Deposits, progress payments and holdback
A payment schedule is the only part of a contract that keeps working after a job goes wrong. This is how to build one where money follows the work.
Why the schedule
It is leverage, and it is the only kind that lasts
Before a job starts you have every choice. Once it is under way you have one: what you have not yet paid. A schedule that keeps that amount meaningful until the end is what makes a contractor’s return worth more to them than walking away.1
It is also the clause that decides how bad a stalled job gets. Money already released cannot be un-released, and recovering it is the slow route this library’s other half exists for.
Four principles
True wherever you are
Money follows work, never dates
Each payment attaches to a stage somebody can look at and agree is finished. A schedule keyed to the calendar keeps paying while a job sits still, which is precisely when you need it to stop.
The deposit buys something specific
Materials ordered, a slot booked, a design drawn. A deposit that buys goodwill is the one nobody can account for later, so write down what it is for.
You should never be ahead of the work
At every point in the job, the value of what has been built should exceed what has been paid. When that inverts, the contractor's incentive to come back inverts with it.
Something is kept back until the end
A final portion released only after the punch list is cleared and any inspection has passed. It is the only leverage that survives to the day the work is nearly done.
The number this page will not give you
What a deposit may be is set where you live
Several states cap what a home improvement deposit can be, some tie it to the contract value, and others leave it entirely to the agreement. Any figure printed here would be wrong for most readers, so there isn’t one. Your state’s consumer protection office or licensing board publishes the rule that applies to you, and a contractor asking for substantially more than that rule allows has told you something before the work begins.
A shape that works
Five releases, each attached to something
On signing
The deposit, against named materials or a booked start. Ask what it covers and keep the receipt or order confirmation it produces.
On delivery or first fix
Released when the materials are on site or the first stage is physically done, not when the contractor says it is imminent.
At agreed stages through the job
Each one named in the contract and each one checkable. Two or three is enough; the point is that every release has a thing attached to it.
On practical completion
When the work is usable and only minor items remain. This is the payment people release early, and it is the one worth holding to its condition.
After the punch list and any inspection
The holdback. Released once the remaining items are done and any required inspection has passed, which is what it exists to wait for.
Next
Where this clause lives
A schedule agreed aloud is not a schedule. What belongs in a contract is where this sits alongside the other clauses that decide a dispute, and keeping a record as the work runs is how you evidence that a stage was actually reached before you released the money for it.2
Disclosures
- 1.Satisfy is not a law firm and does not provide legal advice. This page describes how payment schedules are commonly structured. It does not review any contract, and it does not say what you should pay or when for a particular job.
- 2.Limits on deposits, requirements for progress payments, retainage rules and the notices that must accompany them are set by each state, and several states regulate them for home improvement work specifically. Nothing on this page states an amount, a percentage or a period, because none of them is the same in any two places.