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    #16
    Here in CA there are very restrictive laws on down payments for home improvement contracts - 10% or $1000.00, whichever is less. Having said that, we have been doing this for over 41 years and almost never ask for money up front. We bill upon completion and acceptance of the project or project phase. Customers really appreciate that trust and we have rarely been stiffed. To those who see this as free financing, that may be true but all of those costs are just rolled into the overhead costs and end up getting paid anyway. It's just another type of business plan that works very well for us.
    Bob on the left coast.

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      #17
      Originally posted by bkludecke View Post
      Here in CA there are very restrictive laws on down payments for home improvement contracts - 10% or $1000.00, whichever is less. Having said that, we have been doing this for over 41 years and almost never ask for money up front. We bill upon completion and acceptance of the project or project phase. Customers really appreciate that trust and we have rarely been stiffed. To those who see this as free financing, that may be true but all of those costs are just rolled into the overhead costs and end up getting paid anyway. It's just another type of business plan that works very well for us.
      After 41 years the company probably has a big enough nest egg that buying materials up front and billing after they're up and running isn't a big issue. For a smaller contractor, I'm assuming that money would be tighter.

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        #18
        Originally posted by bkludecke View Post
        Here in CA there are very restrictive laws on down payments for home improvement contracts - 10% or $1000.00, whichever is less. ....
        Is covering for materials considered a down payment? Material costs could be more than half of a job total for some.

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          #19
          In CA down payments on home improvement work are those payments received before any work is completed or any materials are delivered to the job-site. Once work has commenced and/or materials are delivered any payments can be requested but cannot exceed the value of the work completed. In other words, according to CA state law, the contractor can never get ahead of the homeowner financially. These laws are not always understood or adhered to but they are in place to protect the homeowner from unscrupulous contractors who would demand a large down payment and then abandon the job, leaving the homeowner hanging.
          Bob on the left coast.

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            #20
            Originally posted by bkludecke View Post
            These laws are not always understood or adhered to but they are in place to protect the homeowner from unscrupulous contractors who would demand a large down payment and then abandon the job, leaving the homeowner hanging.
            What about the customer who leaves the contractor hanging for the final payment or cancels the job before it is completed?

            Oh, I forgot. There are no dishonest customers in California. Only unscrupulous contractors.

            -Hal

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              #21
              Hey, don't shoot the messenger; I didn't write the laws, I just try to understand them and comply as much as possible. Contractors have a few remedies available to deal with customers who don't pay. They have mechanics lien laws, the courts, and, hopefully, the good sense to choose their customers carefully and provide a detailed and well written contract. The CSLB (Contractors State License Board) in CA is an agency that has consumer protection as its mission and contractors get very little sympathy or support from the CSLB when it comes to deadbeat customers.
              Bob on the left coast.

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                #22
                Originally posted by bkludecke View Post
                The CSLB (Contractors State License Board) in CA is an agency that has consumer protection as its mission and contractors get very little sympathy or support from the CSLB when it comes to deadbeat customers.
                If it were me with the laws stacked against me like that I would want to bang the customer 75% up front because it means that it's real easy to get screwed! But they have that covered so you can't.

                Every time somebody talks about California there's always a horror story about stupid laws and regulations. And you wonder why I always criticize the state. Why the hell would anybody want to work in California?? Or even live there?

                -Hal

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                  #23
                  Originally posted by hbiss View Post
                  Why the hell would anybody want to work in California?? Or even live there?
                  The earthquakes give you a free ride every now and then...

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                    #24
                    Originally posted by hbiss View Post
                    If it were me with the laws stacked against me like that I would want to bang the customer 75% up front because it means that it's real easy to get screwed! But they have that covered so you can't.

                    Every time somebody talks about California there's always a horror story about stupid laws and regulations. And you wonder why I always criticize the state. Why the hell would anybody want to work in California?? Or even live there?

                    -Hal
                    Don't get me wrong, I get as frustrated as anyone with CA nonsense; but just because the rules of the game make it difficult does not mean you can't make it work and make money at it. I started in the trade here in CA in 1974 and hung out my shingle in 1978. We rolled with the punches and learned some tricks (invented a few) and managed to carve out a good career. This past January I sold the company to my son who is doing well with it. The regulatory foolishness continues but so long as you keep yourself educated and current with all of it this state is a beautiful place to live and work. We are in a rural mountain resort area so all of the weird stuff going on in the metropolitan areas seems a world away from us. The earthquakes keep the knickknack shelves from getting too cluttered.
                    Bob on the left coast.

