Don’t Pay Contractors Up Front

You may have a contractor ask for upfront payment. Usually, they’ll tell you they need the money to purchase materials so that they can get started. Contractors always say it’s to buy materials or mobilize workers, but it could also be to finish another job and they’ll never tell you that.

How do you guarantee that your money won’t end up on someone else’s project? Don’t pay contractors up front.

If you pay the contractor up front, how do you make sure they’ll actually come back? The law gives the contractor the legal right to lien your property for work they did on your house, to protect the contractor from owners who do not pay their bills. Give away money though, and watch how hard it is to get it back if the contractor decides to walk away, as one of our members found out prior to finding us:

Her mother wanted the exterior of her house painted. She contacts a local painter who was recommended, and asked him to come and give her a price. They meet and talk and become fast friends. He tells her he can do it for $5,000 and needs to have half up front. She asks for references, which he gives her. She calls them to inquire, and they all tell her the guy did a great job. So she meets with him and says she can pay for it all up front.

He says, “No, no half is fine,” but she insists and he leaves with a check for $5,000. A week goes by and my client calls the painter for her mother, to find out what’s going on, and is told he is getting materials together. Several weeks later, he still hasn’t called or showed up to do the work, and the mother is panicking. She ends up having to chase the contractor down with phone calls and letters, files a complaint with Better Business Bureau, and eventually takes him to small claims court. After months of stress, time and money spent, and despite a court win, the mother has yet to get her money back. Worse, this guy is now out there operating his ‘new’ painting business.

The time… Gone. The money… Gone. Only frustration and hurt remain.

This is a common and predictable story. There are endless examples of contractors that have taken advantage of people, shuddering one business and opening another. to continue as usual. Sure they could have pressed on, spent more money, more time, gotten an attorney, tried to pierce the corporate veil, gone back to court, maybe gotten an injunction, then payed the sheriff to go collect, and so on. But, at what cost?

The real lesson is this:

Keep the money in your pocket until the work is satisfactorily completed. Remember, money is incentive. If you have the money, the contractor’s incentive is to work to get it from you.

Some may try to talk you out of it, most will work for it, and many will work both angles to some degree to get it. The bottom line here is that maintaining control of the money will help ensure you maintain control of the project. In general, if you give up the money, you give up control.

TIP: Money = Incentive: Don’t pay contractors before the money is due.