I was shocked to notice that now it is a norm for a renovation contractor to get 50% deposit/preliminary sum for them to accept and start on their renovation project. As long I am in construction industry handling even billions ringgit value for a project, the norm for the preliminary sum is always less than 10%. Thereafter, the payment shall be based on the progress work of the project.

I am not sure why a lot of the consumers are accepting 50% deposit as this really expose them to the risk of contractor running away without even starting the project. Bear in mind the contractor does not only collect the money from you but a lot more people out there like you who are giving in to their request for 50% deposit.

This disadvantage arrangement reminds me of the mega failed pipeline project in Malaysia whereby 80% payment had been made but only 13% pipeline is completed. Therefore guys, please be prudent and don’t give in to the 50% deposit/preliminary sum to the renovation contractor.

Sometimes, the contractor will give excuse that these 50% sum would be needed to buy materials and etc. You should be worried with this kind of contractor because their cashflow is not in a good position and would be at risk to run away. This risk should not be carried upon consumers.

Therefore, if everyone does not give in to the 50% deposit then we can filter out unscrupulous renovation contractors and thus leaving the good renovation contractors which will finish the work and being paid on their project progress. Heck, even banks pay developers based on Housing Development Act progress payment which do not have the nonsense 50% deposit.

That's all from me guys

NO, Don't pay. after he get run away.

Just tell him done how many % work only pay how many % money, if he not agree , just tell him to FUCK OFF.

many out there waiting, many more choice.

Where did you get this idea that it is a norm to pay 50% for many renovation projects? May be it is a norm for gullible and stupid people but for sure it is not a norm fr myself and most people that I know. 10-20% deposit may be acceptable for mobilization and opportunity cost should the owner changes his mind of engaging the contractor. Buying renovation materials/equipment should never be the excuse to collect money upfront. These the owner can pay based on when these are delivered if the contractor insists.

The payment should tie to the deliverables. This is true in every business and industry.

50% is con job contractors. Legit ones won’t ask for 50%

luckily mine was 30-30-30-10..

If a contractor can't even cough out money to buy materials, he can go fly kite. Only dumbass part with 50% deposit.

To be fair, (commenting from the point of a contractor), it depends on the scope of works as well as the project sum. I personally handled multi-million construction project before as well. Now, I am just running a start-up ID renovation company.

And logically, the bigger sum of a contract, it is more ideal to pay by stages and less deposit upfront. And preliminary is not even the same as deposit.. not sure why you compare them as they are not equivalent. For a big commercial project, even preliminary is claimed by stages according to progress.

On the other hand for a small project (depending on work scope), it is understandable why the renovation contractor will likely request the amount of 20-50%.

For example, if your renovation work is RM10,000 comprises painting and built-in cabinet works only. Without taking a fair share of the deposit, the contractor takes great risk to fabricate the cabinet.

Scenario 1: Owner pay right after the cabinet completely installed.
- Happy endings for both owner and contractor

Scenario 2: Owner somehow refuse to pay a single cents after work is done
- Total loss to contractor. Assume the contractor only earn 10% of each job, it will take another 10 jobs of similar size for the contractor to recoup the losses.

Scenario 3: Owner only pay 80% of the work and delay balance 20% of payment.
- Not the worst case for the contractor... But let's say 3 out of 10 customers delay payment. Can you imagine how much additional cash flow the contractor will need to run the business?

What I am trying to tell is, you have to see the situation from both sides, especially you mentioned that you are working in the construction industry.

For big project, both clients and main contractor are bound by legal compliance and there is form of contract. Those additional legal costs are to be borne by the client. Then, the main contractor will have to get a performance bond and so on.

So, it is like comparing apple to orange. If you are handling billions project, I think you may aware that for certain M&E service like lift, they do take up to 30% deposit before they even lift their finger to put a purchase order of material from China

Renovation works simply don't have the luxury to prepare all these legal documentation, other than a simple quotation that is agreed by the client and contractor.

It is a give-and-take situation.

I do understand from the standpoint of an end-user, it feels very risky to pay the contractor anything before they even start work.

As long as you do your due diligence, communicate with your contractor, you could at least sense whether they are honest. Check their track record, whether they are a properly registered company, are they registered with CIDB etc.

By the way, just to share. For our company, we normally take 30% of the deposit upon confirmation fo work. Then, depends on the project sum, we will either claim by stages or claim by weekly progress.

For a larger sum project, we can reduce the deposit to 15-20%. That just makes sense. 30% of RM10,000 is only RM3,000, while 10% of RM500,000 is already RM50,000. Hope you understand what I'm trying to convey.

And sorry for the lengthy mumbling, I just hope I clear up this contractor vs. client deposit thing a bit.

You made some good points and I do agree that for highly specialized projects (custom made cabinets, non standard automate, etc) the contractor may request for more amount of deposit. 50% may be acceptable if the "product" can't be resold if the customer refuses to accept (for whatever reason not the fault of the contractor).

