@Mockwriter: "How much 'free' work should you complete, if any, before requiring/demanding payment for a project? When building a relationship with a producer you send material, they have ideas, you suggest/write ideas, but how much of back-and-forth before you have to say 'contract/remuneration?', without souring the relationship?"
An excellent question and a difficult one to answer. This depends on many different factors such as where you are with your writing career, who the producer/director is, how much money they have, the film's budget and what they're asking you to do. In an ideal world you should be paid for all the work you do, but sometimes you have to make compromises.
Firstly never demand, always ask politely, and firmly if you have to.
The most important thing I would say is never do any work without some kind of agreement in place, at the very least for a credit, and preferably with a deferred payment and an agreed percentage of the producer's profits. If it's down on paper, and has been signed and agreed by both parties, then the details can't be argued. Any producer/director on the level shouldn't have a problem with this, it's how they work and they're used to it. Don't be afraid to ask. Equally, if they say no don't be afraid to walk away because it's your only writing opportunity to date.
Why should you have an agreement in place? I've been caught out two or three times by student filmmakers, who have promised a credit and payment for short films, only for them to vanish when the finished script was forwarded on to them. I had to contact one particular student director's tutor to stop him using a short film script of mine for his coursework after he failed to pay the agreed fee. Unfortunately for him he failed his final year assignment because of it. Make sure an agreement is in place and signed BEFORE the writing begins. Never hand over any work you don't have an agreement for. You are only asking for trouble if you do.
Low budget films are where I would expect a writer to do some work for free. When a project begins the producer/director will initially be spending their own money, so there might not be much, if any at all, for the writer. Costs have to be kept to a minimum if the project is to make it to production. This is where the deferred payment agreement comes into its own. It allows the project to move forward until funding is found (this is usually when the writer gets paid), so it can eventually go into production. What you don't want to happen as a writer is to demand money, get a token amount begrudgingly from the producer/director and then find the project fizzles out because the producer/director has run out of money and can't afford to take it forward any further. The aim here is to get the project made and to get paid.
With mid to high budget features and well known, established production companies you can expect to be paid upfront and on delivery for your work. The bigger companies/producers/directors will have money behind them and will be able to pay you as you work. However, if you are a new writer with little or no track record they may ask for a first draft of your idea before an agreement and payment is forthcoming, simply because your work isn't yet proven. Why would they spend thousands of pounds out on an idea only to find you can't actually write?
Should you ask for payment when a producer/director options your low budget screenplay? Again it depends on whether the producer/director has any money or not. I've seen writers without a single writing credit give advice on Facebook and Twitter insisting a writer should always be paid upfront, even for an option, and should never accept a £1 option from anyone. And they wonder why they don't get commissioned. As a writer you have to build your profile and low budget features and short films are the way to do this. It is perfectly acceptable for a new or unproven writer to accept a £1 option on their screenplay and then do any requested rewrites for free. What should it matter if you have an agreement in place where you know you'll get paid when the project gets funding? Isn't that yours and the producer/director's ultimate aim, to get the project made? If the project fails to get funding no one will be paid anyway and if the project derails because of your unrealistic demands you will get a name for yourself for all the wrong reasons.
Having said that if the producer/director can, and is willing to, pay you a small amount upfront, or on delivery for your work, with the rest on deferred payment, without putting the project at risk, then this would be the idea option. It'll help you with your bills while you're writing, or rewriting the screenplay. Remember, if you don't ask, you don't get.
I heard a perfect example of how tight money is with low budget film making a couple of years ago, from a well known producer with several successful low budget British feature films under his belt. On this occasion he was paying a writer he had worked with before upfront from the project's initial meagre, budgeted funds, only for the writer to fail to meet the final script deadline by a couple of weeks, sinking the project entirely as the money ran out. Money is very tight everywhere, especially at the moment, so as a writer you have to make a choice about whether you are going to insist on payment up front for a low budget feature, or a deferred payment.
Every project is a gamble and you have to make your own mind up on which of those you think will have the better chance of eventually being produced and are worth working on, initially for free, to get that deferred payment you have agreed.