Builder wants 40% deposit?

[stanski]

Total works will be about 60k. Doesn't start til middle of summer. They are asking for 40% deposit which is unheard of. The rest to be divided into stages.

How much did you pay, if any?

I wouldn't..most smaller builders do have to work on trust. If he is trying to secure your slot then it feels excessive, most builders will have flexibility of a few weeks.

Reputable builders will have trade accounts and pay their workers in arrears so staged payments is standard.

One builder asked for a large deposit, we said no, he turned unpleasant which I think showed us we made the right decision.

Are they recommended? Where are you based? Have you spoken to other firms to see what the norm is in your area. We are paying a 5% deposit on a 50k build then in stages after work is completed. Deposit not paid until near the start date.

A freind of mine paid £15k to a builder who declared bankruptcy the next day so lost it all so would be wary about paying so much upfront. Especially so early on. Sounds like cashflow problems to me

I paid 30% but that was with a well established company and I paid the deposit on credit card.

No way would I pay anything more than materials up front for a large job and I would only pay at the point the builder needed to order them.

Go with your instinct, this doesn't sound right.

When we had building works done we arranged to pay for the materials to be delivered to us in stages that the builders required direct from the builders suppliers we also paid for this by our credit card

The builders were then paid in stages , they were a small family firm and although they initially wanted an upfront deposit we refused and the agreed to work with us

Don't pay anything up front at all. The builder will have accounts with suppliers and won't pay them until at least a month after it is invoiced. If he doesn't have trade accounts, then it will be because he isn't credit-worthy so be suspicious if he asks for money in advance to buy stuff.

He won't have any other costs like wages until work actually starts.

Has the builder done the architectural drawings, or any other actual chargeable work yet?

If not then pay nothing in advance. Normally the first instalment would be either when clearance work begins or 'goods on-site' whichever comes first.

I was recently talking to a builder about a domestic job and asked about deposits. He said he invoices in stages as he does the work. I asked why some builders ask for a deposit and he said I don't know, and that builders have a line of credit with merchants and don't pay for a month so not necessary.

Paying such a large deposit would indicate that they have financial difficulties possibly, might be wrong on this but clearly you're not comfortable with it, they are going to do a significant amount of work before they spent the 40% and how will you have any leverage if things aren't going the way you expected?

As someone who worked in construction supplying materials, we do not start to shout until over 60 days accounts owing. My DS an architect would not pass for payment until he was satisfied with works carried out. Tell your contractor to take a running jump. Round here a lot of folk pay for materials and pay the builder at the end of each work for labour carried out. It does keep them on the job.

week not work, sorry.

None! Mine was a 4 month build and I was invoiced monthly for works completed and materials used to date with a 2.5% retention paid 6 months afterwards. You need a more reputable builder.

My husband is in the building trade and has started to take larger deposits more recently because of the number of times he has turned up on the first day of the job to be turned away because the client can no longer afford it (we lose a substantial amount of money because we’ve labourers to pay and no other job booked in for that particular time).

We’ve also sphagnum several private clients reusing to pay instalments for spurious reasons that all boil down to the fact they basically don’t want to pay it.

So, like Comefromaway we now stick to larger established private clients or public sector clients. If private clients want us to work for them then they’re going to have to pay a sizeable deposit (they are willing to pay. We have work booked for the whole of the coming financial year.)

Not sphagnum, but had

A 40% payment upfront for building works is preposterous! If he doesn’t trust that you are able to pay for the building works, set up a contract with payment plan and put the entire amount into a security account. The money will be getting paid to him in stages, upon work completed. That way he is assured and you won’t have to be afraid that he goes bankrupt after paying him for work that wasn‘t completed.

Noooooo don't pay 40% upfront and make sure you get a contract they protect both you and the contractor - if they are a Federation of Master Builders registered contractor they have a fairly simple suite of contracts available to their members for free otherwise there are various other standard ones available JCT, RIBA - which contract will depend on whose involved in your build. (qs, architect, project manager or you) if you google standard domestic building contracts you should be a bale to work out what ones right for you.
I would only expect to find an upfront deposit on very particular made to measure items not general building work.
I am an architect and often act as contract administrator for clients but generally for larger jobs as obviously my involvement costs an extra fee.
There is a reason that the construction industry has a bad reputation because some contractors take the piss and domestic clients especially are often naive and too trusting opening themselves up to problems. It's also a very fragile industry and people even good ones go bust all the time so protect yourself and when it comes to paying don't take the piss yourself, check work before paying but then pay promptly within the payment terms usually 14-30days

We paid a small deposit around 5% (which had a guarantee of refund if project cancelled, minus expenses incurred), then around 30% on start date (large amount of materials also delivered that day), 50% on 1st fix and a final amount around 10% on completion. They were exemplary builders.
We also had a longish wait to start date, presumably as they are so busy they are so good!

Absolutely do not pay anything in advance. As persona has said, use one of the standard JCT (or SBCC in Scotland) forms of contract. The Minor Works Contract will cover simple constructions and there is a Homeowner contract which is really simple and two options (where you have a consultant and where you are managing it yourself).
I design and manage contracts and often domestic clients don't want to pay extra for project management - I accept this but always point them to the contracts available. Refer to your designer for assistance.

This deposit would put me off using the contractor, but if you are set on using them then you could suggest lodging the money in an escrow account so they can be assured that funds are available to pay for the works.
Make sure you are totally happy with their price, their references and have viewed work they have completed.
To keep tabs on costs during works (for both parties), clearly agree what is included in contract and have a regular meeting where cost variations are recorded (e.g. if you think about changing the style of doors, verify the cost uplift or saving in writing before you proceed - record this change against the total contract sum and no unforeseen cost issues should arise)

Thank you all! Renegotiated the whole thing
So paying 2.5% deposit to ensure the start time is booked. 2.5% 7 days before the work starts 5% on the day they start the work which will be when many of the materials are delivered. The rest will be phased out on instalments for the duration of the project when they hit targets. Every two weeks once project starts with the last 10% once the work is completed and finished.

Thank you all for your very helpful advice.

Targets may be the wrong word. Completed stages is more accurate

That’s a good result, just come to say for business contracts we pay 30% up front, the rest is paid in stages during the job and 10% retained until snagging completed.

I’m having some work done on my house and have done it differently, I’ve bought the materials, pain having them delivered and storing them but it means paying nothing up front to the builder, he is happy with that.