Advance Payments
Advance
An advance is a reasonable request once
the contract is signed and money is needed for materials
prior to the start date. Don’t give your contractor
more than half the payment. Giving your contractor
a large advance removes the incentive to come back and
complete the work. You should never give a contractor
more than half down, even when your bank is involved
in the transaction! To make sure you’re protected,
the following five practices are recommended:
-
Try to limit your down payment. Some state laws limit
the amount of money a contractor can request as a down
payment. Contact your state or local consumer agency
to find out what the law is in your area.
-
Try to make payments during the project contingent
upon completion of a defined amount of work. This way,
if the work is not proceeding according to schedule,
the payments also are delayed.
-
Don’t make the final payment or sign an affidavit of
final release until you are satisfied with the work and know
that the subcontractors and suppliers have been paid. Lien
laws in your state may allow subcontractors and/or suppliers
to file a mechanic’s lien against your home
to satisfy their unpaid bills. Contact your local
consumer agency for an explanation of lien laws where
you live.
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Some state or local laws limit the amount by which
the final bill can exceed the estimate, unless you
have approved the increase. Check with your local consumer
agency.
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If you have a problem with merchandise or services
that you charged to a credit card and you have made
a good faith effort to work out the problem with the
seller, you have the right to withhold from the card
issuer payment for the merchandise or services. You
can withhold payment up to the amount of credit outstanding
for the purchase, plus any finance or related charges.
Often homeowners fail to exercise proper judgment because
they think that the involvement of their bank means there
will not be problems. Should your contractor fail
to complete the job, you are most likely still required
to pay the loan since the bank is lending the money directly
to you, regardless of whether the contractor completes
the job satisfactorily.
Arrange to pay in installments and by check, never cash. Never
pay in full before the job is finished.
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