Builder in financial trouble

[Gem77]

Hi All

 

I wasn't sure where to post this topic so just went for this thread in the hope that someone could advise.

We started our build back in January, obvious delays due to covid so have been putting the speed of the build which is soul destroyingly slow down to that.

Without going into too much detail we have encountered delay after delay with everything, we have recently found out that the builder has cashflow issues - we paid for materials back in May that have still not arrived on site and we have paid for deposits of materials etc that again have not materialised. Groundsmen were telling us that they hadn't been paid etc etc.

We have now held back paying this months invoice to avoid 'being out of pocket' until we see what we have paid for or have confirmation that they have been ordered.

My gut feel is to stop working with them but my husband is reluctant to do so as he doesn't want to have to find another builder and have more delays.

The next step is to order windows and we have been told that they won't order them until we pay a deposit, again I do not want to part with another penny until they are installed (these windows should have been ordered weeks ago but again they have been delaying on this point).

What is the normal practise of paying deposits?

 

Thanks for any advice.

 

[PeterW]

I can sympathise with you on this, but sadly it is more common than you think. 
 

In terms of your specific question, who are the windows coming from ..?

 

I would pay the supplier directly and ensure they (the supplier) know that they are for your build only. Ask them for the stage payment points and then have a straight conversation with your builder about your reasons for doing this. 

[Gem77]

2 minutes ago, PeterW said:

In terms of your specific question, who are the windows coming from ..?

 

Thanks PeterW 

The builder said we could pay for them direct but would rather we didn't.

He is affiliated to the window company in some way as it's another part of the business.

The trust is gone on my part so I don't want to give anyone any money at this point LOL!

I was completely aware of the stresses of a build but wasn't anticipating this as well.

[PeterW]

38 minutes ago, Gem77 said:

He is affiliated to the window company in some way as it's another part of the business.

That worries me more !! One part of the business propping another up is not a good sign. 
 

49 minutes ago, Gem77 said:

we have recently found out that the builder has cashflow issues

Out of interest, how did you find out..? Is it just from the ground workers or have you got other instances where you have seen cash related issues ..? And what were the deposits for ..?

[patp]

Can you swap to a "labour only" arrangement with the builder? You order, and pay for, any materials from the builders merchant and then your builder comes on site to do the work. If he does not arrive then you could find someone else to lay those bricks/install those windows etc. We are working like that and I do feel more in control. I can do all the research on materials and then get them on order in readiness for the availability of the trade that we need.

Of course, you will have to sort out where the materials are that you have already paid for. You could treat that as another problem to solve while the build is going ahead, assuming your finances will stand it.

[Bored Shopper]

I suggest stop and look for another builder. We've been in exactly the same situation, cost us a small fortune. PM me if you'd like more details.

[Moonshine]

1 hour ago, Gem77 said:

The builder said we could pay for them direct but would rather we didn't.

He is affiliated to the window company in some way as it's another part of the business.

 

That is odd, I could imagine a situation that the builder would rather the.order went through them to make sure the sizes were right and to make a 15% uplift on the cost of the windows, however having the two companies linked is something I haven't really come across, and it seems like there could be a chance of a monopoly on the price of windows provided.

[Moonshine]

6 minutes ago, Bored Shopper said:

I suggest stop and look for another builder. We've been in exactly the same situation, cost us a small fortune. PM me if you'd like more details.

 

Could you outline some of the things that happened to you? I guess it is a risk of using a main contractor that all your money is tied up with them, and if they get into trouble then so do you. Where as if you are dealing with more trades you have less money at risk with each one of them, though more to manage.

[nod]

To have more than one company running together isn’t that unusual 

Your husbands gut feeling is right 

A new builder will want at least as much money upfront Perhaps more 

At the moment the risk has increased for the contractors also 

With many clients having cash flow problems also 

Now would be a good time to sit down with your builder and discuss a labour only deal 

 

Suppliers have become very twitchy My main framing supplier has cut my monthly limit from 100k to 50k for the foreseeable future 

Some jobs are having to be put off till the filling month So the client tells I’m not paying you this month till you are back onsite 

Lots of work in Cashflow isn’t great 

I run three companies for this very reason 

If I had just one company I would be in a position where I’ve got enough work in for 40 men and have to cut wages down to 20 men 

Im struggling to keep on top of the work we have now with 40 plus 

It’s like being a juggler 

 

While you don’t want your job propping up other jobs You need your job to progress 

You need to strike a balance 

If you choose to bring in another builder They will hit you with higher rates 
 

 

[SteamyTea]

If you have not already done so, pay with a credit card, then you get section 75 protection.