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                      #25
                      I used to ask for at least a portion of material cost up front. I convinced a former boss to do that when he got burned on a job. I was convinced that anyone refusing a deposit would likely stiff us on pay later too.
                      Yes, I'll be happy to do a first class job for less than anyone else and take a dollar a week for 10 years.

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                        #26
                        Originally posted by jmellc View Post
                        I used to ask for at least a portion of material cost up front. I convinced a former boss to do that when he got burned on a job. I was convinced that anyone refusing a deposit would likely stiff us on pay later too.
                        Good policy!

                        I would get a down payment. One particular job I got a $20,000 down payment. Ordered the "W" cable and I-Line panels. Then the economy locked up in 07/08. The job stopped. The GC just quit working and would not commit to paying for materials I received.

                        I stored the materials in a bonded warehouse and then sent the GC a letter stating he could take ownership of the materials and start the job whenever he wanted or ... I would pay the restocking fee for the panels, and sell the wire (probably for $0.50 on the dollar or less) and apply the deposit to cover the expenses of doing this. Bottom line, purchase the material or lose your $20k.

                        I got my check and of course when the job started up in 2010, I was not called (and was happy about that).

                        The majority of GC's are in business you use your money, not theirs. You must protect yourself, you must get the deposit. I agree with your sentiment, if you won't pay a deposit, you are likely to stiff us later.

                        A BTW, I went to an attorney and showed him my letter. He asked who wrote it, and I told him I did. He said he wouldn't change it, send it as is. I was pretty happy about that.

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                          #27
                          Originally posted by JJWalecka View Post
                          Customer wants to give 75 percent after rough Inspection and the remainder after final.

                          I'm not a fan of paying for stock out of pocket.

                          How does everyone feel about that?
                          Whatever you can work out between you and your customer works for me.

                          Some states limit how much you can ask for up front, at least for consumer projects.

                          A lot of contractors have gone broke because they took projects on without adequate funding hoping they can get paid before the bills come due.

                          Other contractors have made a lot of money by acting as a bank of sorts for their customers.

                          If your customer is solvent and known to pay their bills and you are comfortable with the arrangement I see no reason not to go ahead with such a request.
                          Bob

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                            #28
                            Originally posted by bkludecke View Post
                            Here in CA there are very restrictive laws on down payments for home improvement contracts - 10% or $1000.00, whichever is less. Having said that, we have been doing this for over 41 years and almost never ask for money up front. We bill upon completion and acceptance of the project or project phase. Customers really appreciate that trust and we have rarely been stiffed. To those who see this as free financing, that may be true but all of those costs are just rolled into the overhead costs and end up getting paid anyway. It's just another type of business plan that works very well for us.
                            Bob ,
                            Is / Was there a CA code section that allowed a greater than 1000 deposit for a new home on undeveloped land. Or does the Home improvement contract laws apply to the new home also.
                            This question was just posed to me by a fellow contractor. I personally do the 1k max or nothing up front.

                            However what if you are a window contractor, You have to place special order 100k worth of product for a Mcmansion without any more than a 1k. ?

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                              #29
                              In CA, the Business and Professions Code, Division 3, Chapter 9, Article 10 deals with Home Improvement Business. A "Home Improvement", as defined by Section 7151 "...means the repairing, remodeling, altering, converting, or modernizing of, or adding to, residential property and shall include, but not be limited to, the construction , erection, replacement or improvement of driveways, swimming pools,including spas and hot tubs, terraces, patios, awnings, storm windows, landscaping, fences, porches garages, fallout shelters, basements, and other improvements of the structures or land which is adjacent to a dwelling house...." It goes on and on to cover just about everything else you can think of.

                              Nowhere does this section or article say or imply that the rules for a home improvement contract apply to a new construction of a dwelling. Hope this helps.
                              Bob on the left coast.

                              Comment


                                #30
                                A significant difference between remodelling (most often of a residence currently occupied by the owner) and new construction (most often speculative building for a company planning to sell to eventual owner) is the set of means available to the contractor to protect their interest if something goes wrong.

                                Sent from my XT1585 using Tapatalk

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