What is the Standard Rule for Down Payment?

A week does goes by without someone calling and asking what the “rules” are on upfront payment for a construction job.
My wife and I have selected a contractor to install a large concrete patio and walkway.  His bid was the lowest of the four estimates received and he is asking for 80 percent of the job at the signing of the contract.  This sounds like too much money up front.  What do you recommend? 

It is not at all uncommon and is an industry practice that contractors ask for advance payment up front.  By doing this, your job is secured on the schedule and the contractor is able to move forward and purchase some of the supplies, or possibly even pay his supplier, however, 80 percent is a substantial amount up front and several of our YCCA members have advised against that large of an advance payment.  It makes one wonder if they are asking for a large amount up front are they having problems with management of their cash flow and if that is the case, how is your project going to be managed.   The contractor and the homeowner should never be placed in a position of being payment disadvantaged.

Your well respected contractors, those that know how to manage cash flow should have well established credit with their supplies and should have payroll processes in place for the employees.  It is reasonable to expect to pay something up front and the standard rule in Yavapai County seems to be anywhere from 30 to 50 percent.  Do not ever pay a deposit in cash, always obtain a written receipt and a contract and make sure that your contractor has a license.  If he does not, he is considered a handyman and your job cannot exceed $1,000.   You should not be expected to pay for the job before the work is complete and on the other hand, it is not fair to make the contractor wait for payment until after the job is done.  Both parties have an obligation and responsibility to one another.  It is also important to make sure that your contractor is paying his subs and suppliers.  Ask for lien releases, both partial and final.  These releases are your proof that the contractor has paid met his obligations and paid his suppliers; therefore a mechanic’s lien cannot be placed on your property.

Phone: (928) 778-0040

810 E. Sheldon Street, Prescott, AZ 86301

Powered by Wild Apricot Membership Software