Builder wants 30% as deposit

[SunflowerLV]

Hi,

I am currently planning a whole house renovation so speaking to potential builders at the moment. A couple that I've spoken to have mentioned that if we were to appoint them then they want a 30% deposit. DP thinks this is normal but I've read in various House magazines that you should never pay a builder upfront and you just pay them in stages as the work progresses. If we gave them a 30% deposit which amounts to around £30k wouldn't that be deemed as paying upfront? That would be a lot of money to give to a stranger, what if he did a runner? I can't believe DP is not concerned about this aspect.....!

What are your thoughts or am I being paranoid and should have more trust in people?

We have been discussing this very thing. DH and I are just about to go out for quotes. We wouldn't be paying any deposits. We said we would do three instalments. First a month in. Second three months or so. Then final after snagging has been agreed.

I have just done a whole house renovation (no structural work, about half your budget) and didn't pay anything up front.

On top of obvious concerns over security of the money, my issue with paying up front would be that it's of greater advantage to the builder than to you. You're committed to them because they have your money, they can still delay a start as long as they like and you wouldn't be able to do anything about it.

What kind of firms are they, are they reputable building firms with big portfolios and good reputation or independent tradesmen working together? I'd be more worried about the latter.

A good way to find out more is to explore references and wait for piglet john to come along

A small builder may have fewer cash reserves for up front costs so be seeking to offset this. I agree that it does put you in.a vulnerable position though.

Is there any form of formal contract in place/proposed? Has he explained what future cashflow will be and how it links to degree of completion of the work?

Have they explained... not has he!

Don't go with anyone without solid gold references.

Usually builders want some money at the beginning of a job- which is reasonable, but only if you trust them. Anyone decent won't have a problem with you asking for references .

It does make some sense to pay a portion quite early but I don't know if I'd pay before anyone was onsite. For a job this big a deposit sounds fair but I'd be thinking more in the realm of £10k, with a further £20k around a third of the way in, £30k at 2/3 of the way through and the remainder on completion?

We pay our builders after the works are done. They are independent builders too. We've bought the materials, they build/fit everything for us. Then get paid.

Pretty much like, you go to work to get paid, you don't get paid first.

Absolutely. Pay for the materials directly to the suppliers; that way the builder doesn't need the advance and you can return the supplies if the builder does a runner.

my dp is a carpenter/builder. He doesn't like taking money up front but we have to cover materials. We take money when the job starts or have the client order and pay for materials depending on what they are. We would never take a deposit but have fallen foul of this before as had a client cancel about four weeks work four weeks before xmas (thanks for that) and dp was left scratching around for work at xmas.

in your situation you need a proper contract but i do believe it is standard practice.

i agree that paying for materials yourself is fine when buying a kitchen etc but for a substantial build like yours that would be complex.

its difficult as i wouldn't want to give that amount of mobey to someone just on trust but by the same virtue the builder has to buy materials and pay staff each week and are risking the same amount of money that they might not have so would be fucked if the client doesnt pay. there are standard contracts available for this reason

tellmemore whilst i agree with you that paying a deposit makes you vulnerable i actually think the builder is equally vulnerable. If we were to buy materials for 30k on credit and then the client either didn't pay or paid late we would at best incur further cost on top of the loss and at worst and more likely be sent bankrupt.

The lovely George Clarke always says NEVER pay anything up front.

We have just done. A build for about 37k and no money was paid up front.

The builder gave us payment dates for each section and once each section had been signed off (mostly by the building inspector), we paid the money.

Sometimes we had to chase him to ask if we could pay HIM!!!!
You shouldn't have to pay anything up front really. They have certain companies they use who invoice them after they have bought the products they use so they don't need the money before they work.

I wouldn't pay upfront but would work out a written pay schedule, to which both sides were committed.

I don't think the builder having to buy materials and pay staff each week justifies this; many companies have weekly outlays but only ask for payment at the end of a job/project, or in a few stages during the project.

