Cutting the Risks

Drive down any street touched by the June floods, and it becomes obvious Calgary's renovation industry is booming. But some Calgary contractors are warning area homeowners to use caution when hiring someone to do the work.

"I think that what's happening is there's an influx of people from other places that maybe aren't as qualified and people need to be careful," said Darryl Pavlove, owner of Fit for a King Renovations. The Alberta government charged a Calgary contractor this month with numerous counts under the Criminal Code and Alberta's consumer protection law. The Crown alleges that between October 2011 and June 2012, the contractor, Kieron and Greta Warren, took prepayments totaling nearly $160,000 from five couples in Calgary and Okotoks for renovations that were never completed.

The province also alleges the same contractor operated as a prepaid contractor without the required provincial licence, misled consumers about the date work would be completed, failed to use contracts that met legislated requirements, and failed to refund consumers.

In 2012, Albertans spent $5.1 billion on renovations. As a result of the floods, insurance claims in the province are expected to exceed $2 to $3 billion according to the Insurance Bureau of Canada, while the Alberta government has devoted an additional $1 billion in funding for rebuilding efforts.

An estimated 14,500 Alberta homes were damaged from the floods. A report from TD Economics estimates renovation spending in Alberta could increase by as much as 10 per cent this year.

Households spend $21,000 more on non-flood related renovations and furniture in the first year after a home purchase, the Canada Mortgage and Housing Corporation estimates – an impressive stat given the 19,601 Calgary homes that were sold during the first nine months of 2013.

With the heightened level of activity, Pavlove said the room for error has increased with homeowners. As more jobs come on to the market, unlicensed contractors often rush in to take on work for less money.

"There are probably a number of companies out there right now that are just start-up companies that are undercutting some of the people that have been in the business for a long time," said Pavlove, who said his schedule is full every day even without taking on any flood-related renovations. Glenn Young, who takes on renovation work in his free time, has also seen the impact of a labour shortage in the city.

"The people that come into your house, they'll tell you they know what they're doing, but I'll guarantee they're on Google the night before trying to figure out what they're going to do the next day."

According to provincial laws, contractors who take payment before the work is complete and who look for work, discuss or finalize a contract away from a regular place of business must be licensed by Service Alberta and post a security.

"You can't take a cash deposit unless you're licensed by the province as a prepaid contractor. Anybody that I know in the business right now, they're not prepaid," said Pavlove, who estimates that his company spends around $5,000 a year to meet all the government regulations.

"We're trying to do everything right and it does cost. It's probably $5,000 a year that we spend in licensing and insurance and the whole bit, but I'm hoping that in the long run it's all worth it."

With the Alberta government's flood remediation standards calling for specific materials and so many in the city performing similar jobs, another issue that is arising for some in the city is a shortage of materials.

"You can always tell in commodities what's happening by the price of lumber," said Young. "It's really funny because I've watched this trend for five years. You know that there's a problem with OSB (Oriented strand board) if it starts to go up in price."

Young said in the last month alone he has seen the price of two-by-fours fluctuate significantly and on one occasion he was unable to purchase drywall due to a store shipping their entire supply to another location.

Although such stories are anecdotal, they certainly speak to the overall level of activity taking place in Calgary's renovation industry. Pavlove said when it comes to hiring someone to do the work, homeowners should resist the urge to simply go with the lowest offer and do a little research before making their decision.

"Your house is the biggest investment that you're going to make in your lifetime, so if it costs a few thousand dollars more and people come with credentials, then I think it's worth it for that homeowner to actually look into it and make sure their butts are covered."

Tagged: Calgary Real Estate | Calgary Real Estate News | Renovations