Thursday, November 09, 2006

"Significant delays in getting building consents" sinks homebuilder

I'll post this without comment lest I give those who berate me for offensive language have even more evidence for their cause:

NZ HERALD: Builder's collapse devastates homebuyers
A company that builds houses from Waiuku to Whangarei has gone into liquidation, leaving customers wondering whether they will get back their deposits of $25,000 to $50,000.

Meridian Homes Ltd of Orewa had 30 contracts for homes, with half under construction, said joint liquidator Paul Sargison.

Managing director Dean Hopper blamed the collapse of the six-year-old company mainly on significant delays in getting building consents for homes.

By the time the council gave consent, he said, the cost of the building had exceeded the original contract price and profit was lost....
RELATED READING:
High and higher regulation. High and higher house prices. - Not PC (Oct, 2006)
"The building is the easy part" - three stories of red tape and resource consents - Not PC (Sept, 2006)
Frank Lloyd Wright on building codes and education - Not PC (June, 2006)
The house that Norm could no longer build - Not PC (June, 2006)
Building Act brings building delays - Not PC (Oct, 2006)
Architect v Bureaucrats - Not PC (Dec, 2005)
Council 'asks' nicely for more money. Yeah right. - Not PC (Nov, 2005)
Who'd be a builder? - Not PC (Nov, 2005)
Councils to builders "More red tape please." - Not PC (Nov, 2005)
The 'deregulated' building industry... - Not PC (Nov, 2005)

RELATED: Building, Politics-NZ

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18 Comments:

Anonymous Kane Bunce said...

PC, why surrender to them like that. Don't let them win like that. As they said on Penn and Peller's Bullshit, there are no bad words, just bad intentions. And as Penn said, "After all it is the meaning that is the meaning not the words."

The story is poof that building consent only ruins lives rather than improving them.

11/09/2006 01:32:00 pm  
Anonymous DenMT said...

PC: If building consent delays (rather than resource consent) were the main reason for the company's collapse, it makes one think:
- The legal requirement for processing BC applications is 20 working days, and while this is usually blown (by a few days), that's simply not time enough for significant fluctuation in the market to cause losses of the order these guys are talking about. Sounds like these guys were not producing adequate documentation. You can hate the game as much as you like, but if you get burned (or worse, burn other people - your clients/customers) for not playing by the rules, whose fault is it?
- This shows more what a slim margin the spec-house design/build environment survives on.

If the fluctuations in a month and a half are enough to make your project no longer viable, you are not doing your cost estimates adequately. If your consents are taking longer than a month and a half, you are not preparing your documentation adequately.

Either way, it seems on the face that it is the design/build firm's lookout, and laying the blame at the feet of the Council seems a bit far out to me (and should to you too, from inside of the system). I feel terrible for the clients, who at the end of the day have suffered at the hands of a cowboy contracting firm, not at the whim of the Council. From the article:

"But an Aucklander who had signed up Meridian to build a home in Warkworth said last night that Master Build had not received his guarantee application form.

Eric Thompson also said there was not even an engineer's report or builder's plans to show for the $28,000 deposit he paid in late August."

As I said, for sure, hate the rules, but don't complain if you suffer from disregarding them. And if you cause misfortune to others who are relying on you to follow them, well - shame on you.

DenMT

11/09/2006 01:56:00 pm  
Blogger PC said...

"The legal requirement for processing BC applications is 20 working days, and while this is usually blown (by a few days)..."

Excuse me while I bust a gut laughing.

How many building consents of any consequence have you got back within the last twelve months that were returned within 20 working days (plus or minus "a few days"?

11/09/2006 03:00:00 pm  
Anonymous DenMT said...

I just went through all the files above my desk for the last year quickly, and the longest WCC took to come back with a consent was 40 days (that one a medium-size residential alteration with two suspensions in it which were due to omissions on my part). Other than that three residential alterations under 25 days (one in 16) - two new houses in 21 and 24 days - and four $200K+ commercial fitouts at 19, 22, 22, 23 and 28 days.

