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Customer Wants to Hold Money for 30 Days

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Posted by: from Aurora
7/26/2013 at 2:26:27 PM

Hello,

I have a customer that I did work for, the total cost was $60,000 and the work has now been complete.

The customer paid the bill and held back $5,500 and provided a list of minor repairs to be done. The list is now fully completed and the customer seems to be very happy with the work: however, when it comes to paying the remaining amount, customer wants to hold back $2,700 for 30 days "to see that nothing will come apart". Everything was done with a permit and has passed every single inspection without a hitch. In the end the inspector told the customer that Newmarket needs more contractors that go beyond the minimum requirements and care for the job as much.

So the question is: is it practical for customers to hold back the money for so long? Is it allowed by law? what is practical? (I normally allow the customer to keep up to $500 for two or three days).

Your help is greatly appreciated.

REPLIES (13)
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Date/Time7/26/2013 at 3:17:58 PM

Put a lean on the house. I'm sure you will get paid right a way.

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Date/Time7/26/2013 at 3:22:55 PM

Check the construction lien act. There is a section on holdbacks and liens. If work is complete they can't hold anything. But you can put a lien the house.

Talk to a lawyer, most have free 1 hour consultations.

Good luck

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Date/Time7/26/2013 at 3:54:14 PM

In Ontario the customer has the legal right to hold back 10 percent of the contract value for 30 days. You have 45 days from the last day that you worked on site to put a lien on he property if you are not paid in full. These funds are to ensure that your subtrades are paid and can not be used for deficiencies.

I would get a signed agreement from the owner on a date for payment. If he knows that you know your lien rights, he will pay on time and you won't need a lawyer.

Make sure that your lien rights don't run out. If you need to put a lien on the property, get a lawyer. Try to get an agreement on your last day of work or get information to prove it.....ie.....delivery slip.

With lien rights, if you do it right, you will get paid. The process is set up for contractors in the situation that you now find yourself in.

Go for it and get the pay that you worked for and you deserve!

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Michael from Construction EMS Inc in Laval
Date/Time7/26/2013 at 4:29:08 PM

Actually in the commercial sector, a holdback of 10% is very common. In this case I would wait it out and as far as legality the customer can not hold on to your money, this is why you need a clear end contract.

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Alexandre from WellCore Corporation in Thornhill
Date/Time7/26/2013 at 5:40:32 PM

I believe in Ontario we have a legislation to hold back 10 percent of the total amount of the contract... and I think the main purposes of this legislation is to protect customer's property against the liens made by sub trades if general contractor failed to pay his trades or employee. So I think customer is in his right here. He actually holding much less then he can.

I do not think treating customer with lien is good idea, if you have agreement you can just patiently wait and he will pay once time is expired.

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Date/Time7/26/2013 at 6:24:07 PM

Hi There,

Most of these contractors never worked on commercial project, if they did they would't be talking like this. There is something called statutory declaration mining. You have to provide this form that all if you trades and employees have been payed and they will not put the lien on the property. According to contraction association 10% of the total amount can be held for 45 days and that is the low and nothing you can do about it.

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Date/Time7/26/2013 at 7:44:13 PM

Please call the Law Society of Upper Canada for advice...I believe the customer can hold back up to 10% for 90 days.

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Marco from Vacuums Plus in Toronto
Date/Time7/27/2013 at 3:40:06 PM

Business owner to Business owner,

Sometimes we have to put ourselves in our clients shoes. Your $60,000 Contract doesn't come to you with all the trust in the world. You have to earn it, by proving to your client, that you deserve it. Already, with one hold back of $5,500 there were minor repairs to be made.

Your client paid some more, and left a Balance of $2,700 just in case there are a few more minor repairs to be made. So far, he has kept up with his word, and he's waiting to see if your quality workmanship is up to yours. By his track record, he will pay the balance if you "used enough glue in your work". That's all he wants is a job well done. Also, you being a great contractor, allowing the situation some time to resolve itself, just proves that you "ARE the contractor that Newmarket Needs" and the referral from your client will prove that in the long run.

In todays contracting world, the old school frase has been lost in the wild, and I really wish it came back..."We are here to buy our clients, not sell them, and the richness will follow"...

My Dad...

No Advertising all word of mouth...

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Date/Time7/29/2013 at 12:53:54 PM

In Ontario the customer has the legal right to hold back 10 percent of the contract value for 30 days. These funds are to ensure that your subtrades are paid.

I do not recommend to go for a lean as this is will cost you some money that not worth the remaining balance.

Try to keep asking to get the money as soon as you can. In case you did not get paid till the period that they asked for, you could proceed with a small claims court and by then they should pay.

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Date/Time8/26/2013 at 9:52:56 AM

Here in Alberta a Client can hold back 10% for 45 days, probably same in other provinces, but only for the purpose of paying any sub contractors who do not get paid by the general contractor. They cannot use it to pay for stuff they do not like etc. However they can hold legally 10% for the 45 days. I have to actually put this in my contracts. Most clients do not use it as I have such good references but some do, annoying but fact of life being a contractor...I do not think you have anything to worry about and as they have been reasonable so far.

I do not agree with the guys who say "put a lien on right away". References is what keeps good contractors in business and antagonizing your client is just going to result in a bad one for a otherwise satisfied client. It is only $5 grand, if you can't float that for 30 days you should probably not be doing $60,000 jobs.

Good luck

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Date/Time9/29/2013 at 8:05:58 PM

I agree with john. No need to put a lien on right away you have 45 days from final invoice. I have had to do this, just with one client that completely avoided any of my phone calls for weeks. (sketchy guys). I make it clear on invoice as well.. payment to be made in full with in 30 days... at 45 day mark a lien is put on the property and explain it.. it is to cover my butt.

Some people will use this 30 days to sell a house. Get top dollar and then you are out the money. Have herd of it here in Calgary... and not one thing you can do. I have customers I like to build great relationships with. Some of them owe me money for up wards of 18 months. Only cause I know they pay when they can or when I ask, and keep calling me back. It is winning their trust.

If you are a good guy.. stand behind your work and put out an awesome product with no call backs or issues. Just be patient, they will pay.... and just explain the lien process, it is to protect you not necessarily to hurt them.

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Eddie from EJ Masonry in Hamilton
Date/Time11/26/2013 at 7:53:38 PM

From experience ...

If I was you ... I would bite your lip for 30 days....

If it goes to court you will have lost so much time and money...

Legally they can hold 10% for more then 30 days....

As a contractor you need to have it in Capital, or Highlighted letters Paid upon completion. Even then its still debateable in court!

But from the judges mouth in my case .... Capitalize PAID IN FULL UPON COMPLETION !!

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Eddie from EJ Masonry in Hamilton
Date/Time11/29/2013 at 5:24:51 PM

From experience ...

If I was you ... I would bite your lip for 30 days.

If it goes to court you will have lost so much time and money.

Legally they can hold 10% for more then 30 days.

As a contractor you need to have it in Capital, or Highlighted letters Paid upon completion.

Even then its still debateable in court!

but from the judges mouth in my case .... Capitalize PAID IN FULL UPON COMPLETION !!

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