James Frome Posted July 8 Share Posted July 8 (edited) I have posted a few times at various points in this difficult process, but we now have an updated situation. To provide some brief context, we agreed to a cost plus contract with a friend's building company. We signed his contract, agreeing to his PM and QS (we trusted him). It was a Cost Plus basis contract. We agreed 10 payment instalments in a six month window (May - November 2023). Jump ahead to December 21st 2023, and we are still going with the project. The payment plan has increased to 14 instalments, and we have paid 12. We are led to believe that works are close to completion with only a few weeks left aside from decoration (due to conclude by the start of March 2024). By December 21st 2023, we have therefore pay 96% of all costs (including retention). We do raise our concerns with why we are paying so much in advance (in an email on 21st December), but at this point, we ultimately revert to trust (the email was ultimately ignored). Soon after this point, on the 2nd January 2024, the PM suddenly leaves the project. Then, a day before the final 2% is due (aside from retention), around 10th February 2024, we are told that the costings are wrong, and this ultimately leads to a jump of £80,000 ish with a reduced scope of works and plenty of PM done by us (all the decoration, the carpets, the external cladding of an extension). We are consequently charged around £5,000 for the resulting financial discussions including the QS, with the contractor stating: "The QS costs were incurred to deliver this project, as such they're re-imbursable on the basis that this is a cost-plus contract.". We have now concluded the project (aside from snagging) and we are in dispute over a range of items. It isn't legal, yet, but the discourse is heading that way. Given that much of the contract may be construed as a cost-plus contract, certain aspects are complex to contend in a black and white manner. Moreover, the whole accounting process has been unclear to say the least. However, there are certain lines of avenue that I am interested by: 1. Should we be charged CITB tax? We have been (it was never mentioned until March 2024 and it was never in the cost plan upon which the contract was signed). The contractor stated this to me recently when I queried this: "This is mad!! I have explained this so many times. Who are you talking to. CITB is a legal requirement for a main contractor. The amount is determined by the required works on site and varies project to project so is a project cost. Google it." 2. We have received some documents during our queries that give a price with a subcontractor with CIS and without CIS (please see attached image). We have never actually seen a single invoice for the whole works, and have simply seen payment orders issued by the contractor. This subcontractor came in at £65,000 total where originally it was stated to be £44,000 (also the works they were supposed to do came in at £50,000+ over and we were only told about this in February 2024 - they left the project without completing all their works and going £21,000 over - again, we weren't told about this until February). Given our concerns about CITB, we have suspicions the contractor has either not paid CIS or we have become responsible for it. My question about this recently was simply ignored. How can I delve deeper into this in a sensible manner? 3. Are there any questions / specific documentation we should be asking for to get a bit more clarity? Can we ask for certain subcontractors invoices with breakdowns of CITB etc. Can we ask for proof of CIS payments for certain subcontractors to verify we didn't absorb it in any way? I do know that the contractor paid certain subcontractors (like the one referenced above) cash only. 4. Should we be getting the input of a QS or some other profession (we thankfully do have quality legal advice as my partner's father is a construction lawyer)? If we were to get a QS, how much should we expect to pay for this? I have spent about 30 hours going through various financial documents provided, but I still can't pinpoint things (partly because alot of contention points were historical before we clocked onto things being amiss / partly because I feel there are some accounting games going on). Would a QS input be useful if things went legal? Finally, if anyone can recommend a QS, please do (if you advise going ahead with one). It may just be that the QS advises us how to deep dive a few areas that I have already pinpointed as interesting. Thank you! Edited July 8 by James Frome Link to comment Share on other sites More sharing options...
Jilly Posted July 8 Share Posted July 8 Eek, that sounds stressful, I can’t advise, only commiserate. Link to comment Share on other sites More sharing options...
Roundtuit Posted July 8 Share Posted July 8 Wow; that's a self-build story! If I'm reading correctly, you've paid the extra cost, it's in a livable condition and you're considering how to get some cash back after being screwed-over? Sorry, cant help with specifics, but first thought would be that getting money back once paid - i.e effectively having agreed it's due - is going to be a challenge, and second thought is that it's a job for legal professionals. Many of us have ended up spending more than we'd planned one way or another, but I hope you've got the home you wanted. Only you can judge, but I'd be weighing up the potential gain, and cost of gaining it, against the benefits of writing it off to experience, drawing a line under it and moving on. Link to comment Share on other sites More sharing options...
