Q. We’re in the middle of getting our house renovated, and we’re talking to three contractors. Each one wants a large amount of money to start the job. Our architect also got more than a third up front, and we were concerned about that, too. Now the contractors want between 25 and 30 percent of the total cost, upfront, and won’t start the job without it. Why does it have to be so much, and how do we protect ourselves if they take our money and run away? Our neighbor had that happen to them. What if we hold back money? Do you have any suggestions?
A. Good question! The exchange of money should go hand in hand with a good contract, one that protects both parties. Payment creates good faith, and allows a company to devote its staff and resources.
It takes time to prepare plans — more than the average person realizes — due to regulations, problem-solving and a lot of limitations. Expecting an architect to carry the costs to pay their expenses as a favor to the owner is unrealistic. People often forget that the plans prepared, signed and sealed by an architect or engineer are a part of the contract to the contractor. Plans are a critical component, because they show what is expected to be completed by the contractor. Unfortunately, many people, including owners and contractors, believe that plans are a how-to manual for building. In fact, plans represent what the results are intended to be.
Not paying a down payment, upfront, gives the architect and the contractor very little ability to commit resources, including their time, to carrying out the first steps in their parts of the process to get you a meaningful result. Everyone has bills to pay, and expenses like overhead insurances, license fees and equipment costs, aside from groceries, mortgages and taxes. Expecting anyone to fulfill the tasks you hire them for without the ability to pay their bills is the beginning of misunderstandings and miscommunication.
Most government contracts I’ve seen include major delays in payment, from months to years, where it is expected that companies that will ultimately get paid far more than what a private project would cost have to wait. This waiting creates a situation in which companies either borrow money or take money from one customer to cover the costs of another customer’s project. In essence, not paying in a timely manner but expecting results creates a Ponzi scheme that nearly every company has to develop to survive. Small businesses take money from one customer to cover costs while trying to finish and get paid by the one before.
When you delay, underpay or shortchange the people providing a service, you’re part of the whole economic roller coaster that causes many businesses in your local community to fail in the first five years. Prevent this instability by looking for reputable companies, have a good contract and accept that you are half of a commitment. Good luck!
© 2022 Monte Leeper. Readers are encouraged to send questions to firstname.lastname@example.org, with “Herald question” in the subject line, or to Herald Homes, 2 Endo Blvd., Garden City, NY 11530, Attn: Monte Leeper, architect.