deposit on commercial jobs

[N844AA]

The only thing a lien does is hold up sale of a house until the debt is settled.

Around here you can get a bonding company to assume the lien, thus lifting it off the property and leaving a clean title. General Contractors call this "Bonding Around The Lien".....

 

[George Stolz]

Around here you can get a bonding company to assume the lien, thus lifting it off the property and leaving a clean title. General Contractors call this "Bonding Around The Lien".....

Well, nuts.

 

[aline]

I just don't understand what the deposit covers. Does anyone have a hard time explaining tis to customers, or do just not quite get it?

The deposit covers my piece of mind.
I usally will get a down payment or deposit and seldom does the customer question this.

One time when I asked the customer for a $500 down payment, while he was signing the contract, he said he didn't have the $500 for the down payment because he had a loan with the bank for the work I was going to do and some other work being done by others.

He said he would have to get the money from the bank if I needed the down payment.
It was a small job that I could complete in a couple of days so I went ahead and did the work without the down payment.

After the job was done I asked for payment and he told me he was denied the bank loan so he didn't have the money. He said he owed the heating and air conditioning guys more than he owed me. I guess this was supposed to make me feel better.

Unlike when you buy a car and don't pay I cannot come to your home and reposes my materials. It's Illegal. Once installed the materials become his property and I cannot remove them. I cannot reposes my labor.

I can put a lien on his home but that doesn't do much for me unless he sells or refinances the home.

About all I can do to collect my money is take him to small claims court.
Without a contract this will be more difficult to do.
It still doesn't mean I'll ever see the money.

It took six months and a lot of phone calls before I finally got paid.

I've had other experiences similar to this when I didn't get a down payment.
A down payment and contract doesn't guarantee I'll get paid for the job but my odds are better.

 

[LarryFine]

A down payment and contract doesn't guarantee I'll get paid for the job but my odds are better.

It should at least cover the materials and permit.

 

[hardworkingstiff]

i cant get a dime up front (wish i could). there are 8 builders in the united states with deliveries of over 20,000 units per year and sales of $10 billion or more. i know these guys dont pay a penny up front.

Have you asked?

and i am saddend to find that i am not a businessman because i dont use contracts.

You really should, you've been lucky and I hope your luck doesn't run out.

i cant believe i have been doing this wrong for all these years.

Aren't you glad you came to this site to find out? :grin:

 

[N844AA]

Unlike when you buy a car and don't pay I cannot come to your home and reposes my materials. It's Illegal. Once installed the materials become his property and I cannot remove them. I cannot reposes my labor.

Here's the workaround: If you believe that your installation is unsafe and poses a hazard, you can remove it, in fact you may be legally required to remove it.

A few years ago I installed a sub panel on a guest house behind someone's home. The guy didn't pay and after several attempts to resolve this he stopped taking my calls. I went out there and removed my panel and cut the branch circuit wires flush with the connectors. He had a paying tenant living there who was now without electricity.

I was prepared for trouble, I decided that if anything serious came of this I would claim "That I removed a fire hazard" or something along those lines to justify what I had done. Anyway, I was very excited, I couldn't wait for this guy to call me, I was gonna really give him an ear full.

But he never called.

 

[satcom]

Here's the workaround: If you believe that your installation is unsafe and poses a hazard, you can remove it, in fact you may be legally required to remove it.

A few years ago I installed a sub panel on a guest house behind someone's home. The guy didn't pay and after several attempts to resolve this he stopped taking my calls. I went out there and removed my panel and cut the branch circuit wires flush with the connectors. He had a paying tenant living there who was now without electricity.

I was prepared for trouble, I decided that if anything serious came of this I would claim "That I removed a fire hazard" or something along those lines to justify what I had done. Anyway, I was very excited, I couldn't wait for this guy to call me, I was gonna really give him an ear full.

But he never called.

In my state you would still be in the lockup and ready to be served court papers for damages after your time was served

 

[cowboyjwc]

Just a couple of interesting notes:

1. There are a handful of contractors in California that have special bonds in place and permission by the CSLB to take deposits of any size.

2. This requirement is for Prime Home Improvement contracts only, not commercial contracts or contracts between a GC and a sub. I realize this discussion is indeed about prime home improvement contracts (or the lack of) but I thought I would just chime in with this since most GCs think this applies to subs. Also I'm aware that Shockin is not in California.

