Paying

[Hecateh]

Not sure if this is the right area for this question but I can't find a better one

 

My builder is asking for 20% upfront and then fortnightly invoices.  This doesn't seem to fit with advice I've googled on paying.

 

Advice anyone?

 

[Mr Punter]

I would not pay up front unless it was for goods that he has to order and pay for in advance.  Most builders have accounts with merchants.  Have you looked at their work and spoken to customers?  Lots of builders have cashflow issues but there is no reason that you should act as their lender.

[Ferdinand]

Others will comment on the 20% upfront.

 

You need to keep it sufficiently in step that the money reflects the work that has been done, and the builder does not have large amounts of your money in excess at any time ==> problems if he goes bust. But equally, you should not rely on large amounts of his money to be funding your working capital.

 

You also need some sort of retention for leverage if mistakes get made.

 

It also depends if eg you are buying materials. If so, then the Builder's risk is reduced.

 

Settling bills promptly carries huge kudos.

 

You may want to read the "Saving Money" thread. Significant savings are possible - I reckon I have essentially paid for the labour on the current approx 25k project by the money saved by buying materials well. And I also have the air miles for a Business Class return to Japan :-).

 

Ferdinand

 

Edited October 24, 2017 by Ferdinand

[IanR]

I would not pay anything "upfront". No issue with fortnightly invoices with a swift payment, but paying money upfront will not work in your favour.

[Ian]

15 minutes ago, Hecateh said:

My builder is asking for 20% upfront and then fortnightly invoices.  This doesn't seem to fit with advice I've googled on paying.

 

What type of construction is it?

If it's timber frame then he may be asking for the 20% upfront to pay for the timber. After all, once he starts cutting and fabricating the frame it can't be used on anyone else's build if you suddenly cancel your order.

If you decide to proceed with this I'd strongly recommend doing a credit check on them before handing over the money.

[ToughButterCup]

A delicate one this: your 6th sense is a good a guide as anything.

 

However, as a starting point, you might like to consider the following

• 20% of what? 
• Is that figure reasonable  if you were to source much / some/ all of the materials?
• How will that figure ('of what' above) be evidenced?
• How will you deal with poorly executed work?
• Who will judge the standard of the work?
• What level of detail will be included in the invoices submitted to you?
• Does the contractor have an account with the local BM / suppliers? If so, why should you pay more frequently than he pays his suppliers?

I used to settle bills very promptly indeed. Until this tale of woe. Luckily, Debbie (SWMBO) trod on my foot before I paid the final invoice. She put it very neatly

 

"Why do you think you should enable him, by paying up front, to over-trade even more than he is?"

 

Be very circumspect until you have good reason to trust one another. Little steps. 20% is a big step. 

[Ferdinand]

You could of course pay the BM directly.

[Vijay]

I think others are right, pay for the materials and nothing upfront to him. Way too many people get burnt by trades having different ideas of what the customer wants. On the flip side, pay promptly when the payment is due, so everyone stays happy

[Hecateh]

You have all said what I am thinking.

 

I do trust him - as much as is possible before work has started, I've seen other work and spoken with customers BUT My view is goods are paid for as needed and labour is paid in arrears so 20% of the final cost (a small bungalow coming in at £90k to second fix  seems ridiculous when the first few weeks will be ground clearance and foundation digging so little in the way of material costs.

 

Now how to tell him whilst still keeping him on side 

 

Edited October 24, 2017 by Hecateh

[Hecateh]

1 hour ago, Ian said:

 

What type of construction is it?

If it's timber frame then he may be asking for the 20% upfront to pay for the timber. After all, once he starts cutting and fabricating the frame it can't be used on anyone else's build if you suddenly cancel your order.

If you decide to proceed with this I'd strongly recommend doing a credit check on them before handing over the money.

Nope - it is standard brick and block

 

[Ferdinand]

46 minutes ago, Hecateh said:

You have all said what I am thinking.

 

I do trust him - as much as is possible before work has started, I've seen other work and spoken with customers BUT My view is goods are paid for as needed and labour is paid in arrears so 20% of the final cost (a small bungalow coming in at £90k to second fix  seems ridiculous when the first few weeks will be ground clearance and foundation digging so little in the way of material costs.

 

Now how to tell him whilst still keeping him on side 

 

 

The Harold Lloyd approach - A Pair of Glasses and a Smile.

 

 

Whisky in the pair of glasses if necessary.

 

(tempted to whip that over to off topic for a caption competition)

 

F

 

Edited October 24, 2017 by Ferdinand

[Vijay]

Calm and straight to the point that you're not prepared to pay £15k upfront. If he gets annoyed or upset, you may have bigger problems down the line when/if you have to pull him on anything. You have every right to know why so much money is needed upfront as it's your hard earnt money not his   Maybe it also sets the tone that you want a working relationship with him and you will ask questions when you need to

[ProDave]

For my ground work, and then the construction and erection of the frame, I paid in stages in arrears.

 

When I got the same builder to supply and fit the windows, I paid 50% of the window cost up front to them, and the remaining 50% and the labour for fitting once they were in. But by that time there was a lot of mutual trust between us.

[warby]

I agree with most of the advice you have received. I would add if the  builder is not VAT registered you have a major problem and if this is the case you MUST have all invoices addressed to you and YOU must pay for them not the builder as you you not be able to recover the VAT on the materials. 

