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When do contractors get paid for their work?

On Behalf of | Nov 23, 2022 | Construction Law

When someone is buying a product, they pay for it at the time they receive it. But when that product is something like a new home that has to be built, it can take months or even years for this process to play out. It depends on the size of the project and many other factors.

From a payment standpoint, this can complicate things. Should a contractor get paid at the beginning of the job? This would give them some security, knowing that they were going to be paid for their time and they could use the money to buy materials. It would also be a risk for the homeowner, who would be paying for a house that didn’t exist. However, if the homeowner pays once the job is complete, that’s a risk for the construction company, which could do the entire project and then not get paid.

Multiple payments

What will often happen is that contractors will be paid multiple times. For instance, you may give someone a quote and request a down payment if they choose you to do the job. They have to pay the down payment at the beginning, but then they have to pay the full balance listed in the contract once the project is complete and the home has passed inspection.

Additionally, contractors will sometimes have their clients buy all of the parts and materials for the project. This can reduce what they have to pay. Alternatively, the contractor could buy these parts and materials and then bill the client, However, not all clients have the cash on hand or want to be that involved in the process.

However you would like to get paid, the key is to create a strong contract. When disputes arise, you need to know about your legal options.