Receiving a Down Payment Before Work Begins: The 2025 Legal Framework and Best Practices for Construction Tradespeople

In recent years, construction companies have faced difficulties in maintaining their operations on construction sites. Rising prices for building materials, higher energy costs, and financing difficulties are leading to decreases in order backlogs. To accommodate clients’ financial difficulties without jeopardizing their cash flow, it is becoming increasingly common to charge advance payments in the construction industry, with the number of installments proportional to the size of the project. But is this a legal practice? Can any advance payment be collected before work begin?

1. Collecting a deposit before work begins: Is it legal?

A down payment is an amount that the customer pays to the company before the service begins. This payment is usually upon signing of the quote, but it is not strictly required. It represents a percentage of the total invoice amount and commits both parties to honoring the terms of their contract.

The Law on Advance Payments for Construction Work for public contracts is now included in the Public Procurement Code. Articles R2191-20 through R2191-22 regulate the right to, the amount of, and the frequency of advance payment disbursements. The frequency is set at three months, except for artisan cooperative societies (for which the interval is reduced to one month). The of advance payments is reduced by the portion corresponding to the retention. For private contracts, the regulations governing advance payments are set forth in ArticleArticle L111-3-1 of the Construction and Housing Code.

2. Down payments and other advance payments: What are the differences?

From a legal and accounting standpoint, you must distinguish between a down payment and other advance payments, such as deposits, theadvance or progress payments (Public Service): 

• The down payment binds both parties upon signing the estimate. If the contractor (the contractor) withdraws from the project, they may be required to pay damages to the client. If the client cancels the agreement, the down payment is nonrefundable, and the client may be required to pay compensation to the contractor as damages.
• The deposits do not create a definitive obligation for the parties. This reservation provides greater flexibility regarding the right to cancel. However, if the customer terminates the contract, the company retains the deposit as compensation, just as it would with a down payment. If the company withdraws, it will refund double the amount paid to the client in accordance withArticle L214-1 of the Consumer Code  (Habitat Presto).
• Theadvance payment is an initial payment for work that has not yet been performed. The terms are the same as for a deposit. It is not a binding contract, and the contractor must also refund double the amount paid if they withdraw from the contract. However, a money-back guarantee is included in the invoice to protect the client. This is why this practice is particularly well-suited for public contracts or large construction projects.
• The construction project is an interim invoice issued as work progresses, unlike an advance payment. It is very useful for long-term projects. There may be multiple progress invoices for a single service, and these can be combined with a deposit invoice is possible. 

Good to know: After signing the estimate, the customer has a 14-day cooling-off period of 14 days, as stipulated in the Consumer Code. During this period, if the customer wishes to cancel the contract or if work has not yet begun, the company is required to refund the customer’s deposit.

3. Why collect the down payment before starting the work?

T’construction industry down payment serves several vital functions for the company that receives it: 

• Finance the initial purchase of construction equipment without putting too much strain on your cash flow. This strategy is very important when you’re calculate the price and profit margins for your project. You can include other expenses, such as travel costs or on-site equipment setup.
• Reduce the risk of non-payment and last-minute project cancellations. By dividing payments into installments, the client can better manage their funds and avoid financial difficulties. The chasing down an unpaid invoice in the construction industry is a time-consuming task that only causes problems for both parties (penalties, legal proceedings, etc.) 
• Securing the customer relationship from both a financial and legal perspective. If the client wishes to modify or cancel the contract after the work has begun, they may be liable for compensation to cover the resources already committed. These resources include construction equipment and the team of tradespeople who have already been notified by the construction schedule.

This advance payment with a commitment does not only protect the general contractor. Not only does the client make the expenses more manageable through multiple payments, but the client also ensures the company’s reliability. This latter factor forms the basis of a healthy and transparent relationship between the two parties, provided that certain rules are followed: 

• Draft a clear and detailed contract that includes all provisions regarding deadlines and refunds;
• Keep receipts for expenses incurred before the work begins;
• Provide regular updates on the project's progress to avoid having to redo the work at the end of the service. TheArticle 1217 of the Civil Code allows the client to take legal action if the company fails to fulfill its contractual obligations (suspension of the contract, termination of the contract, reduction of the service price, etc.) (Attorney Cohen-Boulakia).

4. How much is the down payment for the project?

No regulations specify a precise amount for a down payment for construction work. The average rate is 30% to ensure sufficient funds are available for materials and labor (masons, electricians, landscapers, etc.). It can be renegotiated downward by about 10 to 20 percent, or upward by up to 40 percent (Rénovation Man). Don’t hesitate to talk with the contractor to find out the reasons behind the percentage they’ve included in their estimate.

5. How do I invoice the down payment?

ArticleArticle 289 of the General Tax Code requires the issuance of an deposit invoice for any payment received. It must include the following required information: 

• the company's name and contact information; 
• its SIRET number;
• the customer's contact information;
• the invoice number;
• the amount of the service, excluding tax and including tax;
• the VAT rates that apply to the cost of the work (except for self-employed contractors in the construction industry).

It is best to label the document “down payment invoice” or “X% down payment on quote No. XXX.” Once this initial payment has been approved, a final invoice will deduct the various down payments that have already been made from the total cost of the service.

6. What should you do in the event of a dispute regarding the processing of the down payment?

A lack of clarity in the contract or unmet obligations can lead to disputes between the client and the construction company. If the down payment was made without signing the estimate or if the contractors do not begin work as soon as the money is received, the client may file a lawsuit. Such cases are heard in a court determined by the value of the dispute (France Victimes): 

• Court of the locality in the jurisdiction where the work is being performed, for a dispute less than €10,000;
• Court Judicial, with or without the a lawyer, for a dispute involving more than €10,000. An appeal is possible if the amount in dispute exceeds 5,000 €.

Before resorting to legal action, it is best to try to reach out-of-court settlements from among the following two: 

• request a refund of the deposit by registered mail with return receipt requested ; 
• organize mediation between the two parties.

If the court finds the contractor at fault based on the evidence presented (estimates, invoices, registered letters, photos of defective work), it may issue the following orders: Either the work must be completed by court order, or the contractor must pay damages to the client and demolish the work.

7.Conclusion

Receiving a down payment for a construction project before work begins is a legal practice, provided it is clearly governed by a signed estimate and a compliant invoice. The construction company secures its cash flow and protects itself against unpaid bills. The client ensures a firm commitment from the contractor and a payment plan tailored to their situation. All of this requires clear and transparent communication to avoid last-minute cancellations or even legal proceedings.

The deposit invoices are essential documents in your construction project file. To save time and minimize errors, the construction management software Techtime offers an electronic document management (EDM). Discover this feature and other equally strategic ones in our web app or mobileapp.