Contracts and Payment Schedules: Protecting Your Money

A builder who walks off your site with £30,000 of your money and no written contract is almost impossible to recover from. It happens more often than the industry likes to admit. The builder quotes verbally, the homeowner pays a large deposit by bank transfer, work starts promisingly, then slows, then stops. The builder moves to another job. Weeks pass. Calls go unanswered. And the homeowner discovers that without a written contract specifying scope, payment terms, and completion dates, their legal position is weak and their money is gone.

This guide exists to prevent that. A written contract and a properly structured payment schedule are the two most important financial protections you have on any building project. Get them right and you're protected when things go wrong. Skip them and you're relying entirely on trust, which is a strategy that works right up until it doesn't.

Why You Need a Written Contract

When you tell a builder you'd like them to do the work, you've made a contract. Even verbally. Even over a cup of tea on site. The problem with a verbal contract isn't that it's not legally binding. It is. The problem is proving what was agreed.

Six months into a build, when the builder says the bifold door threshold was never included in the quote, and you're certain it was, a verbal agreement gives you nothing to point to. A written contract gives you a clause, a line item, and a clear answer. The dispute ends before it escalates.

The Consumer Rights Act 2015 protects you as a homeowner regardless of whether you have a written contract. Work must be performed with reasonable care and skill. Materials must be fit for purpose. You can demand corrections or refunds if standards aren't met. But exercising those rights without written evidence of what was agreed is expensive, slow, and uncertain. A written contract makes every protection enforceable in practice, not just in theory.

What Should Be in the Contract

You don't need to draft your own contract from scratch. Standard forms exist for exactly this purpose. But you do need to understand what a good contract covers, so you can spot what's missing from whatever your builder puts in front of you.

The essentials

Scope of work. A detailed written description of exactly what the builder will do. Not "build an extension" but "construct a single-storey rear extension measuring 6m x 4m to the specification shown in drawing ref. [X], revision [Y], dated [Z]." The scope should reference the architect's drawings by revision number so both parties are working from the same version. If the scope says "as discussed" or "per our conversation," push back.

Contract sum. The total price for the work, including whether it's a fixed price or subject to variations. A fixed-price contract means the builder carries the risk of cost increases. A cost-plus contract means you do. For a straightforward extension, you want a fixed price wherever possible. Cost-plus makes sense only when the scope is genuinely uncertain (major renovation of an old property where hidden problems are expected).

Payment schedule. When each payment is due and what triggers it. This is covered in detail below.

Start and completion dates. A specific start date (or at minimum a start week) and a target completion date. Without these, the builder has no contractual obligation to start or finish by any particular date, and you have no grounds for a claim if they don't.

Extension of time provisions. What happens if the builder is delayed for reasons beyond their control: bad weather, material shortages, changes you've requested. The builder must notify you in writing within a reasonable period (typically 7-14 days, as agreed in the contract particulars) of any delay, with a revised completion date. Without this clause, the completion date becomes unenforceable if a non-fault delay occurs.

Variation procedure. How changes to the scope are handled. Every change should be agreed in writing before work proceeds, with a confirmed price impact. Without a formal variation procedure, the builder does the extra work first and presents you with the bill later.

Retention clause. The percentage you hold back from each stage payment, and when it's released. Covered in detail below.

Defects liability period. A period after completion (the industry standard is 12 months) during which the builder must return to fix defects at their own cost. If using JCT Minor Works, the default rectification period is only 3 months, so specify 12 months in the contract particulars.

Insurance requirements. What insurance the builder must hold throughout the works. At minimum: public liability (£2,000,000 minimum) and employers' liability. See insurance and liability for details.

Dispute resolution. What happens if you can't agree. Standard contracts specify mediation before litigation, which is cheaper and faster for both sides. Look for an adjudication clause too. Homeowners have no statutory right to adjudication (the Housing Grants, Construction and Regeneration Act 1996 excludes residential occupiers), so a binding decision within 28 days is only available if your contract grants it. JCT Homeowner and JCT Minor Works contracts include one; many builder-supplied contracts do not. The builder disputes leaf explains this adjudication trap in full.

Nice to have

Liquidated damages. A pre-agreed daily or weekly rate the builder pays you if they finish late. For example, £150 per week per week of delay beyond the completion date. This is not a penalty. It's a genuine pre-estimate of your losses (temporary accommodation, extended site insurance, etc.). If the RIBA or JCT contract includes a liquidated damages field and you leave it blank or write "£nil," you may lose the right to claim any damages for late completion at all. If you include one, set a realistic figure.

Working hours. When the builder can work on site. Hours commonly specified in planning conditions are 8am–6pm Monday to Friday, 8am–1pm Saturday. Restricting hours protects your relationship with neighbours but extends the build programme.

Access arrangements. How and when the builder can access your property. Whether you'll be living in the house during construction. Where materials will be stored.