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The Magic of the Payment Holdback

If you’re in the middle of a project and considering tweaking the terms of the contract or adjusting milestones, one of the best things you can do to protect your interests is to stipulate that there will be a holdback of final funds until all items are completed to your satisfaction. The more concerns you have about your contractor, the more you should hold back until you are fully satisfied. It’s amazing how fast things can get done when there’s money on the line!

And, while holdbacks are often used by homeowners to give leverage over a contractor, they can also be a way to give the contractors a hand. For example, if the supplier made a mistake and shipped two light fixtures instead of three, and the contractor has to wait a week to install the third, you may choose to pay them the majority of the final payment but hold back a few hundred dollars until the final light is in and installed. This protects you while also helping out the contractor and their subcontractors.

On large projects, you may also find that it makes sense to tie payments to a home improvement loan. This allows you to have the bank act as the “bad cop,” because draws won’t be released until construction milestones are fully met.

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Escalation

Lastly, you can consider escalating the situation. Threatening to give bad reviews on sites such as Yelp, Angie’s List and the Better Business Bureau can quickly bring things to a head, for better or for worse.

Ideally, you’ll get along with your contractor and they will be motivated to do excellent work both out of pride in their craft and goodwill toward you. But, if the only way you can ensure that your job is done correctly is to hold a threat of poor reviews or slow payment over their head, you should be willing to do so. If things are going very badly, don’t hesitate to contact a legal professional. By the time you get to that point, it’s a good idea to keep a very close eye on the contractor’s work in order to make sure they’re not cutting corners. If you don’t have the training to do that yourself, ask around and see if you have a friend who can help out. Check out the 10 home improvement projects for which you should always hire a pro.