Builder Payment Schedules: How and When to Pay

Getting the payment schedule right protects both you and your builder. Here's how to structure payments fairly.

How you pay your builder is one of the most important aspects of your building project. Get it right and you protect yourself while keeping your builder motivated. Get it wrong and you could end up overpaying for incomplete work or struggling to get snags fixed.

The Golden Rule

Never pay more than the value of work completed. This is the single most important principle. If 30% of the work is done, no more than 30% of the total should have been paid.

Stage Payments

The most common approach for residential projects is stage payments tied to milestones:

1. Deposit - 10% on signing the contract (to secure your slot and cover initial material purchases)
2. Foundations complete - 15%
3. Walls to plate level / roof structure - 20%
4. Roof complete, windows in - 15%
5. First fix (plumbing, electrics, plastering) - 15%
6. Second fix and decoration - 15%
7. Completion and snagging - 10% (retained until snags are fixed)

The exact stages will vary by project type. For a simple extension, you might have fewer stages; for a new build, more.

Retention

Retention is money held back to ensure defects are fixed. Standard practice is:

• 5% retention on each payment, released half at practical completion and half after a 6-12 month defects liability period
• Alternatively, hold the final 10% until all snagging items are resolved

Retention gives your builder a financial incentive to come back and fix any issues.

Red Flags

Be cautious if a builder:

• Asks for more than 10-15% upfront deposit
• Wants large lump sums before work reaches the corresponding stage
• Asks for cash payments with no receipts
• Refuses to agree a written payment schedule
• Becomes aggressive or threatens to stop work over payment timing

Practical Tips

• Put the payment schedule in the contract - never rely on verbal agreements
• Inspect work before paying - or have your architect/surveyor do it
• Keep records - photograph progress and keep all receipts and invoices
• Pay promptly - once work is verified, pay on time. Good payment builds trust
• Use bank transfer - creates a clear paper trail