Last month we got back an application for a $6 million, complicated commercial fitout over a number of office tower levels from WCC in 10 working days, no queries. The Council got a letter of appreciation in response.

My understanding is that AK is much slower than here, but by how much I'm not sure. We're talking provincial councils though, Whangarei etc who presumably don't have the same workload pressures as the urban authorities.

Regardless of that, I am still amazed that you would blame the clients' misfortune on the TAs rather than the sloppy operation of Meridian, which one can plainly read through the article.

DenMT

11/09/2006 03:49:00 pm  
Anonymous Anonymous said...

Sorry but I have to comment on this. Agree with Den - if these people cannot make money in this environment they do not deserve to be in business. The builders and their coys around here are absolutely creaming it, and have been for years now.

That's capitalism Peter - the weak have to go sometimes to make way for the strong.

11/09/2006 04:34:00 pm  
Anonymous Sus said...

PC, this to-ing and fro-ing as to Council consent timeframes misses the material point; that there is no reason for the bastards to exist in the first place!

It's a bit like the old Soviets discussing the comparative lengths of the food queues.

If I want to build a carport on my property, why the fuck should I have to report to a petty bureaucrat, who I'm also forced to fund via rates, in order to do so?

11/09/2006 04:37:00 pm  
Anonymous Sus said...

Oh, and the affliction's not confined to NZ. North Sydney council took 18 months; yep, 18; to approve my sister's house plans. Every visit to the council seemed to result in yet another chq for $5000 - for sweet FA in return, of course.

*All shrubbery/foliage had to be listed, including colours thereof. And get this: if you decided to plant say, an apricot rhododendron instead of the pink one originally listed on the plans, a council twat could force you to rip it out and replace with the original.

Nazi fucks.

*Don't get any ideas, Den, or I'll be forced to come to Wgtn to smack you hard! :)

11/09/2006 04:46:00 pm  
Anonymous DenMT said...

Sus: "If I want to build a carport on my property, why the fuck should I have to report to a petty bureaucrat, who I'm also forced to fund via rates, in order to do so?"

Because if it is poorly designed, and shoddily constructed, and you sell up, and Jane Doe moves in and there's a mild earthquake, and the connection between the support post and the footing fails and the carport roof falls in, right on Jane Doe's spleen, we need a better comeback than simply suing whoever it is that designed it, and whoever built it, or hoping their PI insurance covers a replacement spleen.

Obviously culpability lies with them, but cowboy design/build flogger-offers (Meridian sound like prime examples) are the exact reason why the industry needs a verification process. It is simply not good enough to let the market take care of poor workmanship, because it is simply not a robust enough solution. We can't trust the market to flush out all the half-skilled opportunistic shysters out there for a quick buck on the property market.

As PC will attest no doubt, it is actually not the easiest thing in the world to design a weatherproof, structurally sound, and well put-together building. The layperson can't simply look at a set of plans and see that he/she is getting taken for a ride. It is essential for the quality of NZs building stock that we have an independent verification process, as frustrating as it certainly is at times.

PS: On listing shrubbery etc, I am currently working on a large multi-unit social housing project, which during the resource consent process had to have landscape plans resubmitted three times for successive levels of detail. Starting at plant location, and ending at species, planted size, mature size, bag size, and appearance. Just because I agree with the need for a checking process, doesn't mean I agree with the current stringency!

11/09/2006 05:46:00 pm  
Anonymous Anonymous said...

Again you want to waive compliance costs and protect losers in your own industry - but not anyone elses - like the finance industry.

Last time I looked FBU were doing great. Coys that are not well managed go to the wall. Economics 101.

What astounding hyprocrisy.

11/09/2006 07:26:00 pm  
Anonymous Anonymous said...

Privatise the building consent business. When it comes to buying a house, whether or not it has been built to a certain standard will be on record, the buyer then decides.

Warwick

11/09/2006 08:08:00 pm  
Anonymous DenMT said...

