How much should you give as first deposit to your contractor?

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How much should you give as first deposit to your contractor?

contractor deposit

Picture it: you’ve crossed the hurdle of finding a contractor to work on your home. You think you’ve accomplished the hardest part of the mission. Then, you realize that you’re faced with a tough decision. How many of a deposit should you pay your contractor?

Seemingly a simple question, determining deposit payment amounts is actually quite a tough decision to make. Apart from reserving the contractor’s services for your job, the deposit acts as a binding trust agreement between the client and the worker. Reducing the chances of non-payment at the end of the worker, while contracting the worker for the client’s job.

Therefore, deposit amounts vastly vary and typically depends on the person hired. In Canada, for example, the law stipulates that a contractor cannot request a deposit in excess of 10% of the total cost of the job.

In fact, the Canadian government actually recommends that you should not pay anything more than a CAD$1000.00 deposit irrespective of whether the amount is significantly less than 10% of the complete job.

In the United States of America, laws governing how much a contractor may request as a deposit change depending on which state. Legally, in Maryland, a contractor is permitted to request a deposit equal to the value of one-third of the total job cost. California, on the other hand, has different laws that govern a contractor’s deposit amounts. It would be illegal for a contractor to request either solicit or accept a deposit in excess of 10% of the total cost of the work to be completed.

Having said this, there is no hard and fast rule when it comes to determining how much of a deposit should be given to your contractor. You need to revise the laws which govern the state in which you’re located to find out whether there are any legally binding declarations concerning deposits for contractors. If there are none, be open and willing to your contractor’s demands.

Also, take into account the nature of the job being done and whether it is extremely difficult for your client. Giving more money up-front as a deposit may motivate your worker to push through a difficult job. That being said, it is not wise to give anything more than 50% of the total job’s cost as a deposit, for fear that the contractor may pocket your money and never complete the job.


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