Payment Schedules and Retention

Payment structure is quiet risk management: done right, neither party is ever dangerously ahead of the other. One principle governs everything: money follows completed work — never precedes it.

The shape of a healthy schedule:

• Deposit: the legal maximum of $1,000 or 10%, whichever is less (lesson 11.6's law, now in context).
• Milestone payments tied to verifiable completion: foundation poured and inspected → framing complete and inspected → rough plumbing/electrical/HVAC signed off → insulation/drywall → finishes. Notice the pattern: several milestones align with city inspections (Module 12.11), which gives you a free, expert, third-party verification that the milestone genuinely happened before you pay it.
• Final payment — the retention: hold roughly 10% until the punch list is complete (Module 12.13) and final inspection has passed. This is standard, professional, and the single most important line in the schedule: a contractor with your last dollar and a to-do list has schedule-mysteries; one with 10% outstanding finds the time.

The tests to run on any proposed schedule: At every point in the timeline, does paid roughly equal built? Front-loaded schedules ("40% at start of framing") transfer risk to you — if the company folds mid-project (it happens), you've paid for a building that doesn't exist. And is the final payment meaningful? A $500 "retention" on a $150K job retains nothing.

Lien releases — the step homeowners skip. California lets unpaid subcontractors and suppliers lien your property even when you paid the GC in full — the GC just didn't pay them. Protection: with each progress payment, collect conditional lien releases (and unconditional ones for prior payments) from the GC and major subs. It's a standard form and a standard ask; builders used to professional clients expect it. Your contract should require releases as a condition of each payment.

Practical mechanics: pay by traceable means (never cash), against invoices referencing milestones, on the contractual timeline — slow-paying a good contractor is its own project killer; the leverage principle cuts both ways. Fair, prompt, documented: that's the whole game.