I am in total agreement re: private building certifiers. In my first job out of architecture school Nationwide were still around, and my boss got a building consent off of them for a new house in two days. As long as there is a centralised, agreed baseline for building standards, and every set of plans is subject to checking under those plans, it shouldn't matter who does the checking. A competitive environment would be good.

Obviously this would only hold for building consents, and the TAs would need to keep their hand in for resource consents, although I don't see why at least parts of the process couldn't be handled privately, vastly reducing the load on the TAs.

DenMT

11/10/2006 12:08:00 am  
Anonymous DenMT said...

...every set of plans is subject to checking under those STANDARDS...

No more reading the interwebs late at night for me.

DenMT

11/10/2006 08:23:00 am  
Anonymous Kane Bunce said...

DenMT even if you are right the whole thing could still be avoided if consent was needed. And more importantly it breaches property rights which is enough reason to hate the system by itself. So even if you fail to abide by them there IS good reason to complain: because they violated the rights of you and your customers.

PC, I take it you failed to get them within that time. Or even close to it. That is of course what I'd expect from government, whether it be local or national.

DenMT, 40 days is still a lot longer than 20.

Anonymous 1, that is NOT capitalism. We don't habve capitalism. In capitalism consent wouldn't exist. I suggest you read Ayn Rand's Capitalism, The Unknown Ideal for full details on what capitalism really is.

Sus, you are right. As I said it breaches property rights.

DenMT, that does NOT justify violating the right of the property owner to do what he likes with his ownj property. There is NEVER any right to that. You are wrong that there is a need for more than suing. More would be a breach of property rights. There is never a need for rights violations. We CAN trust a FREE market to flush them out as customers in a free market won't go to them, thus putting them out of business, thus flushing them out.

Anoymous 2, I believe what PC is actually trying to protect is property rights, as often ignored thing that would greatly boost the economy if it was recognised.

Warwick and DenMT, privatising it STILL violates property rights and as such is still EVIL. No on has the right to tell others what they can and can't do with their own property. And don't get me started on Resource Consent! That's even more evil! It has stopped my mother (and others) from opening a perfectly legitamte business.

11/10/2006 12:30:00 pm  
Anonymous DenMT said...

Kane, first of all, the 40 day consent was, as I pointed out, my fault. I submitted a fairly hastily-put-together set of documents and the client bore the brunt due to the ensuing delay. We wrote off the extra hours.

Quibbling aside, the essence of your rather vehement post as I take it is that people should be allowed to build whatever they like, with no required standard, as long as it causes no immediate harm to anyone else.

I see this as a hopelessly romantic ideal - if you applied it to the reality of today where well-meaning clients are still getting done over by seat-of-the-pants developers like Meridian seem to be, it just doesn't fly.

As I pointed out a bit laboriously, saying that the Council is in the wrong is ridiculous on the balance of facts. You say they 'violated the rights of you and your customer' - I say that Meridian, who owe due diligence to their clients, clearly failed in their responsibility. Working in the industry, I can guarantee you that the bottom fell out of Meridians boat due to them running way to fine a margin, and the Council is a convenient scapegoat for their poor management.

I am surprised that PC, who also works in the industry, has maintained radio silence on this one. I'm curious to know what he thinks.

At the end of the day Kane, entirely deregulating the construction industry and 'letting the buyer beware' is a totally Martian idea - the consequences would be unthinkable.

DenMT

11/10/2006 01:12:00 pm  
Blogger PC said...

"I am surprised that PC, who also works in the industry, has maintained radio silence on this one..."

Radio silence does not indicate agreement. Sometimes it just means you're busy -- that Carlaw Park post took up a few hours I didn't have.

But I presume, Den, that you're aware of the Fallacy of Faulty Generalisation?

And I assume you've already read those other posts I linked to about the difficulties faced by builders?

And I presume you've noticed over the last few days the Master Builders and Certified Builders both highlighting this issue. Master Builders:
The Master Builders Federation says builders are having to put up with consent delays of up to six months..

Chief executive Pieter Burghout says the statutory requirement is for building consents to be processed in 20 days, but builders are sometimes waiting three to six months.