(terms and conditions may apply, check them)

[Temp]

If you have paid him for materials that haven't arrived what makes you think the windows will? I'd pay the window co direct by credit card as others have suggested. If they are reluctant then as long as you pay at least £100 on the card the whole lot is covered. But it has to be for the windows themselves not "fitting" or "designing" the windows.

[scottishjohn]

If you feel you are way behind on materials and labour you have paid for -- then now is the time to get it sorted --it will only get worse 

 this pandemic could be a full lock down soon -and if your builder is in trouble then you will be last thing on his mind .

he will pay his men at the end of the week --not the beginning before they have even turned up on monday  morning ,which is what i think you are saying he is wanting you to do ,if its in arrears then no problem --just make sure it keeps in step 

 

[Gem77]

2 hours ago, nod said:

While you don’t want your job propping up other jobs You need your job to progress 

You need to strike a balance 

If you choose to bring in another builder They will hit you with higher rates 
 

 

It's good to get this from another perspective. As we understand it our invoice payments are allowing the next lot of work to continue. But I then wonder why should we have the extra pressure on top of everything else about keeping his business afloat - as selfish at that sounds. There have been constant delays, no one on site etc etc. We just want our home to be built.

I have got to the point that I am worried that if we continue to pay for things up front and deposits they will declare bankruptcy and then we'll be in real trouble.

[Gem77]

1 hour ago, SteamyTea said:

If you have not already done so, pay with a credit card, then you get section 75 protection.

(terms and conditions may apply, check them)

Thanks - quite a few have mentioned credit card payments so I'll definitely look into that.

[Gem77]

4 hours ago, patp said:

Can you swap to a "labour only" arrangement with the builder?

We could definitely look at this option, the issue we have is time at the moment what with both myself and my husband working full time, the whole point of having one company oversee the whole build was supposed to be less stress!!

[Gem77]

5 hours ago, PeterW said:

Out of interest, how did you find out..? Is it just from the ground workers or have you got other instances where you have seen cash related issues ..? And what were the deposits for ..?

Groundsmen telling us they were not getting paid, pallets of materials just turning up one at a time not in bulk so in the end we just asked the question outright and got the answer we were expecting ?

We paid for bricks and deposits for screed and underfloor heating.

[dangti6]

Has the builder made any mention of why the materials haven’t arrived? Is the build at a stage where it’s appropriate for their delivery and subsequently holding it up? 

[Gem77]

4 minutes ago, dangti6 said:

Has the builder made any mention of why the materials haven’t arrived? Is the build at a stage where it’s appropriate for their delivery and subsequently holding it up? 

Not really, I think they simply didn't order the bricks, probably used the money to fund something else?  Apparently the screed etc are turning up next week, but that is because we are now querying everything whereas before we were trusting and paying up. You live and learn.....

[Bored Shopper]

5 hours ago, Moonshine said:

 

Could you outline some of the things that happened to you?..

Month 1-3 of the build with a main contractor (and a PM as well). Things go really well, prompt and 2 weeks ahead of schedule. However the builder gets twitchy when we visit the site (?).

Month 4 of the build. Work gets slow, 4-5x people on site but no real progress by end of a week. Materials which were supposed to be purchased by the builder seem very slow to arrive. Chased the builder for windows order for 3 weeks, eventually ordered ourselves (and just in time to fit before the Lockdown!).

Month 5 of the build. All progress stopped. 4x people on site doing nothing. Already 6x weeks behind schedule. Builder starts cutting corners (eg DPC level too low, drainage not sorted, BC recommendations ignored, structural steels positioned incorrectly, incorrect lintels used etc. Builder extremely aggressive at weekly meetings and at our site visits. Our PM is still blissfully tranquil at this stage, his position is that we are imagining things. We urge everyone to be transparent and communicate so we could find a solution, but are angrily ignored.

