Contractor Took Your Money and Disappeared? Here’s How to Avoid It.
We’ve all heard the horror stories: a homeowner pays a contractor upfront for a fence, a renovation, or some other project, only for the contractor to disappear with the money. No work is done, no materials are purchased, and the homeowner is left out of pocket, sometimes thousands of dollars. It’s a frustrating and all-too-common scenario, but there’s a simple solution that can save you from this headache.
The Trust Account Solution
One of the easiest ways to protect yourself is by holding the funds in a trust account managed by your lawyer. Here’s how it works:
- Agree on Milestones: Before starting the project, agree with your contractor on specific milestones (e.g., completion of groundwork, delivery of materials, etc.).
- Deposit Funds into a Trust Account: Instead of paying the contractor directly, deposit the funds into a trust account held by your lawyer.
- Release Funds as Milestones Are Met: Once the contractor reaches an agreed-upon milestone, your lawyer releases the corresponding portion of the funds.
Yes, there’s a small upfront cost—usually a few hundred dollars for the lawyer’s services—but it’s a small price to pay to avoid losing thousands.
Why Contractors Don’t Need Upfront Payments for Materials
Some contractors might argue that they need the money upfront to purchase materials. Here’s the truth: most suppliers offer trade accounts, meaning contractors can order materials on credit and pay the invoice later. If a contractor insists on upfront payments for materials, it could be a red flag. And if they don’t have accounts set up with suppliers? That’s another sign you might want to think twice about working with them.
A Basic Document to Get You Started
To make this process even easier, we’ve created a basic document that you can take to your lawyer to set up a trust account. The best part? You don’t need a fancy lawyer—any lawyer can handle this for you.
If you’d like a copy of this document, connect with Sanjesh through here and send him a DM. He’ll happily send you a copy to help you get started.
Have questions or need advice? Reach out to us.
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