Controlling the cost of house renovation

Back to blog
gloss-grey-kitchenLiving Room Lightingglamorous bedroom design

It’s the New Year and, if you’re not booking a world cruise, you may be thinking of doing up your home; but how do you control the cost of house renovation ? If you are planning a refurbishment, this article offers tips and advice for making sure your dreams remain affordable.

an advice page on controlling the cost of house renovation

Key Requirements for Controlling the cost of house Renovation

I can put my hand on my heart and say that we have never had a project go “over budget”. There are four key ingredients for controlling the cost of house renovation: a taut specification, a fixed price, an appropriate payment schedule, and a figure for the total renovation cost. We spend an age on the first, tie down prices for the second, agree suitable payments for the third, and detail everything for the fourth. You can do the same.

We provide links at the foot of this blog to advise you further on successful house renovation, and to guide on what things cost.

House Renovation Specification

A key factor in controlling the cost of house renovation is a taut specification.  A taut specification pre-supposes the following:

  • you are clear on your requirement and won’t make significant changes part-way through.
  • you have acquired detailed construction drawings for projects with structural changes.
  • you have produced a layout with floorplan to scale, electrical and lighting scheme, and identified your heating requirements.
  • you have scale kitchen and bathroom designs available.
  • you have a good idea of your finishes, fixtures and fittings.
  • you are clear on what a contractor is to supply and what is to be “supplied by others”
  • you are clear what a contractor is to do (eg paint the living room), and what others will do (eg lay a carpet)
  • you have done your homework and have realistic expectations of what things cost, and how long they take.

It helps to separate the specification into the contractor’s 5 main trade annexes:  structural and building; plumbing and heating; carpentry and joinery; electrical; and decoration. We also reserve an extra annex for “other” which may include works to the garden or patio. We and our contractors find this easier than a room-by-room separation, particularly for larger projects.  Each annex effectively forms a package of work for a specific trade (which may be a sub-contractor).

Each requirement, or group of requirements, in your specification should be priced. Against a taut specification, a contractor can supply a reliable quotation, which will appear in the first section of your pricing spreadsheet.

airy kitchen

Cost of House Renovation Spreadsheet

Our pricing spreadsheets have 4 sections.

  • price for contractor’s work (labour and materials)
  • price for furnishings and fittings (those not supplied by the contractor, including any external labour, like hanging curtains)
  • professional fees
  • risk provision.
pricing spreadsheet to calculate building costs

Looking at each in more detail:

  • Price for contractor’s work:  this covers the labour and materials supplied by the main contractor.   Your specification should make clear which items the contractor is to “supply and fit” (eg trade radiators and light fittings) and which the contractor is to fit only (where items are supplied by you or others).
  • Furnishings and fittings:  this covers anything not supplied by the contractor.  “Supplied by others” is accepted terminology and your specification should make this clear. It may include kitchen cabinets, bathroom suites, flooring, paint, and so on. You should also include here a price for any labour carried out by others (such as fitting a carpet).
  • Professional Fees:  Depending on the extent of the project, professional fees may include an interior designer, an architect, a structural engineer, a Party Wall surveyor, the water board, the council and others.
  • Risk Provision:  We identify specific risks and estimate associated costs.  We also include a 10% general provision (of the contractor’s price) for unforeseen risks.

These 4 sections should give you the total cost of your project.  The spreadsheet will help you to manage your figures and to see where you might trade one price for another.  You can also see more clearly if you need to phase the work to meet your cashflow.  For example you might complete the building work but decide to delay the fitting of carpets for a few months.

Ultimately, if you follow this approach you will manage the cost of house renovation more successfully.

edwardian sitting room in bath

House renovation Estimates and Quotations

You may know that an “estimate” is just that – an estimate;  it is not binding. Price increases can result if an estimate is re-evaluated upwards when the final bill is delivered. Always ask for a fixed price “quotation”.

For higher value projects, a competitive tender should help you to obtain better value for money. When choosing your contractor, make sure you are comparing like with like. The more detailed your specification, the more likely you are to obtain a true comparison of prices.

