I recently heard about a construction contractor who's building a house for someone, and this contractor wants the client to open a checking account with the contractor's name on it so that the contractor can use that account to pay for building expenses. I assume the money in the account would come from the client (some kind of cost-plus contract?).

This sounds super sketchy to me. Is there any legitimate reason for doing this instead of just invoicing expenses?

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    Giving a contractor access to the full funds for the job before it is complete is a recipe for disaster. I have heard a TON of horror stories of contractors absconding with the funds and never finishing (or starting) the job.
    – JohnFx
    Commented Dec 12, 2018 at 22:08
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    @JohnFx I can very well imagine the contractor having heard (or lived) a ton of horror stories of clients not paying. Combined with the popular belief that lawyers and notaries cost (instead of save) money, it's not that hard even for an honest contractor to come up with such idea.
    – Pavel
    Commented Dec 13, 2018 at 8:49
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    People have made good points about how this is problematic but the example doesn't actually say that this account should have the full amount in it so that is not necessarily a problem. Where I am it is common to pay a certain amount up front and potentially further installments as the project moves along, withholding a significant percentage (like 50%) until the end. I don't really see the advantage of letting them write their own cheques against your account versus you just writing them a cheque when the time comes to give them some money.
    – Eric Nolan
    Commented Dec 13, 2018 at 10:42
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    The issue I have heard from this method of contracting is that the contractor does not have the funds to build the house without you. Not necessarily a scam, but maybe not the ideal contractor for a house.
    – Jordan.J.D
    Commented Dec 13, 2018 at 17:14
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    Is this a real licensed contractor, or someone doing under the table stuff? Commented Dec 14, 2018 at 2:49

5 Answers 5


While a traditional checking account with the contractor's name on it sounds a bit off, it's not uncommon for private contractors to leverage a construction escrow account for larger projects like building a house. This enables a situation where the contractor can get paid for their time as work progresses and doesn't have to pay for materials out of pocket and wait for reimbursement from the client.

This may be what the contractor in this instance is intending, but an escrow account would have a third party managing release of funds, which is safer than the client owning an account and giving the contractor the ability to draw from it at will, since that could lead to overdrafts and other issues.

If this is all 2nd hand information maybe there is some communication breakdown, but otherwise it sounds like the contractor is either ignorant of industry standards for this type of arrangement or is trying to do something shady.

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    It also is used when the construction is being funded by a loan/mortgage. The lender needs to make sure the money results in equity in an asset they agreed to, and the homeowner or contractor doesn't run off with the cash or spend it on anything else.
    – user71659
    Commented Dec 13, 2018 at 0:10
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    What my family does with contractors here (Europe) is to have an arrangement with suppliers for a sort of limited open account for the contractor with a weekly to monthly review and payment. Not a bullet proof concept, but it shifts the trust relationship to between the customer and the local supplier who isn't that likely to move away with what is for him way too little money, and saves time considerably.
    – Pavel
    Commented Dec 13, 2018 at 9:02
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    @NuclearWang It would depend on the arrangement, escrow is a compromise, client would prefer invoices after work is done, contractor would prefer money up front. Often there would be milestones on both sides, ie client puts up $50k at project start, escrow releases $20k for materials to contractor after initial permits are approved, funds are released on a schedule and funds are added on a schedule (time/milestones). When financing construction, the bank typically releases money in stages, this is similar to that.
    – Hart CO
    Commented Dec 13, 2018 at 16:05
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    @NuclearWang Having a client pay the contractor in stages works too, but escrow provides assurance that funds are available ahead of their need, and a third party controlling the release of funds can be helpful for clients that don't know the industry/process very well.
    – Hart CO
    Commented Dec 13, 2018 at 16:23
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    @NuclearWang Escrow satisfies both parties concerns in a large transaction. The contractor would rather be paid upfront, but the client does not trust them to finish the job then. Placing the money in escrow upfront guarantees to the contractor that the money will be available upon job completion and guarantees to the client that the contractor will not be paid until the contract is fulfilled. The key thing here is trustworthy third party... it isn't just a bank account, but maybe a law firm instead. Commented Dec 14, 2018 at 2:47

Scam. The contractor is trying to transfer liability onto you.

What makes a contractor accountable for getting the job done is the financial peril he faces if he does not. There's the hypothetical distant risk of being sued, but what really keeps him honest is the immediate risk of not being paid.

That is the entire business model of contracting; it's why they get the big bucks. You may notice the raw cost of materials, tool rental and $9/hour Mexican day laborers are a fraction of what he charges. The difference is accountability, he has to get the job done no matter what, including all complications.

By paying up front, you break this accountability model. Because he's been paid, he has no reason to stick out a tough job; he can just say "sorry" or make up a line of bull about the problem being out of scope, and demand more money to finish or simply bail, and leave you with messy unresolved problems, or an unfinished project and a pile of lumber and supplies. It's almost human nature to do so. It is altruism for him to stay with the job once paid.

Humans kinda suck at altruism. This "demanding the money up front when he perfectly knows the business does not work that way" is a great example of sucking at altruism.

And of course, the tension over this unstable relationship will itself sour the relationship, making an abandoned job even more likely.

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    Actually, decades of communist experiments have proven that humans suck at altruism in large groups. In groups up to 100 or so, humans are very, very, good at altruism. Commented Dec 13, 2018 at 15:25
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    @MartinBonner Its probably due to the size of our monkeyspheres. Commented Dec 13, 2018 at 19:15
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    @Harper vote updated. Commented Dec 14, 2018 at 3:18

TL;DR: No.

There is no legitimate reason for doing this. It's trying to replicate the invisibility of a cash job with the convenience of not having to lug around briefcases full of cash, with the bonus that the person who opened the account has all the criminal liability.


While I wouldn't do it it might not be a scam. Rather, it could be the contractor is attempting to hide money and doesn't want accounts in their name. Maybe the IRS is after them, maybe they have a judgment against them, maybe they owe child support etc.

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    But it has the same accountability problem I discuss in my answer, inflamed by the fact that the guy probably has some accountability/finance/management issues and should not be trusted not to get himself into a bind which causes the project to fail. So here, he would have good intentins +incompetency and he should know that about himself, the scam part is where he rigs the finances to serve his incompetency. Commented Dec 13, 2018 at 20:02
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    @Harper As I said, I wouldn't do it. The risks remain, I'm just suspecting it's about hiding money rather than about intended evil. Commented Dec 14, 2018 at 1:31
  • What's not evil about evading taxes / child support obligations / whatever? Commented Dec 16, 2018 at 4:32
  • @BenMillwood Not being evil to the person they want to open the account. Commented Dec 16, 2018 at 6:14

Such arrangements might happen when the contractor and the client know very well each other and the contractor is really trusted. But if the client was caught by surprise by this request it sounds an alarm bell, after all there are many ways contractors might dupe the clients, they might use substandard materials with inflated prices or subcontract to unskilled illegal workers. The risk of the contractor running away with the money is minimal compared to the other cases because it is easier to take a legal action when it happens. If the client has no experience in this kind of business the best thing to do is finding and independent third party who could supervise the works, the materials used and the accounting.

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