Paying a "deposit" for building work?

waveyjane

There seems to be a fair amount of controversy about whether you should pay a builder any money up front. In my case, I'm talking to builders about building an extension.

With the exception of small or packaged works like glazing or loft conversions, everything I've ever read about working with builders (and all the recognised standard contracts I've seen) say that you should never pay anything up front. However, most builders I've spoken to say that they would ask for about 10-20% up front, then take the rest in stages against work completed to the specification. Not surprisingly, this makes me a little nervous.

On reflection however, I'm OK with the idea of paying a refundable deposit to help a builder with their cash flow (no more than 10%). This would only be on the condition that it's a good will payment that I will have returned to me in full on practical completion of the works when we're all done. The only circumstance they can use the deposit as part of payment is if we go into dispute, in which case they may be able to use it if authorised to do so as part of, say, a Small Claims adjudication.

So, does anyone have a) any views on this (eg have you done it?) b) an example of any wording for the receipt of such a deposit?

Thanks for any help.

baldelectrician

I get most of my work from word of mouth, and ask for a third deposit.

The deposit is there for both parties, the works are detailed in writing at this point also.

As I take credit cards then any deposit is covered by the consumer credit act when the client pays via credit card. This provides additional protection for the client

If a customer won't pay a deposit then will they pay the bill at the end of the job?

waveyjane

Thanks,

Just to be clear, when you say you ask for a "third deposit" do you mean an amount as an advanced payment (deducted from the total), or an amount that you agree to pay back to them on completion? I'm talking about the latter form of deposit: a "good will" payment that does not form part of the total unless things go badly wrong.

Also, what do you mean when you say "the deposit is there for both parties?

baldelectrician

The deposit is deducted from the total job cost.

The balance is due on stages (for longer jobs) or on completion (for shorter jobs)

The works detaield on the quote are included. If it is not on the quote then it may be extra (I don't charge for clients changing locations of items, just increasing the amount)

latecomer

We are having some quotes at the moment for an extension and one of them has specified £20k up front despite stating they would expect staged fees in arrears when they were on site. There is no way I'd part with that kind of money to anyone, recommended or not.

EliteHeat

I work in pretty much the same way as baldelectrcian and I have never heard of the method described by the OP.

Most trades will have their own, established ways of working which, to be honest, will be similar for everyone. Introducing you own system is likely to make many trades suspicious, especially when they are expected to front up most of the outlay from the off.

I can see you spending a lot of time trying to convince a builder of the validity of your scheme, only to have him walk away.

socrates

One way I get around this cashflow problem for the larger jobs I get done at my properties is:

I purchase all the materials (that they specify) meaning the tradesman has no initial outlay. It also means I can shop around and find the same product cheaper as most tradesmen will visit the same supplier.

Nine times out of ten I can make a 10-15% saving using this method.

Incidentally most of them seem to have trade accounts and can pay after a month anyway!

There is no way I am paying up front large deposits UNLESS as was offered earlier it is a credit card payment.

So if I am paying for all the materials, they have no outlay I can make stage payments as agreed between us that we are both comfortable with.

baldelectrician

socrates wrote: »

One way I get around this cashflow problem for the larger jobs I get done at my properties is:

I purchase all the materials (that they specify) meaning the tradesman has no initial outlay. It also means I can shop around and find the same product cheaper as most tradesmen will visit the same supplier.

Nine times out of ten I can make a 10-15% saving using this method.
This is usually OK until the client goes to screwfix / B&Q and buys similar looking but inferior tat that takes 40% longer to install due to poor build quality- GU10 spot lights are a prime example

Incidentally most of them seem to have trade accounts and can pay after a month anyway!
I try to pay my wholesalers at the end of the week, or as I go during the week, that way the money I have at the end of the week is mine. It saves bills mounting up.

There is no way I am paying up front large deposits UNLESS as was offered earlier it is a credit card payment.
I get charged 2.5% for credit card, to this is added on top

So if I am paying for all the materials, they have no outlay I can make stage payments as agreed between us that we are both comfortable with.
What happens if you get the wrong amount / wrong type of materials- who pays for the time to go and get the stuff. Who pays to remove / replace if it is faulty?

