We’re in the process of hiring a contractor to work on an extension for our kitchen, living and dining space. We’ve struggled to find one but have just met a builder who has asked that we pay up front. Naturally, we feel a bit uneasy about this and worry that they may not carry out the work fully and leave us in a difficult situation. However, we also want to get the job done and are worried we might not get another contractor, especially given the high demand for their services at present. Can you advise us on how we could move this forward while also putting adequate protections in place?
The request from a contractor for part-payment up front before commencement of works is not an uncommon one. A request for everything paid up front is, in my experience, unusual and not to be advised.
Generally speaking, where two parties are in agreement, a contract can be formed. In the construction sector this will usually be supplemented with a full set of construction documents. The manner of payment is then between both parties. To protect yourself, it is recommended you have a written contract in place setting out the details of your agreement. This may be one of the standard building contracts with amendments made or a new contract generated specifically for this project. Most will have a standard retention clause. This is a percentage held by the client – often 5 per cent – as protection from incomplete or inaccurate work.
Where you are feeling “uneasy”, it’s possible that your instinct is telling you to be cautious. I would certainly not encourage full payment up front for works. This request by the contractor suggests several things, but I will look at three key ones.
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1 The contractor is stretched financially and cannot risk being out of pocket by paying for the materials for your project. Most building suppliers have removed their credit facilities and so contractors must pay up front for supplies. A contractor without enough money to carry the initial outlays for a project may be in heavy financial difficulty and may go bankrupt. If this happens, your contract will offer little protection unless there is a guarantee bond in place. Contractors often are not in a position to secure/offer one of these.
2 The contractor is so busy they don’t need your project but cannot say no to you. If they have gone from boom to bust and out again it will be against their nature to say no, so instead they offer a carrot. If you agree to their terms, they can take or leave the project.
3 The contractor is sceptical about your ability to cover the costs of the job and is concerned that a delay in payment will put them in financial difficulty, so they are making a bold request.
In all these scenarios one thing is clear. The risk is too high for you. I would also advise you look for references and examples of previous work undertaken by your chosen contractor. Where possible, you should appoint a qualified professional to oversee the work. They will approve stage payments, sign off on all works and ensure minimum standards are maintained.
The building environment is very trying at present. Costs are starting to settle but there are a lot of stretched contractors out there, paying too much for materials, paying high wage bills, not to mention struggling to retain staff and find quality tradespeople.
Try not to make this your problem. It may mean you’ll have to wait for the right fit for you but it is a lot better than risking a half-baked, half-finished home/building site and a legal battle with your contractor. It may not seem like it now, but things will steady down, and you will be in a position to seek better terms.
Finally, in summary, if you pay for the job up front, and you have no contract in place, you will have no control on the project, its programme, finishing or its final quality.
Brigid Browne is a chartered building surveyor and a member of the Society of Chartered Surveyors Ireland
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