When to or when not to pay contractors

[Charles Bailey]

When should you pay a contractor? Should you pay them in increments, with a deposit in the beginning, again midway through the project and lastly once the project is complete? Or is there a better way to protect both parties?

[Bruce Woodruff]

Quote from @Matthew Paul:

When hiring a contracting company the majority require a minimum of 1/3 deposit 

Not only is this not smart, it is not even legal in most states. I never did this and no Contractors I knew would do this. You give some unscrupulous Contrs 1/3 up front and they'll just take off. On a $600k  project, you're really going to write someone you don't know a check for $200k....?

Give no money up front. Your Contr should give you a payment schedule detailed in the contract. The fairest and safest way to do it is have the Contr submit an invoice at the beginning of each phase of work, i.e. framing or electrical, and ask you for small amount to help them pay for materials so they aren't financing your project. Then when that phase is complete - and inspected - you will get an invoice for the balance due on that phase. 

So as each phase is complete, satisfactory and inspected, it is paid in full. Everybody is happy and the money is where it should be....nobody is shorted or holding back money.

If you need info on how to do this or the documents used, just PM me.