If you've turned on the TV lately you have probably seen enough reality shows to know how quickly things can go wrong. Home renovations don't have to be a disaster; with enough awareness, planning and preparation you can be well on your way to a happy home.
Initial Preparation: Sit down and write out what you want changed, how and why. The Canada Mortgage and Housing Corporation (CMHC) website has detailed fact sheets for almost every different type of renovation. Once you have set out the scope of your renovation you will be able to determine the breadth of experience your contractor will need to have.
Contractors: Referrals from satisfied friends and family are the best place to start your search. Trade associations are also helpful sources of information. Once you've found a contractor, you should be aware of several things:
At the outset, you must be aware of what builders' associations call "the underground economy."A contractor offering a great price on the condition that you pay in cash, "under the table", is probably not just looking to save money on his taxes. Even a small renovation project is a complex business transaction. The law requires building permits, insurance, Workers' Compensation, compliance with zoning, and health and safety regulation and more. If your contractor is cutting costs by not complying with the law, you might end up paying for some of these expenses and be on the hook for liabilities that could arise out of the renovation.
As well, the government has provided consumers with a "cooling off period". This means you are not stuck with a contract for renovations you feel you were pressured in to. If you sign a contract for over $50.00 in your home, the Consumer Protection Act gives you the right to cancel the contract within 10 days unless the contract was for emergency home repairs.
Liability: The actual cost of the renovation is only one of the expenses that might come out of your wallet. There are several other costs and potential liabilities you must consider before you renovate.
To start, call your insurance company to find out whether the renovations are covered under your homeowners insurance and what your policy covers. Even if the renovation isn't a problem, theft of the construction materials from your property or passersby being injured might be.
Additionally, although some repairs do not require building permits (ex. painting, flooring) many do including: additions to your home; structural changes (ex. moving walls, doors or adding things like fireplaces); and changes to the systems of your home (ex. electrical, plumbing). Check with your municipal building permit officer to be sure. As a homeowner, you are legally responsible for obtaining any building permits. However, you can include a clause in your contract with the renovator making this their responsibility. Just remember to be specific.
Finally, and most importantly, you must consider whether you will be deemed to be the contractor. If you're actively involved in the renovation, hiring subcontractors, performing part of the work or supplying all or some of the materials, this might be the case. If you are, you will likely be responsible for ensuring all government regulations are followed, obtaining building permits, complying with zoning regulations, obtaining Workers' Compensation coverage, and be liable for workplace safety (a liability you will probably want to purchase insurance coverage for).
Money Matters: If possible never pay in cash, and always obtain a signed receipt with the date, amount paid and what the payment was for. Not only is it necessary to protect you in case of a dispute, but you will need it to claim a tax credit. Several other important money matters include:
At the start, making sure you are protected if the contractor requests a security deposit. You will want to ensure this requirement is in the contract, and obtain a receipt for the payment. The receipt and contract should characterize the payment as a refundable deposit, as some documents include terms that indicate that the deposit is nonrefundable. According to the Canadian Home Builder's Association's (CHBA) and the OCP, deposits should not exceed 10-15% of the final amount due.
Moreover, if the project is big enough to require several payments, make sure they are tied to the completion of specific elements of your renovation (with a comparable value) to ensure you are always getting value for your money. Never pay the entire cost of the renovation until the job is inspected in detail, with deficiencies itemized and repaired, and all contract work is complete and signed off by you.
Lastly, according to the OCP, by law the final price of the goods or services cannot be more than 10% over the original estimate. The contractor can avoid this requirement by having you approve a "change order" that includes new work and a revised estimate.
"FREE MONEY" (seriously, but only if you act fast): The federal government recently introduced the Home Renovation Tax Credit (HRTC) to help stimulate the economy, but it is only available for renovation expenses incurred in the 2009 tax year. According to the Canada Revenue Agency (CRA), taxpayers will get a 15% credit on renovation expenses over $1,000.00 and up to $10,000.00 per household. That means you could get up to a $1,350.00 credit applied to your household's 2009 taxes. For more information see the extensive and easy to understand Q&A section on the CRA's website.
In this economic climate, saving money matter. Remember, the size of the renovation does not limit your liability in any way. The job may cost less than a steak dinner, but the liability might cost you more than your house.
For further information concerning this issue, please contact Pradeep Chand at email@example.com or 1.877.727.1443. Special thanks to Carla Hanneman, summer student at Brauti Thorning Zibarras LLP for her assistance in preparation of this article.
Pradeep practices Criminal/Civil/Commercial and Employment Litigation at Brauti Thorning Zibarras LLP.