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Question DetailsAsked on 11/4/2016

A contractor asked for $1500 on a $4000 job - is that legal?

A contractor I located wants $1500 before starting job on 11/14. I need to know if that is reasonable and is that the law in Texas. I thought it would be 10% making it $400.00. Also, shouldn't reputable contractors not have to charge upfront fees?

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2 Answers


Answer at other post here -

The reason for the deposit can be one or more of the following, depending on the vendor and type of job. Note if we are talking a "deposit", this is not an up-front "fee" - it is a deposit or advance payment of part of the contractual amount you will owe on the job:

1) by making the person pay a deposit, it "locks " them into the job mentally, reducing the chance of them cancelling - especially if the deposit or a portion of it is non-refundable under the contract. This deposit to "hold the date" for the job to commence is a strong inventive in many cases, especially for contractors who work a limited season and want compensation if a client cancels and they then have to find another job to fit that specific timeslot, which adds uncertainty to the firm's operation and income.

2) commonly the deposit money pays for up-front planning and ordering of materials before the actual on-site work begins, especially if the job involves long lead time items - custom built, specially imported, etc.

3) many small contractors do not have much operating cash, so this provides up-front money to buy materials. Also, if they have to pay for initial materials and for preparation labor upfront out of pocket, those are funds they are either paying interest on (operating loan money) or working capital that they are losing interest one using it on your job - so if they can use your deposit money instead that is money they are not "payuing" for the use of. Some push the limit (or violate the law in many cases) and do not hold those funds specifically set-aside or in trust for that job, but use it to fund on-going projects - living hand-to-mouth and basically "kiting" or "pyramiding" the funds. This is illegal in many areas but still happens a great deal - and gets some contractors and startups into trouble because they take more and more deposits and use the money to cover current costs on jobs they are not making a profit on, so they are not generating working capital to use in the business, and dig deeper and deeper into a hole, eventually going bankrupt and a lot of people are left with unrecoverable deposit monies. That is one of the most important reasons for requiring contractors to have current Bonding and Liability Insurance.

4) for scammers, a deposit they can take and skip out with is a simple way to get money - there are some storm-chaser "companies" including the famous gypsy families for instance that go around the country following disasters, taking many deposits (or even full payment in advance) for a week or so in a given area for roof or siding repair and such, then skipping out with the money and doing little or no work. Obviously, this sort of risk is one of the main reasons you don't give a large deposit upfront without specific justification (like to pay for specifically invoiced custom ordered items).

For a job starting imminently, I would suspect he intends to use the $1500 predominately for up-front materials purchases - is a high percentage for normal remodel work, but if cabients or bathroom remodel or replacement of flooring say, that is about the right percentage of the total job for materials.

If you are concerned about the $ amount but not the contractor, you could try negotiating a smaller amount or giving him the $ based on actual purchase receipts as soon as the materials are onsite for instance.

Answered 4 years ago by LCD



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Answered 4 years ago by Member Services

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