Can a company charge interest on a balance due before work begins?

1 week ago

In Arizona, can a licensed, bonded & insured roofing company place in their contract, an interest charge on the balance due, before the roofing project starts. Down payment was made, 5 months later roofing project started. Company was backlogged due to high volume of jobs.

Senior Legal Associate Levelset

When a contractor hasn’t performed work and isn’t owed payment, interest should not be accruing. This is doubly true when the reason the contractor hasn’t performed their contract is due to their own fault, rather than the fault of the owner.

What’s more, where a contractor signs an agreement and accepts a downpayment, but has not performed any work after several months, that contractor may well be in danger of breaching their contract. This is especially true if there’s a defined start time and/or a project schedule that’s fallen by the wayside.

If a contractor is charging you interest on a job that hasn’t even begun, it might be a good idea to reach out to that contractor and discuss the matter. There may be a chance they’re doing so in error due to their back-office systems. But, if they are charging interest due to something that’s wholly outside of their customer’s control and, quite honestly, a result of their own questionable planning – that may lay the groundwork for further action like a complaint with the registrar of contractors or termination of the agreement, down the line.

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