Three veterinary hospital construction nightmares—and how to avoid them

Three veterinary hospital construction nightmares—and how to avoid them

Expanding your practice into a new facility doesn't have to keep you awake at night—if you take necessary precautions ahead of time.
Jun 01, 2013

Veterinary practices are like people in certain ways—they have identities, personalities, peculiarities and even Facebook pages. And just as people often outgrow their dwellings, businesses outgrow their physical environments, too. But unlike a person, a business can't just move into a Hampton Inn if the lease expires. A veterinary practice can't just bunk up with relatives for a few weeks if the building it lives in sells faster than anticipated.

Therefore, it's vital that veterinary practice owners give due consideration to the logistics of moving to new facilities. Failure to plan for such a move can mean paying a steep price to landlords, banks, construction professionals and potential tenants.

There can also be a big financial sacrifice in lost revenue and lost clients, not to mention what you could spend on inadequate temporary facilities. And all that stress on the practice owner? That too is a price that can be incredibly high and impossible to quantify.

So let's look at some fixes to consider when faced with a nightmare situation.

Nightmare No. 1: Construction contracts

Ask most folks who've ever had a building project done and they'll likely tell you the same story: Builders almost always take longer to complete a project than they predict (or at least than they tell you to expect).

When a construction firm runs behind on your building project, it means you'll probably be paying interest and principal payments on your construction loan before you can use the space you're paying to have constructed. And the majority of each payment in the early stages of a typical building loan is interest you won't recover, even if you pay your loan off early.

In the meantime, you'll have to continue operating out of your existing facility. If you're renting, that means making continued rent payments along with construction loan payments, as well as a land mortgage in some cases.

The fix: Although it's a long shot, you might be able to do what schools, municipalities and other large organizations do, which is require the builder to post a surety bond. Such bonds are like insurance policies that guarantee the timing and quality of the construction work. Unfortunately, they're expensive and can cause the price of the project to rise dramatically. But it's worth checking with your architect about the possibility.

A more realistic option is to insist that your construction contract include a clause indicating that "time is of the essence." It could be drafted to state that the builder will forego a certain portion of his payment for each day or month the project runs over the promised completion date.