Building Work – Advance Payments

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  • Building Work – Advance Payments
  • Premier Icon dazh
    Subscriber

    Asking on behalf of a mate. He’s doing a 100k extension project on his house. Builder has asked for a 20k up front payment to pay for materials. Never worked with him before, and builder has agreed to a proper contract etc, but he’s still nervous about handing over that amount of cash. Is this normal practice? What would the STW collective do?

    Premier Icon Flaperon
    Subscriber

    You need to find previous customers and ask hem how he handled the project and proceed based on that.

    Premier Icon ourmaninthenorth
    Subscriber

    I’m paying in arrears based on signed off valuations.

    Up front payments = tight cash flow = I don’t care if there’s a contract if he goes bump and can’t provide a refund or materials to match.

    Every tradesman I know has a credit account with their suppliers and therefore get stuff on tick and take payment after the work is done.

    Not a chance in hell I’d be handing over £20k.

    Premier Icon dazh
    Subscriber

    don’t care if there’s a contract if he goes bump and can’t provide a refund or materials to match.

    His thinking exactly. I don’t think I’d be handing over that amount of cash in one go. I suggested opening up a credit account(s) with suppliers they’ll be using, or handing over smaller amounts on a regular basis to cover expenses.

    glasgowdan
    Member

    100k is a large job for a small firm, and 20k is a high risk. credit account or not, the builder still takes on that risk when they acquire the materials from the supplier.

    Probably the best outcome for all is a compromise of some sort.

    hodgynd
    Member

    Not all tradesmen have credit accounts ..and that sort of money is not unheard of ..
    Ask what materials he needs to purchase and maybe drip feed in £ 5k amounts ..

    Premier Icon frankconway
    Subscriber

    For a £100k domestic job I’d be using a project manager with stage payments agreed based on work completed and valuations submitted by builder being signed off by PM (or architect).
    Payment schedule and valuations/applications for payment should be agreed in contract before any work starting.
    Builders are notoriously bad at fully completing jobs so your mate should also consider retentions – 5% say – to be released on full completion of works and resolution of all snags.
    If builder doesn’t like it, find another builder.

    The builder won’t be needing all the materials at once so there’s no need to pay 20k up front. You should, though, make progress payments on signed off valuations.
    Remember, it’s a two way street and to expect the builder to trust you to cough up £100k on completion is nuts.

    wobbliscott
    Member

    No builder is going to start work with nothing upfront, they’re going to want something. They can get credit for materials, but will need to hire plant, pay wages and live themselves. Every business needs cashflow. I had staged payments released at the start of a package of work. Can’t remember the value of the staged payments – around £5k or so at a time, but I think the first one was higher because that is where all the high value stuff is going in like foundations, drainage etc. £20k sounds alot, but depends what the work is.

    You’re not going to do it risk free, risk is taken on both sides.

    poolman
    Member

    Whenever i get building work done i make sure i owe the builders, something always go wrong, if you owe them you have some leverage. Last week i had a job done, i paid materials and the builder wanted payment on completion. Something did go wrong, it was sorted straight away.

    I wouldnt risk 20k in advance, maybe 2k per stage and pay directly for materials.

    spectraken
    Member

    I wouldn’t pay 20K up front, perhaps your friend can come to an agreement to trickle feed payments based on work done. If the builder doesn’t have money to break ground, i’d be concerned.

    I say that having worked for a builder doing basements in London who took good sized deposits to get the job started. In reality he was covering his jobs where he was running over and making a loss, trying to finish them. In the end, robbing Peter to pay Paul caught up with him and he put the company into administration, but not before starting up a new company in a similar name. All the new customers who had paid deposits, unsurprisingly didn’t get anything back.

    Premier Icon Akers
    Subscriber

    When we built our home we paid the builder 10% upfront for materials (mainly bricks, cement and sand) to get started, then fortnightly, based on the agreed value of the completed works. Once the initial supplies were depleted we then paid for additional supplies as they were required. As such we owned all the materials and should anything go wrong neither party was left owing the other.

    wrightyson
    Member

    20k at the start of a job is a bit rich. Agree fortnightly payments or even weekly with proper valuations. If say a large amount of concrete is required then offer to pay supplier for him, then knock off the running total. As for high cost items being at the start of thr job id disagree as it’s your finishes and labour in general that swallow up your money. He wont be paying his lads up front.
    As for concrete costs I could get you 2 weeks machine and dumper hire and a 150 cube dug out removed and repoured for less than 20k and I can assure you it ain’t gonna be anywhere near that.

    dyls
    Member

    I know a few builders who have had their trade accounts suspended because of them not paying the builders merchant.

