Contracts

Started by ReneeC4 • 4 replies • 1220 views

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ReneeC4 (California)
Posts: 50

Posted:

We are about to add some hardscaping to the common grounds and the labor to have it installed is $50,000. They are asking for a 37.5% of total payment to start, followed by a second payment of 25% and a final payment of 37.5% once the job is completed. Does anyone know is a 37.5% is too much of a "start payment". In reviewing contract requirements for California, I ran across this...

The Contractors State License Board (CSLB) is alerting California consumers who are considering hiring a painter, landscaper – or any other type of construction contractor – that it is illegal to ask for or accept a down payment of more than 10 percent of the total home improvement contract price or $1,000, whichever is less.

I went to the website and read the same thing.
(8) If a downpayment will be charged, the details of the
downpayment shall be expressed in substantially the following form,
and shall include the text of the notice as specified in subparagraph
(C):
(A) The heading: "Downpayment."
(B) A space where the actual downpayment appears.
(C) The following statement in at least 12‐point boldface type:
"THE DOWNPAYMENT MAY NOT EXCEED $1,000 OR 10 PERCENT OF THE
CONTRACT PRICE, WHICHEVER IS LESS."

Is this for HOAs?

SheliaH (Indiana)
Posts: 6,964

Posted:

You might want to call the contractors licensing board and ask them - there may not be any requirements for HOAs since this would probably been seen more as a business to business agreement.

That said, from my consumer protection days, I remember us telling people it's really not a good idea to give any contractor a huge down payment because there's no incentive to compete. I saw instances where someone would plunk down 50% and then the contractor would say something like "I can't finish unless you give me more money", when in fact he/she hadn't even done 50% of work to that point. Most of the time, the contractor would use the money from the new job to finish the old and then grab more loot from the new client to finish that job (especially if he/she couldn't find a third customer to start the same old thing). Or they would just disappear, and the consumer would have to get someone else to finish the job and then chase after the old guy.

Now keep in mind this is for a homeowner who's getting the work for his/her own personal use. In the HOA's case, take a closer look into the contract terms to see what the contractor is doing that may warrant a 37% down payment (if you're talking about several acres of land to work on, this percentage may be justified). Considering the association is about to spend $50K, you HAVE looked at more than one contractor, haven't you? If not, why not?

In our association, we had a policy where contractors who wanted a down payment over 25% had to start the work within 7 days from the date the contract was signed, otherwise we went elsewhere - that may also help you out.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

TimB4 (Tennessee)
Posts: 21,059

Posted:

Contracts can be negotiated, even payment times.

We did a 33K project recently and were not required to put up any money until the job was complete.
If the contract wasn't signed, you may want to find a different contractor, one who is more trusting (and perhaps on better financial footing to not need partial payments).

ReneeC4 (California)
Posts: 50

Posted:

Thank you for you answers. I will call the CSLB tomorrow and see if they have anything to add. I will let you know what they say.

There is no reason why they would need that much up front in regards to our project. We have already bought the materials.

I know there was other offers, but I didn't see the other offers themselves as that was a different project/committee. This current contract was handed to the Architectural committee to look over. It's not that the Architectural committee needs say on this, but there was general concern amongst the homeowners expressed in the meeting, so they thought new eyes on it might help.

SheliaH (Indiana)
Posts: 6,964

Posted:

You may not think they need that much money up front and perhaps they don’t, but you haven’t stated exactly what they’ll be doing and how much common area is involved – if it’s a huge piece of land, requires special equipment/expertise to install the materials, or part of the work may have to be delayed, depending on the weather. That may or may not affect the price, so keep looking at the contract details to get more information. You might also want to talk to the committee members who looked at the other offers.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

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