Real estate lawyer Khalil Haji offers the following practical insights for protecting yourself in your next renovation project:
1. Know who you are hiring
It is important to research and gather information on the contractor you are hiring to make sure you understand their reputation and experience. Ask friends for recommendations and ask the contractor for references and examples of completed projects to gain insight into the quality of their work. Avoid hiring a contractor just because they knocked on your door.
Searching the Better Business Bureau allows you to determine if the contractor is accredited, read reviews and see a history of complaints.
Ask the contractor to provide proof of public liability and property damage insurance, as well as proof that the contractor and all tradespeople have Workers’ Compensation Board (WCB) coverage.
If the contractor is asking for any money, such as a deposit, ahead of work being completed, they are considered a “prepaid contractor,” so you should obtain confirmation that they are licensed by Service Alberta and appropriately bonded.
It is always a good idea to get multiple quotes and opinions to ensure you are getting the best advice and a fair price.
2. A written contract is essential
Many disputes among homeowners and contractors stem from disagreements related to the scope of work and cost. A well-written and detailed contract will help alleviate some of these issues. At a minimum, the contract should clearly outline the contractor’s duties, the timeline for completion, the scope of work, the materials to be used, the cost for all labour and materials, how and when payments are to be made, warranty information, benchmarks for completion, and a mechanism for handling disputes.
Also, if the contractor is a “prepaid contractor,” they must include certain statements in the contract, including specific cancellation rights of the homeowner.
It is important to have the contract reviewed by your lawyer to ensure you are protected.
Before offering payment to the contractor, you should inspect the work to ensure that the work being paid for has been completed, or the materials being paid for have been purchased and brought on site. Also, always get a receipt for money paid to the contractor.
Most importantly, any time funds are to be paid to the contractor, you must first ensure no builders’ liens have been registered against the property. You must also obtain a WCB clearance certificate and a statutory declaration from the contractor confirming that all workers and materials have been paid to date.
4. Lien holdbacks
The contract should specify – and you should always maintain – a lien holdback of 10 per cent of each payment to be made to the contractor. The lien holdback is accumulated and held for a period of 45 days after the entire project is substantially completed. This is to ensure no builders’ liens are registered against the property by unpaid tradespeople and that the contractor has paid for all workers and materials before paying themselves.
5. Permits and inspections
Always ensure that required permits are being obtained. Check with the municipal authority yourself to determine what permits are needed and what inspections are to be conducted.
Obtain copies of required permits before any work commences and ensure the appropriate permits are posted on the job site. It is a good idea to attend any municipal inspections with your contractor so that you can learn firsthand the outcome of the inspection. Lastly, be sure to obtain confirmation from the municipal authority that all work has been completed in accordance with the permits, and retain copies of all permits, inspections and completion certificates for your records.
Khalil Haji is the principal lawyer of KH/Dunkley Law Group.