Mitigating Risk With Upfront Payments To Timber Frame Companies?

[thefoxesmaltings]

 

A follow up thread as to what only can be described as a nightmare situation for willraymond, with Flight Timber recently going into administration after 30 years.

 

Aside from visiting the timber frame manufacturing facility and speaking with previous clients before placing an order, which even in this case, seems like it wouldn't protect you if you pay for a large percentage of the package upfront, is there any other way to help mitigate the risk of the TF company going under and losing your cash? Is it possible to negotiate on payment terms?

 

I know there are the additional data points of looking on Companies House, but even these figures can be manipulated to an extent, for the purposes of corporation tax. Is it worth paying Experian £60 to pull the credit report on a TF company, or are these largely useless?

 

As someone currently deliberating between a few (Turner Timber, English Brothers, Fleming, Maple), I'd be interested to see how people validated their decisions to pull the trigger on a TF company. I appreciate 'gut feel' is a large part of it, but that's not a quantitative data point as such.

[JohnMo]

Think I would consider stick build.  There are a few people on here who are way more knowledgeable than me, who have suggested to a few it's the way to go.

[thefoxesmaltings]

10 minutes ago, JohnMo said:

Think I would consider stick build.  There are a few people on here who are way more knowledgeable than me, who have suggested to a few it's the way to go.

But then surely you lose all the benefits of TF being constructed in a controlled environment, quicker on-site erection, faster to watertight etc.

[Barryscotland]

We went with claymore a small family business after visiting a few mainly as they seemed the most normal down to earth people. They asked for each phase (design, kit, roughings, windows etc) to be paid two weeks before goods delivered so we never felt like we where putting all our life savings in there hands. The amounts where small enough they could of been paid using credit cards for security if I felt it was needed.

 

at the time of our build a stick build was going to be more expensive than a kit but that was mid Covid when materials where scarce and pricey

Edited September 10, 2022 by Barryscotland

[Kelvin]

I posted a similar question recently. 
 

I asked my timber kit company (Heb Homes) what client protection they had in place should they go bust. They laughed nervously when I asked as no one had ever asked them this. After a few weeks they came back to me with two options: insurance with BJP

insure (at my cost) and a personal guarantee in writing from one of their directors (while laudable won’t be worth much in reality)  My situation is slightly more complicated in that it also includes all the windows and doors and that  Heb Homes don’t make the kit, they sub the kit out to another company and the windows to Nordan.
 

I phoned BJP insurance and they have a product called advance payment insurance but it’s expensive at 10%-15% of the total contract value which would be at my expense. 
 

I’ve asked HH if I can pay part of the invoices on various credit cards so that would give me some protection just waiting on their answer. 
 

There are other things I will ask them to do such as show pictures of our materials with order numbers and my name on. 
 

No doubt they think I am being over cautious (difficult) but that’s  three people I know or heard of losing large sums of cash to a timber kit company going bust. 

[thefoxesmaltings]

8 minutes ago, Kelvin said:

I posted a similar question recently. 
 

I asked my timber kit company (Heb Homes) what client protection they had in place should they go bust. They laughed nervously when I asked as no one had ever asked them this. After a few weeks they came back to me with two options: insurance with BJP

insure (at my cost) and a personal guarantee in writing from one of their directors (while laudable won’t be worth much in reality)  My situation is slightly more complicated in that it also includes all the windows and doors and that  Heb Homes don’t make the kit, they sub the kit out to another company and the windows to Nordan.
 

I phoned BJP insurance and they have a product called advance payment insurance but it’s expensive at 10%-15% of the total contract value which would be at my expense. 
 

I’ve asked HH if I can pay part of the invoices on various credit cards so that would give me some protection just waiting on their answer. 
 

There are other things I will ask them to do such as show pictures of our materials with order numbers and my name on. 
 

No doubt they think I am being over cautious (difficult) but that’s  three people I know or heard of losing large sums of cash to a timber kit company going bust. 

The BJP insurance is an interesting option, but definately pricey at 10-15% of the contract value. I might look into that. I wonder if there are other insurance companies that offer such protection?

 

The pictures of materials with order numbers and names on is certainly a 'quick win' that can be added into the process. I'll definitely note that down.

 

Nothing wrong with being over cautious. Better to be safe than sorry! I think I'll definitely take your approach and ask the TF companies.

[NSS]

One of the main reasons we chose the TF company we did was because they offered ESCROW account protection of stage payments.

[Kelvin]

Yes I wish I had considered this a bit more deeplt before signing the contract. 🙄 I’ve asked them about an escrow service too. 
 

The guy I spoke with at BJP was really helpful. He said he rarely sells the advanced payment product (because it’s dear I guess) but did mention he’s seen an increase in the number of people asking for these kinds of products. 
 

Yes there are other companies that offer this type of insurance (Allianz for one) but the blurb seems to assume you are a company rather than an individual. I have a few follow up calls to make next week about it. 

Edited September 10, 2022 by Kelvin

[thefoxesmaltings]

24 minutes ago, NSS said:

One of the main reasons we chose the TF company we did was because they offered ESCROW account protection of stage payments.

