When and Why to get a QS Report?
A Quantity Surveyor Report (QS Report) is an important part of the development process for any property, this document is also a requirement for obtaining funding from many Financial Institute Lenders. This is important because without a QS Report, lenders will not fund your project and you won’t be able to move forward with your plans.
(Note: A QS Report, is NOT, a tax depreciation schedule report although some refer to it as such. Financiers will use the term correctly, however, accountants will often use the wrong terminology, when in fact they are referring to tax depreciation schedule reports. Note: BWK Group also offers tax depreciation services).
Typical any construction project over one million dollars will trigger the need for such a report from a lender. Furthermore, inexperienced developers and or owner/builders will also require this independent report as a risk management measure and tool for the financier to review and use to facilitate initial funding.
From the eyes of a Financial Institute Lender, these reports are namely used to provide an independent means of property development feasibility that also helps to address many areas of potential risk for the Lender (in terms of the proposed property development).
Other terms used to describe the same (QS Report, for funding):
- QS Initial Report
- QS Report for Banks
- QS Cost Report
- Independent Financiers Report
The main areas covered in a QS Report include:
- Title and Plan of Subdivision
- Site Conditions
- Estimated Cost & Building Contingency
- Cashflow Forecast
- Proposed Drawdown/ Progress Claims
- Construction Programme
- Building Contract
- Construction Plans / Drawings
- Builder’s Insurance
- Approvals: Planning Permit and Building Permit / Construction Certificate
What happens after the report is reviewed by the financier?
If the figures and advice stack up and are within the risk tolerance of the financier/lender/bank and or to the budget of the client, Funding will be granted. The property development can then progress to the construction phase (subject to Council approval and development of ‘For Construction documentation’ i.e. architectural drawings, specifications etc.)
Progress Payments and Progress Claims
From that point on (when construction commences) to enable progress of construction and to protect all parties, there will be intermittent requirements to release funds to continue the construction phase of the project (i.e. pay suppliers, sub-contractors etc.)
Video: demonstrates a progress claim inspection on a residential townhouse development
Due to the nature of construction projects each can typically run from 4-8months for a simple residential build and longer for more complex projects (and for those of greater scale).
Intermittent payments are called progress payments and depending on the arrangement i.e. if there is a Head Contractor involved (Builder), the builder will make progress claims, in order to claim for works complete, that will need to be verified and certified in order to receive the required funds or the amount stipulated in the building contract.
Building Stages (as per major residential contracts):
The below are typical stages that require payment once complete. Due to the large amounts of money to be exchanged, it is wise and often a requirement to have a specialist quantity surveyor certify the stages. This also enables ‘fair-and reasonable’ compensation for works complete to the builder and also safeguards the client from releasing payment too early (which is often a bad situation, in case the builder defaults and becomes bankrupt).
Typical Building stages (residential project)
On larger projects and if stipulated the contract, monthly progress claims are advised, in order to keep the project running without any cash-flow issues.
Who provides this service?
Not all Quantity Surveyors offer this service, as not all have experience in the construction industry, but rather only offer tax depreciation services. Look for an expert quantity surveyor, that is well rounded and has experience in both the property industry as well as the construction industry.
Are you in a position to develop property?
By having a QS Report, independently completed by a qualified quantity surveyor, such as BWK Group, the property developer (or owner/builder) will be in a better position to proactively approach a Financial Institute Lender for project funding, or satisfy the lender’s requirements of having a tailored QS Report for the planned property development project so the property development can commence.
If you’re looking for financing for your next development (construction project), it’s wise to obtain QS Report first.