Yeah I know, but like someone else said this post changed a little bit. I always got paid at delivery of material, I figured that way if I got bit it was only for my labor and I still had a good repor with my suppliers.

 

[dbuckley]

Since this thread is really about commercial, surely on any significant size commercial job it'll be tendered, and the payment terms being offered will be in the tender doc, and just to the right of the terms theres a little space to write "comply", or "not comply"?

 

[satcom]

Since this thread is really about commercial, surely on any significant size commercial job it'll be tendered, and the payment terms being offered will be in the tender doc, and just to the right of the terms theres a little space to write "comply", or "not comply"?

Yup it's all about terms and you can either accept or move on

 

[readydave8]

Around here you can get a bonding company to assume the lien, thus lifting it off the property and leaving a clean title. General Contractors call this "Bonding Around The Lien".....

same way in georgia

 

[dduffee260]

It must be a regional thing. If you required deposits on Commercial or Residential jobs around here you wouldn't be in business very long. Or atleast you wouldn't be working with any reputable GC.

The "standard" around here on commercial is to submit a bill on the 25th of every month and then you get paid 30 - 45 days after that. This continues throughout the duration. The retainage is 5% and you won't see that for 90 days after competion. On a $1M project that means you won't see your last 50K for 3 months.

The "standard" on residential is 60% after rough-in and 40% after trim is complete.

On a personal note - I would never under any circumstance pay someone up front to do work for me. I have built a few homes over the years for myself and every sub was hired with a handshake and not paid until thier work was completed in full. I would personally be offended if they asked for a deposit which would imply that they think I'm going to rip them off.

The line about "needing to pay my suppliers" doesn't fly either. If you buy materials the first of the month, you have until 30 days after the end of the month to pay your supplier. That's 60 days!

The best part about this system is that it weeds out the little "up and coming" electrical contractors. (No offense) They can't afford to go without their money that long.

We operate the same way. We hardly do any residental projects. The last project we just finished was 1.3 million, it was a HUD project. The retainage is 10% on HUD. There is absolutely no way they would have given us $100,000 up front on this project. We had to at least start one month. As far as paying a supply bill up front, why?? We get ahead a little then discount it. Yes they still owe is 130k but it will show up soon and when it does we will bank it.

Guys, do you have to give the supply houses money immediately when you buy? Or do you have to give them a deposit? If so then set up an account. Set up seperate job accounts for each job so if you do not get paid they will help lien the project. Yes I know you have labor tied up but that is contracting. You build in these costs in your bid.

To all the contractor who do not want to do business with GC's like this. Send em my way. We will take em all as long as they are bonded.

 

[brantmacga]

* The subs carry all the risk.

Yes and no. What risk are we talking about. They can lien the propoerty and guarentee they will get paid so that eliminates to finacial risk. What other risks are there?

absolutely false;

lien laws vary by state, and when you file a lien you have to get in line and hope there's enough money left to pay you.

in my state filing a lien doesn't force a property into being sold. liens are only settled when the owner decides to sell the property, and if it goes into foreclosure your lien is wiped out; you'll never see a penny if it gets to that point.

 

[George Stolz]

We operate the same way. We hardly do any residental projects. The last project we just finished was 1.3 million, it was a HUD project.
(snip)
Set up seperate job accounts for each job so if you do not get paid they will help lien the project.

I think it's good to point out that it is incredibly difficult for some of us minnows to get a perspective on things. I think each of us should state the price range of the advice we're tendering. I would not think that someone asking the question in the OP would be asking it if he had built his company up to the point where he was pondering how to divvy up the payments on a 1.3 million dollar job.

Using the old adage Celtic introduced to me, "Never take on a job more than twice as large as your biggest successful job", I would not be eligible for a 1.3 mil job for many years, if ever.

 

[hardworkingstiff]

Guys, do you have to give the supply houses money immediately when you buy? Or do you have to give them a deposit? If so then set up an account.

Supply houses around here will require a personal guarantee, in other words you put up your personal assets.

Set up seperate job accounts for each job so if you do not get paid they will help lien the project.

This is a very good plan of action.

To all the contractor who do not want to do business with GC's like this. Send em my way. We will take em all as long as they are bonded.

Somehow I don't think the OP was talking about bonded jobs. On non bonded jobs how do you proceed, same or different? Do you get the GC to put up a personal guarantee in order to extend credit? When you perform work for someone, that's what you are doing, extending a line of credit. How many of us actually do a credit check?



