My Situation

[bono]

Hello all

I am a plumber and I formed a limited company in June of this year, (as a director).

I have been working for a developer, who made me sign a contract which stated that a 10% retention on all bills will be held back for a period of 12 weeks after the invoice date. As it turned out, he was also taking a 10% retention on materials, I tried to argue that this was unreasonable given that all materials have manufacturer guarantees etc. In addition to this, all of my bills and quotes were being "chipped" frequently, I was losing money hand over fist. Further to this, I was told that if I wanted the "lucrative" work, I must also agree to working at his own house on a meagre hourly rate. One more thing, bills were frequently paid late...

In any case, a lot of the work that had been promised never materialised (another issue) and my cash flow has been severely restricted and I have now left the developers clutches carrying about £3.5k in unpaid bills.

Yesterday I visited the accountant to discuss my options, I was told that if I failed to pay any of the debts then my personal credit rating (which is perfect) would be destroyed. I was advised that I'd be better off putting money back into the business account (I would need to borrow this from credit cards) to settle the companies debts to the merchants. Is this good advice?

Many Thanks.

[Susie]

Re: My Situation

Is there no other way you can get the money to pay the creditors? If you can get a 0% card then it may be worth paying that way but not if its going to be something like 29% interest.
As someone who used to work for a property company I can tell you that I am not in the least suprised at the treatment you had All I can suggest is that you start invoicing for interest on the outstanding amounts, and also prepare court papers as that often makes them sit up and take notice, but it would depend on how close to completion the project is, and with you being a plumber I suspect its getting towards the end?
Depending on the size of the development the company would probably have a drawdown loan and I would think they are getting to the end of their available finance so will be playing hardball with you and any other creditors. Their profit will come when they sell or rent/lease the property so as long as they have only the one company set up for the development and receipts it could be worth the court fees and quick action, but they would normally set up individual companies for each project they do with the reasoning that if 1 project goes belly up then the others that they may have are not involved, hence the company would possibly not have any assets other than the development property.

Hope you can get sorted out, Ias I said, I know that the property people can be real pigs to work for.

[PlanB]

Re: My Situation

Bono. I've worked with property developers too, so like Susie I know the score. He's trying it on from where I'm standing and what I would do is make it clear to him (in a nice way obviously) that you know where the 'bodies are buried' when it comes to everyone's tax position. That should get his attention and a sensible conversation could follow. Having work done on his personal house and maybe charging the cost of those works against his development costs doesn't go down too well with HMRC. Some would say that's fraud

Did your signed contract give a specific reason for the hold-back of 10% such as against faulty workmanship? If this was a new development (not a conversion) surely it would carry a NHBC warranty which covers any work defects so it wouldn't matter how much you messed up because the insurance would pay out to put it right? No need for the shoddy workmanship clause. Also when is the 12 weeks up for the hold-back because you may just need to keep everyone happy until then as your worst case scenario.

I would contact the Trading Standards department based at your local council and report a possible 'problem' with the developer. Most Trading Standards officers are only to happy to look over contracts and see if they're fair and also write you a letter to confirm their investigation into Mr Developer is taking place (who cares what the outcome is) which you can wave under the developer's nose for maxiumum effect. Once the developer gets wind of that he may well pay up what he owes you because he'll know that all Trading Standards Departments provide lists of "recommended" tradesmen on the website www.checkatrade.com and also keep blacklists Does he want to work again . .

Of course all of the above is irrelevant if your developer is built like a Trojan Tank and lives in Essex with friends with sawn-off shotguns

Hope this helps, Plan B x

[Undercover Elsa]

Re: My Situation

Hi Bono,
As you're a Limited Company technically your company debts shouldn't affect your personal credit rating, as far as I'm aware...unless you signed a personal guarantee with your suppliers, in which case they could claim against you personally.
Trouble is, if your personal bank account is with the same bank as your business account and they got wind of a CCJ against your business they might start playing silly beggars and call in personal overdrafts/restrict credit etc.

I suspect that you need to keep good face with your suppliers in order to continue your business through this unfortunate run of problems with the developer, in which case your accountant's advice may well be in your best interest, business-wise.

Only you know how long it will take you to recover from this, but on the face of it if the only way you can cover the bills to the suppliers is by using credit to help your cash flow then I would think it's worth the risk. If you go that route, I would definitely, as mentioned above, try to get a 0% interest balance transfer while your credit's still good. Presumably you've looked at other sources such as an overdraft?
I would imagine as a plumber your busy season is about to start, as cold weather approaches, so I hope you can sort this out and work through it.
In the meantime you also have the option of initiating a claim against the developer for work done which was underpaid.

kind regards,

Shepherdess x