This is a refurbishment disaster story. These stories are shown as examples of how good people can get in financial trouble when hiring a builder. Stravelles main mission is to help these people avoid issues.
In this case, a homeowner (a married couple) hired a builder to install a garden room in their rear garden including producing a drawing and full installation.
It should be straightforward for any householder to purchase the supply and construction or installation of a garden room.
But there are risks that people never really take into account.
How the couple researched their builder is typical.
They got onto their computer or phone, went onto google.com and looked up ‘garden rooms in my area’ , viewed the advertisements and then contacted several companies.
Then they simply selected the quotation from the company they liked the best. The company had a great website, lots of satisfied Clients and seemed to be first rate builders.
As all of the builders who provided quotations insisted on a deposit payment upfront, the couple paid their selected contractor a deposit — they saw this as a normal standard practice.
The builder duly started onsite and took regular payments over the first couple of weeks as per the contract (the couple had signed the builders standard form of contract).
Then, as it can easily do, the works slowly ground to a halt. At first the couple thought nothing of it, that these delays were the normal part of the construction process or the builder was just too busy.
After several weeks of delay the couple got concerned and started to put more pressure on the builder to complete the garden shed. The builder kept in contact and said they had delays with their suppliers and that they would complete as soon as possible.
However, one day the couple were informed by post that the business had gone into administration.
They were left with a basic timber frame structure in their back garden after having paid the builder over £40,000 pounds.
The works that were carried out were valued at perhaps £10,000 so they lost out £30,000 in just one day.
Its important to understand what happened to the garden room installation business.
As per usual, the business had started off well and built a good reputation fast. But then it got too many orders, became too greedy and were suddenly overwhelmed leading to the first danger sign of slow progress onsite.
It only takes one project to go wrong, and it suddenly puts the company in a perilous financial position.
A successful business can easily fail and go into administration or liquidation.
For example, if a business is selling garden homes for £50,000 each it might be making say £15,000 profit on each one.
Now what if there is an issue on just one of their projects?
Say for example, a Client is unhappy with their work and is suing them for £25,000.
Or perhaps an employee hurt themselves whilst working for the business and is also suing for £20,000.
And to compound this issue lets say increased costs and competition from rivals mean the business is now making only £5,000 per project.
The company might just decide its better off closing down than fighting for a year or two just to stay in business.
Businesses stop trading all of the time. Its normal and its not personal. Most businesses fail eventually – look at blockbuster videos.
Should a business go into administration whilst on your project you are most likely going to lose any money you have given them.
If you choose a small builder who just has a limited company and a website then there is always the risk they will go out of business.
It is always a risk, even if they have one hundred glowing reviews and completed projects.
So, you have to be careful not to pay them upfront. In larger commercial project there is no advance payment or deposit, the builder tends to get paid for works completed after four weeks and every four weeks thereafter.
But it is almost impossible to find a small builder who is willing to proceed on say an extension project without monies upfront. You may be lucky to find a builder who will proceed without a deposit but most builders will request a deposit/advance payment upfront.
And if you are unlucky to give a deposit to a builder just when they are failing then you might lose it.
This is the risk that every Client needs to be aware of.