That's Capital! Planning for Capital Improvement Project Contingencies

That's Capital!

 Sooner or later, every resident living in a condo or co-op community 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 clear, consistent  communication between board members, residents, management and the project  crew, the hassle of the project can be significantly reduced.  

 Those Pesky Projects

 All capital improvement projects have their major inconveniences but industry  professionals note that some are definitely more disruptive than others.  

 Roof replacement and facade work projects always seem to pose some coordination  troubles, says Josh Koppel, CPM, president of HSC Management Corp. in Yonkers. “The dust and noise it creates, possible falling debris and possible cracking  plaster from construction can create issues.”  

 Other projects such as elevator work or hallway restoration can be challenging  as well. “These types of projects have a direct impact on the daily lives of residents  during the project but improve the quality of life once completed,” says Dan Wurtzel, president of Cooper Square Realty in Manhattan. “Residents deal with inconveniences during projects that affect their daily  routine. Leaving your apartment and entering a hallway that has been stripped  of carpet with bare walls and temporary lighting or having to wait that extra  time while an elevator is under modernization has its drawbacks. But once  completed, everyone feels much better with the end result.”  

 Doing work on storm drains also has its difficulties. Working on a 100-unit  building in Forest Hills, Jay Cohen, director of operations at Manhattan-based  A. Michael Tyler Realty Corp., says the basement and lobby flooring had to be  torn out, requiring coordination with activities that residents could do such  as pick up mail and access the lobby. “We were constantly putting up notices on what residents could access on any  given day,” he says.  

 Prepare Thyself

 The impact of a capital improvement project can be reduced if building  administrators prepare both themselves and their residents adequately for an  upcoming project.  

 When the board or management is initially planning to undertake the project many  months in advance, it is critical to keep everyone informed about the potential  schedule, costs and purpose. “When cooperative and condominium boards undertake a large-scale capital  improvement program, such as installing a new roof garden, replacing windows or  a heating plant, repaving a parking lot, or restoring the facade, they take on  a serious financial commitment for their building,” says Stephen Varone, AIA, president of RAND Engineering & Architecture in Manhattan. “Unfortunately, too many boards forge ahead without taking the necessary steps to  adequately determine the anticipated costs associated with their plans, thereby  risking a serious fiscal shortfall.”  

 Varone encourages boards to make sure they have adequate funds available for the  projects before jumping in, determine which projects are the most critical at  the time and establish a contingency fund that can cover any unanticipated  costs. Taking these steps can ensure that projects will run smoothly and won't  be interrupted or delayed due to financial constraints.  

 For major capital improvement projects, communication is key. “It all starts and ends with communication. In order to get ahead of the curve  and set a positive tone for the project, a building needs to prepare their  residents and set expectations in advance of starting a project,” says Wurtzel. “Depending on the scope of the project, its duration and impact on residents will  determine how far in advance to begin informing residents.”  

 Koppel agrees, adding that it is important to keep residents updated with very  detailed description on what specific work is going to occur each day so they  are better prepared.  

 Notices, updates and scheduling regarding the project can be dispersed in many  different forms. “Communication will include, a general meeting of residents, updates in a  newsletter, special notices to residents or general notices posted in public  areas of the building and email blasts. For some types of projects we have  established an "800" number for residents to call for daily updates,” say Wurtzel.  

 Generally, boards will begin to notify residents of a project once it has been  approved, says Koppel.  

 Scheduling the Work

 While there is no job that can be perfectly scheduled, certain actions can be  taken to help minimize the impact on residents.  

 “Most work needs to be completed during business hours. For those who are home  during the day, it will be a difficult time but more people are home in the  evening, night and weekend hours,” Wurtzel says.  

 Koppel agrees saying that projects are generally scheduled during normal working  hours 9-5.  

 Most professionals agree that work should not extend into the evening hours for  the safety of the workers and the convenience of residents, but there may be  exceptions. “There are some exceptions for after hours work such as elevator modernization  work that takes place in the elevator room,”says Wurtzel.  

 Most painting and plastering work is also completed at night to minimize impact  on residents, says Cohen. “When we have to, for example, paint the floors of the basement, we try to do so  in the evening hours so that is has enough time to dry by the morning,” he says.  

 A lot of times the project dictates when you will be able to do the work.  Obviously, it would be very difficult to revamp the facade or redo the parking  lot in the winter but might be equally as challenging in a summer heat wave. “Heating jobs and boiler replacement jobs should be done in the spring or summer,  not in the middle of winter for, obviously, lack of heat. If you put a mobile  boiler in you might not have sufficient heat so that is a project that is  dictated by the seasons,” says Koppel.  

 Cohen suggests that working weekends, though potentially disruptive, can  ultimately be beneficial. “We try to work on a Saturday so that we capture an extra day per week and  shorten the job up.”  

 When Complaints Arise

 But even under the best of circumstances, preparing residents, including rental  tenants as much as possible doesn’t mean that the project will go off without a hitch and without complaints.  

 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.  

 Koppel stresses that everyone involved in the job should be reporting to the  property manager. “It all starts with the managing agent. Even if there is an engineer who is  monitoring the job, the engineer is responsible to report any issues with the  contractor, any issues they foresee, and then the managing agent reports to the  board,” he says.  

 A designated project manager should be managing the work of the engineers and  contractors, for scheduling purposes and how the project is going to be  completed so that the effect on residents is minimal, says Cohen. “I do the day-to-day project management and I am also responsible for the weekly  updates for the building,” he says.  

 Unfortunately, no matter how meticulous the organization and how prepped the  residents and team are for the project, problems may arise.  

 “Even the best plans can go astray. Communication and transparency are extremely  important. If something goes wrong then you need the brain trust to find  solutions and communicate those solutions to the residents. Pointing fingers  will not solve problems and the board will make a business decision on how to  deal with unforeseen issues,” Wurtzel explains.  

 Safety during projects is a big concern and Koppel says it is critical for  property managers and project staff to maintain a safe environment for  residents. “Protecting residents is number one. In your interview process with your  contractor, maybe spot check some of their other jobs so see how clean they  work and how organized they are. Also, have your super patrolling and make sure  things are in place. Your super is a big part of this because he is the eyes on site,” he says.  

 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.  

 “All contracts are vetted and approved by corporate counsel with the board's  understanding of critical business and legal terms. These include but are not  limited to price and unit pricing, if applicable, payment schedule, work days  required to substantially complete the project, performance rewards and  penalties, insurance requirements, performance bond if necessary, subcontractor  requirements, lien waiver process, etc.,” says Wurtzel.  

 If you are a member of any trade organization, such as the New York Association  of Realty Managers (NYARM) or the Institute of Real Estate Management (IREM),  these organizations have resources, including back issues of their publication  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 you with. These organizations also offer online  services to make your job easier.  

 Lisa Iannucci is a freelance writer and a frequent contributor to The  Cooperator.  


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