When To Pay Contractor

By Tim Carter
©1993-2010 Tim Carter

Summary: Pay your contractor for construction costs when each job stage is completed correctly. Agree to a fair payment schedule before you sign the contract.

DEAR TIM: My contractor has asked to get paid in three installments, 1/3 at each time. Is this fair for both myself and my contractor? J. D.

DEAR J. D.: Not necessarily. The best way to pay your contractor is to make agreeable periodic payments based upon the amount of work he has completed. Do not pay for work which has not been performed.

Before your job begins, you must obtain from your contractor a breakdown of the costs of your job. This breakdown will list each phase of the project (demolition, rough carpentry, electric, drywall, contractor's profit and overhead, etc.).

When your contractor submits a bill to you, he must list each category and the amount of work completed for each item. You must verify if it is accurate. Make sure that he is not asking for too much money in any one category.

The contractor is entitled to collect a portion of his overhead and profit at each billing. However, he should only receive an amount in proportion to the percentage of the job which is in fact complete. You should always hold back a portion of the contract amount until the entire job is complete.
Remember, you must always have enough money in your possession to finish all uncompleted tasks as well as a proportional amount of the contractor's profit and overhead. This arrangement is fair to both parties.