Freaking out as building costs go up and up and up - advice needed

tegmim

In mid-2019 I got a quote on some building work at our house (a dilapidated farm cottage with several outbuildings) from a local builder - I'll call him Nick. The quote was for £189,690+VAT at 5% to convert an old stone barn into a pair of holiday cottages. It was the middle quote of five, but the guy clearly knew what he was doing and had done good quality work in the past, and had great references, so we trusted him the most out of all the companies that quoted. Whilst the most important work was to modernise and extend the house itself, we needed this work done first, as the work on the main house would start with demolishing the kitchen, cloakroom and bathroom, meaning we would need to live in the holiday cottages during the work. So we accepted the quote and he started work.
We also agreed a plan to have a ground source heat pump and solar panels to make the whole site run on 100% renewable energy. It was expensive, but the RHI claim was intended to slowly repay us the majority of the costs. This didn't involve Nick, but his quotes included the underfloor heating it would connect to, and he agreed to dig the trenches for the heat pipes that were to run between the buildings.

Not long after Nick started work on the barn conversion, the traditional methods carpentry company that was doing a major repair to our workshop (the place we do farm and wood work downstairs, with a small office space for my business upstairs) turned out to be incompetent. The roof structure they had built couldn't support the weight of the tiles, and they had damaged the foundations of the building. So we took them to court and won back the £24,000 we had paid them for the repair. However, we were left with a building that needed an almost total rebuild. Nick said he could fix it all for £150,500+vat and bring it up to modern residential specifications that would mean it could also run on the renewable energy system and be used as a venue for events (subject to planning permission) if we ever wanted that in the future. It was £100,000 more than we had planned on spending, but it seemed like we didn't have many options in the circumstances, so we agreed the quote.

We also need work doing on our home, which has major structural problems including needing better insulation and damp-proofing, as well as an ugly old extension pulling down and replacing with a larger modern replacement (for which planning was in place when we bought the property). Again, Nick quoted on the work.

So I arranged mortgage borrowing to cover the 3 quotes, plus a small contingency fund.

Then the world was hit by the pandemic, and lockdown/Brexit made material costs (and demand for builders) spiral. Whilst they could still continue to work on site (as the work was mainly outdoors, with farms being an exemption even in the lockdowns) things went very slowly, and Nick told us that we'd need to stockpile materials ahead of some price rises at his suppliers. So we got as much as we could in advance.
Whilst I knew it would be more sensible to do each building in turn, Nick ended up doing work on each of them in parallel to keep going despite delays in getting various things agreed with planners/building regs/structural engineers and delays in getting various trades (we struggled to get good roofers, and the scaffolding company tripled their original quote, so we had to find another company). Then, as is always the case with building projects, there were a few changes that had to be made as we went along. An additional set of metal joists to hold up water tanks in the roof. A wall that crumbled when being underpinned and had to be re-built. A slight change to the roof levels, as the design didn't work in practise.
Then Nick told us that his quotes hadn't included any drainage, earthworks or retaining walls, as these were not included in the architect's drawings. He wanted an additional £125,000 for this, which was a huge shock and more than we had in the contingency budget. So we had to arrange additional borrowing.
But now his invoices are far beyond the quotes plus the additional work that was agreed. Not only that, but we've paid for things directly that were in his quote (windows/doors, scaffolding, electrician). In fact, we've already spent the total we expected including the work on the main house. It means we have used up every penny we can borrow before we even start on the house. And not one of the outbuildings is finished. We still need the kitchens, lighting, and skirting to finish the interiors, and the exterior cladding putting up.
Maybe I'm crazy, but I still 100% believe that Nick is an honest guy. The quality of the work that has been done is great. And there are times he has gone above and beyond (eg when we had to cancel our kids' birthday party in the first lockdown he came in over a weekend and built us a treehouse for them out of salvaged materials, without charging anything). And I do get that material and labour costs have gone through the roof since we started. But (even though I know we are hugely privileged to be in a position to buy and do up a farm cottage like this) I'm someone that keeps track of every penny, let alone thousands of pounds - I would split my shopping between two supermarkets as I keep track of the costs of every item. So I feel very distressed about where we have got to and how I don't know the cost to finish the job. I simply can't understand how costs can spiral like this, without him ever giving us a clear indication of what the additional costs to finish the project would be. Even now he won't give us a number to finish the work we are committed to. He seems to have relied entirely on a third party called ProQuant to work out his quotes, and because they charge £500 per calculation, and don't have the flexibility to amend things according to what is needed on site (eg the fact we can't use cranes here, or that we can simply move soil on site rather than charging for grab-vans and disposal) he hasn't amended the quotes at any point as he has gone along - and if he did, they'd quote the entire job as if he were starting from scratch now, with much higher material and labour costs for work that has already been done.
So, now I am in a mess like the worst stories on Grand Designs, where we all think "how could they be so naive and let costs spiral like that", what can I do? 

