With a renovation you pay for work that does not yet exist. That makes the payment arrangement the most important risk tool you have: if you pay too much in advance, you lose your leverage and carry the risk of a bankruptcy; if you pay nothing in advance, you will not find a contractor willing to order materials for you. This article explains what the law does and does not say about deposits, which split into instalments is customary in the industry, how you can secure a large sum safely and what to do if the contractor fails to deliver after you have paid. We do not quote amounts; the proportions are what count.
The law does not oblige you to pay a deposit
For a construction contract, the agreement you conclude with a contractor (Title 12 of Book 7 of the Burgerlijk Wetboek, BW, the Dutch Civil Code), the law has no rule on deposits for a renovation. Whether you pay anything in advance, how much and when, is a matter of agreement between you and the contractor. A contractor may ask for a deposit and you may refuse it or make a different proposal; if you cannot agree, there is simply no contract. The Consumentenbond (Dutch Consumers' Association) sums it up: paying in advance for a service is not legally required, and anyone who does pay in advance will in most cases lose that money in a bankruptcy.
Two legal limits do exist, but they apply only in specific situations. If you buy a product as a consumer, for example a kitchen or window frames separately from their installation, the seller can require you to pay in advance no more than half of the purchase price (Article 7:26(2) BW). And if you, as a private individual, have a new home built, Section 2 of Title 12 applies: the contractor may only ask for payments that roughly correspond to the progress of the build, with at most a security deposit of 10 per cent of the contract sum held by the notary (Article 7:767 BW). That provision does not apply to a renovation, but it is the yardstick that judges and disputes committees know: paying according to progress is what counts as reasonable.
What is normal: instalments that follow progress
In practice contractors work with a payment schedule in the quote or contract. Common is a limited first instalment on signing or at the start, intended for ordering materials with a long delivery time, followed by two to four instalments at clearly recognisable milestones: shell work finished, installations in place, finishing work done. The final instalment follows after the handover. The Consumentenbond advises against paying large sums in advance, at most something in the order of ten per cent at the start, and recommends withholding part at the handover if there are still snagging items.
When assessing a schedule, look at three points. First: does payment lag behind the work? After each instalment, more work should have been done than you have paid for in total. Second: can the milestones be established objectively, for example "roof structure watertight" rather than "week three"? Third: is the final instalment large enough to keep up the pressure on snagging items? A final instalment of five to ten per cent is common and matches the statutory arrangement for new builds. How to assess the rest of the quote is explained in Comparing quotes: how to read a building quote.
Materials with a long delivery time or made to measure, such as window frames, a kitchen or a staircase, are the reasonable exception: in those cases the contractor's supplier often asks for a deposit itself. Ask for the supplier's quote, pay in advance only for that material, and have it recorded that the material becomes your property once paid, so that it does not fall into the estate in a bankruptcy.
The 5% rule: only for new builds
Many clients know the 5% rule and assume it also applies to a renovation. It does not. Article 7:768 BW gives a private client of a new-build home the right to withhold up to 5 per cent of the contract sum from the last instalment and to deposit it with a notary, without being in default and while keeping the right to handover. The notary pays the deposit to the contractor three months after the handover, unless you indicate that there are still defects you want repaired. Since the Wet kwaliteitsborging voor het bouwen (Wkb, Dutch Quality Assurance for Building Act), the contractor must ask you in writing, between one and two months after the handover, whether you wish to keep the deposit in place, with a copy to the notary; if they fail to do so, the notary may not pay out. These rules cannot be departed from to the detriment of the client (Article 7:769 BW).
With a renovation you can only achieve the same effect by contract: agree that the last instalment is due only once the items recorded at handover have been repaired, or that a percentage is deposited with the notary. Many contractors agree to this if the amount is reasonable and the period clear.
A large sum in advance? How to secure it safely
If a contractor nevertheless asks for a substantial deposit, for example because they have to pre-finance materials themselves, you have alternatives that are fair to both parties.
