Home Renovations & Dealing with Contractors
Wednesday Sep 13th, 2017Share
Home renovations can be a blessing, a headache, or both. Whether you choose to do it yourself or hire a contractor, considerable time, money and effort will be spent before your vision becomes reality. While it is generally recommended to hire a contractor to complete renovations, homeowners should consider the following before retaining their services:
1. Selecting the Right Contractor – Due diligence should be completed on all prospective contractors. This includes an internet search, ensuring the contractor is properly licensed and carries satisfactory insurance, and requesting references and examples of work. Be wary of contractors who refuse to provide this information.
2. Contract for Services and Materials – A formal contract should be entered between the homeowner and the contractor with respect to the services and materials to be provided, and should address the following:
a. The full legal name of the parties;
b. The scope, design, construction, and price of the project;
c. A schedule for performance, including a start and completion date;
d. The responsibilities of each party, including responsibility for obtaining permits, purchasing equipment and materials, and hiring sub-contractors;
e. Warranties and indemnities to be provided by the contractor, if any, and what they cover (i.e. personal injury, damage to building, real estate, or the homeowner’s personal property);
f. The decision-making authority of the parties.
Contractors generally use their own agreement so it is important that homeowners carefully review it in its entirety. It is advisable to have a lawyer review the agreement.
3. Price, Payment and Financial Considerations – Though the scope of work or expertise of the contractor will dictate price, the method and timing of payment will differ depending on the project. Homeowners should explore the possibility of making milestone payments based on performance and set outcomes. Other financial considerations include:
a. Ensuring payment due dates are clear;
b. Holding back portions of the price for liens, warranties, deficiencies and security;
c. Obtaining a performance bond from the contractor;
d. Determining if there are events which may increase the price;
e. Interest on late payments;
f. Bonuses for early performance, penalties for late performance, or liquidated damages for breach of contract or poor performance;
Always be wary of contractors who request large deposits upfront or who demand cash payments.
4. Unforeseen Events and Changes to the Scope of Work – It is impossible to predict every occurrence in a renovation project. Delays can occur if the contractor or homeowner fails to obtain the necessary permits, designs, equipment or material in a timely manner. The project may also experience unforeseen events, such as discovering unknown deficiencies with the property or events of force majeure (i.e. events outside of the parties’ control, such as natural disaster). Homeowners may even wish to change the scope of work or materials used during a project. It’s therefore important for owners to understand the implications with respect to unforeseen events and changes to scope.
5. Compliance with the Law – In addition to local bylaws, all construction projects in Ontario are subject to the Construction Lien Act. The Act establishes construction liens and holdbacks for parties who have supplied services and materials to a construction project in the event they are not paid in full. Often, the homeowner has no direct contract with these contractors; rather, the head contractor may retain sub-contractors to assist with the work.
There are many other considerations when entering into renovation agreements, such as matters relating to Insurance Notification, Dispute Resolution, and Termination of Contract. Careful attention should be paid to every aspect of the project and to the contract itself prior to entering into any renovation agreement.
By: Garry Shapiro and Evan Shapiro
Source: Harvey Kalles Real Estate Ltd., Brokerage