He says slow processing of consents affects a company's cashflow in a big way.


Certified Builders:
Derek Baxter from the Certified Builders Association says the level of detail needed to gain a resource consent is a struggle for all builders.

Mr Baxter says the process is inconsistent across the country and councils and builders need to work together to improve it.


And I presume you've also read the surveys quoted recently indicating (from the Herald) "Surveys showed nearly 50 per cent of building consents, or 40,000 each year, were not processed within the 20 working days required by the Building Act." Admittedly, these were quoted by Nick Smith, but I guess you'd be aware of the costs associated with uncertainty, and of all the uncertainties surrounding any project when waiting for consent, or for questions about consent.

We can all generalise from our own limited outlook -- and when after three months waiting I'm asked questions like, "Can you please specify the balustrade fixings," for a three-tread stair, I'm keen to generalise as well -- but there is more than enough evidence out there to support what Meridian's MD had to say, without needing to damn him without even any evidence to do so.

11/10/2006 01:38:00 pm  
Blogger PC said...

BTW, I see no more need for councils to vet buildings when you build them than I do for them to vet cars before you buy them.

Take them out of the loop and you would find Insurance companies taking a bigger role in specifying and ensuring standards (as they used to in many pre-war US states), and professional private certifiers taking a much bigger role in pre-purchase inspections (just as Hometune and the AA do for cars), and perhaps even pre-certification inspections during construction.

And 'Michelin Standards' for buildings? Why not. Better than our current gold-plated-but-already-tarnished Building Standards surely.

As Frank Lloyd Wright said of them, "The building codes of the democracies embody, of course, only what the previous generation knew or thought about building..."

11/10/2006 01:45:00 pm  
Anonymous DenMT said...

PC, this will be unfortunately brief, as ale is about to be served.

I might be seen as a bit hard-hearted here, but if builders are suffering so much under the more stringent approach TAs are taking to vetting consents, they need to look at getting their documents prepared elsewhere.

In my first job, the boss had some builder mates who gave me a failed consent application to tart up and reapply for. It was three A4s with dimensions in pencil and very quick detail sketches. At that stage of course, I had no idea what the appropriate level of effort in documentation was for a building consent, so I laboured day and night producing a mountainous proliferation of paper, reinventing every wheel there was to be reinvented, and scrutinising every junction of materials.

Naturally I made a bunch of fundamental errors, and did way too many hours than what the job was worth (although in that job we wrote loads of hours off habitually), making a mountain out of a molehill. These days I have it much more streamlines...

However that experience gave me a good insight into the economy of documentation (obviously an extreme example) that the design/build ethic often operates on. If there was no mechanism other than the market to catch shoddy operators out, people would make a killing in property very quickly, and move offshore before the properties they hocked off sprang leaks, collapsed, or were blown away.

It takes an extraordinary faith in the good nature of mankind to countenance a building industry with out regulatory mechanisms. Here in the real world, there are way too many wolves ready to fleece the unwary.

That'll do. Beer time. Cheers all!

DenMT

11/10/2006 04:29:00 pm  
Anonymous Kane Bunce said...

Yes, DenMT, the consequences of letting people live their own lives their own way as they have the right to do would be unthinkable. But only to likes of collectivists like yourself. Objectivists have no problem thinking up the massive benefit everyone would get from a free market. History is littered with proof of the failure of collectivism and the success of true capitalism (as opposed to the fake capitalism that currently exists).

besides what about the issue of my mother and others needing resource consent to open a much needed business?

As PC said, the insurance companies would be your protection. Not good enough standard? Sorry we won't insure your building. That is all the incentive a rational builder needs and it is moral unlike consent.

You need no confidence in the good nature of mankind. You need only confidence in the free market's ability to choose competitors that do a good job. You are saying either implicately or explicately saying that man cannot be good, which is in itself evil. There may be wolves, but there are less of them than non-wolves. Especially in a free market.

Ultimately if builders fail because they met overly stringent and immoral standards it is not their fault. It is the fault of the people who created and uphold the standards.

11/11/2006 03:00:00 pm  

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