First and foremost, please ignore people who tell a client not to pay the contractor anything until the job is finished. This is completely the wrong way to start a relationship with a contractor, unless of course the contractor is happy to sign a contract in which he states he wants no payment until he is finished. In this case he is highly likely to ask you for bank details so he can do a credit check on you.
We would also suggest that you insist on him taking some payment in stages so there can be no possible excuse for him running out of money before he finishes.
There is no reason in the world for your contractor to spend any of his own money building your house and many good builders have been "ripped off" by customers who refuse to pay for the silliest, or fictional, reasons.
This "money management" can be handled by a third party payment plan and many of these exist. They will arrange to handle the money for you. You will never be in a position where you have paid the contractor too much and the contractor will know that his money is available for him when he reaches an agreed stage of the works.
Using an agreed payment schedule is the least expensive way of paying the builder and this contract forbids and requests for payment other than those outlined and dated in the signed contract. Ensure your payment schedule details exactly what is to be paid at which stage.
Why should a good contractor have to spend his own money buying materials for your house? He may get 30 days’ credit from material suppliers but will have to pay himself and his men on time.
Trying to eliminate cowboy activity by not paying until the end can ensure that your contractor will rush through a job without concern for detail in order to get paid.
Many people have told us they get over this by accompanying the contractor to the merchants and paying for the materials he orders. This is a poor and ill-advised "solution". Good contractors have accounts at builder’s merchants. They receive good discounts on the materials they order and are often happy to pass some of this discount on to you. They keep the rest to cover their time in working out quantities, ordering, pricing and unloading etc. This is very fair.
If you take your contractor to the merchants, it will be you who is paying. You will get no discount because you have no account. The contractor however may be able to reclaim the discount later as it was he who arranged the sale. You can miss out big time!
It is perfectly acceptable for the contractor to ask you for a deposit on the work to be done. This allows him to purchase the materials that are immediately required. He should provide a receipt for you for this money and this is fully detailed in our payment schedule in the contract.
In most cases 30% of any contract fee is approximately the amount it costs, in materials, to take the building up to "wall plate level". This is the top of all the masonry or timber framed work reached just before the roof trusses or roof timbers are positioned. Take a look at the payment advice below to see the best way to pay the contractor.
You are in this together and you both want to achieve exactly the same result - a good job for a fair price! If you start the contract with mistrust it will end badly, if it does indeed actually end!
1 in 3 home improvers get involved with cowboy builders. Of that 33% - 75% have tried to cut corners by demanding cheaper and cheaper quotes and arranging "cash deals" with the builders. Cash deals, with no contracts, usually mean no come-back for the client when things go wrong.