PM Disagreement

Discussion in 'Development' started by Ichigo, 27th Mar, 2021.

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  1. Ichigo

    Ichigo Well-Known Member

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    May I have your thoughts on this issue, please?

    Project Mgr (PM): Formal Agreement to subdivide a corner block in Perth WA into 3 lots and prepare building contract for the 3 dwellings.

    Sold as a land contract (with myself as the land owner and the buyer) and a separate building contract (builder and buyer). PM was supposed to tender to find suitable builder but decided to act as the builder. He is a registered builder, but the building contract is with another registered builder - a friend of his.

    DA Approved (I paid for designs and DA Approval, which is now DA Approved). Titles expected in 1-2 weeks. This morning, PM requested an in person meeting and now threatens me to pay an extra $39,518 towards the building contract for items (see attached which I received for the first time today after the meeting) we have no agreement that I should pay for. We have a 3rd offer that we are trying to close by 31/03 so the buyer gets the 15k Building Grant and he is using that to pressure me into signing an agreement to pay the above amount by COB Monday otherwise he will pull out of all Building Contracts and saying that I stand to lose all the other offers.

    Offers are as such..
    Offer 1 - Unconditionally Approved
    Settlement Date: within or before 21 days of issue of titles, Property Chattels: N/A, Amount of Loan: TBC, Special Conditions: N/A

    Offer 2 - Approved subject to titles
    Settlement Date: within or before 21 days of issue of title, Property Chattels: N/A, Amount of Loan: (Land price + Build Price - Buyer Savings), Special Conditions: N/A

    Both offers had separate Building Contracts signed before 31/12/2020 with buyer aiming to obtain the 45k Building Grant

    Thoughts on the above would be very much appreciated, thanks!
     

    Attached Files:

  2. Scott No Mates

    Scott No Mates Well-Known Member

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    Are these matters arising from the conditions on the DA?

    What are the additional PM fees? How are they calculated? Is it in accordance with the PM contract?

    What are the terms of the building contract with regards to the treatment of variations?
     
  3. Ichigo

    Ichigo Well-Known Member

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    No, not a condition of the DA. As the PM (and acting Builder), he adjusted the floor plans designs to suit the Buyer's requirements and the DA was updated accordingly. He approved the final floor plans (done by his draftsperson) and advised to request DA approval to fasten the process.

    He claims he had to put more effort than he anticipated and is requesting the extra 6k. The Agreement was not effort-based, but milestones based (titles issued and building contracts ready) and has not changed since the beginning.

    The Building Contract is between his builder friend and the buyer in December 2020. I was not involved when they signed the contract (which was facilitated by the PM) and only obtained one of the building contracts a few weeks ago. Attached is what I think (but unsure) might be the terms for variations. All utilities have already been connected, and paid by myself to obtain clearance of the subdivision conditions.
     

    Attached Files:

  4. The_Billy

    The_Billy Well-Known Member

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    The value in question here is enough to warrant the cost of 3k to 5k to pay a solicitor / lawyer for legal advice on the matter.
     
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  5. Scott No Mates

    Scott No Mates Well-Known Member

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    Those changes are as a result arising from the buyer's request/requirements, not yours. Advise the buyer that those changes requested will cost them $$$ (this should have required your consent from the PM to submit the amendment to the DA).

    If the buyer is on the hook, they will pay.
     
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  6. Ichigo

    Ichigo Well-Known Member

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    Obtained advice from various professionals and they all agreed that these items are part of the building contract and should not be paid by the land owner.

    Spoke to the buyers and they understood that these items are part of the building contract. They will resolve it with the builder directly.

    PM was very unprofessional and was instructed to stop dealing with all matters wrt to the PM agreement.

    Thanks all for your thoughts.
     
  7. Scott No Mates

    Scott No Mates Well-Known Member

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    Glad to hear that the coin has fallen right side up for you.
     
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  8. K168

    K168 Well-Known Member

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    who is the PM so others can avoid
     
  9. NWHT

    NWHT Well-Known Member

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    This is the correct way. You should have had your solicitor prepare an agreement for the buyers to sign outlining the costs and changes before the DA was amended.
     
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  10. Ichigo

    Ichigo Well-Known Member

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    I'm unsure if it's ok for me to post his name publicly but I'll send you a message privately and anyone else who's thinking of using a PM in Perth.

    What I've also learnt along the process is that he used to be the ex-managing director of a big project builder in Perth for about 14 years and says he has built over 1800 houses in WA, etc to sell himself. We submitted a subdivision application without a feature survey which was rejected, had to change demolition company which led to further delays, did not get paid the 50% of the new dividing fence as he did not follow the procedures from the Dividing Fence Act when he spoke to the neighbours, the watercorp land agreement was requested 7 weeks late - only after speaking to another well-known developer in the forum who brought that up to me, he failed to notice the building easement requirements from Western Power which led to a 3 months delay as further Clearance Assessment was required, he requested his electrician to do the electrical works without requesting for a design/scope of works from Western Power and that led to further delays as they weren't fully compliant - process should have been to request the design first then do the works, I've lost multiple offers as his pricing for the same build changes every time we meet a different buyer (once was 15k higher for the floor plan and specs we had when we met another buyer 3 days later) - as he tends to suss out who much they can afford and adjust accordingly...

    List goes on, but the main lesson for me is just because someone was the managing director of a big project builder, it does not necessarily mean they know how to execute the day-to-day activities required for a subdivision. They may know the big picture and have the contacts but no guarantee they can PM the project smoothly or with minimal hassle.
     
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  11. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Did you get tax advice on this masterplan ?
     
  12. Ichigo

    Ichigo Well-Known Member

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    Hi Paul,
    How about we have a quick phone chat sometime? I'll PM you, thanks.