Milestone payment

In plain words

A milestone payment is a scheme under which the buyer pays not the whole amount at once but in instalments as construction progresses. The logic is simple and sound: the money follows the result rather than being paid in advance for all the works.

The whole difference lies in what the payment is tied to. The right option: the next payment falls due when a specific stage of completion is reached, confirmed by a document or report. The risky option: payments are tied to calendar dates and go out whether construction is progressing or has stalled. Outwardly the schedules look similar, but in substance they protect different parties.

Hence the practical rule: in the contract you look not at the percentages but at the wording. What exactly counts as reaching a stage, who confirms it, what happens in the event of delay, and whether the buyer has the right to suspend payments. A properly drafted schedule is the buyer’s main, and often only, lever if construction starts to fall behind.

Where the scheme is used

What is looked at in the schedule

How it should work

1. 01Agreeing the schedule in the contract
2. 02Confirmation that a stage is complete
3. 03Payment for the stage
4. 04Monitoring the next stage
5. 05Final payment and handover

What you need to know

• It is better to tie payment to completion, not to a date
• Each stage must be confirmed by a document
• The right to suspend payment in the event of delay is set out in advance
• Payment through escrow or a dedicated account is safer than direct transfers
• The schedule is the buyer’s main lever in the event of delay

Common mistakes

• ✕Accepting calendar-based payments not tied to construction
• ✕Not checking what confirms that a stage has been reached
• ✕Paying in advance for a discount without guarantees
• ✕Not setting out the consequences of delay
• ✕Transferring money directly instead of using a protected scheme

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