Deposits and Payment Stages for London Home Extensions: What is Normal?

A mobilisation deposit for a London home extension is a payment made to the contractor before or at the start of works to cover the contractor's initial costs — primarily materials procurement (materials that must be ordered and paid for before they arrive on site) and site setup costs (temporary facilities, scaffold, site security). A normal mobilisation deposit for a London home extension: 10-15% of the contract value is the standard range for a mobilisation deposit on a residential extension project. For a £100,000 extension, a 10% deposit is £10,000 — covering the initial materials procurement and site establishment costs. For a £200,000 extension, a 10% deposit is £20,000. In some cases, particularly for smaller extensions where the initial materials cost is a higher proportion of the overall project cost, a deposit of up to 20% may be appropriate — but above 20%, the homeowner should request a clear breakdown of what the deposit covers. Deposits above 20-25% are not standard and are a risk flag: they may indicate the contractor has cash flow problems and needs the homeowner's money to fund other projects or personal expenses. In no circumstances should a homeowner pay a deposit that covers more than the first stage of the works — if the contractor stops working after receiving the deposit, the homeowner should not be significantly out of pocket. What the deposit should cover: materials ordered in advance of the works commencing (structural steel, windows if long lead, groundworks materials); scaffold erection (if required before works start); temporary site facilities; and an element of the contractor's general overhead. What the deposit should NOT fund: significant payment of the contractor's own wages before any work is done; payment for materials that have not yet been ordered or received; or the contractor's personal debts or other project debts.

After the initial deposit, a London home extension should be paid in staged payments that match the completion of defined work stages (milestones) — not on a simple time basis (monthly invoices), and not as a large single payment at any stage. Milestone-based payment stages for a London extension: Stage 1 (Mobilisation): 10-15% of contract value. Paid at start of works — covers initial materials procurement, scaffold, and site setup. Stage 2 (Foundations complete): 15-20% of contract value. Paid when the foundations (and any below-slab drainage) are complete, inspected by Building Control, and concreted. Stage 3 (Structural frame / roof plate complete): 15-20% of contract value. Paid when the structural masonry (walls) or frame is complete to roof plate level, structural steels installed and signed off by Building Control. Stage 4 (Weathertight / roof watertight): 15-20% of contract value. Paid when the roof is complete (flat roof waterproofed and covered; or pitched roof tiled/slated), windows installed, and the extension is weathertight. Stage 5 (First-fix complete): 10-15% of contract value. Paid when first-fix plumbing, first-fix electrics, and first-fix carpentry are complete throughout the extension. Stage 6 (Plastering and second-fix): 10-15% of contract value. Paid when plastering is complete throughout and second-fix works (carpentry, sanitary ware, floor finishes) are substantially complete. Stage 7 (Practical completion): 5-10% of contract value (retention). Paid on practical completion (the date on which the extension is sufficiently complete for the homeowner to take occupation) — after a snagging inspection and the contractor has resolved all snagging items. Retention: the standard construction contract approach to managing defect risk after practical completion is to withhold a retention (typically 2.5-5% of the contract value) for a defined defects liability period (typically 6 months to 1 year after practical completion). The retention is released at the end of the defects liability period — once any defects that have become apparent after practical completion have been rectified. For a standard London residential extension, a retention of 5% for 6 months is appropriate.

The primary risk to the homeowner's payments during a London extension is contractor insolvency or abandonment — the contractor stops working before the project is complete, leaving the homeowner out of pocket by the amount paid in advance of the works completed. Practical protections for deposit and staged payments: Pay by bank transfer, not cash: always pay by bank transfer (not cash) so there is a full audit trail of all payments. Cash payments are untraceable — if a dispute arises about the amount paid, cash payments are very difficult to prove. Pay on milestone achievement, not on request: structure the contract so that each payment stage is triggered by the completion of the defined milestone, not by the contractor's request alone. Before making a stage payment, inspect the works (with the architect or contract administrator if appointed) to confirm the milestone has been met. Retain documents: retain copies of all quotes, signed contracts, invoices, and payment receipts throughout the project. Structural warranty: a structural warranty (LABC Warranty or Premier Guarantee) does not protect against contractor insolvency during construction — it protects against structural defects after practical completion. However, a contractor who is willing to provide a structural warranty is generally a more reliable contractor. Retention: withhold a 5% retention for 6 months after practical completion — this gives the homeowner leverage to ensure the contractor returns to resolve any defects that appear after practical completion. Deposit protection (Trustmark's deposit protection scheme): some London contractor schemes (TrustMark) offer a client deposit protection guarantee — the deposit is protected against contractor insolvency. Ask whether the contractor participates in a deposit protection scheme. JCT Homeowner Contract: using a JCT Homeowner Contract (or Homeowner Contract with Consultant) provides a clear legal framework for the payment structure, the defects liability period, and the contractor's obligations — significantly reducing dispute risk compared with an informal contract.

The following are significant red flags in a contractor's deposit and payment structure that a London homeowner should treat as warning signs: Deposit above 30% before any works start: a contractor requesting 30%+ of the contract value as a mobilisation deposit before any site work has commenced is a major red flag. This amount exceeds any reasonable materials procurement or site setup cost and suggests the contractor has cash flow problems or is not operating in good faith. Request for a large payment immediately before practical completion: in the final stages of the project, some distressed contractors request large payments that exceed the milestone value — to fund other obligations. Resist any payment request that is not matched to a completed and inspected milestone. Cash-only payments: a contractor who insists on cash-only payments is not operating through a transparent accounting system, will not provide a VAT invoice, and cannot be monitored for tax compliance. This is a risk flag from both a legal and a financial protection perspective. No written contract: a contractor who is unwilling to sign a written contract (even a basic JCT Homeowner Contract) with a defined payment schedule has no accountability to the agreed payment structure. An informal contract based on email or verbal agreement is very difficult to enforce if a dispute arises. 'Just trust me' communications about payments: a contractor who discourages a homeowner from using a formal payment structure ('we don't need all that paperwork, just transfer what you can when you can') is not operating professionally. All significant payments should be linked to a specific milestone in a signed contract.