Contractor wants 40 percent up front on a 31,000 cosmetic scope

Helping on the paperwork side of a small flip and the general contractor's proposal asks for 40 percent at signing, 40 percent at what he calls substantial completion, 20 percent at final. The scope is paint, LVP, two vanities, counters, fixtures, exterior cleanup. Nothing custom, nothing with a long lead time except the counters.

12,400 before anyone shows up feels heavy to me for a job with almost no material deposits in it. He says it's how he covers crew mobilization. His references check out and his timeline is six weeks.

The person whose money it is wants to sign tomorrow. I'm the one saying wait. I don't know if I'm being sensible or just inexperienced about how trades actually get paid.

Answer

1karen_whitfieldPG4APRO7

You're being sensible. The reason to pay a deposit is to cover materials the contractor has to buy before he can start and to keep him from walking on you. On a scope like that the materials he fronts are maybe 6,000 of flooring and paint, and the counters get templated later anyway.

What I'd counter with is a smaller signing payment, 10 to 15 percent, and then progress draws tied to named milestones you can walk in and see. Demo and prep complete. Flooring installed. Paint complete. Vanities and fixtures set. Final at punch list sign off. Five draws on a six week job is not unreasonable and it means at no point are you more than a couple thousand ahead of the work.

Mobilization is a real cost, it just isn't 12,400 on a 31,000 job.

The other thing is that mechanic's lien rules and how you get releases differ by state, so ask a local attorney once what release you should collect with each payment. Do that once and you use it forever.

2 replies

3derekj19SB1B

@orchard's draw list is the answer, and I'd add that a contractor who won't discuss the payment schedule at all is telling you something about his cash position. The ones I've watched work were fine with milestones because they finish milestones.

@plumb one day of delay to restructure a schedule is cheap. Twelve thousand four hundred that walks away is not.