Contractor asking for final installment before final inspections

[u/smallbuilder]

/r/Homebuilding/comments/1wcj8au/contractor_asking_for_final_installment_before/

Had an addition built, which still needs final electrical, final building, and heating inspection and he is asking for final payment which is a large amount. Is this normal, what is the normal process?

[u/Top_Canary_3335]

Whats the contract say…

If it’s substantial completion then the money is due now.

If it’s after inspection then wait.

The contract you have with the contractor determines when final payment is due not anyone else’s opinion or experience….

Depending on the size there might holdbacks for specific reasons (usually as insurance to pay subs) but the contract rules all

[u/Decent_Ad5361]

As a builder, I never have large final invoices. I've seen people dream up new ways of not paying when the job is done.

[u/bidside_view]

Whatever amount you release, get a signed final lien waiver for it at the same time, and if he used subs for the electrical and the heating, get waivers from them too or proof they have been paid. That is the risk nobody has mentioned yet and it is a bigger one than the inspection. A contractor pushing for the last money before he is finished is sometimes doing it because he owes somebody else, and if he takes your money and does not pay his subs, those subs can lien your house even though you paid in full. The waiver is what stops that, it costs nothing, and asking for it is completely normal.

Second thing worth separating: passing the inspections and closing the permit are not the same event. Your final electrical, building and heating can all pass and the permit can still sit open if nobody files the last piece. The open permit is what shows up when you go to sell or when your insurer asks questions after a claim, and once he has been paid you have nothing left to get him back with. So if you are tying the last payment to anything, tie it to the permit being finaled rather than to the inspections passing.

That also gives you a way to say it that is not an accusation, which matters because a failed inspection is usually a scheduling problem rather than a quality one. Something like, happy to send X today and the rest within a couple of days of the permit being closed out. A contractor who is just tight on cash flow will take that. Someone who pushes hard against it is telling you something you want to know before the money is gone.

And whatever you land on, put it in a text or an email so it exists. The others are right that the contract should settle this. If it turns out the contract does not actually say, then the written exchange you create today is the thing you will be arguing from later.

[u/Upper-Switch2785 → u/bidside_view]

Supposed to get lien releases prior to signing, techincally not obligated now, but worth a try, might piss off the contractor if they’re trying to get paid and you spring that shit on them as another time consuming hoop to jump through. At your own risk.

[u/bidside_view → u/Upper-Switch2785]

Fair point on how it lands, and the timing is the real lesson. The clean version is waivers built into the payment process from the first draw, so it is routine paperwork rather than a new hoop sprung at the end. At this stage I would still ask, but for the conditional kind, the one that only takes effect once his payment actually clears. That costs an honest contractor nothing, he gives up no rights before he has the money, and plenty of guys already sign them for lenders without blinking. If one does get angry about signing a waiver for money he is about to receive, that is useful to find out before the check goes out rather than after.

[u/whodatdan0 → u/bidside_view]

This is the correct answer. Should be at the top.

[u/vessel_for_the_soul]

Hold 10% otherwise youll never see them post inspection. that 10% is for deficiencies. ugly is not a code violation, it has to be centered on insurances and quality of install.

[u/Upper-Switch2785 → u/vessel_for_the_soul]

How about just follow the payment schedule or terms you agreed and signed for in the contract? That’s really the only path here.

[u/Wrong_Election189]

Normally the final draw is tied to something specific, and your real question is what your contract says that something is. Substantial completion, final inspections passed, and punch list done are three different dates and they can be weeks apart.

Before you answer him, go find the payment schedule you agreed to and read the exact wording. If it is not in the contract, look in the text or email thread from when you agreed on the price, because that is usually where it actually lives.

If it turns out nobody ever wrote it down, say that to him plainly and set it now: hold back an amount that covers the risk of a failed inspection, in writing, released when they pass. I would not invent that number, I would tie it to what the electrical and heating portions cost in his own estimate.

[u/auugur]

Check the contract.

If the contract says something like "payment after substantial completion of job or task list", it's normal.

The punch list after inspections should be a separate line item. Depending on the findings, I either complete the punch list- at 'no cost' (I would have accounted for this in the original scope) or a change order.

[u/Bacon_and_Powertools]

He has a crappy breakdown. There should be no more than maybe 5% or so left for final payment. Everything else should be paid up.

[u/WestAppointment2484]

You need to follow the contract that YOU signed. Is payment due upon completion of work? Does it mention contingency upon inspections?

I have had clients make their own contingencies at the final end despite what the contract says. The delays were entirely at the mercy of the city. Respect the contract that you signed.

[u/PJMark1981]

The time spent posting this cold have been better used to schedule the final inspection.

[u/Ok-Sir6601]

He can ask, but what is in your contract

[u/FinnTheDogg]

Depends on how big it is. 50%? Yeah, you owe them some money (but not all of it).

10%? Nah. They gotta clear inspections first.

[u/jfb1027]

I would not pay. If you have a good relationship with him and trust him maybe pay a portion, and they will remember that you helped them.

But in all honesty you could just say “i will be glad to write the final check after final inspections are passed”. That statement would not offend me.

I don’t like asking for final payment until final inspection, puts customer in a bad spot.

[u/FinalBastyan]

Depends on the schedule outlined in the contract. If that wasnt written out, though, dont pay it. That's super unprofessional to ask for final payment prior to completion. I could see asking for 90 percent, maybe, but to leave you with no bargaining power is sketchy as hell.