When do subs get paid?

nhbasketsMarch 30, 2014

We are purchasing a home in a 55+ development. When we got on board, the house was only framed, so we have been able to customize to our wants. We will be purchasing the completed house, so the builder has been carrying the construction loan.

One big change we made was to go with our own kitchen designer rather than the builders cabinet maker. This has caused ongoing complaints by the builder, as things are not going in his normal cookie cutter fashion.

When we ordered the cabinets, our KD required a 50% deposit with the balance due upon delivery. We ended up paying the initial deposit from our deposit on the house. Cabinets were delivered this past Tuesday so our KD asked about obtaining the balance due. Her pricing was based on a cash deal so we were able to benefit from this.

The builder has informed us that they do not pay any of their subs until closing, that way they have leverage for uncompleted work. Is this normal? We won't be closing until mid-May.

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Our subs get paid the 15th of every month from our builder. We write a check to our builder the first week of the month for the work that was done the month before. He then turns around and pays all the subs for their work. I can't imagine them all having to wait until we close on our house.

Good luck!

    Bookmark   March 30, 2014 at 4:31PM
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If we go out on our own and pick a sub then we pay in full upfront and get reimbursed by the bank the following month. Our GC floats the payments to his subs but we did a few outside of the contract that we manage ourselves. I would pay your KD and then look into getting reimbursed with all the other subs at the end if that's how your GC does things. I have not heard of subs being paid at the end of the build but at the end of their portion rather.

    Bookmark   March 30, 2014 at 5:02PM
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Our subs get paid by the 10th of each month. We've paid some subs ourselves if we had a unique situation. We either were reimbursed by the bank (who holds our construction loan) or we paid out of our own funds. However we knew these arrangements before we started building.

I hope you find a remedy that works for you, the KD and the builder.

    Bookmark   March 30, 2014 at 5:26PM
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You are being punished for eliminating the kickback from the contractor's favorite kitchen cabinet supplier.

It might be normal to retain some portion of a sub's billing until the end of the project but no sub could make a living financing the GC's project.

    Bookmark   March 30, 2014 at 5:47PM
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Are these subs the GC's employees? If they are independent, they usually get paid every Fri for the work they did that week. The last pay is held until their work is passed by the building inspector if their work is required to be inspected.

This post was edited by robin0919 on Sun, Mar 30, 14 at 19:35

    Bookmark   March 30, 2014 at 7:33PM
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I've been a G.C. for over 20 years and have yet to receive a "kick back" on installed products, nor do I think it is as widespread as comments in this forum would lead people to believe. Then again maybe I'm the naive one.

Where I build (Ohio) standard payment terms are for invoices to be paid 30 days after receipt by the contractor. The better builders pay sooner / more often, such as twice a month / every 2 weeks. Builders quite often operate by receiving 4-5 spaced draws from a bank for the construction of a home.The draws are based upon the percentage of work that has been completed. Paying 50 percent upfront for a relatively large dollar item such as cabinets has the effect of squeezing a builder's cash flow schedule. Ditto for paying the final 50 percent upon delivery. It's as simple as that in my view.

    Bookmark   March 30, 2014 at 8:08PM
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Sophie Wheeler

In this case, you pay this particular sub now because you are the one that engaged his services. Then you fight it out with the GC or bank or whomever.

    Bookmark   March 30, 2014 at 8:39PM
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I don't believe in kickbacks being all that prevalent but familiar subs who do reliable work don't have the upcharge for the unknown. My GC was upfront with us. We use his guys and the prices will be better because he doesn't need to raise his contingency fund at all for unknown complications from unfamiliar subs. He is open to using whoever we choose but he gets the best prices through his guy.

    Bookmark   March 30, 2014 at 8:59PM
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After numerous calls, emails and texts last evening, the developer finally provided a check to our KD today for the balance due. Way too much drama for my taste. Keeping my fingers crossed that everything goes smoothly from here on.

    Bookmark   March 31, 2014 at 9:06PM
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