I like and try to get deposits on jobs over $10K, unless it's a plan and spec job, then I understand that's not going to happen, but that job is often bonded. I am going to try to protect myself as best as I can and the customers I deal with don't have a problem with trusting me with a deposit.

 

[short circuit faulted]

Another Tact

Another Tact

We don't do residential construction, we do run an service department to make residential and commerical repairs. In that market we collect from cusotmer check, cash or credit card before we leave, with the exception of national accounts which we bill the customer's service provider McBride Electric and those sorts.

For Commerical construction, we cannot and do not ask for a deposit but we do build into the submitted schedule of values a "Moblization Fee" which is normally 3-4% of the contract amount which helps keep project in black ink from front end. We of course bill for P&P bond at 100% with first draw also. Retainages here run anywhere from 5 -10% for most projects and like many have said you don't even think about seeing that money until 90 days or more after project closeout complete. They do however normally reduct the 10% to 5% when you are over 50% completed with the project.

Have a good day all and BE SAFE - It only takes a second of carelessness to gain a lifetime of misery or to lose a life altogether!

Steve

 

[dduffee260]

I think it's good to point out that it is incredibly difficult for some of us minnows to get a perspective on things. I think each of us should state the price range of the advice we're tendering. I would not think that someone asking the question in the OP would be asking it if he had built his company up to the point where he was pondering how to divvy up the payments on a 1.3 million dollar job.

Using the old adage Celtic introduced to me, "Never take on a job more than twice as large as your biggest successful job", I would not be eligible for a 1.3 mil job for many years, if ever.

George, we have been at it for 16 years now. Up until last year our largest was 600k. I knew the next step was 1 million. Then we bid one late 08 and mid 09 for 1.3 and 1.5. If you don't have a job you keep bidding until you get one. Well, the 1.5 was awarded soon, then the 1.3 pops up a year later, with copper falling and all other materials. So we did both last year along with others. We were pretty busy last year but things have tapered off now. I was not perfect at managing but we did do a decent job of it. After all, money is just money and stuff is just stuff, and it all belongs to God in the end anyways.

 

[jmellc]

It must be a regional thing. If you required deposits on Commercial or Residential jobs around here you wouldn't be in business very long. Or atleast you wouldn't be working with any reputable GC.

The "standard" around here on commercial is to submit a bill on the 25th of every month and then you get paid 30 - 45 days after that. This continues throughout the duration. The retainage is 5% and you won't see that for 90 days after competion. On a $1M project that means you won't see your last 50K for 3 months.

The "standard" on residential is 60% after rough-in and 40% after trim is complete.

On a personal note - I would never under any circumstance pay someone up front to do work for me. I have built a few homes over the years for myself and every sub was hired with a handshake and not paid until thier work was completed in full. I would personally be offended if they asked for a deposit which would imply that they think I'm going to rip them off.

The line about "needing to pay my suppliers" doesn't fly either. If you buy materials the first of the month, you have until 30 days after the end of the month to pay your supplier. That's 60 days!

The best part about this system is that it weeds out the little "up and coming" electrical contractors. (No offense) They can't afford to go without their money that long.

Subs have to pay their help every week or 2 weeks. If they have to get permits, some locales demand payment up front, no billing cycles. No 60 days there. I would not pay someone a huge portion upfront, nor ask for the major portion. Nothing wrong with asking for 20 or 25%, or more if expensive material is being used. The job where one boss got burned, we racked up huge bills for large UF cable, strut, bus kits for CH breakers, cable tray, etc. Nearly bankrupted the boss, took a year to get his $, in bits and pieces.

You will sing a different tune when it eventually happens to you.

 

[bigjohn67]

Payments

Payments

We do our resi/ small commerical work like this:

Rough-in (close walls) 60%
Devices 10%
Service 10%
Customer fixtures 10%
Final (punch) 10%

Customers have no problem with this as they can see what they are paying for.
We dont complete the next stage unless the account is paid up.
On Small commercial we do the same.
We also do not accept their contract without ours attached.

Large Commercial........ That's a different story......

 

[~Shado~]

Here's the workaround: If you believe that your installation is unsafe and poses a hazard, you can remove it, in fact you may be legally required to remove it.

WHAT??? I have a big issue with that train of thought.

Why in the world should that even be considered a 'work around'? If you are an electrician....ALL your installs should be safe and not pose a hazard!!! Other than that...you are a hack.....and should get out of the trade.