Building Materials – Who should buy them, Customer or Tradesman?

Truck Delivering Building MaterialsToday I want to talk about who should buy building materials, customer or tradesman.  Lately I came across a case where a tradesman was left short of €3,000 for the building materials he supplied.  He has been advised by his solicitor that it will cost as much to pursue the money in the circuit court and that even if he wins the customer may not have the money to pay him.  I came across another case where a tradesman accepted a payment from the customer for windows and he paid the money to the window suppliers but they went in liquidation before they supplied the windows.  This meant it was now the responsibility of the tradesman to reimburse the customer for their loss.  When the tradesman supplies the building materials or appliances there is often some confusion over who is responsible in the event of materials being faulty or where an appliance stops working.

Let’s have a look at the advantages and disadvantages of each:-

Option 1: Tradesman buys the building materials or appliance(s)

Tradesman Advantages

1. May avoid delays as the tradesman knows the materials to buy and is used to working with the suppliers

3. Since the tradesman is providing an additional service he can legitimately charge a mark-up on the materials for so doing

Tradesman Disadvantages

1. Higher risk.  If the customer doesn’t pay the tradesman is caught for a lot more money than if he was just charging for labour alone.

2. The tradesman takes on additional responsibility when he supplies materials as he is responsible if the materials become faulty in the future.  A higher mark-up should reflect the extra responsibility in terms of after sales support as well as additional administration and risk of not getting paid.

3. A self employed tradesman in Ireland doesn’t need to be registered for VAT if their turnover is less than €37,000.  However, if they are providing materials as well as labour they will quickly get pushed into a higher turnover which may mean they will have to begin charging VAT for their services.  Charging VAT means that they have extra administration costs in calculating and handling the VAT.

Customer Advantages

1. The customer saves time as the tradesman looks after more of the work

2. The work should be done quicker if the tradesman is sourcing materials that he is used to working with

Customer Disadvantages

1. The job costs more money because the tradesman has more work to do.

2. If a problem arises with the materials or appliances in the future the tradesman is responsible for after sales service so if he goes out of business or cannot be contacted there will be problems (this could happen with a hardware store too.)

Option 2: Customer buys the building materials or appliance(s)

Tradesman Advantages

1. Tradesman has less risk as they don’t have any money owed for materials and only have to think about collecting money for labour.

2. The tradesman doesn’t have the responsibility of after sales support as it will be the responsibility of the supplier where the customer purchased the materials.

3. A self employed tradesman doesn’t need to be registered for VAT if their turnover is less than €37,000.  Therefore, if they can encourage their customers to buy the materials they may be able to stay below this threshold and avoid having to register for VAT.

Tradesman Disadvantages

1. Could cause delays if the customer buys the wrong materials or omits some materials.

3. The tradesman won’t be able to charge a mark-up on the materials (this may not be a disadvantage however as the mark-up seldom covers the extra risk, administration and after sales service required.)

Customer Advantages

1. If the customer is taking an interest in what is going on and understands what materials are required they will have more control over which materials are used and where they are sourced from.

2. If there is a problem down the line with the materials or the appliances the customer may have more comeback if they are dealing directly with the supplier themselves (That is assuming that the supplier won’t go out of business of course!  By the way be careful with purchasing materials and appliances online as the delivery charge is not refundable as I recently discovered when I tried to return a product to Amazon.co.uk.  The product cost £7.99 and postage was £32.99 and I would have to pay to return the product myself:( )

Customer Disadvantages

1. The customer will spend a lot more time sourcing the materials.

2. It may cause delays or stoppages if materials or appliances are purchased that are of lower quality or if the tradesmen are not used to working with them.

As you can see it is not a straightforward answer.  If tradesmen really want to supply the building materials they should try to limit their risk by 1. having a written contract, 2. by documenting and taking photos of the work as it progresses, 3. having the work signed off by a certifier if appropriate, 4. delivering the materials in smaller quantities,  5. using an escrow payment facility.

