Payment Disputes with Domestic Clients
Mrs Jones seemed nice enough. She made you cups of coffee. She inquired as to your family’s well-being. She shared a joke with you most days. That was then. Now you haven’t been paid in two months, she’s ignoring your calls, and her lawyer-brother-in-law is threatening to sue you for $450 000.00.
Welcome to domestic building.
In recent times we have had a number of these stories come through the door and they all have things in common that contributed to the payment dispute. These are the saddest stories because they all start out so well. The parties like each other, the relations are good, the work seems to go well, everybody is happy. Let’s take a closer look at how this all goes wrong.
This is perhaps the root cause of most of your problems. You have allowed the relationship to get too close. You must remember that Mrs Jones in your client. She is not your friend. You have been engaged to carry out a defined scope of work for a defined price or rate. You are not doing someone a favour, or helping a friend. By letting the relationship cross the line into friendship you inevitably invite poor practices into your work that will cause a payment dispute.
Keep the relationship friendly, but business-like at all times. Many contractors are told that they can’t get paid because the couple who hired him are now getting divorced. Many contractors have had the client cry in front of them, and feel sorry for them, and then back away from payment. This happens because the contractor has allowed the relationship to become personal. You must insist on payment no matter what. After all, your own divorce would not be an excuse for not completing the contract work, would it?
Now because Mrs Jones is such a nice person you have most likely done additional work for little or no cost. Or maybe you have bought her some materials at trade prices to be nice [and so made no money on it!], or maybe you have done additional work but not bothered to get it signed off as a variation, because it seemed too formal for someone so nice.
These are key errors. The biggest cause of payment disputes in domestic work is variations. It is very common for clients to get carried away with extra work orders only to come crashing to earth when you invoice them. At this point they will pick a fight with you and try to find some reason not to pay you; alleging defects is common.
To keep this under control, do the following:
- Always quote additional work and get it signed off by the client. I am amazed at how few contractors insist on getting Mrs Jones’ written approval before doing variations. It must be because she is just so nice.
- Always try to get to a firm price. If this is not possible then agree on a rate or a ‘capped value’.
- Avoid ‘do and charge’ methods for domestic variations. Your client will always underestimate what it costs, so get it on paper beforehand.
- Each month, somewhere on your invoice or claim, note the value of the initial quote or budget, and then show the current value of completed work. That way you can say that your client was well aware that the works had exceeded the contract price. Many clients argue that they had no idea that the work was a variation, or that the contract sum had been exceeded. You need to knock this one on the head.
Variations will either make you more money, or lose you everything. So keep them under control, and keep the relationship ‘business-like’.
Scope of work
Another typical cause of dispute is the agreed scope. Too many contractors use quotes that only vaguely describe the work they have agreed to undertake for the agreed price. This leads to your client insisting that a whole pile of work that was not in your scope, MUST be in your scope. Because your quote was vague you feel you need to accommodate the client and do the extra work; and lose yourself money.
Avoid the issue by:
Scoping your work in detail. Refer to plans, measures, site locations, materials etc. It must be easy to see exactly what it is you are offering to do for the price.