How Much Contingency Should You Allow for a London Refurbishment?
Refurbishment budgets are rarely as simple as adding up the contractor's price, the kitchen, the bathroom and the professional fees.
Existing buildings carry uncertainty. Walls conceal old services, floors hide damaged substrates, previous alterations may not have been carried out properly, and some problems only become visible once work starts.
That is why a sensible refurbishment budget should normally include a contingency.
The purpose of contingency is not to create spare money for upgrades. It is to give the project enough financial resilience to deal with genuine unknowns without immediately putting the overall budget under pressure.
Why contingency matters more in refurbishment than new-build work
With a new-build project, much of the construction is being created from known drawings, known materials and defined ground conditions.
A refurbishment is different because the existing building forms part of the project.
Before opening walls or lifting floors, nobody can always know exactly what is behind them. You may discover redundant pipework, damaged timber, uneven floors, inappropriate previous repairs or services running through areas that need to be altered.
The older the property and the more heavily it has been changed over time, the greater that uncertainty can become.
This does not mean refurbishment costs are impossible to control. It means the budget needs to recognise that some risk exists.
There is no single correct contingency percentage
Clients often ask whether they should allow 5%, 10% or 15%.
There is no universal answer.
The appropriate contingency depends on the quality of the information available before construction begins.
A relatively straightforward flat refurbishment with a developed design, good surveys and minimal structural work may carry less uncertainty than a full strip-out of an older house involving new steelwork, drainage changes and major service upgrades.
The more unknowns that have been investigated and resolved before pricing, the more confidence you can have in the budget.
That is one of the reasons good pre-construction work can have a direct financial benefit.
What normally determines the level of contingency?
The main factors include:
- Age and condition of the property
- Amount of structural alteration
- Extent of strip-out
- Quality of existing drawings and surveys
- Condition of electrical and plumbing services
- Whether kitchens or bathrooms are moving
- Complexity of the specification
- Amount of design still unresolved
- Risk associated with previous alterations
- How much opening-up has been completed before pricing
A well-surveyed property with a developed scope is simply a different risk proposition from a project being priced from a basic floor plan and a short site visit.
Contingency should not hide an incomplete budget
One of the biggest mistakes is using contingency to compensate for items that should have been included in the original project cost.
If the project definitely requires a kitchen, that kitchen should have a realistic allowance in the budget.
If Building Control fees will apply, they should be included separately.
If flooring is required throughout the property, it should not simply be treated as something that might come out of contingency later.
Contingency is intended for uncertainty, not known costs that have been left out.
Keeping the two separate gives you a much clearer picture of whether the project is genuinely affordable.
The biggest unknowns often appear after strip-out
Strip-out is often the point where the condition of the existing building becomes clearer.
Removing floor finishes may expose uneven substrates or damaged boards. Opening walls may reveal unexpected pipework or electrical routes. Taking down ceilings can expose previous structural alterations or poor fire stopping.
This is why the first stages of a refurbishment can sometimes result in a number of decisions being made in a relatively short period.
Some of those issues may have little financial effect.
Others can influence several trades at once.
A sensible contingency gives the project team room to deal with those findings properly rather than immediately looking for compromises elsewhere.
What sort of work might genuinely use contingency?
Examples can include:
- Local timber repairs discovered after opening floors
- Unexpected plumbing alterations
- Additional electrical work
- Subfloor repairs
- Previously concealed water damage
- Additional structural making good
- Defective previous workmanship
- Minor drainage alterations
- Additional fire stopping uncovered during strip-out
The key point is that these were not part of a deliberate change in specification.
They are additional works that became necessary because of the condition of the existing building.
Client upgrades should be tracked separately
If you decide halfway through the project to upgrade the kitchen worktop, add bespoke wardrobes or change the lighting specification, that should not normally be treated as an unforeseen contingency item.
It is a client variation.
Keeping these costs separate is important because it allows you to see whether the project is genuinely encountering unforeseen construction issues or whether the budget is increasing because the specification is evolving.
Without that distinction, contingency can quickly become a general pot of money that gets consumed without anyone having a clear understanding of why.
A simple variation tracker alongside the contingency allowance can make this much easier to manage.
Better information can reduce the amount of uncertainty
One of the most effective ways to control contingency is to investigate the project properly before construction starts.
That might include structural surveys, electrical testing, drainage investigations, opening-up works or more detailed design development.
You may spend more during pre-construction, but that information can remove assumptions from the contractor's price.
It can also highlight expensive problems while there is still time to change the design or reconsider part of the scope.
The objective is not to eliminate every unknown. That is rarely possible with an existing building.
The objective is to reduce unnecessary uncertainty before trades are on site and the programme is running.
Do not spend the contingency before you need it
Once a refurbishment starts, it is tempting to view an unused contingency as available budget.
If the project has progressed well, clients may decide to upgrade finishes or add additional work.
There is nothing wrong with improving the specification, but doing it too early can remove the project's financial protection.
A better approach is to review contingency as the project moves through the higher-risk stages.
Once structural work, first fix and major opening-up are complete, you may have a much clearer understanding of how much risk remains.
At that point, releasing part of an unused contingency may be more sensible.
A good budget separates known cost from project risk
A realistic refurbishment budget should allow you to see three different things clearly.
First, the cost of the work you know you want.
Second, allowances for items that have not yet been finally selected.
Third, contingency for genuine uncertainty.
When these are mixed together, it becomes difficult to understand whether the project is actually on budget.
When they are separated, cost control becomes much more meaningful.
That is particularly important on larger refurbishments where the overall spend may be substantial and a relatively small percentage movement can represent a significant amount of money.
Planning a London refurbishment?
Contingency should not be an afterthought added to the bottom of a spreadsheet.
It should reflect the actual condition of the property, the level of design development and the amount of uncertainty still remaining before work begins.
Bayocorp works with homeowners, landlords and property professionals across London and the South East, providing refurbishment, cost planning, estimating, project management and construction delivery.
Early cost planning can help establish not only what the proposed refurbishment is likely to cost, but how much financial resilience the project should carry before construction begins.
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