The client agrees to pay for goods and/or services in return for the skills or products from the landscaper. On paper it's simple but often the reality is a lot less straightforward.
Several months ago I was contacted by a person (let's call them client X) who had paid out £46,276.62 as a deposit to a landscaping company toward a project at the client X home.
This payment amounted to 75% of the total contract value of £62,362.08. I have seen the quotation.
The landscape company told the client that £25,164.30 was needed to pay for special materials. Whilst £13,402.05 was needed as a deposit against the rest of the materials.
Two days after the quotation date the deposit was paid by Client X.
After payment was made the landscaper assured Client X that all was in order and that the specialist materials had been requisitioned. A further assurance that the specialist materials had been ordered was given a short time later. This was witnessed by Client X site manager.
Client X never received the materials. Instead, some seven months later client X received a letter stating that the landscaping company had been adjudged bankrupt some three months earlier. This was just four months after the deposit had been paid to the landscaping company.
However it was a mere two and a half months after the quotation was sent that the landscape contractor was advised by their accountant to cease trading.
Furthermore it transpires that no materials were ever ordered. The £46,276.62 deposit is apparently gone and despite an ongoing police investigation and civil proceedings against the contractor, it seems the deposit may never be returned.
Reading through the statement given by the contractor it appears that their financial troubles went back several years.
At the time the contractor was paying off accumulated tax arrears of £1,500 a month to the Inland Revenue. These payments went back several months. But the contractor defaulted.
At the time the contractor took the deposit from Client X they would, in my honest opinion, have already known that they were becoming insolvent.
To add insult to injury the landscape company is still trading under the same name that appears on its quotation.
Looking at the bank transaction statement it's plain to see that who the recipient Client X paid the money to wasn't the trading name of the company which had supplied the quotation. Although the person behind both businesses is the same.
A cautionary tale
Now I hope for Client X that there can be a resolution to this case.
Client X knows now that they should have never agreed to pay so much money in advance.
I will be personally talking to the officials dealing with this case to try and understand why a company can still be using a trading name that's the same as the one it used during the transaction between itself and Client X? It cannot be right, can it?
Let's hope there can be some kind of good come from this process.
There is definitely a weakness in the system. Whilst I do understand that good businesses go bankrupt from time to time and it is no fault of the business owner, the current system is apparently weighted against the innocent party, in this case Client X and there's no reason Client X should be out of pocket.
Paying a deposit
The moral of the story here is, always be diligent and never agree to pay more than you can afford to lose.
A landscape contractor has a right to ask for advanced payments to finance the materials and the labour element of the work.
My advice would be that no more than 40% of a project costs should be advanced to a contractor. Agreed stage payments thereafter should then be applied at reasonable intervals until a protect is completed with the final payment (plus any agreed extras) being paid on final completion.
If the value of your project is considerable then do a full credit check first.
If the company is limited then doing a search through Companies House is a good starting point.
Another good resource is Duedil.com. Searching here is easy and much of the information is free to view.
You can search the history of people, what directorships they've had, how many companies they've owned. You can also download company reports and see the current position of companies currently trading.