With a heated real estate market in Toronto and surrounding regions like Hamilton and Burlington, a lot of homeowners decide it’s a wise investment to undertake renovations to their property for the promise of a higher selling price.
Unfortunately a lot of things can go wrong when hiring a contractor, and contractors can have special rights and interests in your property if they are not paid, depending on the scope of the project.
Here are a few tips on how to take the appropriate precautions when hiring someone to renovate your property and avoiding contractor disputes.
1) Determine what exactly it is that you want done to the property
It’s always a good idea to think about your project in as much detail as possible so that you can ensure that every aspect of the project is discussed and expectations are made clear when you are talking to potential contractors. You need to consider the scope of the project, the timeframe, and whether any building permits or professional inspections will be required.
2) Do your research and check credentials
Be sure to ask questions and seek verification about the contractors licensing, experience, credentials, general liability insurance and worker’s compensation, and any workmanship warranties or guarantees.
It is important to ask how long the company has been operating under the same name, and whether the company has operated under any other names. Ask the same questions about the members of their team – ask to be introduced to each of them. Ask for references and examples of past work. It’s a good idea to see what your potential contractor’s web presence and online reviews look like and to check with the Better Business Bureau website to see if there are any patterns of complaints.
If your contractor will be hiring sub-contractors for your project, it is critical to know this information. You can be responsible for making sure that the sub-contractors and suppliers are paid since you are ultimately the one who is paying. Each of them has a potential lien right against your property if unpaid under the Construction Lien Act.
3) Get more than one estimate – in writing.
This gives you a clearer idea as to what the going rate is for your given project. Never accept an estimate over the phone, or without a contractor coming in to inspect the property. Even where prices are similar, the scope of the project you are being supplied a quote for could differ wildly from contractor to contractor. In this situation, you are not comparing apples to apples. Always get a breakdown of labour costs, material costs, and a commitment to a timeline.
4) Sign a contract
The importance of having a signed contract in place cannot be emphasized enough. This needs to be done before any work starts. This is critical to establishing what the agreement is between the parties and what you can expect from each other. Consider provisions which contemplate what happens if any aspects of the contract are not complied with. This document will be paramount if anything goes wrong and the there is a potential lawsuit. Make sure you carefully review any contract to identify whether the contractor is seeking to preserve lien rights to your property in the event of a failure to pay.
Contractors and suppliers are usually under strict deadlines to place a lien on a property, so a failure to make timely payments can have major consequences since once a lien is placed, it can be costly to have it removed. These types of contracts come with a 10-day cooling off period, which means that once you sign the contract you have 10 days to cancel the contract for any reason at no cost, provided the work hasn’t started. It may be a good idea to wait the full 10 days before the work commences.
5) Do not pay upfront
If the contractor is insisting that they are paid up front for the job, be extremely wary. A good contractor will not require you to pay for the project up front. If they insist that they require a deposit to pay for materials, consider paying for the materials yourself and supplying them to the contractor to begin the work. If you do decide to pay a deposit, never pay more than ten percent of the contract price.
6) If the project will take time, make progress payments
If the project will take more than a week to complete, consider building progress payments into the contract, so that the contractor is paid incrementally as the work is completed. Unless the scope of the work changes a contractor cannot increase the cost more than 10% of the original contract price. If there is an additional scope, they must provide you with a new estimate for the additional scope which you must approve before they can proceed.
7) Never pay the full amount until after the work has been completed
Your final payment should not happen until the work has been completed and you have had a chance to thoroughly inspect it, and any minor touch ups have been completed. If there are sub-contractors involved, you will want to ensure they have been paid before you make your final payment. Under the Construction Lien Act, you are permitted to holdback ten percent of the contract price for 45 days after the project is complete, for your protection against a lien, in case sub-contractors or suppliers are not paid.
For more tips and advice check out the Consumer Protection Ontario webpage on home renovations:
Have you recently had a bad experience with a contractor and lost money? Gilbertson Davis LLP are here to help you figure out what your options for recourse are.
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