Oh, that's very interesting. Not heard of that being done before, but I've not yet asked to be fair. Would you mind sharing the TF company you're using?

[Iceverge]

2 hours ago, thefoxesmaltings said:

But then surely you lose all the benefits of TF being constructed in a controlled environment, quicker on-site erection, faster to watertight etc.

 

Stick build could be framed and roofed in a week with a good team of chippies. 

 

As to build quality, some of the TF manafactuered to a millimeter hype is just that. It's an operator placing a stick and banging home some nails to make a panel in both cases. I've heard tales of a roof being 100mm out of plumb with a  "precision kit".

 

Both can be done wrong and done well.  

 

 

 

[NSS]

1 hour ago, thefoxesmaltings said:

Oh, that's very interesting. Not heard of that being done before, but I've not yet asked to be fair. Would you mind sharing the TF company you're using?

We used Scandia Hus but completed our build 5 years ago.

[willraymond]

To answer the original post, I went for a factory tour, checked companies house & did a credit check on Experian (even now it shows 75 out of 100, below average risk) but I think this is only based on the last companies house figures rather than a proper in depth credit check like you can have on an individual.

 

Regarding escrow - unless the whole amount stays in that escrow account until you have the product (which would cause cashflow issues for the company) then I would assume the same problem would occur? Or would they withdraw from the escrow in line with their payment stages.

 

I can now see the attraction of a traditional masonry build as there is never a massive outlay and what outlays there are you should soon see on site as physical bricks and mortar.

[Kelvin]

Yes I don’t think ESCROW would work for many timber kit companies. In my case because they sub-contract the work to another company my assumption is they release the money to them as they need to fund the manufacture of the house. If I can find an insurance product that isn’t too expensive I’ll do that. If not I’ll need to swallow the risk. 

[Simplysimon]

19 hours ago, Kelvin said:

Heb Homes don’t make the kit, they sub the kit out to another company and the windows to Nordan.

so what do these 'kit' companies actually do then?

[thefoxesmaltings]

7 minutes ago, Simplysimon said:

so what do these 'kit' companies actually do then?

Aside from Heb Homes, most TF companies make the timber frame themselves in house. It's more unusual to find companies outsourcing it, I've found.

[Kelvin]

HH are a firm of architects so they’ve done all our drawings and submission for planning, warrant, and organised all the SE work etc. They can also manage getting all the other professional stuff done like topo survey, site investigation, drainage, utilities, etc but I did all of that before I bought the plot and they used the reports. 
 

They use three kit manufacturers I believe. One for their SIP builds, one for CPS and an Austrian company for the CLT builds. 

Edited September 11, 2022 by Kelvin

[TonyT]

21 hours ago, JohnMo said:

Think I would consider stick build.  There are a few people on here who are way more knowledgeable than me, who have suggested to a few it's the way to go.

that’s what I did, didn’t take long.

60m2 side extension walls made in 1 weekend and a couple of hours after work.  

[Haylingbilly]

The way I did it was to make a part payment via a credit card. It then covers you for the entire contract (up to a point). The timber frame company would only take a thousand or so on a card, but were happy to do so, understanding that it offered me protection.

[Haylingbilly]

https://www.moneysupermarket.com/credit-cards/guide-to-credit-card-protection/

 

£30,000 is the limit....so if overall contract is over £30k you are not covered but maybe you could break it down into smaller chunks if it is...

[jonM]

On 10/09/2022 at 19:33, JohnMo said:

Think I would consider stick build.  There are a few people on here who are way more knowledgeable than me, who have suggested to a few it's the way to go.

We did stick build primarily because the architect and builder were familiar with this approach and due to concerns regarding cost / quality of the factory built frames. We achieved great airtightness results which were better than those I have seen quoted by pre-fabricated frame companies. Stick build is a good approach as long the build team are comfortable with this way of working and it allows you to distribute your payments across multiple suppliers to mitigate risk. 

[Mikey]

On 11/10/2022 at 16:48, Andy brown said:

The way I did it was to make a part payment via a credit card. It then covers you for the entire contract (up to a point). The timber frame company would only take a thousand or so on a card, but were happy to do so, understanding that it offered me protection.

So are you saying that even if you only pay say £1k on credit card and the rest bank transfer, you are covered up to £30k via Section 75? 

 

 

 

[PeterW]

12 minutes ago, Mikey said:

So are you saying that even if you only pay say £1k on credit card and the rest bank transfer, you are covered up to £30k via Section 75? 

 

 

 

yes - the CC payment can be only £100 to still qualify 

[Kelvin]

22 minutes ago, Mikey said:

So are you saying that even if you only pay say £1k on credit card and the rest bank transfer, you are covered up to £30k via Section 75? 

 

 

 

You are indeed and it doesn’t need to be as much as £1000. (£100) You really ought to buy everything on a credit card this way to give yourself extra protection. 

[Temp]

11 minutes ago, PeterW said:

yes - the CC payment can be only £100 to still qualify 

 

+1

 

But check the rules.

 

If its your name on the order it must be your card eg not your wife's.

The payment must be towards the frame not a separate fee for "design services" or "delivery" etc. 

[Temp]

PS It must also be a CC not DC.