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Q&As
How Should We Pay for an Extension Project?
Hi, Can you please advise as to the correct practice for paying a builder for an extension?
We have an estimate of £47,000 for a two room, two storey extension to shell stage, for us to do second fix.
The builder is asking for payment upfront before each stage but we are uncomfortable with this as have had a massive financial loss 11 years ago when our builder (for our self builder) went into liquidation part way through construction after not paying his suppliers and pocketing the cash. He was a FMB member and we did not see that coming.
Can you please advise as to what is safest practice for us?
Many thanks,
Sue
One Answer
My advice is to arrange to pay in stages in arrears.
It’s up to you if you wish to offer an initial payment up front as a gesture of goodwill, but paying up front in two massive chunks like this can leave you vulnerable as you have already found out to your cost.
If your builder is worth his salt, he will be able to buy materials on credit through a trade account, so should be able to cover the initial costs involved in commencement. He will need to pay for sub-contracted labour so cash flow for him will be important, but to incentivise the build, link any payments to the work as it is completed in a series of agreed stages.
Ask him to break the work into discrete packages, for example: footings completed, oversite up to damp proof course, external walls up to wall plate, roof on and tiled, first fix joinery, electrics and plumbing, plastering/dry lining, second fix and finally completion to the satisfaction of your building control inspector.
You might wish to hold a small percentage (5%) back against any ‘snagging’ issues post completion. This way, your builder knows he will be paid, but only when he’s done the work.
Your part of the deal is to pay up promptly when the work has been done.
Mike Hardwick, Build It expert