Entering into a JCT agreement for a construction project is a great first step to ensure there is clarity and a framework to the project. They are used to protect all parties to a construction project, but so often do not include clauses for proof of affordability to the service provider such as the contractor, sub-contractors, suppliers etc. It is becoming quite common practice to include deposits in such agreements to help cash flow for contractors or provide a proof of affordability for part of the project.
Payments to contractors and tradesmen during your JCT contract project shouldn’t be done whereby unnecessary risks are taken by you or your appointed company or sole trader. Those demanding large upfront deposits may be looking to take advantage of you, but equally may be worried you are one of the many terrible bad payers. There are clear risks both sides. Many contractors have experienced this risk and now demand deposits upfront which creates an unfair bias in their favour. Asking contractors to work entirely in arrears tips the dial too far in a clients favour which is the standard offered by JCT.
Pay-Trade mitigates this two sided risk by providing 100% proof of affordability at outset by a deposit into the FCA Regulated Project Wallet held against the JCT contract and payments are released from the Project Wallet to the company or sole trader once a milestone, stage or project has been completed.
Retentions can be kept in the Project Wallet for the agreed amount of time post project completion to ensure snagging works and defects are carried out before being paid for.
Variations can be agreed online, adjustments made to increase or decrease the Project Wallet and projects quickly moved back into progress. This ensures all parties remain protected throughout.
This process ensures the contractor or tradesman is fully protected and has proof of intent to pay and affordability, and ensures the home owner does not release money from the Project Wallet until professionally completed work is delivered. This ensures neither party has an unfair bias over the other, and creates an unparalleled level of trust and security to the process.
The Pay-Trade system allows for architects acting as contract administrators to create and administer projects for you and your chosen contractor or tradesman. This is in our view a more robust setup as it allows for independent valuations and checks of the work, in addition to any provided by building control.
Where deposits are demanded for cash flow purposes, we at Pay-Trade would urge caution, but remind everyone that construction is an expensive product to deliver, and many smaller but very professional contractors and tradesmen simply don’t have the funds or credit accounts to work entirely in arrears. Where deposits are necessary, we would suggest a credit card payment is used to provide buyers with section 75 protection. This is likely to incur a payment charge but is likely worth it for the peace of mind it provides. All other payments are then made via The Pay-Trade Project Wallet.
JCT Contracts
Protect your JCT Agreed Project
1 – Request the architect or contractor or tradesman submits the project and JCT contract via Pay-Trade for mutual protection and full transparency.
2 – All parties agree to the contract and any drawings and the buyer pays the full project amount, or initial agreed stage amount (for large projects where perhaps the total amount isn’t yet available) into the Project Wallet. Once the money clears with the Project Wallet, the project is marked as Work In Progress.
3 – The work is carried out to a completed milestone, valued stage and a payment release is requested either by the contractor or tradesman, or by the appointed architect by way of a valuation certificate. The buyer can then review the work carried out and release the amount requested by agreeing to and permitting the release of money from the Project Wallet, or where not happy, raise a dispute for resolution.