Would you pay tens of thousands of dollars to a complete stranger for work they haven’t done?

It’s a question that often crops up on Fair Go, especially when hearing from people who have entrusted a tradesperson with a hefty deposit, only for the job to turn to custard and the money’s long gone.

John Green told Fair Go there are “good reasons and bad reasons” why contractors ask for deposits.

He founded the Building Disputes Tribunal – a service that specialises in ironing out problems with building and construction projects, ranging from $1500 to $100 million.

Whatever the amount, Green says securing materials isn’t a reason to be paying people up front.

“Any contractor worth their salt will have access to credit and that’s how this industry has operated, certainly in the last 50-odd years that I’m aware of,” he explained.

But he contends that contractors can be hung out to dry, like when they set aside time to do a job and turn away other work.

“At the last moment, the client or homeowner will obtain a better, sharper quote and simply tell them that they’re not needed.”

The Concrete Contractors Association agrees that deposits offer job security – if a customer won’t pay upfront, they might not be able or willing to cover costs when the project’s completed.

Master Plumbers members also request deposits, especially for major projects like full bathrooms or renovations. Some products, like vanities and showers, are also made to a specific size and can’t be returned to a supplier.

Floor NZ says contractors working for flooring stores don’t ask for a deposit, but companies or contractors supplying the flooring might.

The same goes for the Roofing Association and it says it can be a way for a customer to secure their place in the queue.

But this is new ground for Master Painters, who say in the past its members weren’t encouraged to ask for a deposit. However, since Covid-19 hit, it says deposits are “badly needed”, with painters unable to cover wages and materials in advance.

In terms of an amount that would be appropriate for a contractor to ask for, Green doesn’t believe there is one.

“It’s often done as percentage and in some cases, it’s just a nominal lump sum that someone thought was a good idea.”

The Concrete Contractors Association told Fair Go that 50% “seems to be the norm”, but it can vary.

Plumbers also say up to half is reasonable, although regular clients often aren’t asked for a deposit due to the ongoing relationship with the contractor.

Painters ask for up to 30% but advise people to be wary if asked for over 50%.

Floorers couldn’t put a figure on it because operating costs can be so different from one business to another but say comparing a number of quotes for a job should give someone a fair idea.

Roofers also couldn’t give a set percentage but they say whatever it is, make sure it’s not paid in cash.

Green told Fair Go it’s not the paying of a deposit that’s the problem, rather it’s where the money is being kept.

He suggests a middle ground, where the funds are held in a solicitor’s trust account or similar, so the contractor is assured the money is available and customer knows it’s secure until the job is completed.

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