When you’re working out a renovation budget, it’s natural to focus on the things you can see.

The new kitchen. The bathroom. Flooring. Painting. Windows. Maybe knocking out a wall or changing the layout.

But there should usually be another part of the budget that isn’t attached to anything exciting: contingency.

It might not be the most enjoyable part of planning a renovation, but having some breathing room in the budget can make a big difference if something unexpected appears once work begins.

At Bang Bang Building, we don’t see contingency as money that has to be spent.

We see it as protection for the overall project.

What Is a Renovation Contingency?

A contingency is simply an amount of money kept aside for costs that couldn’t reasonably be confirmed before the renovation started.

It’s different from an allowance for something you already know you’re going to buy.

If you know you need a new vanity, for example, there should be money in the budget for the vanity.

Contingency is there for the things nobody knew about.

That might be damaged framing hidden behind a wall, plumbing that needs more work than expected, an old alteration that needs correcting, or another issue that only becomes apparent once the building is opened up.

If those things don’t happen, there may be no need to draw on that contingency.

MBIE’s Building Performance guidance also recommends homeowners understand how contingency, provisional sums and prime cost sums are treated when reviewing building quotes.

Why Are Renovations Different From New Builds?

With a new build, we’re generally starting with a known design and constructing from the ground up.

A renovation is different because we’re connecting new work into an existing building.

And sometimes that building has been standing for 50, 80 or more than 100 years.

It may have been altered several times along the way.

Even with a thorough site visit and good planning, there are limits to what can be known without pulling the house apart.

That’s why the level of uncertainty can be higher with renovation work.

So, How Much Should I Allow?

There isn’t one percentage that’s right for every renovation.

For a relatively straightforward project where we’re changing finishes but disturbing very little of the existing building, the risk may be reasonably low.

For a major renovation of an older home involving structural changes, plumbing, drainage and significant demolition, there are considerably more opportunities to uncover something unexpected.

As a general planning principle, the greater the uncertainty, the greater the contingency should be.

Rather than choosing a percentage simply because it’s a common industry number, we prefer to look at the actual project and consider where the risks are most likely to be.

What Can Affect the Amount of Contingency?

There are several things we’d consider when discussing how much breathing room to leave in the budget.

These include:

• The age and condition of the home
• How much demolition is involved
• Whether walls, floors or ceilings are being opened
• Structural alterations
• Plumbing and drainage changes
• Previous renovations or additions
• How much information is available about the existing building
• The complexity of connecting new work into old
• Any potential issues identified before work begins

A small renovation in a relatively modern home is a very different risk proposition from opening up half of a century-old house.

The contingency should reflect that.

Contingency Isn’t the Same as Changing Your Mind

This is an important distinction.

Contingency is intended to help cover unexpected project conditions.

It isn’t there to fund extra work or upgrades that are added during construction.

If you decide halfway through the renovation that you’d like a more expensive benchtop, additional cabinetry, upgraded tapware or another room renovated while we’re there, that’s a change to the project.

There’s absolutely nothing wrong with making changes if the budget allows for them.

But ideally, the contingency remains available for genuine unknowns rather than slowly disappearing into upgrades.

Can We Reduce the Risk Before Work Starts?

Absolutely.

Good planning can reduce uncertainty.

Depending on the project, that might involve detailed site inspections, reviewing existing plans and council records, talking with designers and engineers, investigating suspicious areas, or confirming products and selections before construction begins.

Sometimes it may even make sense to carry out limited investigation before finalising the full scope.

But there is a balance.

You can’t dismantle an entire house just to find out what might be behind every wall before starting a renovation.

The goal is to understand and reduce the risks where practical, then allow for the uncertainty that remains.

What Happens If We Need to Use the Contingency?

If something unexpected is discovered, the first step shouldn’t simply be to spend the contingency.

We need to understand the problem.

What have we found?

Does it actually need to be repaired?

What are the options?

What will those options cost?

Does it affect anything else?

Once we understand that, we can discuss the way forward with the homeowner.

The contingency provides some financial room to make that decision, but good communication is still important.

A contingency isn’t a blank cheque.

What If We Don’t Use It?

Then that’s a good result.

Keeping money aside for contingency doesn’t mean we’re looking for ways to spend it.

How unused contingency is treated will depend on how the project has been priced and the arrangements agreed at the outset. The important thing is that everyone understands how it works before construction begins.

On some projects, contingency may simply be an amount the homeowner has kept available within their overall budget. If it isn’t needed, then that’s money they haven’t had to spend.

Other projects may be structured differently, which is why we think having that conversation upfront is important.

Either way, getting through the major risks of a renovation without needing the contingency is a good outcome.

And it’s certainly a much nicer position to be in than discovering an unexpected problem with no room left in the budget.

Don’t Plan to Spend Every Dollar Before You Start

If your renovation budget is already being stretched to its absolute limit before construction begins, there may be very little room if something unexpected changes.

A better approach may be to establish the total amount you’re comfortable investing and then work backwards.

How much should be allocated to the planned work?

How much uncertainty does the project carry?

And how much breathing room would make you comfortable if something unexpected happened?

Those are useful conversations to have before construction begins.

If you’re still working out what your overall renovation budget might look like, we’ve also put together a guide explaining what goes into the cost of a renovation in Southland.

Contingency Is About Being Prepared, Not Pessimistic

Talking about unexpected costs doesn’t mean expecting a renovation to go badly.

It’s simply recognising that we’re working with an existing building and there are some things nobody can know until work begins.

At Bang Bang Building, we’d rather identify those risks early, have an honest conversation about them and build some protection into the budget.

If those unexpected costs don’t eventuate, fantastic.

But if we open a wall and discover something that genuinely needs attention, having a plan is considerably better than having a panic.

Bang Bang Building

Focus on quality, not quantity.

Planning a renovation in Invercargill or wider Southland?

Get in touch with the Bang Bang Building team for an initial conversation about your project, budget and the potential risks involved.