Dealing with Deposits
When a home renovation project is assigned to a company, most of them work after taking a fixed amount as a deposit. Trusting a company and handing over a sum of money is not easy all the time, especially when you keep listening to stories about people being scammed. Though in most cases, the projects go on as planned; however, there are some cases where people have to face a loss of their deposited amount.
Therefore, we planned to assist you on how to deal with such a situation.
Why Do Tradespeople Need ADeposit?
In fact, when a small scale renovation is required, most tradespeople do not ask for a deposit. But if a big project that is expected to go on for weeks or even months, is assigned, then companies ask for depositing some percentage of the total amount of the project. These amounts may vary between a small token amount or a part of the total pre-decided sum of money.
Now comes the real question, why do tradespeople ask for the deposit amount? The answer that they have in reply to this question is that they need this amount to buy the required material for carrying out the work plan. The other understandable and acceptable reason is that this deposited amount gives the company some cover if at any case you decide to pull off the assigned job. It is justifiable because the company has blocked its time, hard work, and must have spent some amount for your job. It might also have rejected some other projects to deal with yours. Hence, this deposit amount gives them some return on their wasted time and effort.
What Amount is Acceptable as A Deposit?
No standard amount has been set as a standard for deposit. Different companies charge different amounts depending upon their rules and policies. Most commonly, 5% to 20% of the total amount of the project is required as the deposit amount. But keep in mind, that if a company is charging an exceptionally high price in the name of deposit you should get alert.
Another important thing is that the tradespeople should explain to you the reason and use of your deposited money. Moreover, they should provide you with a receipt for that amount. When a lengthy and complex project is going on that is expected to complete in various stages, then payments are most commonly made in parts. In this scenario, the deposit is the first amount paid.
It is advisable that you make a documented contract with the company with all the milestones and pricing details quoted. In this case, you keep yourself on a safer side against any theft or scam.
What If You Suspect A Scam with Your Deposited Amount?
There are many different cases that homeowners face while dealing with these tradespeople. Some common situations are:
The Company’s Representative Disappears
Many cases are reported where the company’s representatives disappear after you pay the deposit amount. You cannot reach them through any channel whether its phone, internet or their physical offices.
The Company is Reachable, But Work Doesn't Start.
In other cases, you are able to contact the company, but you do not see any progress. The company's workers keep making lame excuses for not starting the job. It is also a red alert situation.
The Tradesperson Keeps Asking for More Money
Another susceptible situation is that you have already submitted the deposit amount, but the company is asking for more money. This is the worst scenario because you are now stuck for the sake of your already made payment. You cannot withdraw because you do not want to lose that amount.
If you find yourself stuck in any of the above situations, you should start keeping a strict check on the activities of the company you are consulting with, but it may be of no use because you have made the payment and there is no guarantee that you will get your amount back or you will get the job done.
Therefore, it is advisable that you check the past performance of the company that you are selecting for your job. You may also contact their past clients for having a thorough understanding of how fair the company is in its dealings.
Can You Reclaim Your Deposited Money?
If you made the payment through a bank transfer or through your credit card, then there is good news for you. There are chances that you may get the refund of your deposited money. Section 75 of the consumer credit act gives you the right to claim your payment back.
What If You Are Unable to Reclaim Your Money?
Most tradespeople are connected with some higher trade bodies such as the Federation of Master Builders or Guild of Builders. You may contact these higher authorities to report about your loss. They start trying to approach the company and push it to either refund your payment or start the project.
How To Make A Claim?
Making a claim for your money might involve a complex process of collecting strong proofs against the company. It will also charge you a fee that is non refundable whether you get your money back or not. In addition to these problems, you may still fail to get your payment back even after winning over the company, because the company might have gone bankrupt and is unable to refund your amount.
Is There Any Way of Securing Your Deposit Amount?
If you are planning a renovation for your home, but you suspect money loss in the name of deposit, then we have good news for you. There are some companies that work as the insurance providers for the security of your payments and guarantee of the completion of your project as planned.