- Deposit with the notary. You pay the amount into a notary's client account (derdengeldenrekening), and the notary only releases it once a pre-agreed milestone has been reached or both parties request it. The money sits outside the contractor's assets and is safe if they go bankrupt. The notary charges a fee for this.
- Bank guarantee from the contractor. The contractor's bank guarantees that your deposit will be repaid if they fail to deliver. For smaller firms such a guarantee is costly, but on large projects it is customary.
- Guarantee scheme. With a contractor affiliated to a quality mark that offers a renovation guarantee, you can take out a scheme before the start that covers completion of the work in the event of bankruptcy. Such a scheme often sets requirements for the payment schedule. More on this in Guarantees after a renovation: how long, on what and from whom?
- Ownership of materials. Record that paid-for materials are your property and are delivered to your address, with the supplier's invoice in your name or with you named as owner.
A contractor who accepts none of these options and still wants a large sum up front is, by that refusal, telling you something about their financial position. A contractor with healthy finances does not need a large advance to start an ordinary renovation.
Invoice and VAT: what to check with every instalment
Only pay against an invoice, including for an instalment or a deposit. The Belastingdienst (Dutch Tax Administration) prescribes what it must contain: the full name and address of the contractor and of you, their VAT identification number and KvK number (Chamber of Commerce registration), the invoice date, a sequential invoice number, a description of the work delivered or the instalment, the date of the service or advance payment, the amount excluding VAT, the VAT rate applied and the VAT amount. For labour on a home more than two years old, the low rate for the labour component and the standard rate for materials are shown separately. A "deposit without an invoice, then there's no VAT on it" is not a discount but a sign of cash-in-hand work, which leaves you without proof if defects appear.
With the first invoice, check via the Handelsregister (Trade Register) that the KvK number exists and belongs to the company, that the account holder is the same legal entity as the contracting party and that the invoice for each instalment refers to the contract. Keep proof of payment with the contract; it is your evidence if a dispute later arises about what has been paid, especially with additional work.
If the contractor fails to perform after you have paid
If the contractor does not turn up, the work stalls or they deliver poor work, your legal position starts with a notice of default (ingebrekestelling): a written reminder in which you set a reasonable period for them to perform after all (Article 6:82 BW). If they still fail to perform within that period, the contractor is in default. Only then can you terminate the agreement in whole or in part (Article 6:265 BW), allowing you to reclaim what you paid in advance for work not done, and claim damages for the extra cost of another contractor. A notice of default is not needed if the contractor states in writing that they will not perform, or if the agreed completion date was a strict deadline. Send the letter by registered post and by email, state specifically what is wrong and keep everything.
If the contractor goes bankrupt, you file your claim with the curator (trustee in bankruptcy); realistically, a private individual rarely gets anything back. If the contractor is bound by industry terms with a disputes procedure, you can submit your dispute to the Geschillencommissie Verbouwingen en Nieuwbouw (Disputes Committee for Renovations and New Builds); otherwise the kantonrechter (subdistrict court) has jurisdiction, where no lawyer is required for smaller claims. Legal expenses insurance with housing cover usually pays for legal assistance. What to do step by step if it comes to that is explained in contractor goes bankrupt during the renovation.
Red flags: when not to pay in advance
- The contractor wants to be paid in cash or offers a discount without an invoice. Cash payments are hard to prove later.
- There is no KvK number, the number belongs to another company, or the account is in a private name that does not appear in the Trade Register.
- A large percentage up front, with time pressure ("otherwise I can't guarantee the schedule") and no willingness to use a deposit or guarantee.
- No written agreement, no description of the work and no payment schedule linked to milestones.
- The company has only existed for a short time, has no verifiable references or recent projects, or refuses a visit to ongoing work.
A good payment schedule protects not only you but also the contractor: they know exactly when each amount is coming and do not have to argue about advances. Whether you hire a roofer, a carpenter or a contractor for the whole renovation, the rule stays the same: payment follows the work, never the other way round.