money paid in a contract?

[electricguy61]

In California, contractors are limited by law to 10% or $1000, which ever is less, for a down payment.

I usually get 10% down (or $1K), 50% on rough, 40% or remainder on final. (Simple residential remodel projects)

Small jobs, under $2500, I don't usually require a down payment.

Commercial jobs, usually 50/50. Often, public works projects require a 10% retainage for one year, so you have to figure that into the equation.

 

[Kessler4130]

Not a chance I would pull a permit until I have the job.

 

[JJWalecka]

Kessler4130

"Not a chance I would pull a permit until I have the job."

Everyone I asked said the same thing.

I am "Hungry" for work. It was what we had agreed upon and I am a Man of my word.

Justin J. Walecka

 

[chris kennedy]

how to

how to

sorry, i went to FAQ to see how to ask a question. its about art 500.

 

[satcom]

In my state you are required to have a signed contract, before you can apply for a permit, and if it were not a requirement, you can be sure I would not file for a permit until I had a signed contract, with a down payment.

As far as the amount of down payment, that can vary greatly, a 50% down payment for services type contracts, is very common for a lot of companies, where the material, or supplies are a large piece of the pie.

The issue of banking a job, presents a lot of issues, most small contractors have limited cash flow, and limited credit lines, for them to bank a job may present a problem. If your billing for 1 to 30 days, you are extending credit to the customer, for that period, if you question this, try missing a home, or auto payment, and you will have a quick course in the real cost of money.

 

[JJWalecka]

Thank you everyone. A learning experience!

 

[petersonra]

The issue of banking a job, presents a lot of issues, most small contractors have limited cash flow, and limited credit lines, for them to bank a job may present a problem. If your billing for 1 to 30 days, you are extending credit to the customer, for that period, if you question this, try missing a home, or auto payment, and you will have a quick course in the real cost of money.

I bet most customers do not want to be your bank either. Fronting the costs of parts is a part of the project to some extent.

As a customer, I would be real nervous if a supposedly solid contractor could not front a few hundred bucks worth of parts for a few weeks.

 

[hardworkingstiff]

.....I would be real nervous if a supposedly solid contractor could not front a few hundred bucks worth of parts for a few weeks.

How about $50,000 of stuff (just the front end stuff, no labor included)? Would a deposit be in order?

 

[Davis9]

I don't know where it is stated. I will look.

He can have another electrician in my opinion. You might have trouble getting your money back from the town. There is a procedure, I'm sure, but it often is a huge PIA. In one town I mistakenly put the wrong street number on the application. The next day I tried to change it and they wouldn't let me. The procedure to do so would have cost me more time than it was worth for $60.00.

Either way, I'd walk away from this customer.

http://www.mass.gov/Eoca/docs/sampcont.pdf


The only restrictions I could find are for Home Improvement Contractors, 1/3rd is what they are allowed up front.

Tom

 

[dduffee260]

How about $50,000 of stuff (just the front end stuff, no labor included)? Would a deposit be in order?

Lou, on our projects which are bonded projects we can apply for payment for materials stored on site or in a bonded warehouse. As far as asking for $50,000 up front before you start a job??

I do remember a project a while back when a contractor was given $25,000 up front for a $137,000 project. He then quit about 25% in the project because he told the GC " I am tired of being your bank". We were hired to finish the project. The GC won a suit for around 50K, plus there were damages in the contract.

There is absolutely no way we would ever ask for that much up front. Like I said, we buy the materials, we store it on site, then get paid for it in about 20 days. We then pay the supply house. The way I see it the supply house is being the bank.

 

[satcom]

I bet most customers do not want to be your bank either. Fronting the costs of parts is a part of the project to some extent.

As a customer, I would be real nervous if a supposedly solid contractor could not front a few hundred bucks worth of parts for a few weeks.

Let me see, Sears (A supposedly solid contractor) had my credit card charged before they even came to the job, no parts no labor extended, but the money was already being paid, before any work was done.