    I wouldnt pay in advance. Especially if you dont know him. Maybe a contract with a 2 weekly payment for work done to date?

    woffle
    Member

    No way I’d be paying in advance. Offer to buy the materials maybe, but 20K up front – not a chance.

    The last lot of building work we had done we paid invoices for completed works every two weeks / per agreed stage and when signed off. I did buy some materials – either sourced myself or direct via his suppliers.

    Premier Icon jonnyboi
    Subscriber

    No builder is going to start work with nothing upfront, they’re going to want something.

    That’s incorrect.

    Stage payments are perfectly reasonable in arrears. If the buillder cant work on that basis then he already has cash flow issues and no line of credit with his suppliers.

    From memory I think we made payments after

    Foundations completed
    Roof trusses on
    First fix
    Second fix
    Completion

    With 5% retention for snagging.

    The builder was quite clear that it was my responsibility to release payments promptly

    Premier Icon wallop
    Subscriber

    No way, José.

    Rockape63
    Member

    Frank says it as well as anyone, although from the Builders point of view he doesn’t know the Client either, so he is trying to avoid any a payment issues at the outset. Can’t blame him, but it would be unusual, so would suggest finding a compromise.

    If he’s a very good highly recommended builder he may well hold out for it, but if he’s just one of a few options he has little leverage.

    wrightyson
    Member

    Do not offer to supply materials. It is one of the biggest mistakes any wanna be home owner/project manager can make. The minute they lay the last brick and they won’t tell you it’s the last brick they will say we want day work as we haven’t got materials. Merchants/suppliers are all incredibly busy. For example, after previously having 60k I’ve just acquired the last 6 packs of bricks on earth to complete my current job, they are now on a 20 week lead time.

    wrightyson
    Member

    And you really don’t need a project manager. It’s just extra cost. Just have a Frank and recorded conversation with the builder and agree terms. We recently took on board a fledgling ground works company who needed fortnightly payments, it was all agreed at the pre start meeting and then in black and white in the concrete. Some 18 months later they are now booked up till 2020 with future projects.

    wobbliscott
    Member

    That’s incorrect

    Not necessarily. Depends. Like I say it’s not just materials. They have overheads like any other business which they incur from day 1 of the job. It might take a couple of weeks for the foundations to be completed if they have a bad run of weather or, come up against an issue mid job, over-runs from other jobs that take them off site for a day or so. I think we paid an initial deposit then the staged payments at the points you highlighted, with the deposit netted off the first stage payment. It was a one-man band builder so not a company as such, so he was managing labour and all the trades than had to come on site.

    The key is It is a negotiation and depends on the job. If you can get away with not paying anything initially then good for you. And £20k is way too much, but I thought it was reasonable to pay a couple of grand up front to get things moving.

    If you don’t trust the builder to that extent then you should question employing them in the first place. You’re going to be dealing with them for months and months. They become a big part of your life for a good while. Trust is essential and part of the point on getting at least 3 or 4 builders in to quote in the first place. The cheapest is not always the best way to go. I think our builder was third cheapest of six but we liked him, he came highly recommended so I was happy to pay the extra. He did a great job and he’s now my go-to guy for any building work I need and we’ve recommended him onto a few other people since.

    Premier Icon jaminb
    Subscriber

    We had a contract with a schedule of payments linked to stages of work. When the materials were delivered to site we were suppose to pay c30% £15k of the total bill. What actually turned up on site looked like it was scrap from another job and I valued it at at less than £5k which was what we paid and then the arguments really started.

    Tell your mate to beware if he has signed a JCT small building works contract – he will be stuck with the builder however bad the relationship gets. If he tries to get out we will be sued for breach of contract and the arbitration process will not find in his favour.

    Despite taking out references we found out too late that our builder was serial cowboy and a want to be lawyer. He shafted people at the same time as us and is continuing to do so. He picks up work off those web sites where you advertise your job and the trades repond.

    sharkbait
    Member

    I wouldn’t.

