Home renovations can be one of the most stressful projects a homeowner takes on.
If it goes right, you could increase the value of your home and enjoy an improved lifestyle.
If it goes wrong, you could be on the hook for thousands of dollars, have mortgage issues or even be liable if a contractor gets hurt doing the job.
Of the $65 billion Canadians spent on home renovations in 2014, about $10-11 billion was undocumented, according to David Foster, communications director for the Canadian Home Builders’ Association (CHBA).
Foster warns there are no guarantees, but there are steps you can take to protect yourself and get the job done right.
Q: What are some of the warning signs?
A: Foster said undocumented, cash deals should be avoided.
“There’s all sorts of risks, not the least of which is if something goes wrong you’re kind of on your own. If the company you’re dealing with doesn’t deliver what they promised, if you have a contract, you can sue them. It’s not a lot of fun, but you can take them to small claims court. If you don’t have anything written down, you can’t go to court.”
The courts generally frown on both parties when the work is undocumented.
“You can’t operate outside of the law and then ask the law to resolve your differences.”
Foster warns that informal agreements can include other liabilities. Without a contract, anyone working on your home essentially becomes your employee.
“In Ontario, we’ve seen cases, particularly for roof repairs, where there is a fall and injury and then [the homeowners] are charged under the Labour Relations Act,” Foster said.
For more information and advice on contracts, see the Get It In Writing campaign put together by the CHBA and the Canada Mortgage and Housing Corp.
Q: When should you pay and how much should you pay up front?
Foster said there is no hard and fast rule on this matter, but homeowners can expect to make “some reasonable payment on signature of the contract, especially if the contractor has to put in an order.”
The average deposit payment is about 10 to 20 per cent, with the rest paid in installments.
He said higher deposits could be justified if a lot of custom materials, like windows or cabinets, have to be ordered before the work can start.
Foster recommends tying the installments to job milestones rather than time.
“It shouldn’t be, ‘It’s Friday, you need to give me more money.’ But, ‘all the cabinets have been installed, you need to pay me,'” Foster said.
Q: What should you ask for before hiring a contractor?
Reputable contractors should be able to produce a business licence, a letter of clearance from the province’s Workers’ Compensation program and business liability insurance documents.
“He should be able to pull all that out. Boom, boom, boom. If they have this shocked, vacant look on their face when you ask, that’s not a good sign,” Foster said.
Foster said the documents are difficult to forge, and the penalty for faking them would push the shady contractor into “serious, going to jail fraud,” territory.
He also advises that work being done after storm damage be done by the contractors recommended by your insurance company.
“I always go with that list,” Foster said.
Q. How important is asking for references?
Foster said it’s understandable that some homeowners are hesitant when it comes to asking a contractor for reference but they are beneficial for parties.
“Frankly the best advice we can give anyone is ask for customer references and actually call these people,” he said.
The most important question to ask a contractor’s previous client, according to Forster, is “if you were doing this again, would you hire the same person?”
Foster added that most business is done through recommendations and often times the contractor has already cleared it with the homeowner so they are expecting calls for references. He suggested calling a reference who has had similar work done.
If you’re still nervous or confused about what to ask someone about the work that has been done to their home, click here for a worksheet of sample questions.
Foster said to be weary of a company that cannot give you references.
Q. After all this, how can you tell if you’ve picked the right contractor for you?
When it comes to a large project, the contractor will be in your home for a large part of the day, perhaps for weeks or months; Foster says it’s very important to feel comfortable with the person you’ve hired.
If something feels a little off when you meet this person, don’t ignore it.
“(Do) the gut check. You want to make sure you’ve got a rapport, you’re comfortable and you feel confident. If it’s a couple that owns the home, they need to both be there,” Forster explained.
This interview has been edited and condensed.