Find a Tradesman: Fair Tradesman Deposits

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When you find a tradesman to handle your home improvement projects, understanding the nuances of deposit and payment terms is crucial. Negotiating these terms upfront sets clear expectations, ensuring a mutually beneficial arrangement between you and your tradesman. 

Deposits are a common practice in tradesman services. They serve as a commitment from both parties: securing your booking and enabling the tradesman to cover initial expenses such as materials and planning. However, the deposit amount should be fair and proportional to the project's scope to avoid any potential issues.

This blog tackles deposits, but there's so much more to consider! Our ultimate guide provides a roadmap to help you find a tradesman for any job.

Standard Deposit Amounts

Generally, tradesmen might ask for a deposit ranging from 5% to 10% of the total project cost. This range is considered fair and reasonable, allowing tradesmen to begin work without placing an undue financial burden on homeowners. For larger projects, such as major renovations, the deposit might be slightly higher to cover significant upfront costs.

Factors Influencing Deposit Amounts

Several factors can influence the deposit amount a tradesman requests:

• Project Size and Complexity: Larger and more complex projects typically require more substantial deposits to cover initial costs.
• Materials and Equipment: High-quality or custom materials may necessitate a higher deposit.
• Tradesman’s Policy: Each tradesman may have their standard deposit policy based on their business model and previous experiences.
• Market Conditions: In high-demand periods, tradesmen might require higher deposits to secure bookings.

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State-Specific Deposit Rules in Australia

New South Wales (NSW)

For smaller jobs, such as changing a powerpoint or unblocking a pipe, it's unlikely you'll be asked to pay a deposit. For bigger jobs, where a large component of the cost is in the materials, the builder or tradesperson may ask for a deposit. Under NSW home building law, the maximum deposit you can be asked to pay is 10%.

If the work is required to be covered under the Home Building Compensation Scheme, it is illegal for the contractor to ask for a deposit or other payment under the contract unless the cover has been taken out, and a certificate of the cover is given to you. More information

Victoria (VIC)

By law, a deposit can be no more than:

• 10% if the total contract price is less than $20,000.
• 5% if the total contract price is $20,000 or more.
• You must give your client a copy of your domestic building insurance policy and a certificate of currency covering their property before you take a deposit or any other money for work worth more than $16,000. More information

Queensland (QLD)

Generally, the maximum deposit a contractor is allowed to request is:

• 5% deposit for building work that costs $20,000 or more.
• 10% deposit for building work where the contract price is between $3,300 and $19,999.
• Maximum of 20% for work priced at $3,300 or less.

Exception: A 20% deposit is allowed where more than 50% of the value of the work is to be performed offsite (e.g., for kitchen renovations where the modules are custom-made in a factory). More information

Western Australia (WA)

Paying upfront for goods or services puts consumers at risk if the business fails to deliver or goes broke. That’s why only paying smaller deposits of about 10% is recommended to limit that risk and to have greater bargaining power if something goes wrong.

For larger jobs, paying in instalments as goods are delivered and stages of the work are finished is recommended. In Western Australia, it is illegal for tradespeople to accept deposits of more than 6.5% for building work valued at more than $7,500. More information

South Australia (SA)

For smaller jobs, tradies usually only require payment at the end of the job. For bigger jobs, a maximum 10% deposit is recommended. 

For larger domestic building projects, the maximum deposit allowed by law is $1,000 for a contract valued between $12,000 and $20,000. A maximum deposit of 5% of the contract price is allowed for contracts $20,000 or more. You can also be asked to pay for third-party expenses in advance, such as planning approvals and building indemnity insurance. 

Make sure the amount the tradie asks you to pay matches the quote or contract, and always get proof of purchase, like a receipt. More information

General Guidelines for Other Territories

For areas where specific guidelines aren't available, a good rule of thumb is to follow the general best practices:

• Smaller Jobs: Usually no deposit required, payment upon completion.
• Larger Jobs: A deposit of around 10% is reasonable.
• High-Value Projects: Check local laws, but deposits typically range from 5-10% of the total contract price.
• Documentation: Always ensure the deposit request matches the quote or contract and obtain a receipt for any payments made.

Legal and Consumer Protection

In Australia, consumer protection laws safeguard homeowners from unfair practices. Under the Australian Consumer Law, tradesmen must perform services with due care and skill. If a tradesman demands an excessively high deposit, this could be deemed unfair. Homeowners should be aware of their rights and seek advice if uncertain.

Red Flags to Watch For

While deposits are standard, certain red flags may indicate potential issues:

• Excessively High Deposits: Demanding more than 20-30% upfront without justification could be a warning sign.
• Lack of Written Agreement: Avoid tradesmen who refuse to provide a written contract outlining the deposit and payment terms.
• Pressure Tactics: Be cautious of tradesmen who pressure you into paying a high deposit quickly.

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When you find a tradesman, understanding what constitutes a fair deposit and clear payment terms is essential for a successful project. You can build a smooth and mutually beneficial arrangement by negotiating terms upfront, establishing clear milestones, and being aware of your consumer rights. Remember, a fair deposit encourages trust and sets the foundation for a positive working relationship, leading to the successful completion of your home improvement project.

Ready to take the next step? Check out our comprehensive guide for everything you need to know on how to find a tradesman.