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Contractor
Payment Tips
- Paperwork. Keep a good file with all of your paperwork.
All receipts, bills, the contract, copies of the building permit(s),
etc. If it pertains to your job, no matter how insignificant you think
it is, keep it!
- No Cash Payments. Never give a contractor cash,
and never provide any type of payment without a written contract.
- Down Payments. Never pay a contractor more than
10% of the contract as a down payment after the contract is signed.
In California, the law says down payments are 10% or $1,000, whichever
is less!
- Materials List. Always develop a materials list.
Specify the exact materials, parts, product codes, etc.
- Progress Payments. As the work progresses, you
will use a system of 'progress' payments to pay off the contract.
These payments should be made at the end of each step of actual work.
Example: The foundation has been poured and is set. A payment is due
for the concrete and all related labor, or, the framing is completed,
then pay for the lumber and the labor costs. Also, remember this,
various stages of your project will require a building inspection.
Example, electrical, plumbing, framing, etc., all require a sign-off
by the building inspector. It is common to require that you see the
sign-off by the building inspector before you make the progress payment.
The inspector is an impartial third party and he or she will not signoff
until the work meets approval.
- Final Payments. Withhold at least 10% of the contract
amount to be issued as a final payment. Do not make final payment
until you have reviewed the completion notice and have a lien release
for each sub-contractor as well as material supplier. Also, you should
have a final approval from your local building and safety department.
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