It is sometimes easier to let the trader get the materials, other times it is not. It is a judgement call dependent on the the experience (or lack of ) on both parties

socrates

baldelectrician wrote: »

It is sometimes easier to let the trader get the materials, other times it is not. It is a judgement call dependent on the the experience (or lack of ) on both parties

If you notice in my first sentence I say "that they specify"

I go with the tradesman to say Wickes or Screwfix or wherever - they choose the items and I pay for them - then there is no reason to get paid up front - they get paid like everyone else at the end of the week or the month (for most salaried people) - I am not saying pay a tradesman monthly but at the end of the week is fine if they have not had to lay for materials

My way around things was not aimed at you specifically - but I am sure you will agree a trader will not shop around when they are spending someone elses money.

baldelectrician

I always shop around, but if a client wants to travel a 16 mile round trip to save £15 or so they can.

I usually have 1 wholesaler I give most of my business to, as I get a much better discount there. if my customer goes there they will pay 20% more at least.
I am spending £100-£600 per week there so I get a better discount, should my client spend the same he will get the same discount.

Another main point (re my local wholesaler) if there are things missing the rep or a member of staff can get the part from another place and drop it off to me. This only happens occcasionally as they are usually on the ball.

For my regular cleints they get my full materials discount and they pay the wholesaler directly as I do not do VAT. I then only charge them for labour.

I tend to price things OK, as I have been doing it for a while.

You did not answer my point- what if you book a trader in and there is a problem with your materials (or lack of). If he can not arrange other work would you pay for his non productive time?
This is why many traders like to source their stuff themselves, as they usually arrive on site with all the gear.

When I get materials there is usually a small margin for me (this is to deal with the associated guarantee of parts etc)

When you specify materials the client may go to another wholesaler (such as CEF / Check Everything First), who sill supply similar 'own brand' items to the quality brands you specify. You then have to fit tat and leave a job you would not be happy to leave in your own house.

socrates

baldelectrician wrote: »

I always shop around, but if a client wants to travel a 16 mile round trip to save £15 or so they can.

I usually have 1 wholesaler I give most of my business to, as I get a much better discount there. if my customer goes there they will pay 20% more at least.
I am spending £100-£600 per week there so I get a better discount, should my client spend the same he will get the same discount.

Another main point (re my local wholesaler) if there are things missing the rep or a member of staff can get the part from another place and drop it off to me. This only happens occcasionally as they are usually on the ball.

For my regular cleints they get my full materials discount and they pay the wholesaler directly as I do not do VAT. I then only charge them for labour.

I tend to price things OK, as I have been doing it for a while.

You did not answer my point- what if you book a trader in and there is a problem with your materials (or lack of). If he can not arrange other work would you pay for his non productive time?
This is why many traders like to source their stuff themselves, as they usually arrive on site with all the gear.

When I get materials there is usually a small margin for me (this is to deal with the associated guarantee of parts etc)

When you specify materials the client may go to another wholesaler (such as CEF / Check Everything First), who sill supply similar 'own brand' items to the quality brands you specify. You then have to fit tat and leave a job you would not be happy to leave in your own house.

First of all lets compare eggs with eggs.

The OP is building an extension - so as long as the correct building materials are ordered by the OP as specified by the builder I do not see a problem.

If a trader tells me to get a particular item from a particular manufacturer - that is exactly what I get and try to get a better price on.

With the advent of online shopping people do not need to leave their house and go on any trip it can be ordered and delivered from the comfort of your own armchair.

I can fully appreciate your discounts and I too as a LL negotiate trade discounts - for sure the OP would not be experienced enough.

However lets say you meet a builder are happy with his quote(say £20k) but have never worked with him before - are you saying people should hand over 30% up front?

I will answer your question - when talking about builders - a delivery could be delayed whoever ordered it - as an electrician its different we both know that - as you generally pick the goods up as I do.

The most telling line of your post is the one about a small margin - and this is the bit that I as a LL am not prepared to pay when I can get the materials myself or go with the builder.

You may only take a small margin but there are others that will exploit this.

In all fairness I have heard about a lot more situations where a builder has run off with someone's money than a builder not getting paid - however I could be wrong.

Fundamentally I agree with most of the things that you say and if you are an electrician there is comeback through your professional body - which I am assuming you are a member of - but when it comes to builders its a whole different ball game.

That's why you generally hear about 'cowboy builders' more so than 'cowboy electricians'

Saying that there was another thread about a 'cowboy electrician' - which I think you contributed to.