TELLIT01

Material costs quoted back in 2019, and the reality of material costs in 2022 are worlds apart.  Your builder should have been keeping you informed of the spiralling costs.  I think you need to speak to him and tell him straight that you only now have £x left in the budget and see what he can complete on that basis.  Even that isn't going to be straightforward as he will be able to give a labour cost, but he has no control over material prices.  From the way you describe him, I suspect he has already sucked up some of the costs.

Just a very small example of the speed of price increase on materials, we were having timber raised bed installed and proposed a fairly minor change to the design.  Our contractor checked timber prices and advised us of the cost.  When he actually went to get the timber about 6 weeks later the cost had increased by 50%.

tacpot12

'Nick' may be honest, but he's not your friend.  You have contracts with him to deliver a complex range of building work, none of which has been delivered, and for which there is no clear end to the costs. 

I think you both need some professional help to work out what can be done. I think I would call your insurers (assuming you have legal expenses cover) for some advice on how to get a resolution from 'Nick', but ultimately the best approach is going to be to sit down with him, and another professional, to identify what has gone wrong, what can be done, and ensure that any plan reflects the fact that he has bled you dry and finished nothing.

I can't see that his use of ProQuant makes any difference to you. He quoted you a price, and the only way he can change it is if the contract you have with him says he can. This contract almost certainly requires you to agree to any changes, and by the sounds of it, you have only agreed to changes that you could fund. How he manages the chaning cost of materials and labour is his problem, not yours.

The one thing that won't help is freaking out. Clients can and do get angry when things don't go to plan, but anger is not a useful commodity when tryin to solve this sort of problem. It needs a clear head and an open mind. 

tegmim

TELLIT01 said:

Material costs quoted back in 2019, and the reality of material costs in 2022 are worlds apart.  Your builder should have been keeping you informed of the spiralling costs.  I think you need to speak to him and tell him straight that you only now have £x left in the budget and see what he can complete on that basis.  Even that isn't going to be straightforward as he will be able to give a labour cost, but he has no control over material prices.  From the way you describe him, I suspect he has already sucked up some of the costs.

Just a very small example of the speed of price increase on materials, we were having timber raised bed installed and proposed a fairly minor change to the design.  Our contractor checked timber prices and advised us of the cost.  When he actually went to get the timber about 6 weeks later the cost had increased by 50%.

Yeah, we know that the costs of blocks and wood and many of the materials have risen by 60% or more. And I know that Nick has not increased their day rates or taken any overheads on the material costs (in fact, he offered for me to pay his supplier directly). I think you are right that we need to work out where we can get to on our current budget, and then see whether we can borrow enough to to whatever work is required to reach the claim point for the RHI before that window closes (as missing that would make it much harder to dig out of this level of debt). The key frustration is just not being given clear enough information as we went along.

tegmim

tacpot12 said:

'Nick' may be honest, but he's not your friend.  You have contracts with him to deliver a complex range of building work, none of which has been delivered, and for which there is no clear end to the costs. 

I think you both need some professional help to work out what can be done. I think I would call your insurers (assuming you have legal expenses cover) for some advice on how to get a resolution from 'Nick', but ultimately the best approach is going to be to sit down with him, and another professional, to identify what has gone wrong, what can be done, and ensure that any plan reflects the fact that he has bled you dry and finished nothing.

I can't see that his use of ProQuant makes any difference to you. He quoted you a price, and the only way he can change it is if the contract you have with him says he can. This contract almost certainly requires you to agree to any changes, and by the sounds of it, you have only agreed to changes that you could fund. How he manages the chaning cost of materials and labour is his problem, not yours.

The one thing that won't help is freaking out. Clients can and do get angry when things don't go to plan, but anger is not a useful commodity when tryin to solve this sort of problem. It needs a clear head and an open mind. 