[Hecateh]

20 minutes ago, warby said:

I agree with most of the advice you have received. I would add if the  builder is not VAT registered you have a major problem and if this is the case you MUST have all invoices addressed to you and YOU must pay for them not the builder as you you not be able to recover the VAT on the materials. 

 

 

He is VAT registered, so at least that is one worry I don't have  Thanks

 

[Hecateh]

This has been great.  Thanks to everyone who has responded/

 

I knew I wasn't happy and to get confirmation makes it a lot easier to talk to him about it.  

I have got on with him so far and he has been as helpful as he can prior to building.  Providing everything the council need for 'conditions' etc.  

 

Edited October 24, 2017 by Hecateh

[ToughButterCup]

£15K up front sounds (feels?) too much.

 

But, but but....

You want to start, you need , neeeeed to get started, he's been good to you so far. There's tremendous pressure on you to get going. Won't it be good to get into the new house?

 

I'm new to this lark too. And if there's one thing I have learned it is that this sector takes the mickey if it can.

 

Self-builders are often seen as a money tree.  Trust your instinct.

[Jeremy Harris]

I was more than happy to agree a stage payment plan that went like this, on a contract that was just over £60k:

 

1.  £10,000 deposit to cover the cost of detailed design and materials for the frame, payable with order.

 

2.  £13,000 second stage payment to be paid two weeks before start of foundation works, to cover cost of materials for foundations.

 

3.  £20,000 to be paid on delivery of the house and garage frame kit to the site.

 

4.  £7,409 to be paid on completion of frame erection and membrane and battening of the roof to be rain proof.

 

5.  £10,000 to be paid after internal boarding out and insulation pumped in, subject to the air permeability test result being equal to, or less than, the PassivHaus standard of 0.6 ACH at 50 Pa.

 

Bear in mind that work started on the foundations on the Monday of week one, and was completed by Thursday the same week.  Work started on the erection of the house frame on Tuesday of week two and was completed by midday on Saturday, so this was a very quick build.

 

Edited October 24, 2017 by JSHarris

[Hecateh]

1 hour ago, recoveringacademic said:

£15K up front sounds (feels?) too much.

 

But, but but....

You want to start, you need , neeeeed to get started, he's been good to you so far. There's tremendous pressure on you to get going. Won't it be good to get into the new house?

 

I'm new to this lark too. And if there's one thing I have learned it is that this sector takes the mickey if it can.

 

Self-builders are often seen as a money tree.  Trust your instinct.

You are so right - if I have to start again finding a builder I will.  Feeling 'P^^^^^d' with him before I start does not a happy woman make.  

[Russell griffiths]

i will play devils advocate here. 

 

All these answers seam to be very one sided towards the client. 

If he is site clearing and digging. 

 

Who is is paying the digger driver, 

who is paying for the muck to be taken off site

who is paying the labourers wages on Friday. 

Who hired the dumper. 

 

If it was us coming to your job we would have all these things ironed out before we start why am I bankrolling your house build. 

You have every right to do a company check on him, how would you feel if he asked to see your funding in place to complete the build. 

 

I think 20% is far to much to ask, but I would certainly want a deposit of some kind to cover any expenses incurred before they occur (spelling sorry)

in my experience I know more contractors who get knocked by a client than clients who's builder has gone bust on them. 

 

[Jeremy Harris]

As above, I was happy to pay a £10k deposit on a £60k contract, so 12% 16.7%.  This seemed fair and reasonable to me, as the last thing I wanted was for the builder to have cash flow problems.

Edited October 24, 2017 by JSHarris
error in the arithmetic........

[Oz07]

Cmon @JSHarris your maths is better than that

[Oz07]

Op suggest 10% perhaps and payable day work starts?

[Hecateh]

16 minutes ago, JSHarris said:

I was more than happy to agree a stage payment plan that went like this, on a contract that was just over £60k:

 

1.  £10,000 deposit to cover the cost of detailed design and materials for the frame, payable with order.

 

2.  £13,000 second stage payment to be paid two weeks before start of foundation works, to cover cost of materials for foundations.

 

3.  £20,000 to be paid on delivery of the house and garage frame kit to the site.

 

4.  £7,409 to be paid on completion of frame erection and membrane and battening of the roof to be rain proof.

 

5.  £10,000 to be paid after internal boarding out and insulation pumped in, subject to the air permeability test result being equal to, or less than, the PassivHaus standard of 0.6 ACH at 50 Pa.

 

Bear in mind that work started on the foundations on the Monday of week one, and was completed by Thursday the same week.  Work started on the erection of the house frame on Tuesday of week two and was completed by midday on Saturday, so this was a very quick build.

 

This looks good and I don't have a problem with how quick the stages come round (the quicker the better so long as they are done right) just the thought of paying 15K plus up front, when he isn't going to get any cost until foundations seems like a recipe for disaster.  I soooooo want to trust him BUT I've been burnt before.

 

I need to sit down and work it out with him.  And this is not a good week as I have a funeral going from my house tomorrow.  Not a sad occasion as such as my aunt was 98 but still leaves me unable to concentrate on what I want to.  It also sounds (forgive me if I'm wrong) as if you are dealing with a big company who offers a complete package.  My guy is a builder with a staff of 2 who sub contracts some of the work.  

[ToughButterCup]

@Hecateh, how about

• £7,000 up front
• Monthly detailed invoice 

How are you going to manage quality control (to give it a pompous name) ?

 

Thing about people like @JSHarris and others like him, they know what they're doing. I don't....