How do progress payments work in construction?

Progress payments (draws) convert a residential remodel contract from a single lump-sum payment to a series of milestone-tied payments. This structure protects both parties: the contractor gets cash flow for materials and labor, the homeowner only pays for work actually completed.

Typical 5-draw residential schedule ($100K-$300K remodel):

1. Signing / materials deposit — 10% or $1,000 (whichever less in California).
2. Framing and rough-in complete — 25%.
3. Mechanical rough-in + inspection passed — 25%.
4. Drywall, paint, flooring installed — 25%.
5. Substantial completion + final inspection + punch list — 15%.

Each draw reduced by 10% retainage until the final draw releases retainage too.

Typical 7-draw schedule (ADU or larger remodel, $200K+):

1. Deposit: 5-10%.
2. Permit + materials: 15%.
3. Foundation + underground rough-in: 15%.
4. Framing complete + weatherproof: 15%.
5. Mechanical rough-in + insulation: 15%.
6. Drywall + paint + trim: 15%.
7. Final completion + CO + punch list: 15%.

Before releasing any draw:

1. Inspect the work — verify the milestone is actually complete.
2. Check building department inspection records.
3. Collect lien waivers — unconditional partial waivers from GC and any noticed subs/suppliers.
4. Check change order reconciliation.
5. Verify allowances.

How draws connect to construction loans:

• The lender's inspector verifies each milestone independently.
• The lender's draw schedule may differ from your contractor's.
• Lender typically requires title update at each draw.

Variations to discuss with contractor:

• Material-heavy milestones — cabinets can be 25% of cost and ordered 8-16 weeks ahead. Materials-delivered trigger in contract, not materials-ordered.
• Selection-dependent milestones — homeowner selection delays can shift schedule.
• Weather-dependent milestones.

Common disputes:

• Contractor claims milestone complete; homeowner disagrees. Resolution: itemized substantial completion list.
• Contractor requests draw for materials ordered but not on site.
• Homeowner delays selections, blaming contractor.
• Retainage dispute at end.

Protective clauses:

• "Contractor shall submit draw request with: (a) photos of completed work, (b) list of subcontractors paid for this period, (c) unconditional partial lien waivers from GC and each noticed sub/supplier, (d) current running total including any approved change orders."

AskBaily's contract template includes a structured draw schedule, retainage, and required draw-request documentation.