Upfront deposit in building work

[Heather2011]

Hi,



I'm doing an extention and garage conversion work and am about to sign contract with the builder. He has asked for upfront deposit (£2500) and the staged payment seems 'top heavy' to me, i.e. 40% of contract value when the extension is built to DPC level.

I'm feeling a bit uncertain at the moment and would really appreciate any thoughts/advise from this forum.

On one hand my friends and some builders I met says it's a rule of thumb that never ever pay upfront. On the other hand, however, I have met him a few times and I feel that he is trustful and realiable. I have been to see 4 of his previous extension work, one is actually being built. All are sizable works and clients spoke highly of him. I'm also trying to think from a builder's perspective, he has to protect his own interest as well.

Should I trust him and go with what he suggested or should I be more cautious? Would really appreciate any thoughts here.


Thanks, Heather[/list]

 

[^woody^]

There is nothing wrong with paying some money upfront to help a small builder's cash-flow. But the amount should be proportional and only to cover say initial material purchase or perhaps some hire costs .... never for labour costs

Never, ever pay an amount greater than the portion of work done at any given stage

40% of the contract value at a stage when only 20% of the work is complete is not acceptable. However nice the builder is and good his work is, he can always go bust with your money.

Stage payments are normal, but these should be proportional to the work done at each stage. And there should be a sizeable amount left to pay at the final stage so that the builder has an incentive to finish the work

And don't forget about keeping money back as a retention - for six or 12 months to cover any possible defects

I'd suggest a token deposit of a few hundred pounds only - it should not take much money to start a job, or get it up to DPC level. No more than 5% or a maximum of £1000

Stage payments should be at

DPC level (with the floor in too)
Wall plate level
Roof on and building weathertight
Services installed (optional)
Final completion

Another option to to retain 5% of the stage payment value to cover issues with that stage.

 

[noseall]

40% is a disproportionate amount to have received at dpc level.

More like 20%.

A deposit of £2500 does not mean a lot unless we know the overall cost of the contract. It may only pay for the spoil removal or it may be a quarter of the overall cost.

Regardless, we do not receive a penny until there is some value of work undertaken and things have 'commenced' on site.

Handing over £2.5k on a handshake makes me nervous unless there is some tangible value in it like his tools on site for instance....

 

[noseall]

HA, pipped by Woodworm!!

Great minds eh Woodshop...

 

[Heather2011]

Hi,

Thanks for sharing thoughts. To clarify, below is the payment details he proposed. The work is a 24m2 single floor extension, plus garage conversion and move a couple of internal walls. The quote doesn't include electric or any 2nd fix carpentry work.

His reason for deposit is to purchase material. For the 'top heavy' payment, his explanation is that other work such as internal work/garage conversion will also be carried out when the extension is being built.


Contract value £29,480.00

Building works deposit £2,500.00 on commencement of works.

2nd payment of £6,000 on completion of foundations & drainage

3rd payment of £2,980.00 on completion of brick & blockwork to dpc level.

4th payment of £6,000.00 on completion of brick & blockwork to wallplate level.

5th payment of £8,000.00 on completion of roof installation.

6th payment of £2,000.00 on completion of all other works.

Final payment of £2,000.00 on issuing certificate from Building Inspector.


Does this sound reasonable?

 

[^woody^]

No - you will have paid over 80% of the money just for a shell with no windows or internal fit or external landscaping