All the roofers in my area wanted the material cost covered (All supposedly solid contractors) ,before they would even consider accepting a contract, roofing material being the biggest part of the project.

For my AC installation (A supposedly solid contractor) wanted $7,000 half the job cost, so I called 4 other supposedly solid contractor to get quotes, they all wanted the same 50% down.

Offering terms, or extending credit is a business all it's own today, vendors are not banks either, and the customer should not assume that they are entitled to any of the terms offered to a contractor, a customer that has no understanding of how a business operates, would not understand how that business handles cash flow, or where that contractors is in the vendors billing cycle.

Today a lot of the customers are over extended with credit, and the real risk may be allowing them to use you as a bank.

 

[celtic]

As a customer, I would be real nervous if a supposedly solid contractor could not front a few hundred bucks worth of parts for a few weeks.

Why SHOULD an EC "front" anything?
Once it's on the job site(installed or not) - who owns it?
Why would I want to expose myself to that kind of liability?

 

[Paul B]

Maryland only allows 1/3 deposit, terms after that are up to you. I charge as the OP suggest.

 

[satcom]

Maryland only allows 1/3 deposit, terms after that are up to you. I charge as the OP suggest.

And the way they they skirt that is, one sales contract for the material or equipment, and another contract for the installation cost, legal in most states, with percentage limits, your best bet is to contact a contract attorney, in your state, he may be able to help you with all your contract concerns.

 

[hardworkingstiff]

There is absolutely no way we would ever ask for that much up front. Like I said, we buy the materials, we store it on site, then get paid for it in about 20 days. We then pay the supply house. The way I see it the supply house is being the bank.

When I do a fuel system, I ask for 25% upfront. I then order the equipment and start to work. I've had customers change their mind after I order and before it's delivered. This can be a problem since once I order them, they are pretty much mine.

On electrical, I admit I order wire (W cable to the tune of $25,000) and then invoice after it's delivered. If the order gets to be $50,000 or more (in wire) I request a 25% deposit.

 

[satcom]

When I do a fuel system, I ask for 25% upfront. I then order the equipment and start to work. I've had customers change their mind after I order and before it's delivered. This can be a problem since once I order them, they are pretty much mine.

No kidding, you mean a customer can change their mind if you don't have a decent deposit, what an intresting concept! I wonder if that is why sears and all the other large service companies want a decent deposit before responding to the service calls?

Hmmm
I think for some the fear of loosing a job if they ask for a deposit, must be overwhelming.

 

[bradleyelectric]

Maryland only allows 1/3 deposit, terms after that are up to you. I charge as the OP suggest.

Where did you get this information. As a contractor in MD I have never been made aware of this.

steve

 

[hardworkingstiff]

I wonder if that is why sears and all the other large service companies want a decent deposit before responding to the service calls?

I wouldn't exactly equate spending $160,000 to a service call.

Hmmm
I think for some the fear of loosing a job if they ask for a deposit, must be overwhelming.

Wow, I guess it is.

 

[dduffee260]

Once it's on the job site(installed or not) - who owns it?
Why would I want to expose myself to that kind of liability?

The supply house that supplied it until it is paid for by the contractor.

 

[kbsparky]

Where did you get this information. As a contractor in MD I have never been made aware of this.

steve

I have always thought that the 1/3 down max was the law in Maryland as well. As far as I knew, this requirement is part of the MD Home Improvement statutes.

The 1/3 down part is found here:

? 8-617.
(a) A person may not demand or receive any payment for a home improvement before the home improvement contract is signed.

(b) A person may not receive a deposit of more than one-third of the home improvement contract price before or at the time of execution of the home improvement contract.

So, I looked further into the specific statutes, and found THIS:

Business Regulation.
? 8-301.

(d) This section does not apply to:


(4) an .... electrician .... who:

(i) is required by State or local law to meet standards of competency or experience before engaging in an occupation or profession;

(ii) currently is licensed in that occupation or profession under State or local law; and

(iii) is:

1. acting only within the scope of that occupation or profession....

So, we are back to square one, unless someone can quote me another law that limits the down payment amount?