Pay Builder in advance?

[swiftkick]

Hello Ladies,

Just about to embark on an extension next week ( So I'm certain this is the first of many questions!).

After quite a long negotiation phase with my builder we are about to sign contracts tomorrow and start on site next week. The builder has requested us to pay about 7,000 in advance, as he says he needs funds to get the project started. The builder in question has done a number of projects for people I know so he is not some random builder. I know the first rule of dealing with builders is to not pay anything before completion, & my question seems so naive!!!!

Has anyone ever done this with a good outcome? Does this happen from time to time?

Thanks!

I've never heard of not paying anything until completion. That's a massive risk for a builder to take.

We made stage payments to our builder. Nothing up front, but a payment every Friday.

7k up front sounds like a lot.

I think that's fair. Builder will have to shell out for materials, pay his staff and subcontractors. Staged payments for a long job is the norm. Otherwise builder finds himself having to get materials on account so always playing catch up and have to dip into a pool of money he may not have to pay wages.

We paid the builder at the end of the week for his labour, he invoiced us and we transferred money directly into his bank account.

For building materials we paid the builder's merchant directly. Builder would put his order in, tell us how much it was, we would pay and it would be delivered that day.

And just because a builder has a good reputation, it can all go pear for you.

I don't like the idea of paying upfront, I understand builder's need supplies but if they are that credible why don't they have a credit account with the merchant or why can't you pay the merchant directly like I did?

We paid monthly on receipt of an agreed invoice. They supplied the materials, labour and equipment up front. We did not pay a deposit. My DH runs a business and no-one would ever pay him up front! Stage payments occasionally if it is a large job. Most builders are happy with stage payments in our experience.

We used to have credit accounts but it always put us on the back foot. Especially if a job ran over the end of the month. Most accounts payable that way or 30 days. Now we either ask for money up front (depends on how much materials needed) or as you have suggested have the client pay the merchant direct. Many builders will be quite amenable to this as it keeps the turnover down, also from our point of view any issues with shoddy materials can be sorted by client directly. Although i am quite happy to be the rottweiler on the end of the phone on client's behalf.

I don't think the rule is pay nothing until completion, at least I don't know of a builder that has done that. But I also wouldn't like to pay such a big sum up front, he may need materials in which case you can arrange to pay the merchants yourself directly. He may need to pay for labour but this isn't usually paid until some labour has actually been done so paying next week should be ok for this.

It is the norm to pay in reasonable stages.

My only caveat would be to hold back the last £1k or so until you have your building control completion certificate.

We didn't pay our builder anything for the first couple of weeks. Then it was a mixture of payment into their bank accounts, cash and cheque payments to builders merchants/subcontractors. I have made the last payment now but haven't had the building inspector round yet for the completion certificate... fab job though

You can't pay nothing until completion! You can agree milestone payments and hold a sum back for six months until all snags dealt with plus any that crop up in that period. Well, we've got 12 months in our contract but depends on size of job really. Early weeks can include low costs such as clearance, but there is still a cost there.

Same experience as above. Staged payments plus additional transfers for specific materials. 7k seems a lot. Previous good reputation is good, but it doesn't mean they can't develop a cash flow problem. Can you check their financial status? Maybe double check their liability insurances (in case money is tight and they have stopped paying things). If you have good recommendations speak to the previous clients and find out how they paid.

Sounds fine to me, stage payments are the norm - wish I'd held back a bit against building control sign off though! We haven't been signed off yet and I'm a bit worried some of it won't get sign off.

We paid 25% up front. I felt uneasy even though the builder was a nice guy but it was all fine. Definitely hold back at least 10? for building regs etc.

Hi.
We do work like this, so I can just tell you our experience, for smaller jobs we ask for 40% deposit.
We make it clear that a deposit will be expected when we give a quote and everything is in writing.

For a larger job like an extension it would be stage payments but we would expect a deposit.
Firstly we would want a deposit to secure the agreement - many weeks before starting - though perhaps not all of the deposit at once.
A deposit of at least £7k before actually starting sounds reasonable to me.

I know if it were our company we would be doing a lot of work booking materials and labour to be on site a various dates. It would cause a great deal of trouble if the customer cancelled everything at the last minute without paying a deposit. Material deliveries can be cancelled (although even these can incur charges from some suppliers).
But more importantly the people scheduled to work on your job will have been turning away other work for those weeks and may be left with no income as it may not be possible to reschedule work at such short notice.

So, part of the reason for the deposit is to limit the risk that the customer might not pay or might cancel at the last minute.

You should definitely agree in writing what the stage payments are. When they are due and what work will have been done by then to justify them. You don't want to have paid more than half the money if the job is less than half complete.