How should we pay for an extension project?

Can you please advise what the correct practice is for paying a builder for an extension? We have an estimate of £47,000 for a two-room, two-storey extension to shell stage, with us completing the second fix. The builder is asking for an upfront payment before each phase, but we are uncomfortable with this. We suffered a massive financial loss 11 years ago when a builder on our previous self build went into liquidation during construction.

Despite being a member of the Federation of Master Builders, he was not paying his suppliers, and instead pocketing the cash. We did not see that coming! Can you please advise as to what is safest practice for us?

Arrange to pay in stages in arrears. If you wish to offer an initial payment up front as a gesture of goodwill, it’s up to you, but to pay up front in massive chunks can leave you vulnerable as you have already found out. If your builder is worth his salt, he will be able to buy materials on credit through a trade account, so he should be more than able to cover the initial costs involved in the commencement of construction work.

He will need to pay for sub-contracted labour so cashflow for him will be important, but to incentivise the build, link any payments to the work as it is completed in a series of smaller agreed stages. Ask him to break the work into discrete packages. For example: footings completed, oversite up to damp proof course, external walls up to wall plate, roof on and tiled, first fix joinery, electrics and plumbing, plastering/dry lining, second fix – which, in your case, you won’t need – and completion to the satisfaction of your appointed building control inspector.

You might wish to hold a small percentage (5%) back against any snagging issues post completion. is way, your builder knows he will be paid, but only when he’s done the work. Your part of the deal is to pay up promptly when the project has been completed to a point that you are happy with.