Near 50% pay upfront?!

BobCat11

Hi everyone,
Me and my girlfriend are having works done on the house, have met a local builder and now have a contract. Neither of us are experts on this (supply chain operations and insurance we are though, just not building!) and would really appreciate any insight that can be shared.

We live in a 3 bed semi where we want the ground floor redone, first floor decorated and a gym/outhouse. The quote has come to £56K (exc. VAT) and can be broken down as:
Ground floor (knock down walls, extend and renovate kitchen and bathroom) - 50%
Gym/outhouse (this will be 5mx4.5m, insulated, small WC) - 25%
First floor renovation/garden sitting area/misc - 25%
He's also asking for £15K on signing of the agreement and £10K for materials for the outhouse, which he wants to start the work on.

Does this sound reasonable? The £56K sounds ok from what I've read, but it's the near half for the signing and materials that make us nervous. 
Thanks and appreciate any help anyone can offer.

FreeBear

Knocking down walls - If any of these structural, you'll need a structural engineer on board and the work will be subject to building regulations.

Gym/outhouse may require planning permission. Some of the work will certainly need building regulation compliance & sign off (electrics, sewerage, foundations, etc). Have you been advised that any of this is required ?

Personally, I'm never happy when a contractor asks for money up front for materials - It suggests that he has cash flow problems and/or poor credit with his suppliers. Staged payments once the materials are on site might be an acceptable compromise.

ComicGeek

No, that doesn't sound reasonable. No money up front, and definitely no money up front for materials - good builders would have trading accounts which ultimately allow them to pay later for materials. Agree payment stages against completed work only.

Paying 45% of the total costs before he's even started on site is just crazy - you'll be on here the following week saying that he's disappeared! 

BobCat11

FreeBear said:

Knocking down walls - If any of these structural, you'll need a structural engineer on board and the work will be subject to building regulations.

Gym/outhouse may require planning permission. Some of the work will certainly need building regulation compliance & sign off (electrics, sewerage, foundations, etc). Have you been advised that any of this is required ?

Personally, I'm never happy when a contractor asks for money up front for materials - It suggests that he has cash flow problems and/or poor credit with his suppliers. Staged payments once the materials are on site might be an acceptable compromise.

Thanks for the reply FreeBear.

The structural engineer and planning applications will be required and he will start after the initial £15K. He states he doesn't charge for coordinating and working with the engineer and council, so will double check if we pay the fees on top.

I was unclear with the £10K for the gym. The contract says to pay after delivery of the materials. Is that more reasonable?

How about the £15K payment on contract signing? Is that the norm?

BobCat11

ComicGeek said:

No, that doesn't sound reasonable. No money up front, and definitely no money up front for materials - good builders would have trading accounts which ultimately allow them to pay later for materials. Agree payment stages against completed work only.

Paying 45% of the total costs before he's even started on site is just crazy - you'll be on here the following week saying that he's disappeared! 

Thanks ComicGeek. Agreed. In these days with business being poor, I can imagine a lot of disappearing!

I mention above that the £10K is after the gym materials are delivered. Nonetheless, you suggest the gym and house payments should only be after each stage is completed? Would that mean payments are staggered? e.g. Zero at the beginning, £x once ground floor completed, £y after gym etc. 

FreeBear

If I were in the negotiating seat, I'd go for 10-15% deposit. Staggered payments as work is completed, say 25% when agreed points are reached. The final 10-15% to be paid on completion once any snagging issues have been resolve. Payment for bulk materials to be made once they have been delivered to site. Architect/structural engineer/Building Control fees to be paid separately as & when the fees are incurred.

If your builder is reputable, he should be willing to meet somewhere in the middle depending on how you pitch the negotiation.

Hannimal

I have instructed a company to do my bathroom and I've naively paid in excess of 50% of the work ahead of time. They're meant to start soon but I am really nervous reading posts like this.

jefaz07

I wouldn’t be. I think the comments above are a little unfounded. 

You’ll find a multitude of people who have paid up front and have had solid, excellent work carried out. 

The comments above suggest if they ask up front then they’re 100% going to get ripped off. It’s pathetic. 

What has failed to have been mentioned above is that while they slate people asking for deposits, why should that tradesman extend you a line of credit and trust you’ll pay? And take all the risk? 

I myself have done a job and not been paid, I have also done jobs where I’ve had to chase over the period of months. So while I can get terms at 60 days, they still need to be paid in 60 days whether I’ve been paid or not. 

So imagine 2 jobs in the same ball park as above don’t fancy paying you, you’re in a 100k hole and creditors are chasing you. Your credit is trashed and you now can’t work without anything up front. 

Please, when the job is carried out come back on here and tell us whether it has been absolutely fine or it’s went like what the posters ‘assume’ will happen. 

Risteard

jefaz07 said:

I wouldn’t be. I think the comments above are a little unfounded. 

You’ll find a multitude of people who have paid up front and have had solid, excellent work carried out. 

The comments above suggest if they ask up front then they’re 100% going to get ripped off. It’s pathetic. 

What has failed to have been mentioned above is that while they slate people asking for deposits, why should that tradesman extend you a line of credit and trust you’ll pay? And take all the risk? 

I myself have done a job and not been paid, I have also done jobs where I’ve had to chase over the period of months. So while I can get terms at 60 days, they still need to be paid in 60 days whether I’ve been paid or not. 

So imagine 2 jobs in the same ball park as above don’t fancy paying you, you’re in a 100k hole and creditors are chasing you. Your credit is trashed and you now can’t work without anything up front. 

Please, when the job is carried out come back on here and tell us whether it has been absolutely fine or it’s went like what the posters ‘assume’ will happen. 

I'd reiterate what this poster has pointed out. I've had bad debt and also people messing around for months to pay, or deciding to award themselves a discount. And as mentioned, my suppliers still want paid regardless of whether I have been or not. Deposits are completely reasonable.

Hannimal

Thank you to the two people who posted above. This is really reassuring. I will come back when the work is done and I'll let you know. 

Hannimal

They were meant to start working today and no one showed up. They've apologised and said they'd come in tomorrow. I am feeling physically sick as I may have just lost a life-changing amount of money. I have no idea what I can do now, other than just hope they come tomorrow.