Should You Pay A Deposit Before You Build

Should You Pay A Deposit Before You Build

This has become a very contentious issue in the building industry with more and more suppliers and service providers asking for deposits before they will lift a finger. On one hand it could be argued that the sub-contractor’s initial outlay is such that the return simply does not justify the risk and in some instances this is completely valid. And on the other, one cannot help but feel taken advantage of by paying for a service before it is rendered. What exacerbates the situation is that the financial institutions do NOT pay deposits, they only pay on progress.

Deposits paid to unscrupulous vendors essentially tie you to that vendor until such time as he or she delivers goods to the value of the deposit paid and if the correct checks and balances are not put in place before-hand, then there is a real risk of them not only delaying the project but ultimately delivering a finished product that does not measure up to your expectations.

If you are going to pay a deposit you MUST take cognisance of the following:

  • The advice of your building contractor who should not only be in a position to vouch for the quality of workmanship and integrity of the respective sub-contractor but should also be able to assist with the implementation of performance milestones
  • The track record of the supplier or service provider which should be verified by consulting with their most recent clients and, if possible, also engaging with their main suppliers
  • The willingness of the service-provider to negotiate the deposit structure and to consider direct payments to their suppliers for materials required under your mandate
  • The terms and conditions which form the basis of the supplier’s contract with you that, if suspect, generally are indicative of bad intentions

At the end of the day you will find that you HAVE to part with some money upfront, the key is knowing which service providers you can do this with which is why it is so important that you engage with a reputable building contractor from the outset.