PROGRESS PAYMENT

The valuer may be called upon to value progress payments payable to the builder during the course of construction of the building. This is because standard form building contracts require the payment of the VALUE of work completed, not cost. Therefore, if progress payments are determined by quantity surveyors or architects, they are in breach of the valuers' licensing legislation.

The current practice of paying the cost of work done instead of value leaves the practitioner open to a professional negligence claim as the value of a partly completed building is usually less than cost, even if the building represents the highest and best use of the land. If the building does not represent highest and best use, the estimator using cost, leaves him/herself even more vulnerable to a claim for professional negligence.

The amount payable should be determined using the before and after method of valuation of the building being constructed so that the difference is the progress payment due. Materials delivered to the site pending fitting and installation are not included in the progress payment as they are not part of the building. That is, they are not fixtures. The valuer's final certificate of payment is withheld until all relevant authorities, and experts have issued certificates of compliance and completion.

There are a number of methods by which a builder can claim payment for work completed. With progress payments the builder claims for the value of work completed. If the valuer agrees he/she will issue a progress certificate certifying to the client how much in his opinion should be paid. If the two amounts reconcile the client pays the builder directly. Progress payments can be paid either monthly, at definite stages of construction, or at other intervals depending upon the terms of the building contract.

The following is a typical breakup of progress payments for a single level house:
    
STAGE
PROGRESSIVE %
Deposit 10%
10%
Floor slab 10% 20%
Roof frame 15%
35%
Close up 35%
70%
Fixing/kitchen 15% 85%
Painting 10%
95%
Practical completion 5%
100%

See:
practical completion