James Whitaker
Why Payment Structure Matters More Than You Think
Most disputes on building projects do not begin with poor workmanship. They begin with money — specifically, with a homeowner who has paid too much, too early, and a builder who is waiting weeks for the next instalment. Get the payment schedule right before a single brick is laid, and you remove the single biggest source of tension from the whole job.
The principle that protects both sides is simple: money should follow work, not precede it. Payments should be tied to stages that are genuinely complete and can be inspected, rather than to dates on a calendar or to vague percentages of an overall price.
What Good Stage Payments Look Like
A stage payment is a sum released when a defined part of the project is finished. On a typical extension or loft conversion, that might be structured as follows:
- Deposit: usually 5–10 per cent, to cover ordering materials and securing a start date. Be wary of anyone asking for 25 per cent or more up front.
- Completion of foundations and ground floor: the first substantive payment, released after building control has inspected the excavation and footings.
- Watertight stage: roof on, windows and doors fitted, external walls closed. This is often the largest single payment because it represents the most material and labour value.
- First fix: electrics and plumbing run through, plasterboard up, screed laid.
- Second fix and completion: sanitaryware, sockets, decoration and snagging finished.
The exact milestones will vary by project, but the logic holds: each payment should reflect work that already exists on site. If you are ever asked to pay for a stage that has not started, that is your cue to pause and ask why.
Setting Milestones You Can Actually Verify
Vague milestones cause arguments. "Roof complete" means different things to different people — felted and battened, or tiled and finished with flashing? Write each stage in language specific enough that you could stand on site and say yes or no without debate.
Useful habits include:
- Describing each stage with two or three concrete deliverables, such as "roof tiles laid, ridge fixed, lead flashing dressed and sealed".
- Allowing a short inspection window — 48 hours is common — before payment falls due, so you can view the work or have it checked.
- Agreeing in writing who signs off each stage. If a building control inspector or structural engineer needs to see it, say so in the contract.
- Keeping a photographic record at every milestone. A dated photo album on your phone is quietly one of the best dispute-prevention tools you have.
If you are not confident judging technical work yourself, a few hundred pounds spent on an independent surveyor to check key stages is money well spent on a project running into tens of thousands.
Retention: Your Safety Net
Retention is standard practice in commercial construction and worth insisting on domestically. The idea is straightforward: you hold back a small percentage of each payment — typically 5 per cent — and release it some weeks after practical completion.
On a £60,000 project, 5 per cent retention means £3,000 held back. That sum gives you real leverage if a fault appears during the first heating season, if a leak shows up after the first heavy rain, or if snagging drags on longer than it should.
A fair retention arrangement usually looks like this:
- Half released at practical completion, once snags are listed and agreed.
- Remaining half released after a defined period — three to six months is typical — provided no new defects have emerged.
- Clear definition of what counts as a defect, so the money is not held hostage over minor cosmetic quibbles.
Reputable builders rarely object to retention when it is explained properly. Those who refuse outright are telling you something worth hearing.
Variations, Extras and the Dreaded Day Rate
Almost every project changes. A wall turns out to be load-bearing, you decide to move a radiator, the tiles you wanted are discontinued. The question is not whether variations happen but how they are priced and paid for.
Agree a process in advance: any extra work should be described in writing, priced before it starts, and confirmed by both parties — even if that is just an email. Avoid letting a builder drift onto a day rate for significant items, because costs become impossible to predict. Where day rates are unavoidable, ask for a cap and a written estimate of days required.
Also decide how variations affect the payment schedule. If an extra adds £4,000 of work before the watertight stage, does that change the stage payment? Sort it out at the time, not at the end.
Practical Rules to Carry Into Every Contract
Before you sign anything, make sure the payment terms cover the following:
- A full schedule listing every stage, its value, and what must be finished before payment.
- Retention terms with amounts and release dates stated in figures, not generalities.
- A written variations procedure with a named person authorised to approve extras.
- Payment method and timing, including how many days you have to pay once a stage is signed off — seven to fourteen days is reasonable.
- Insurance and certification details, so you know the work is covered if something goes wrong.
- A dispute route, such as an agreed mediator, so disagreements do not stall the build.
Finally, never pay in cash without a receipt, and keep every invoice, stage certificate and email in one folder. A well-documented project is a calm project. Structure your payments carefully at the start, and you and your builder can both get on with the job of building something good.