James Frome Posted July 8 Author Share Posted July 8 (edited) Hi there. To be clear, we are being asked for around £44,000. The contractor wants all £44,000 (this includes £11,000 retention). During financial discussions in February 2024, we agreed to pay a large amount to get us to completion, at which point, we would discuss any outstanding payments. We are now at that point of discussions. Edited July 8 by James Frome Link to comment Share on other sites More sharing options...
Kelvin Posted July 9 Share Posted July 9 CITB is a levy paid by builders that’s based on the wage bill of their employees. I didn’t think it was done on a project by project basis. The levy is a % of the total wage bill but it only starts if the wage bill is above a certain amount. It’s the builders levy to pay not yours. As far as getting a QS involved. They aren’t cheap either. However they would be able to estimate how much each stage should have cost in materials and labour. You presumably don’t have the actual cost broken down like that nor is the builder likely to willingly share that with you. What was your final cost per m2 vs what you estimated it to be or how much are you over your planned budget. Link to comment Share on other sites More sharing options...
nod Posted July 9 Share Posted July 9 I’ve just flicked through before leaving for work One thing that did jump of the page was the CITB levy Which is nothing to do with you While he can levy a 1% charge on subcontractors A contractor can’t do the same with the client Link to comment Share on other sites More sharing options...
Dave Jones Posted July 9 Share Posted July 9 couple points, 1. Have you had the build checked against the original agreed QS by an independent qualified QS ? The normal way of things when making stage payments or drawdowns is the QS employed by the lender (you) visits site with the original QS in hand, looks to see what is completed or part completed and then pays out against this QS. There is also a contingency for the unexpected. Did any of this happen or you just paid the bills when the builder sent them ? 2. CIS/TAX. This is really irrelevant if you followed the normal way of working above. For example the brickie invoices the main contractor £10k. HMRC then tells the main contractor to either pay the £10k gross or stop 20% of it and send it them. Either way it doesn't change the QS figure. Link to comment Share on other sites More sharing options...
kandgmitchell Posted July 9 Share Posted July 9 Ditto to the CIS/CITB tax situation. It's for the contractor to run his CIS system and deal with his sub-contractors within the scheme as they are obliged to do by HMRC. You as the client aren't involved in that nor the CITB levy (which I thought only applied to large companies). Link to comment Share on other sites More sharing options...
ETC Posted July 9 Share Posted July 9 Get your own QS - NOW! 1 Link to comment Share on other sites More sharing options...
saveasteading Posted July 9 Share Posted July 9 8 hours ago, nod said: contractor can’t do the same with the client But it is a cost. And this is cost plus. Link to comment Share on other sites More sharing options...
nod Posted July 9 Share Posted July 9 I think it’s being misunderstood The contractor doesn’t have to pay into it unless he or she has seven or more EMPLOYEES I’ve paid into it for around thirty years and get subsidized Apprentices So I wouldn’t pass this on to the client and neither should he If he is actually paying into the scheme Which I doubt Link to comment Share on other sites More sharing options...
Canski Posted July 9 Share Posted July 9 1 hour ago, nod said: I think it’s being misunderstood The contractor doesn’t have to pay into it unless he or she has seven or more EMPLOYEES I’ve paid into it for around thirty years and get subsidized Apprentices So I wouldn’t pass this on to the client and neither should he If he is actually paying into the scheme Which I doubt Nod I'm supposed to pay it and don't have 7 employees and never did have. Plenty of subbies but only 2 or 3 on the books. Anyway it is a cost that is easily calculated after the event but not one that can be calculated prior to paying the subcontractors so in a way it could be chargeable. https://www.citb.co.uk/levy-grants-and-funding/citb-levy/about-the-citb-levy/#apply Link to comment Share on other sites More sharing options...
