Dealing with deposits
Reading time: 7 minutes
When you take on a home improvement project, especially a larger job, some tradespeople will ask for a deposit before the work starts.
Handing over money before any work takes place can make many homeowners uneasy and, while in the vast majority of cases the work proceeds as planned, there can be rare occasions where money is handed over but the work never materialises.
This guide talks you through how the problem can arise and what you can do about it.
Why tradespeople ask for deposits
Not all tradespeople ask for deposits, but for larger projects, such as extensions or loft conversions that will take several weeks to carry out, it is fairly common to pay some money up front.
Sometimes, this is just a token amount of a few hundred pounds, but in other instances, you may be asked to pay a larger deposit that forms a sizable chunk of the overall value of the job.
The main reason tradespeople give for charging deposits is that it allows them to purchase materials up front.
The other common reason is that it provides a small amount of cover for the tradesperson if you decide to pull out of the job - since they have blocked out the time for your project and may be unable to take on other work for that period, the deposit guarantees them some income for that time.
How much should a deposit be?
There is no industry standard for deposits, and different tradespeople will charge different amounts if they even ask for one at all. Anything from 5% to 20% of the total value of the job is fairly common - deposits that are significantly above that could be a red flag.
Tradespeople should be happy to explain the purpose of the deposit and provide you with a receipt when you’ve paid. On larger projects, a deposit is commonly the first payment in a series of staged payments that are made throughout the job on the completion of certain milestones.
A contract that details when payments should be made is an invaluable thing to have when working with tradespeople, especially on bigger jobs - find out more about quotes and contracts in our dedicated guide.
You’ve paid a deposit, but something is wrong
All cases are different, but there are a few scenarios in which homeowners can find themselves, for example:
- You’ve handed over the deposit, but can no longer make any contact with the tradesperson - they don’t answer their phone, or don’t reply to messages.
- The tradesperson is still in contact but keeps making excuses for why work hasn’t started, and you’re becoming suspicious that the work won’t ever take place.
- After handing over the deposit, the tradesperson has begun asking for more money before they start work, which can raise concerns that they don’t intend to start at all.
If you find yourself in any of these situations, you may not want to continue working with your current tradesperson, and instead get your deposit back.
Keep a record of everything
Ideally, you will have kept some kind of proof that the deposit was paid, even if it was in cash, with the tradesperson having given you a written receipt to show they have taken the money. This will help if you need to take further action later on.
Regardless of how you paid, and whether or not you have a written quote or contract in place, from this point on you should keep records of all your attempts to contact the tradesperson and any responses they make to you.
Even if you speak on the phone, write down the times of the call with notes of what was discussed.
Reclaiming the money
In some instances, you may be able to reclaim your money through your bank or credit card provider.
If you have paid by bank transfer, you may be able to ask your bank if they can recall the money - however, this will depend on the recipient agreeing to it with their bank.
If you paid by credit card, you may be able to make a claim under Section 75 of the Consumer Credit Act and get your money refunded.
You can’t reclaim the money - what else can you try?
If the tradesperson belongs to any trade bodies - for example, the Federation of Master Builders or the Guild of Builders & Contractors - you could contact them, as many will have mediation services that could help you settle the matter.
If you hired your tradesperson through MyBuilder, our experienced customer service team can provide impartial advice on the options you can take to help you reach a satisfactory solution with your tradesperson.
However, if your relationship has broken down completely, or you are unable to get in contact with them at all, your only option may be to pursue a claim against them.
Before you make a claim
Although the process of making a claim has been relatively streamlined in recent years, it is still a fairly involved process that requires compiling evidence and potentially attending hearings.
You will also be charged fees to make a claim which will not be returned if you are unsuccessful.
If you do win your case, there is still a chance you will not get your money back if the tradesperson is unable to pay. If the tradesperson has gone out of business or is personally bankrupt, it will make matters more difficult.
You can also check online to see if a person or business has been taken to court before and refused to pay.
Sending a letter before you take action
If you want to go ahead with legal action to reclaim your money, the first action should be to send a letter which outlines your claim, giving them a chance to respond - this is known as a letter before claim or letter before action.
This formal letter must comply with Pre-Action Protocol, and include certain details, such as the result you want, how you calculated your claim, and any documents you will be using to support your case.
You should also state that you are willing to try mediation if you have not already pursued it.
Your letter should also give a clear and reasonable deadline for them to respond - usually 14 to 28 days.
Citizens Advice has good resources for how to write a letter before action.
Making a claim
If you haven’t received a satisfactory result from your formal letter, your last resort is to initiate a civil claim against them.
Since you’re claiming a specific amount of money, you should be able to make the claim online through the Government’s claims portal.
Alternatively, you can download and fill in a paper form which you can post to initiate proceedings.
You will be charged a fee to make a claim, so check that it is worth your while to do - fees begin at £25 if you submit your claim online and are claiming less than £300, but rise to more than £400 for claims of up to £10,000. Fees are cheaper if you claim online, and are repaid to you if you win.
Once your claim is submitted
What happens next depends on how the tradesperson responds.
The threat of imminent action may be enough for them to settle the issue, meaning you get your money back.
They may fail to reply at all, meaning you can win a judgement by default.
Or, they can dispute your claim or make a counterclaim. In this case, you will be offered the chance of going through free mediation if you both agree, avoiding court, or you can proceed to a county court hearing where a judge will review your case and make a judgement - hopefully in your favour.
Peace of mind for your job
If you have any concerns about handing over a deposit before your next home improvement project, you can get peace of mind with MyBuilder Plus.
MyBuilder Plus is comprehensive cover for your job that takes away the stress and financial risk if the unexpected happens.
With insurance from MyBuilder Plus, you’ll be covered if the job isn’t completed, work is substandard, or if your tradesperson goes out of business - all without any excess or hidden fees.