Yeah. I think this is good advice also. I'm not angry, so much as worried*, and keen to find a pragmatic resolution that doesn't end up with us in a level of debt we can't dig out of (missing the milestones to claim the RHI, for example, would be catastrophic). I do have legal insurance, so I could ask them for advice (though I'll need to check whether we had it before the building work started, as I can only see it on the policy since since August 2020).

As far as I can tell, the contract was for fixed price work, but had some exclusions (eg it says drainage is assumed for the holiday lets as no plan was provided, and excluded from the other two buildings, whilst the cladding/window costs are marked as indicative costs that will vary according to the final choices I make - though I researched and ordered both changing from hardwood to Hardieboard to stay within the allowed budget).

*I'm also undergoing some scans for a health condition that might need major surgery, which is making me generally more anxious. And our mortgage broker messed up, meaning we will have to start over to raise more finance, which feels like another load of hassle I could do without.

kazwookie

Get 'Nick' in for a meeting about the costs / quotes etc and get it sorted, then follow the meeting up in writing

2019 prices, are way out of date, my brother is a builder and I know how much he is saying prices have shot up, 'Nick' is suffering just the same.

macman

Surely the prices he quoted you back in 2019 had some sort of validity expiration date? Maybe 6m or a year? He'd have been crazy to give you a firm quote with no start date in mind, even pre-pandemic.

TELLIT01

tacpot12 said:

I can't see that his use of ProQuant makes any difference to you.

The way I've read it is that any attempt to update or modify the original quote provided through ProQuant results in a complete new quote for the entire job, when what the OP needs is an indication of the cost of the remaining work.

tegmim

macman said:

Surely the prices he quoted you back in 2019 had some sort of validity expiration date? Maybe 6m or a year? He'd have been crazy to give you a firm quote with no start date in mind, even pre-pandemic.

I had to accept each quote within 30 days, which I did, and then he started work straight away. He had an expected build time of 29 weeks for the cottage, 24 weeks for the workshop and 22 weeks for the other building, with a 36 week estimate for the house, but we hoped they could overlap so he'd move onto working on the main house in under a year. Obviously, neither of us expected the pandemic and other issues to stretch that to 156 weeks!

I should also say that he did dig and pour the foundations of the house extension, so that our planning wouldn't expire given the extended timescales. So that has contributed to the extra costs, particularly as there were a lot of boulders to remove and some retaining walls to build around the back of the house that contributed to that extra chunk of cash we agreed for earth works. And the engineer wanted a deeper floor slab for the workshop with a much heavier RSJ above it. So I do acknowledge the workload/costs increased since he gave the original quotes. I just don't have clear figures about the increase in costs for each building or a clear completion cost, and was blindsided by the extent of the increased costs.

tegmim

kazwookie said:

Get 'Nick' in for a meeting about the costs / quotes etc and get it sorted, then follow the meeting up in writing

2019 prices, are way out of date, my brother is a builder and I know how much he is saying prices have shot up, 'Nick' is suffering just the same.

Yes, this is the plan, and the latter is probably very much the case.

TELLIT01 said:

tacpot12 said:

I can't see that his use of ProQuant makes any difference to you.

The way I've read it is that any attempt to update or modify the original quote provided through ProQuant results in a complete new quote for the entire job, when what the OP needs is an indication of the cost of the remaining work.

Yes, this. I'm hopeful he is going to manually calculate the remaining costs for the three buildings we are committed to. That way I will know what I am dealing with.

It may be that with a higher property valuation, and a resolution to our mortgage woes (see other thread) we can get these three buildings finished and get to the point the RHI claim can be submitted. Then we can see how much it would cost to do the work on the main house, and if necessary pause until we can afford it.

ComicGeek

tegmim said:

It may be that with a higher property valuation, and a resolution to our mortgage woes (see other thread) we can get these three buildings finished and get to the point the RHI claim can be submitted. Then we can see how much it would cost to do the work on the main house, and if necessary pause until we can afford it.

Sorry to add salt to the wound but the RHI scheme closed for new applicants some time ago. As you were linking several buildings that would have fallen under the non domestic scheme so would have needed to have been completed and registered by March 2021.

I would get a quantity surveyor involved to review the contract, the invoices received so far and the costs moving forward. You need someone on your side who understands all of this.