TrustedPros Logo Home improvement starts here.
 

Giving a deposit

 
Tina
Mulhurst Bay
8/27/2012 at 9:52:41 AM
I am about to start some major renovations in my home very shortly. I was wondering what the laws were about giving a deposit.

Do I have to give a deposit? If the contractor wants me to buy all of the materials before they start the job am I obligated to do so?

Thank you for any advice you can offer concerning this,

Tina
SUBSCRIBE TO OUR NEWSLETTER
RESPONSES
8/27/2012 at 11:09:07 AM
Hi Tina,

I would give a very small deposit $500.00 and balance of the 10% when he starts. Always pay on completion of work done or once per week. Don`t be late if you are paying week to week.

Tom
Gill Construction
705 653 4129
8/27/2012 at 11:10:59 AM
If you are supplying all the materials than It is in necessary to provide a deposit, I would immediately check refferences and really look into this contractor!

I have don many large renovations some that took as long as 3 months where materials were provided I did not request a deposit what I did was ask for quarterly payments. Do what I would do is figure out the approximate states where a 25% payment is due and schedule this with the contractor. I honestly get immediate discomfort with this tho, the fact he needs a deposit before work begins when he dosent need to invest anything other than time concerns me.

Believe me check his refferences even try to arrange with a previous customer to go and see his work! In a lot of cases I arrange for my potential customers to come visit me in our current project and talk to the customer see us at work it is not at all wrong to really dig deep into your contractors professional life there are so many people out there whos only profession is scam and rip people off.
Norman
8/27/2012 at 11:14:19 AM
Hi Tina

THere is no law requiring a deposit for renovations on your home. However most contractors will ask for one for two main reasons.

One is if the work is not starting right away when you sign the contract the deposit is a sign of commitment on your part. If you don't commit to the work being done and then back out at the last minute (which does happen) the contractor will be left with empty space in his schedule which will cost him money.

The second reason is that there are often costs incurred prior to the work starting for drawing plans. permits, special order items (e.g. windows, cabinets etc) and the contractor will need money to pay for these.

However you should not give too large a deposit (I usually ask for ten percent of the contract amount). The deposit is to "seal" the deal and not more than that.

And then there should be a schedule of payments to be made as the job progresses.
If you are going to buy all the materials for the job then the contractor is only providing labour (Who is going to pay the subtrades?) then there is no real need for a deposit of ten percent and I would only ask for enough of a deposit to show the commitment I mentioned. Depending on the size of the contract anywhere from a few hundred to a thousand dollars.

The bottom line is that you have to trust your contractor and if you don't feel a good level of trust in him then I recommend reconsidering your choice of contractor.

Cheers
Norm
cell 613-913-0389
8/27/2012 at 11:16:42 AM
Tina,

Deposits can vary from job to job depending on their scope and size. The Construction Lien Act may be a good reference for you as there are laws to govern deposits when contracting work.

Typically, whatever sounds reasonable is fair. No contractor should be requesting large deposits to commence work and, in cases where large quantities of material are required to start, maybe you can supply them on behalf of the contractor.

Hope this helps.
8/27/2012 at 11:25:57 AM
Tina,

Yes it is customary to give a deposit to show good faith on your part and so that the contractor can be confident he can schedule the job. Following that progress payments are usually made as the project moves along. After the deposit it is common to make a payment after the bulk of the materials arrive on site.

I hope that helps.

Brian

Giving a deposit
Syed
8/27/2012 at 11:25:59 AM
No you dont have to give a deposit. there is no law for this. but if you do make sure you get the receipt and mention in the contract too. you are providing the material, i would suggest you not to depost any amount until the job is done.
8/27/2012 at 11:35:46 AM
Hi Tina,

You are absolutely not obligated by any law to make any deposits to a contractor. If you signed the contract in your home, you are entitled to a 10 day cooling off period, where you can terminate the contract for any reason and get the funds back in 14 days.

If I was a consumer that had a large project to fund, I would definitely require the contractor to work on the credit model without any deposits even for materials. However, sometimes it is simply not possible.

The other option to secure money is to use a payment processor (like Paymentech PPS) capable of keeping money in escrow. This will help the contractor and you to safely handle all the transactions as the money don't go to any party without the consent of both.

The other advantage of using Paymentech PPS is that they will ensure, that the contractor is legit and they will give you the money back if there will be any fraud involved.

Hope it helps.
8/27/2012 at 11:42:00 AM
Tina,

it sounds lime you are no 100% comfortable wit bhai your contractor. If that is case, then I suffwat that you proceed as follows. Get a written estimate for all the work to be done j closing what the contractor will be providing , materials etc..... If the job is small and you are going to provide materials, pay on progress. for exAmple. once he starts and does a a good days work. pay him 10 to 20 percent of the contract. dependj g ion the size of the project at the end of the day. Then work. out a weekly payment based on the progress of the job. if the job is small. pay him half when he starts and the balance when he is finished to your satisfaction.

if he is providing materials. provide a 30% deposit when he brings sufficient materials to your home. then follow the progress payment example.

this will insure steady progress of the job and will protect both of you in case of a disagreement

I hope this is helpful
8/27/2012 at 11:55:39 AM
Hi Tina,
There is no laws as far deposits or progress Billings,it is all between You and Your contractor,My advice is if the contractor is asking for large deposit ,I would think does he have money or not ,does he want to" take of on me" ,and do I want to deal with someone like that.In the commercial industry ,big corporations don't pay 30 days after finishing of the project,some don't pay until lean wrights expire.On the residential side usual terms are 30%on signing 30%half way trough the project and remaining on completion.I work with the customer ,how does he or she feels ,if they would like to see, some kind different terms I'm OK with that as well. In many cases I finance the project and we all-ways find mutual grounds if two parties can't find common language is better they don't work together.
Tina
Mulhurst Bay
8/27/2012 at 12:24:03 PM
Thank you all very much for the suggestions and comments regarding my questions about a contractors deposit. I do not currently have a contractor for my upcoming project but I am definitely more informed should the subject arise with the upcoming renovation.

Thanks again,

Have a great day everyone.
Alan
8/27/2012 at 12:55:00 PM
There is no law that I know of that say's you must give a deposit.Its general practice Most contractors usually work with a limitd cash flow, it all comes down to trust.

You can always ask the contractor for a material list and buy the materials your self if your not comfortable giving the contractor a deposit.
8/27/2012 at 3:31:10 PM
Hi Tina,

I own a landscaping company in Halifax called Neat Lawn Cater and before we start any contract with new customers we ask for the cost of material up front. The reason for this is a rather sad truth that some people don't pay after the work is complete. Asking for the cost of materials helps reduce any loss from customers who fail to pay also for a contractor it also helps us identify those who would be willing to pay. Finally, business sometimes fail due to lack of cash on hand.

Hope that helps

Chris

*please excuse spelling and grammar as this was written on a blackberry
David
8/27/2012 at 11:14:07 PM
I am a contractor in Fort McMurray Alberta and here if you are going to take deposits as a contractor you have to have a special licence to take a deposit. I myself ask for a 30% deposit to book the job and progress payments as the job goes on. I always leave it so there is a 10% or more hold back built in until the job is done and the customer is happy with the job.
 
Disclaimer