If customers wish to supply the materials I think they would benefit from doing some research in advance on what materials are required and discuss it with one or more tradesmen to get as much advice as possible.   The customer should request a detailed list of materials or appliances from the tradesman and get prices from a number of local suppliers.  If a tradesman makes a mistake in his work you would expect him to bare the cost of rectifying it.  Likewise if the customer supplies materials that are incorrect and that cause delays or stoppages in the work they should also be prepared to pay the tradesman for any additional work it causes.

I hope you found this article informative and whether you are a tradesman or customer, make sure to agree which materials or appliances are to be purchased in advance with the other party.  If you have any other comments or suggestions please enter them in the comments box below.

Cheers
Oliver Dempsey
Tradesmen.ie
13th September 2013

 

 

About Oliver Dempsey

Owner and Managing Director at Tradesmen.ie and contributor to the Tradesmen.ie Blog You can connect with Oliver on Google+ DISCLAIMER: All content provided in my articles is for informational purposes only. The information contained in these articles has been obtained from research carried out by myself through online and offline sources and through other writers and contributors who provide me with content. While I am responsible for the final editing of each article and I do my best to verify the information, I do not make representations as to the accuracy or completeness of any information. Therefore you must not rely on the information contained in any of these articles and always make sure to seek the advice of a suitably qualified expert before embarking on any project.
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  • Patrick Chesser

    Very impressive article, personally I think it’s best for the customers
    to pay for the materials as it eliminates the risk of a tradesman possibly doing
    a runner when he receives money from the customer for materials!

  • tradesmen1

    Hi Patrick,

    thanks for your comments, yes I think if the customer has the time it is well worth it to become more involved in the whole process

  • Patrick Brady

    Most want a list of the materials to get prices themselves as everyone is trying to get the best price they would then know if the tradesman has added on but a lot of people havent got realistic prices of what jobs / materials will cost – recently had a woman think E50 would cover all the materials for a full bathroom refit !

  • tradesmen1

    Hi Patrick,
    thanks for your comments. I think it’s important for tradesmen to put an extra margin on products to cover, 1. extra time involved in sourcing them, 2. allow a percentage of the margin for bad debts and 3. to cover extra support that you will be responsible for. In relation to the customer thinking €50 would cover all the materials for a bathroom refit, what materials, do you mean?
    Oliver

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    Patrick Brady

    Most want a list of the materials to get prices themselves as everyone is trying to get the best price they would then know if the tradesman has added on but a lot of people havent got realistic prices of what jobs / materials will cost – recently had a woman think E50 would cover all the materials for a full bathroom refit !
    2:25 p.m., Friday Oct. 4

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    Email address: patsybradyplumber@gmail.com | IP address: 95.83.249.60
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  • tradesmen1

    I got an email from Mark in Co. Laois yesterday about this article that I wanted to share with you, see below:-

    “Hi Oliver, I hope this finds you well, its been a while since
    we chatted but i just had to comment to you on your blog. This is not good advice or in my opinion accurate advice regarding the customer not
    paying for goods supplied, its defeatist attitudes from lazy ill
    informed solicitors like that that leave the tradesman out of pocket on
    a regular basis, what you have actually quoted is an urban myth. The
    tradesman doesn’t need to use a solicitor to start with but if he does
    he will get the money back in costs awarded. To prove the case the
    tradesman just needs to prove he delivered the goods to the customers
    house (this is why its a good idea to have them delivered by the
    supplier to the site and signed for), its then up to the customer to
    prove this didn’t happen or prove they have already paid the tradesman.
    Regarding the old chestnut “if he wins the customer may not have the
    money to pay him”, well most people only improve houses they actually
    own, so if the case is won in court a judgement will be obtained. If
    the customer still wont pay then its not a complicated procedure to
    place a judgement mortgage on the customers house, this will attract an
    interest rate of 8%. The tradesman will then be paid when the house is
    sold and the payment will include the interest. This may all sound
    complicated but its not. If the customer is informed of this when they
    initially refuse to pay and the evidence is shown to them i would
    imagine that payment would then be forth coming, maybe your next blog
    could on this topic as it affects all of us weather we are supplying
    goods or service. Kind regards Mark”