MR10 Posted July 9 Share Posted July 9 (edited) 3 hours ago, ETC said: Get your own QS - NOW! +1 to this. Don't be pressured into paying the CIS/CITB. Inform the contractor you'll be speaking to HMRC to clarify who's to pay. I reckon they won't want the tax man sniffing around their books especially if their invoicing is 'dodgy'. Seek legal advice also to see where you stand. Edited July 9 by MR10 Link to comment Share on other sites More sharing options...
nod Posted July 9 Share Posted July 9 3 hours ago, Canski said: Nod I'm supposed to pay it and don't have 7 employees and never did have. Plenty of subbies but only 2 or 3 on the books. Anyway it is a cost that is easily calculated after the event but not one that can be calculated prior to paying the subcontractors so in a way it could be chargeable. https://www.citb.co.uk/levy-grants-and-funding/citb-levy/about-the-citb-levy/#apply It like asking a client to chip in towards your class 4 1 Link to comment Share on other sites More sharing options...
nod Posted July 9 Share Posted July 9 4 hours ago, Canski said: Nod I'm supposed to pay it and don't have 7 employees and never did have. Plenty of subbies but only 2 or 3 on the books. Anyway it is a cost that is easily calculated after the event but not one that can be calculated prior to paying the subcontractors so in a way it could be chargeable. https://www.citb.co.uk/levy-grants-and-funding/citb-levy/about-the-citb-levy/#apply He doesn’t sound like the sort to have a PYE annual bill of plus 135k Link to comment Share on other sites More sharing options...
Canski Posted July 11 Share Posted July 11 On 09/07/2024 at 21:11, nod said: He doesn’t sound like the sort to have a PYE annual bill of plus 135k it includes payments to CIS contractors Link to comment Share on other sites More sharing options...
Jilly Posted July 11 Share Posted July 11 In these situations, I feel a friendship acquires an actual monetary value. Link to comment Share on other sites More sharing options...
nod Posted July 11 Share Posted July 11 2 hours ago, Canski said: it includes payments to CIS contractors So you would pay him Link to comment Share on other sites More sharing options...
James Frome Posted July 11 Author Share Posted July 11 We only started paying attention in February 2024, when the invoices started skyrocketing despite there only being 2% left to pay. This seemed very unusual to me, and it immediately eroded the trust that had up to that point been total. I had really signed the contract, paid and operated in a trustworthy way up to that point, not really questioning anything. I had also assumed that we would be notified of any price changes. What I later learned was that the contractor took a blank cheque position, which was not my understanding of our agreement. In terms of the CITB, I am a bit confused - is the general consensus that this is inappropriate? If not, what specifically justifies the position that we should pay for CITB? Based on the above advice, we have started discussions with a QS. If anyone knows a great one, who would like to be involved, please let me know. Link to comment Share on other sites More sharing options...
saveasteading Posted July 11 Share Posted July 11 It is specific to your project and circumstances. If there was a formal contract in standard form, then it would be clear. Be careful. A Q S is like a lawyer in that he can argue your case to your maximum advantage and does not have to be fair and equitable. You must therefore brief them accordingly....getting all you can out of your friend, or looking for a fair and proper result. And the qs will charge you several £k for the privilege, then it might escalate. Link to comment Share on other sites More sharing options...
Canski Posted July 12 Share Posted July 12 On 11/07/2024 at 13:01, nod said: So you would pay him Hell no 🙂 Link to comment Share on other sites More sharing options...
nod Posted July 12 Share Posted July 12 3 hours ago, Canski said: Hell no 🙂 I think it comes under Worth a try Link to comment Share on other sites More sharing options...
saveasteading Posted July 12 Share Posted July 12 I refer you to the answer I gave earlier. You now have more knowledge of levies. Ask your friend to explain and justify it. Find a compromise. Link to comment Share on other sites More sharing options...
Mr Punter Posted July 12 Share Posted July 12 Why on earth did you enter a cost-plus contract for a refurb? A proper spec, plans and schedule of works would have removed a lot of uncertainty for you and the builder and given you a contract sum before you started. Bear in mind that disputes can cost £1000s, so perhaps meet and discuss the final payment amount. Link to comment Share on other sites More sharing options...
saveasteading Posted July 12 Share Posted July 12 2 hours ago, Mr Punter said: Why on earth did you enter a cost-plus contract Because the op didnt know bh was here for advice. For all we know, this has worked out at a reasonable cost. Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now