All the above time we keep paying (reduced weekly fees, but still paying! stupidly hoping that things would go right).

The lockdown date. It's clear that the builder is unable to continue. We freeze all works.

Five weeks later we find another builder who's willing to take us on at shell&core stage and progress to completion on labour-only basis. We sack PM and completely take over the procurement side. We are on site daily for checks, discussions and deliveries. Finally happy with the speed of the progress. But the lesson learned cost us c. £100k :((( 

[recoveringbuilder]

A steep learning curve! This is why we have always supplied materials ourselves and hired builders on a labour only basis , I’m afraid I’m not a very trusting person and the only person who bought anything for us was the plumber when he was caught short one day and needed stuff urgently, he then went on to try and produce the same invoice twice (one was a photocopy) for payment but he hadn’t reckoned on how meticulous I had been with payments!

[SteamyTea]

3 hours ago, Bored Shopper said:

But the lesson learned cost us c. £100k

Could have bought a holiday home in Mousehole for that.

[Gus Potter]

Hello Gem77.

 

Sorry to hear that things are not going smoothly at the moment.

 

It might be worthwhile trying to seek out a Quantitity Surveyor who works up prices for local builders when they are tendering.

 

I'm assuming you don't have a standard form of building contract, rather, that you have a contract that is written by the builder themselves, or some other form of non standard agreement.

 

What you may look to do is to ascertain; the value of the work to date, whether the work that has been done complies with the drawings, if not what elements don't. Also look at what materials are on site, the value of these and whether they are the correct materials. Say you have some beams.. check the lengths, weights etc and that they will fit, insulation if any.. check the type / performance of any substitute type.

 

To find a QS like this you may want to ask here or go back to your designer and ask them if they know of somebody local. This may be the hardest part... to find a QS who can help you.  You may need to pay say £ 500 - £750 (depends on the size of the project though) for someone to do a rough appraisal. The main thing is that it will give you a better understanding of the true value of the work so far. Also, you'll get someone to lend you a friendly / supportive ear (well worth the money) and advise. QS's no doubt will be seeing more of this type of outcome so they may have the makings of a solution that works for you.

 

Once you get a better handle on the money and values of work to date then you should be in a better postition to take a view. If you have a QS on tap they can often keep you right while sitting in the background to some extent.

 

Another key point is to try and make sure the relationship you have with your builder does not break down completely, hard to do at times. A lot of QS's are quite good at weighing up the risks and to some extent they can act as an arbitor/ mediator, depends on who you can find. This can restore the relationship and bring a project back on track both in terms of programme and payment schedule.

 

If this can't be done then at least you'll have an idea as to how much it will cost you to change horses before you decide to part company with your current builder. It may just a fact that the builder can't do the work for the price he quoted without a substantial loss (go bust) due to the extra cost for example of materials and complying with the COVID regulations. Other builders are probably in the same boat. Having a clear view as to the quality and value of the work to date is well worthwhile.

 

All the best.

 

 

[recoveringbuilder]

1 hour ago, SteamyTea said:

Could have bought a holiday home in Mousehole for that.

That would be a caravan I suspect as I’ve just looked at the price of property down there ?

[SteamyTea]

13 minutes ago, Christine Walker said:

That would be a caravan I suspect as I’ve just looked at the price of property down there

No, it was a small, 1 bed, place about 30 metres from the harbour.

Was actually £103k.

Or about £20k more than my place.

 

There is Cornwall, and then there is the real Cornwall, the bits people don't visit, or even know about.

[Temp]

On 27/09/2020 at 11:39, Moonshine said:

Could you outline some of the things that happened to you? 

 

We paid our builder in arrears not in advance. On one occasion he asked for help with his cash flow and I agreed to pay him in advance for our windows. I paid the amount the window co had quoted less VAT because I couldn't reclaim it. We had a pretty good relationship and I never had any concerns about him. If I had I would have paid the window co direct.

 

We had agreed a %5 retainer and deducted that from each stage payment rather than the whole 5% from the last one.

 

At least twice our builder proposed changes that were going to cost more. Easy time we asked him to formally write to us ammending the quote before agreeing them. Both times his proposals were a good idea. Example, adding a velux to a store room in the roof space.