Your renovations & paying a deposit!

Yesterday’s announcement that Big Day Out organisers have introduced a new deferred payment system to help fans secure tickets (which is awesome for cash-poor students) got me thinking about renovations and cash-poor homeowners who are looking to do building works.

There seems to be a fair amount of controversy about whether you should pay a builder any money up front.

However, most builders I’ve spoken to say that they would ask for about 10-20% up front, then take the rest in stages against work completed to the specification. But what are the actual laws?

Australian law requires that the deposit you pay can be no more than:

• 10 per cent of a total contract price that is less than $20,000, or

• 5 per cent of a total contract price that is $20,000 or more.

You should only sign your contract and pay the deposit after you have sighted your domestic building insurance Certificate of Currency.

Do not sign a contract and pay a deposit until after you have shopped around and made informed choices regarding the scope of works and the builder. When you are ready to sign the contract, ensure that it includes the usual price schedules and stick to them. Only agree to a different schedule in exceptional and unusual circumstances and ensure you understand the consequences of doing so.

There is a risk that if you pay too much for the early stages of the project, the builder may be unable to finish the work on time or fix defects. In some cases builders have taken the bulk of the money early in the project and not finished the building at all, leaving homeowners with a long and costly legal battle!

If you are considering agreeing to a different payment schedule to the usual one, be sure to seek legal advice and examine your financial situation carefully. Do not agree to a different payment schedule if you cannot afford to make those payments. Once you sign a contract that includes a different schedule, you are obliged to make the payments as set out in your contract.

Usually builders ask for deposit amount upfront, then get paid set amounts in different stages of the work. You as the customer get to hold the balance back until you are satisfied with the work, and all the stages are completed.

Just remember that it is important to get written receipts every time you hand over money so it’s all traceable!

Hope this helps!