For more complex renovations you should still fix those elements of the price that can be fixed. However, there may be other elements which are not yet fully defined. Here, it is reasonable for the contractor to include a “provisional sum” (PS) or “PC Sum” (PC), which are reasonable judgments on the eventual price of those elements. However, PS and PC can lead to price increases so it is best to minimise these as far as possible before placing the contract. We explore this further below.

contemporary bedroom design

Minimising Uncertainty and Risk in cost of house renovation

The opposite of a taut specification is a loose specification;  a loose specification adds risk and uncertainty to the cost of house renovation.

A loose specification uses phrases like:  the contractor is to “supply and fit lights” or “supply and fit taps” without stating the specific type and quantity of lights or taps. If the contractor includes a PC sum for this, the price will be at the low end. When you eventually choose your products, they will be higher than the PC sum. We spend signficant time specifying these items to minimise price uncertainty. When tendering, all contractors then price against the same specific products. You might be faced with a higher initial price, but it is one you can budget for with confidence. So be as detailed as you can in your specification.

Similarly, for provisional sums. If your contractor prices to lay foundations without establishing soil conditions, they may set a provisional sum for this. Once the work is complete, the contractor will charge the actual price. By digging pilot holes you can minimise this uncertainty before the contract is let.

As mentioned above, we include a section for risk provision (some call this “contingency”). We identify risks, and price these specifically in case they arise. Depending on the type, age and maintenance of the property, risks include presence of asbestos (eg in artex ceilings), woodworm, poor electrics and so on. We have found water pipes on the point of corroding through, rotten joist ends, and walls to repoint. These typically come to light once the contractor removes plaster and lifts floors.  But the clients have actively budgeted for these additional tasks.  Along with a general risk of 10% of the contractor’s costs, our clients have confidence in the upper bound of their budget.

contemporary bathroom

house renovation Contracts

You can write a contract for most simple house renovations (painting, decorating, installing a new kitchen etc) using your written specification and a covering letter with agreed prices, signed up to by all parties. For more significant projects, particularly those involving structural work, you might use a standard template such as the JCT Minor Works contract. These cover everything that you should be concerned about, and you can order them on-line.

traditional dining room design

Cost Control and payment During house Renovation

If you’ve done all of the above diligently, there should be no surprises;  the cost of house renovation will be under control. You may face some variation from the original fixed price whether through adjustment of PS and PC sums, or the realisation of risks. In our experience, clients often increase the scope of the project as they gain confidence in their contractors, and see good work.  Obviously, you should still agree the price with the contractor for any additional work before committing to it and keep an eye on the overall budget. Hopefully, if the risks don’t materialise, you will have a sum available to spend on these further tasks.

You need to watch that the cost of house renovation doesn’t increase disproportionately as a result of additional work.  Contractors know that you have few alternatives.  So, when checking references, ask previous clients specifically whether the contractor priced additional work reasonably.

Paying the Contractor

Your contract will state the terms of payment.  There are several options.

  • For a small project, you might agree to pay the contractor for materials, then pay the final amount on completion.
  • For larger projects, you could specify key payment milestones.
  • You could pay monthly based on percentage of work completed. For longer projects, this is a reasonable approach.  “Percent complete” is a sensible measure of progress for a domestic project.  The spreadsheet can help here too, as you can quickly create more columns to the right to show the sums payable. For example if the price to install the kitchen was £2000 and about 40% of this was complete at the month end, it is reasonable to pay £800 for what had been done. Totalling these part-sums over the whole project then gives that particular monthly payment.

You should avoid any commitment to pay monthly at a set amount each month without tying this to performance. You could find that you’ve paid 80% of the money but the contractor has only completed 20% of the work.

Finally, you should specify any retention in the contract.  Reasonably, you could state that a 5% retention would be paid 6 months from project end, provided there were no major outstanding issues.

gloss-grey-kitchen

other property renovation guides

We hope the notes above will help you to control the cost of house renovation.  Knowing the total cost, with a taut specification, a fixed price, and a sensible payment schedule, you shouldn’t go far wrong. You can read more about related topics elsewhere on our website by following the links below.

Property Renovation Guide.  This advice column describes what to expect from a property renovation. It leads you through the steps to a successful renovation and covers planning, specification, tendering, choosing a contractor, contracts and overseeing the work.

How to Renovate a Property.  An insight which includes a section on engaging professionals and the different skills they bring.

Cost of House Renovation.  This page and subsequent links show actual costs from our renovations over 12 years.

Best wishes for a successful and affordable project.

Back to blog