I've just been badly stung by rubbish builders so my real advice would be to only go with someone who is willing to give you their insurer's details.

If 30% of your contract value is 30k then this is a 100k plus contract.

PLEASE appoint a contract administrator. They will ensure the appropriate contracts and insurances are in place before works commence, giving you protection if your builder is a cowboy and tries to rip you off.

If there's no structural stuff and you've had the design done by someone else then a JCT Minor Works 2011 contract should be sufficient for your project.

Never pay a contractor upfront and never pay them for work they haven't yet done. A valuation should be done every 4 weeks by your contract administrator and the works done up to that point should be paid for.

Ha! My contract administrator seemed to be working for and in the interests of the builder. It was them against me and they were clearly surprised that I wasn't quite the pushover they took me for. Your contract administrator needs to be truly independent, not someone who thinks they can be even though the builder is a professional friend.

Hi my dh is a builder and he does it this way. Three equal payments one when foundations complete one when roof is on and one on completion of job. Never had an issue keeps everyone happy.

We have had several projects and never paid upfront. Don't do it! Last time around we were keen on a certain builder (as he had done minor work for us very well) but then he asked for a substantial deposit and reacted poorly, very defensively, when we said very nicely no. He was straight off the list as we got an insight as to how he would behave if we had negotiation issues (which every build will have).

The only valid reason for a deposit, that I can see, is to secure a contract start date but that's only in the builders favour. However most builder accept that you will stand by your word, like you have to accept they will start when they say they will.

If the builder is reputable he will have trade accounts with suppliers so materials are paid for at a later stage. Labour is typically paid at the end of the week so it's fair to agree a weekly payment schedule but it more like the (number of weeks of the build/total project cost). 20 weeks/£100k= £5k plus you may want to hold back for snagging work or regs sign off.

I would be extremely wary of a builder asking for a deposit - in my view (and we have family in the industry) it suggests they have cashflow problems and perhaps have overrun on another job so need your cash injection.

If asked why they need that amount of cash cash - what would be the builder's answer? £30k buys you a lots of material and labour so it would be weeks before he spent that amount. I feel it's a red flag....no matter how charming he may appear.

What's is the project - new extension??

We are paying a small amount upfront, another installment once 'shell' is up and final on completion and once we have snagged. 30k seems excessive in terms of building materials, our initial payment is so things such as bifolds /veluxs and basic building materials can be ordered so they will be ready to be fitted in time. A builder that is taking on a 90k job should surely have a substantial trade account with at least one builders merchant so would get basics upfront in their account.
I would negotiate hard, too much to loose!

Thanks everyone, great to have your feedback. I have the confidence now to say no to a request for a deposit. Just thinking through all the checks I need to do; ask and check references, visit their current job, check insurance docs. Anything else?

Floggingmolly - I didn't realise you can pay the builder's supplier. That's a good idea if I get objections that they need to order materials upfront.

Newstart15 - I am doing a full renovation of the interior only so no extension. I know you are thinking £100k is a lot without an extension. I live in London and the building work is so expensive here - or all the builders I have contacted are charging a lot....!

Get a contract in place! it will protect you from allsorts than can go wrong.

Would not pay.
Even if you get materials delivered to site and you agree to pay for those you need to check the insurance documents cover those materials if the builder goes bust. Otherwise those firms will come get them (worst case scenario).
You need some form of pricing schedule which you can go through together to agree a valuation of the works completed up to that point for paying them at whatever intervals you agree. If you're looking at about £100k of work that's probably monthly.

If the builder is a smaller firm and he has to pay for materials etc up front then a deposit of some sort is acceptable to cover those costs or part and then a bit more later before instalments. As long as you have a contract and proof of payment and for what as well as references and recommendations you should be fine

We are in the middle of a renovation worth about £50k and had our first invoice about 3 weeks into the job. We have bought some materials, builder supplied most. I would be wary of paying anything up front.