Escrow arrangements for building work deposits?

Bricks

There are many threads on here and elsewhere, arguing about whether or not it's reasonable for builders to ask for deposits up-front - payments before any work has started.

One potential solution to this might be to use some kind of escrow service. But is this ever practicable or workable for small scale building works?

I'd certainly be interested if anyone has ever managed to use this successfully.

There is, for example this Trustmark scheme:

https://www.trustmark.org.uk/blogs/blogs-home/trustmark-blog/2016/03/18/tradespeople-can-increase-their-revenue-by-using-escrow

Mistral001

Escrow relies on confirming that the work has been done to an acceptable standard before the funds held by the third party are released.  Perhaps a bit expensive to administer for the smaller contracts.

Doozergirl

That reads like the person who wrote it sells Escrow accounts.    They've certainly never been a builder. "Tradespeople rarely receive 100% payment for a job without escrow" - rubbish! 

 If every customer randomly wanted massive discounts at the end of an agreed price project, they'd be in court.  10% is a very significant percentage of profit.  

I'm not using Escrow accounts.  

We are looking at starting to provide a packaged product.  I will consider taking part deposits with credit card and possibly even refer clients to finance providers, but I'm not grovelling for money from a client when it's us providing the credit line for most of a project.  Trust goes two ways.  

Bricks

My preference would always be to not pay a deposit.

If I got two quotes, and one was a little more expensive but didn't ask for a deposit then I'd very likely go for that one.

When its a building co. vs a homeowner the risk seems asymmetrical: if the homeowner pays a big deposit and then the co. goes bust, there's not a lot the homeowner can do. They might not even be able to track down a physical premises. On the other hand, if a builder shows up at someone's home, does a week of work, and then the homeowner refuses to pay, well, the builder knows where they live, there's evidence of the work done, and the homeowner can't really go bust and disappear in the same way.

However... sometimes it seems to be the case, for certain types of work, that it's just really hard to find anyone willing to quote without requiring a deposit. So, I was wondering if there are any other solutions, and whether escrow services are worth looking into. It sounds a bit like maybe not.

For that Trustmark one, it's not very easy to see exactly how it works. As @Mistral001 says, you need some way of agreeing whether work has or hasn't been completed. It's not clear how they deal with that.

Bricks

Doozergirl said:

That reads like the person who wrote it sells Escrow accounts.    They've certainly never been a builder. "Tradespeople rarely receive 100% payment for a job without escrow" - rubbish! 

 If every customer randomly wanted massive discounts at the end of an agreed price project, they'd be in court.  10% is a very significant percentage of profit.  

I'm not using Escrow accounts.  

We are looking at starting to provide a packaged product.  I will consider taking part deposits with credit card and possibly even refer clients to finance providers, but I'm not grovelling for money from a client when it's us providing the credit line for most of a project.  Trust goes two ways.  

Are you saying that you're a builder, and you don't generally take deposits - or you do generally take deposits?

And the credit card comment - are you referring to the fact that if the customer pays a deposit by credit card, then they might be covered by the "section 75" stuff if, say, you were to go bust?

Doozergirl

Bricks said:

Doozergirl said:

That reads like the person who wrote it sells Escrow accounts.    They've certainly never been a builder. "Tradespeople rarely receive 100% payment for a job without escrow" - rubbish! 

 If every customer randomly wanted massive discounts at the end of an agreed price project, they'd be in court.  10% is a very significant percentage of profit.  

I'm not using Escrow accounts.  

We are looking at starting to provide a packaged product.  I will consider taking part deposits with credit card and possibly even refer clients to finance providers, but I'm not grovelling for money from a client when it's us providing the credit line for most of a project.  Trust goes two ways.  

Are you saying that you're a builder, and you don't generally take deposits - or you do generally take deposits?

And the credit card comment - are you referring to the fact that if the customer pays a deposit by credit card, then they might be covered by the "section 75" stuff if, say, you were to go bust?

Don't take deposits.  And don't take credit cards because we don't work in predictable circumstances and give a line of credit for at least 21 days. 

But starting to business plan for a packaged product where we would take significant deposits for building work that can come with a price list, and I would think it fair that consumers have the option of consumer protection. 

Definitely not escrow though.  

Bricks

I might be being stupid but I still don't understand what the relevance of credit card payment is.

twopenny

I would say it depends on the size of the job and reputation of the builder.

If it's a very large job you'd presumably employ a larger established building firm and I wouldn't expect to pay a deposit. Maybe on completion of certain parts but that's never been my experience.

Currently trying to find a plumber and someone to lay paving/level drains. Plumbers are booked 7mts ahead at this time so no room for negotiation. Wouldn't dream of it. You ask for quotes and accept them or not.

Bricks

Here is a "deposit protection" scheme that was recently proposed by a builder. The information on how it all works is a bit scant.

https://www.iwa.biz/deposit-protection/

Bricks

Here is another approach I have come across - this is in an FMB standard contract:

https://www.theplancentre.co.uk/uploads/1/0/6/6/10668835/f222_domestic_building_contract.pdf

I would be interested to hear if anyone has had success using this kind of arrangement.

shinytop

I just had a significant job done (new ASHP central heating).  I paid 1/4 to book the job, another 1/4 before they started and the rest on completion.  I thought that worked well.