    We’ve just completed a renovation job and all labour was paid one week in arrears.

    If it’s for materials then he can order them and you can pay for them directly over the phone (then you also know what you’re buying!). Oh, and £20k worth of materials is a LOT of stuff.

    deepreddave
    Member

    c£60k of work here by smallish local builder and no monies in advance, all stage payments but fairly regularly. I’d happily have bought materials myself from the local BM if needed but in reality stage payments were every 2-3 weeks so builder running minimal credit and little risk.

    I’d want a builder with a proven track record, the ability to accept stage payments and ideally known locally.

    Premier Icon jimdubleyou
    Subscriber

    I’m going through this at the moment. Builder took 20K the day they started work on a 115K loft conversion/ground floor extension. A considerable amount of steel was delivered 3 days later.

    He’s since had another 10k, but I have an almost plastered loft.

    We don’t have completion milestones and I’m basically trusting the two guys in the company not to screw us over.

    I’m not worried.

    johndoh
    Member

    And surely the first part of the job will be all clearing and groundworks – it’ll be an age before he needs to buy substantial amounts of materials.

    Saying that, in my business we always ask for an upfront payment (usually around 25%) before we will even attend a meeting (web design and front-end).

    Could also look at it from the other side. How does the builder know he isn’t going to get screwed over?

    Premier Icon jonnyboi
    Subscriber

    Not necessarily.

    In relation to your definitive statement that no builder will start work without an up front payment, It was demonstrably incorrect.

    We had a very good and trusting relationship with our builder and paid nothing in advance, others have said the same. Others on here have had similar experiences.

    I agree with a lot of your other statements though 😉

    Premier Icon footflaps
    Subscriber

    Builder took 20K the day they started work on a 115K loft conversion/ground floor extension. A considerable amount of steel was delivered 3 days later.

    £20k is a hell of a lot of steel! RSJs are very cheap, even custom welded stuff as they just cut to size then weld the plates on, takes a few mins labour.

    gavinpearce
    Member

    Not read all above in detail but I think general advice is NO! A ‘proper’ building contract will have payment in arrears. Consider if you pay the £20k and he goes bust before starting work or even during work. You should never be in the position that you have paid for more than he has done. If he says ‘it’s to book you in’. You can do that by signing a contract. I wouldn’t touch him with proverbial barge pole!

    revs1972
    Member

    £20k is a hell of a lot of steel! RSJs are very cheap, even custom welded stuff as they just cut to size then weld the plates on, takes a few mins labour.

    You have obviously no idea what is involved in a steelwork job then 🙄

    tang
    Member

    A friend has just lost nearly 20k on a similar story. It was a case of robbing Peter to pay Paul, and they were the end of the line.

    wrightyson
    Member

    I love the builder threads, they do make for some good comedy reading for a change.

    mattyfez
    Member

    That’s a big deposit, I’d go for staged payments as said, or ask him to give you a shopping list of materials, that you can buy in stages. So if he does a runner at least you’ve not lost out too much and the next builder can use them.

    sharkbait
    Member

    £20k is a hell of a lot of steel! RSJs are very cheap

    This bit is right – you get a lot of steel for £2k let alone £20k

    Jamie
    Member

    I love the builder threads, they do make for some good comedy reading for a change.

    You should be wronging the rights in the the thread then.

    blurty
    Member

    £20k is too much. Offer fortnighly valuations.

    I’d say that either the builder already has cashflow problems, or they seriously don’t trust you as a prospective client (in which case the £20k could be put in escrow and drawn against with certified valuations)

    revs1972
    Member

    £20k would buy you between 10-15 ton of fabricated steelwork for the record.
    That would be buying direct from a fabricator , if you bought from a builder who sourced it from a fabricator then it would be 7-12 ton depending on how much markup they put on it .
    If you need to get a crane in to install, on a contract lift you could pretty much say bye bye to your £2k in a day !
    Bearing in mind a big beam with a ledger plate can be knocking on for a ton, it does not take long to “do your money”

    Junkyard
    Member

    You should never be in the position that you have paid for more than he has done. If he says ‘it’s to book you in’. You can do that by signing a contract. I wouldn’t touch him with proverbial barge pole!

    THIS

    I accept they need to be sure you will pay but you only pay for what they have done hence the staged payments

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