In this blog, I have made it more formal and hopefully you can extract the most relevant parts to your project, you may scare some builders off by asking too many questions, thus try and stick to relevant questions.
If you are planning to employ a builder for a home improvement project, you may wonder how to pay them. A payment plan is a way of spreading the cost of the work over a period of time, instead of paying the full amount upfront or at the end. A payment plan can benefit both you and the builder, as it can help you manage your budget and cash flow, and it can give the builder some assurance of getting paid.
However, setting up a payment plan is not as simple as agreeing on a total price and dividing it by the number of instalments. There are some important factors to consider, such as:
- The scope and duration of the work
- The payment schedule and milestones
- The payment methods and terms
- The contract and legal protection
- The risks and contingencies
In this blog, we will discuss each of these factors and provide some tips on how to set up a payment plan with a builder that works for both parties.
The scope and duration of the work
The first thing to do is to define the scope and duration of the work. This means specifying what the builder will do, how they will do it, and how long it will take. You should also agree on the quality standards and expectations for the work, and how any changes or variations will be handled.
The scope and duration of the work will affect the total cost of the project, and therefore the amount and frequency of the payments. For example, a large and complex project that takes several months may require more frequent and smaller payments, while a simple and quick project that takes a few weeks may require fewer and larger payments.
You should also consider the seasonality and weather conditions that may affect the work. For example, if you are hiring a builder for an outdoor project, such as a patio or a deck, you may want to avoid paying too much in advance, as the work may be delayed or interrupted by bad weather.
The payment schedule and milestones
The next thing to do is to agree on a payment schedule and milestones. A payment schedule is a plan that outlines when and how much you will pay the builder, and a milestone is a specific point or stage in the work that triggers a payment.
A payment schedule and milestones should be based on the scope and duration of the work, and should reflect the progress and completion of the work. For example, you may agree to pay a deposit at the start of the work, a percentage of the total cost at each major milestone, and the final balance at the end of the work.
A payment schedule and milestones should also be realistic and fair for both parties. For example, you should not pay too much or too little at any point, as this may cause cash flow problems or disputes. You should also not pay for work that has not been done or verified, as this may reduce the incentive and accountability of the builder.
Some examples of payment schedules and milestones are:
- 10% deposit, 25% after foundations, 25% after walls, 25% after roof, 15% on completion
- 20% deposit, 20% after first fix, 20% after second fix, 20% after plastering, 20% on completion
- 30% deposit, 30% after half of the work, 40% on completion
The payment methods and terms
The third thing to do is to agree on the payment methods and terms. A payment method is the way you will pay the builder, such as cash, cheque, bank transfer, or card. A payment term is the condition or deadline for making a payment, such as within 7 days, on receipt of invoice, or on completion of work.
The payment methods and terms should be convenient and secure for both parties. For example, you should choose a payment method that is easy to use and track, and that minimises the risk of fraud or theft. You should also choose a payment term that is reasonable and consistent with the payment schedule and milestones, and that allows enough time for processing and clearing the payment.
Some examples of payment methods and terms are:
- Cash on completion of work
- Cheque within 14 days of invoice
- Bank transfer on receipt of invoice
- Card within 7 days of invoice
The contract and legal protection
The fourth thing to do is to sign a contract and get legal protection. A contract is a written agreement that sets out the terms and conditions of the work, including the payment plan. A legal protection is a way of ensuring that the contract is enforced and that you have recourse in case of a problem or dispute.
A contract and legal protection are essential for setting up a payment plan with a builder, as they can help you avoid misunderstandings, conflicts, and losses. For example, a contract can clarify the expectations and obligations of both parties, and a legal protection can provide you with a guarantee, insurance, or arbitration in case of a breach, defect, or delay.
You should always read and understand the contract before signing it, and make sure that it covers all the aspects of the work and the payment plan. You should also check the credentials and reputation of the builder, and look for any accreditations, memberships, or reviews that indicate their quality and reliability. For example, you may want to hire a builder who is registered with a trade association, such as the Federation of Master Builders (FMB)1, or who has a TrustMark2 endorsement, as these can provide you with some assurance and protection.
Some examples of contract and legal protection are:
- A written contract that details the scope, duration, cost, payment schedule, milestones, payment methods, terms, and conditions of the work
- A deposit protection scheme that safeguards your deposit in case the builder goes out of business or fails to start or finish the work
- A warranty or guarantee that covers the workmanship and materials for a certain period of time after the completion of the work
- A building insurance that covers the work for any damage or liability that may occur during or after the work
- A dispute resolution service that helps you resolve any issues or complaints with the builder amicably and efficiently
The risks and contingencies
The fifth and final thing to do is to consider the risks and contingencies. A risk is a possibility of something going wrong or causing harm, such as a mistake, accident, or dispute. A contingency is a plan or action that prepares for or deals with a risk, such as a backup, alternative, or remedy.
Setting up a payment plan with a builder involves some risks and contingencies, as there are many factors and variables that can affect the work and the payment. For example, there may be unexpected costs, delays, changes, or disputes that can disrupt the payment plan and cause problems or losses for both parties.
You should always be aware of the risks and contingencies, and try to prevent, reduce, or manage them as much as possible. For example, you should:
- Communicate clearly and regularly with the builder, and keep a record of all the conversations, agreements, and payments
- Monitor and inspect the work, and report any issues or concerns as soon as possible
- Keep a contingency fund, and budget for any extra or unforeseen expenses
- Have a backup plan, and be flexible and adaptable to any changes or challenges
- Seek professional advice or assistance, and know your rights and responsibilities as a customer
Conclusion
Setting up a payment plan with a builder can be a good way of paying for a home improvement project, as it can help you and the builder manage your finances and expectations. However, it also requires some careful planning and consideration, as there are many factors and aspects that can affect the work and the payment. By following the tips and steps in this blog, you can set up a payment plan with a builder that works for both parties, and that ensures a successful and satisfying outcome.
I hope this helps.
Warm regards
Brad
My Blog Joke; Why did the plumber have to quit his job fixing baths, sinks and showers?
The work was just too draining.