That said, most renovation work include labor cost and generic materials (and yes that includes paint) that can be reused for other customers. I wouldn't give 50% deposit to contractors as a general practice. There is a difference between customers and contractors: for contractors you don't know where they live so if they are gone you got nothing to find them. For customers you know where they live or at least where their property is. Yes some customers are assholes but they are ways you can find them until you resolve the issue.

Recently I have done my library cabinet. This is custom designed wall to wall and floor to ceiling. This is the only work and the value is less than 10k. My contractor asked for 30% deposit which I think is very reasonable.

Another example. My tinting cost is much more than 10k. The supplier was asking for 50% deposit. I told her 30% and remaining paid upon completion of the work. No problem there as well.

Since we are talking about renovation projects that are without legal contracts, trust is most important. If trust is low contractor may request for 50% deposit. In most cases, that shouldn't be and customers should be well informed to insist reasonable deposit amount. 50% should be limited to special circumstances.

Yea, I agreed with you. It is totally depend on work scope and project sum.

Just wanna share the story from the other sides as well because I see all the responds are being too negative regarding the contractors.

I was abit off topic from the "50% deposit" though in my previous comment. I don't practise 50% deposit as well.

It's depend on the total quotation sum actually, if the total Sum is less than 20k,the 50%down-payment is still acceptable, more important thing is there is a official black and white contract with all the T&C and payment terms writen down between client and contractor.

For normal renovation works that is mostly more than 30k, a 20-30% down-payment is considered normal and market standard.

This post has been edited by ehwee: Feb 23 2021, 11:08 PM

You can't be serious? I really want to know how many of your projects below 20k that you have legal contracts with your customers?? If you have a contract then you can even pay 100% down without any problem. We are talking about the reality of most if not all renovations (especially those that are below 20k) are performed without legal contracts.

To have a legal enforceable contract requires time and effort to review the terms and conditions. Many renovation contractors are not making big enough margin to talk about liquidated damages, performance bonds, etc. You need lawyer(s) to review and finalize the contract. Of course one can argue to have a simple standard contract but whose's standard contract to be used? Moreover, each renovation project is different and there is not likely a single standard contract can be used.

Usually I collect 100% for materials first. Once paid, will deliver the materials to site. If the client decides to change contractor, no loss to me because materials already paid for.

To clarify, what I meant contract was proper black and write written agreement between owner and the contractor, not the legal enforceable contract. .

Of course small project like just asking contractor to do a 8k kitchen cabinet won't do legal enforceable contract like you said.

Yet at least there is a written quotation copy with the contractor signature and company letter head.

I know many owners just accept a hand writing quotation and make the down-payment base on verbal trust, if this is the case a 50% down-payment will be a risk for end user.

This post has been edited by ehwee: Feb 23 2021, 11:48 PM

I think you are a little naive. Most runaway cons are using really professional letter head, proper business cards and "official" quotations and "signatures". All these doesn't mean anything. Even if these are real and if there are disputes a quotation is not a detailed scope of work and you can't argue legally in court. I can quote you that I will build a wall or a cabinet of size x and y respectively. But in quotation there is no detailed specs and description of the wall or cabinet.

Instead of this, one will be better off doing reference checks or using contractor that are recommended by friends/family/neighbours. Nothing beats a proper research and I also amaze at most people asking renovation contractor contact here are so lazy to ask around to get a contractor that his legit. Like these are the people that also give 50% downpayment for the work.

contractors want to have secure clients / customers too..
anywhere it can be negotiated..and also consider the project sum..

50% is consider too high..

yes. depending on overall value of the project/renovation..

example. mine is around 35K project.
gave initial 5k first... later as work progress.. I give money.. like 3k, 5k etc. weekly basis...

In big projects, in addition to less than 10% preliminary sum / deposit, client protects it's interest by requesting performance bond in the form of bank guarantee which can be quite a large sum from the contractor.

https://www.theedgemarkets.com/article/jaks...estimated-rm50m

Therefore, you can see that the risk should be on the contractor not on the client.
By paying 50% deposit, you are putting a risk on yourself as a client and the contractor in on risk free.

it depends how's the agreement for the project.

few millions and above projects normally will bind to an official contract with legally act and any dispute will go for litigation, arbitration, adjudication and whatsoever kind of negotation.

It is actually depend on what kind of contractor that you're referring..

Let's say cabinet contractor, if they have proper shop or well known one, it's possible. You will have quotation with details listed and itemised.. you really have to pay 50% after everything agreed including size and colour.. after installation then 40% and finishing work done the remaining 10%..

Every business model are different. Can't say people going to scam you. Unless you are referring freelance and unknown contractor with office or retail shop one.. that one based on your item judgement..

I just encounter a kitchen cabinet contractor. The price is attractive. But they had no showroom and office. Only have a factory for you to visit.
When asked to visit on-going project, they say management not allow due to covid-19.
They had proper quotation with letter head, have a proper facebook page.
They asked to pay 50% for deposit.
In the end I choose not to go ahead as they have little to no review in everywhere.

This post has been edited by winter-X: Mar 6 2021, 08:25 PM