Grahame L and a wierd contract

*from Grahame L*
Very informative site and have found what you wrote about planning Czars completely true. I would like some pointers in prepaying/deposits. I’ll give you some background. I lived in Bangkok for 8 years, married a Thai, had a family and then moved back to Scotland where we are now. My wife already has land and a house in the area of Bangkok near Don Muang but the house is “tired” and certainly needs rebuilt.

The plan is to knock down the existing structure and put up a new build. Probably a daunting enough task but even more so when you are based in Scotland and relying on in-laws to over see everything.

The drawings have been done and approval been given. The in-laws have sourced a contractor who they believe is trustworthy and skilful as he has done various other new builds in the immediate area.

He has quoted 1,100,000 baht and is wanting 369,000 baht up front payment which makes me nervous. The other payments are also up front before the next stage of work is carried out.

Can you give me any advice in how to set up safe payments or what is the norm in contractors demanding payment? We will be in Bangkok for the whole of April and would like to get things tied up then. Any advice would be great.

>editor: First off, you are very right to be concerned. One good thing about contract negotiations here is that normally the bulk of payments are paid after the contractor has completed work. There is always some up front payment, but normally it is minimal. The up front payment is only to protect the contractor from digging in to his pocket to get materials. So, lets say there are 5 payment milestones of 200,000 each. For the first milestone there will be about 100,000 material and 100,000 labor. The contractor would want at least 100,000 bhat up front, which will be used throughout the entire contact as a buffer to buy the materials.

>The fact that the contractor is asking for so much up front makes me very nervous (and it isn’t even my money!). The fact that the other payments are up front before work is done is the opposite of how it should be. I would never enter into any contract here under those circumstances.

>One thing you have to appreciate here is that we (farang) are considered soft touches when it comes to business matters. Certain circumstances come up which, unfortunately mean we lose our money. The Thai saying is ‘mai pen rai’, no problem, which undoubtedly you will hear over and over again.

>You are at a distinct disadvantage if you won’t be here. The fact that the contract includes materials means, almost with certainty, that the quality of the project will suffer. Contractors I know that are trying to get my business even admit this…… (saying that if you go labor only and buy the materials yourself the cost will work out about the same but the quality will be better).

>The other thing is you can’t really expect anyone else to keep an eye on things as you would expect. If you’re around the ‘farang’ eye will prevent many really atrocious things from being done.

>I see this as a potential recipe for disaster, if there would be anyway you could postpone upgrades until you are around personally you would have a much better chance for a pleasant outcome.

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  1. Heed what dozer says! Your situation is a recipe for disaster. Very bad idea to have a house built without being present. Also, the contractor will undoubtedly go for the cheapest material to save himself money. Unless your a millionaire and this is small change to you, I would definitely not have the work done until you arrive. Or at the very least offer only a small deposit to cover the materials until you arrive.

  2. I think Dozer is 100% correct. Unfortunately we Falangs come here with preconceived western ideas of honesty and decency. These notions simply dont apply here. It should also be said that there are numerous televised examples of cowboy builders in the UK

    Rule In the far East

    Power is everything

    Money is power

    Once you pay money you lose power

    If you behave like a doormat, you will certainly get walked on and come away a sadder, wiser and poorer man.

    Can you not wait until you have the time to supervise the work on site yourself? In my experience there always seems to be a rush to spend Falang money? Why is it so urgent? It never seems to matter that you might spend your money foolishly and pay double for half the quality. If the structure is still sound, why not remodel it?

    Dont do anything until you are there (this is the third unequivocal warning issued in this thread)

    You could easily and most profitably use the intervening time to do a detailed design, study all aspects of your construction and also produce a construction plan. i have spent most of my working life in various parts of the middle east. The trick they pull there on contractors (no doubt from long bitter experience) is that the calculate very carefully how much you are owed and only pay you half what you expect. Throughout the contract you are always kept in debt for your money so that you should finish the job in complete satisfaction of your contract.

    In practice this backfires

    Lets say a job cost $600,000 to build and you add your profit of 100,000 on top plus 100,000 for contingencies. Then you add another 200,000 on top of that because of the debt factor.

    So your final bid is $1,000,000 split into 5 stage payments. The first 3 will be relatively straightforward. The 4th becomes slow and is dependant on signing off the final construction certificate (ie you hand over the keys and the building becomes the customers property). This can be delayed and haggled for a year or more. The final payment is held over as a contingency guarantee, supposed to be paid after one complete year of ownership, but the customer keeps finding nit picking faults bla bla so this never gets paid (or is lost in bribes). this is typical practice, you dont ever expect to get that last payment so your price your bid accordingly.

    The average jobbing builder here has no real skills in planning his work. Its all on a wing and a prayer always with an eye to cheating.


    Detail design, break the job up into small manageable work packages supported by designs and building specs (ie how to mix cement and concrete)
    Procure materials yourself (you own them)

    Draw up a full contract that clearly states the schedule of payments and construction plan and builders responsibilities (eg he covers all accomodation and subsistence costs for his work force)
    Get it signed and witnessed normally done by the Poo Yai Ban but I dont know what happens in the big mango. start as you mean to go on, and be mean (but smile)

    If this all sounds daunting and burocratic, the alternative is unthinkable for a Falang.

    So, you might ask, why is it that Thais dont go through this when they build a house. Well the answer is that they do this for large commercial buildings (to a somewhat dubious extent). You can see numerous examples of poor planning where the job was costed incorrectly (or corruptly) and ran out of money. Look at the empty half built shells dotted around some very prestigious sites in central Bangkok (almost as bad as Lagos). When Thais build a small house they retain power by virtue of their position, family, influence and being a Thai man. You, as a Falang, have none of this and are a sitting duck (they are very well aware of how little power you can muster. Dont expect your lovely lady to be able to cut much clout when it comes to difficulties.

    You should by now be asking yourself “why am I doing this?”. A good question and you should have a good answer before proceeding any further

    Perhaps you might contribute to this site with your own analysis of your motives at this point.

    Bottom line

    do it if you must but do it properly for the right reasons.

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