collaborating to secure opportunities and offer a better ‘combined’ solution to clients
  
• Competition is tough! Whereas a year ago, if we turned over 5 stones we’d secure work from two of them, today we are searching harder to find the stones, turning over many more of them and securing less. Fee levels are highly competitive, so building on established relationships is key. Finding new points of difference and rediscovering your business focus are also things that are at the forefront of thinking.
  
• Everyone is becoming ‘an expert’ to the Government sector - those in education, health and other Government-related organizations are being hounded with marketing calls as firms seek to establish relationships and secure a position with them to offset the downturn in the commercial sector. 50 registrations of interest on a $250,000 project at a local school is a story we have heard more than once - so differentiating ourselves becomes essential
  
• Changes to the RMA to enable quicker development processing will have a positive effect , so some are positioning now to take advantage of those changes
  
• Firms are guarding their primary client relationships like gold dust as the opportunity and need for clients to ‘change the guard’ and find more cost effective alternatives increases
  

For us it is about changing some habits and doing business differently – New Zealanders are reknown for being focused on ‘adding value’ and following this simple principle makes sense.

It is a time to stay positive, motivated and in touch with your friends – and that includes maintaining a reasonable rapport with competitors who can often become your greatest allies.

We look forward to helping you and your business buck the trend!”

CCC or No CCC? That is the Question.

IGNITE Building Consultancy is becoming increasingly involved in obtaining Code Compliance Certificates (CCCs) for buildings that do not have them.

Unfortunately, nothing is simple and the implications of a missing CCC depend on when the works were consented.

Generally, where a Building Consent has been granted but the works do not proceed, the application for BC can simply be cancelled. However, where works have commenced, but no CCC has been applied for, this can (and frequently does) lead to problems.

The risks are varied:

1. Public Use: It is an offence to use or permit the use of public premises affected by building work that has no CCC or Certificate for Public Use

2. Insurance: Lack of a CCC can invalidate the building’s insurance as there is no proof that any alterations comply with the Building Code

3. Quality of Work: Lack of a CCC raises questions about the extent and quality of the work done. This in turn can create uncertainty around the cost of completing and / or remediating the work to the standard required by the Building Code.

We have also come across instances where a Building Consent Authority cannot issue a CCC. Because a CCC cannot be issued without a Building Consent, and a Building Consent cannot be issued retrospectively, this is where a Certificate of Acceptance, introduced by the Building Act 2004, can be used.

Unfortunately a Land Information Memorandum (LIM) will not identify unconsented works. Only by completing a physical inspection of the property – and comparing the findings against the plans held by Council - will any unconsented works be revealed.

All of these options, however, are far more complicated and costly than ensuring that all the necessary Consents and CCCs are obtained (or cancelled) at the time that the work is undertaken. This goes as much for tenants’ alterations as for any base build works because when tenants move on it is often the landlord who is left to sort out any problems.

Should you find yourself the owner of a building without CCCs, IGNITE Building Consultancy can help. We can pin-point any problems and advise on the most effective remedies. We have also developed strong relationships with many local Councils to enable us to resolve the issues as swiftly as possible.

Does your Body Corporate have a Maintenance Plan?

The Unit Titles Act 1972 (the law governing multi-owned property) is up for review.

Major changes in the number, scale and nature of property developments in New Zealand means the Act no longer provides a sound basis for the creation and sustainable management of intensive, multi-unit developments. One of the changes proposed includes a requirement for body corporates to establish long-term maintenance plans and long-term maintenance funds, and broadens the role of the body corporate in relation to maintaining and managing the building as a whole. The aim of this change is to encourage sound property management practices which will help protect the long-term value of investments.

Other changes proposed in the Bill will:

• Make managing unit title developments easier and more efficient by clarifying rights and responsibilities of unit owners, the body corporate, developers and tenants, and by allowing the body corporate to act on behalf of all the unit owners for the good of the development as a whole.
  
• Make joint decision-making by the body corporate easier by promoting participation and by removing requirements for unanimous resolution.
  
• Make information more readily available to purchasers, unit owners and the body corporate so that they can make informed choices by introducing disclosure requirements for vendors and developers.
  
• Establish effective ways to sort out problems and move forward by providing for the Government to establish a dispute resolution service for unit title matters covering education and information, mediation and adjudication.
  
• Make survey and title processes more streamlined for surveyors and developers by making the staged development process more flexible.
  
• Allow for large, staged or complex unit title developments to be set up and managed more easily by providing for ownership structures to include ownership of common property by the body corporate.
  

The Unit Titles Bill had its first reading in Parliament on 5 March 2009 and it is now at the Social Services Select Committee for consideration, where any member of the public can submit views or concerns regarding the Bill.

Please watch this space for further news on the Act and if you know of a Body Corporate that requires assistance in any aspect of the management of their property, then please do not hesitate to contact us.