Final Payment to Builder

[harry_angel]

We have started a simple two-storey extension - hallway and bedroom above. Unfortunately we didn't get a payment structure confirmed before the work started (we've learnt our lesson!) - we are now confirming staggered payments with him because the builder is now wanting £4k a week steadily throughout the job until the end, which we're not entirely comfortable with.  We would like to hold back a decent percentage at the end because we've been burned before and because we want to make sure the job is finished as we'd like before coughing up most of the money.  We have an independent BC person involved in this project so we're getting everything checked off along the way.  Regardless, how much would you guys recommend as the max % to retain before final payment?  Thanks in advance.

[Mr Punter]

5% is fairly standard, but is kept for x weeks after completion to ensure snagging / site clearance / defects are taken care of.  If you hold back any more they won't have enough cash to finish it properly.

 

How far through the job are you?

[Temp]

A QS we spoke to recommended withholding say 5% from each stage payment.

[harry_angel]

15 hours ago, Mr Punter said:

5% is fairly standard, but is kept for x weeks after completion to ensure snagging / site clearance / defects are taken care of.  If you hold back any more they won't have enough cash to finish it properly.

 

How far through the job are you?

We're two weeks through a 5/6 week job. 5% feels like not much at all! Not much of an incentive to stick around and finish the job...

[the_r_sole]

4k a week for how long? what happens if they go over time? another 4k?

5% is standard retention, it's not a huge amount on a small job but it's there to address snagging rather than as an incentive to stay on site! 4k a week is pretty good incentive tbh!!

What you should have done is set up payments based on progress, paid after that stage is complete but you're never going to get a contractor to sign up to those terms 6 weeks in to a gravy train situation.

How are you tracking any changes or additions to the costs? Did they give you an over all cost for the project?

I would now be looking to reduce the weekly payment to say 2k per week and then a bonus at stages, that way the contractor keeps a cashflow and you have less risk that it's not going to get finished - but might be a hard sell! Start at 1k a week and negotiate hard!

[Mr Punter]

Did you get some breakdown of costs?  Foundations x%, brick and blockwork x%, electrics x, plumbing x, plastering x roofing x carpentry x, decoration x.  That way you can more clearly see where the money is going.

 

If he quoted £24k and he is a third of the way through, you are about right.  Do not overpay early on.

[harry_angel]

2 hours ago, Mr Punter said:

Did you get some breakdown of costs?  Foundations x%, brick and blockwork x%, electrics x, plumbing x, plastering x roofing x carpentry x, decoration x.  That way you can more clearly see where the money is going.

 

If he quoted £24k and he is a third of the way through, you are about right.  Do not overpay early on.

Oh yes, we have a fully itemised quote with costs throughout, so we're clear on that part. 

 

It's £22k and we will have paid £8k after 2 weeks work, and this is how he has asked for it to continue - at £4k a week. We acknowledge that there are upfront materials costs, and a lot of money goes on the initial building, but it just seems like a lot to have every week without fail 'to pay the guys' and not leave much at the end.  We're so used to paying for the bulk of the job at the end when it's finished satisfactorily...

[Mr Punter]

Retain 5% from each payment, so that you have £1,100 when it is complete.

 

So far, he should be about 36% of the way through.  Based on his costs and programme, does that seem about right?

 

These things work both ways.  You could stiff him for payments, he could draw too much on the job and leave before it is finished.  You need to find a middle path.  No way will you get to wait until it is completed, unless he is a mug.

[harry_angel]

On 06/08/2020 at 10:02, the_r_sole said:

4k a week for how long? what happens if they go over time? another 4k?

5% is standard retention, it's not a huge amount on a small job but it's there to address snagging rather than as an incentive to stay on site! 4k a week is pretty good incentive tbh!!

What you should have done is set up payments based on progress, paid after that stage is complete but you're never going to get a contractor to sign up to those terms 6 weeks in to a gravy train situation.

How are you tracking any changes or additions to the costs? Did they give you an over all cost for the project?

I would now be looking to reduce the weekly payment to say 2k per week and then a bonus at stages, that way the contractor keeps a cashflow and you have less risk that it's not going to get finished - but might be a hard sell! Start at 1k a week and negotiate hard!

Yes, we have an overall cost for the project and a breakdown of all the costs - so if there are changes or additions they will be added to that, since everything is itemised. 

 

I've just paid £2k today and said we'll see how progress goes next week. We have genuinely had some delays due to different tradespeople within the team miscommunicating with each other, on more than one occasion, so I feel justified not giving full amount this week.  I can tell the pressure is on me to pay next week though! 

 

Next time though, I will definitely do as you suggest - payments based on stages completed / signed off by BC.  We have a much bigger project coming up, so at least I can apply this lesson to that!  Thanks for your help