Renovation and modes of payment

You’re finally getting started on those renovations you’ve been planning. After meeting with at least three contractors, you’ve hired the best one around. He was recommended as being very qualified, and you found his estimate suitable. You discussed the terms of the work with him, and together you’ll draw up, write and sign a clear and precise contract based on a guide from the Office de la Protection du Consommateur (consumer protection office) or the Canada Mortgage and Housing Corporation (CMHC).

You’ll do this because, unless it’s all in writing, you’ll have a hard time trying to make any claims if the renovations do not end up as you expected. In fact, an agreement signed by both parties that describes the work in detail and its associated costs, including payment terms, is your first defence in terms of protection.

When to pay
If the amount you’re talking about is not very much, then you could agree to pay when the work is completed. However, if it’s a lot of money, then you should create a payment schedule and include it in the contract. This way you can pay your contractor in instalments as the work progresses, as is suggested by the Office de la Protection du Consommateur, or you could decide on a schedule of dates and amounts.
To protect yourself, you should always pay by cheque or credit card – these are easy ways to leave records of all transactions. And don’t forget to ask your contractor for a signed receipt that includes the date, item (first payment for renovation performed on the kitchen, for example, or a down payment on the purchase of some cupboards) and the amount of the payment.

If the contractor has not shown you receipts proving that all subcontractors have been paid for their work, don’t hesitate to hold back 10 or 15% of the total amount of the contract, which you will give to the contractor only 30 days after the job is completed. This way, you will be protected in case of any potential legal mortgage that can be taken within 30 days following completion of the work.

For big jobs, a contractor works with subcontractors whom he hires and pays out of the moneys you give him. And a subcontractor who does not get paid can register a legal mortgage that will tie up a part of your home (representing the value of the service rendered and the material supplied) until he is paid. That’s why, at the very start, you should include a clause in the contract stating that the contractor will show receipts proving that all subcontractors have been paid.

As another protection measure, the CMHC suggests writing one cheque made out to the renovator, supplier and workers, as long as it is stipulated in the contract.

Before
Should or should you not give the contractor an instalment at the time you sign the contract. The Office de la Protection du Consommateur du Québec advises, as much as it is possible, not to make an instalment, or at least to negotiate a very small sum, as “many consumers have lost considerable amounts of money after a contractor has disappeared or declared bankruptcy.”

The Canadian Home Builders’ Association (CHBA), said that the vast majority of contractors request instalments of 10 to 15% of the project’s total value. This first instalment is meant to show good faith on your part. Some contractors ask for less, some more, especially if they have to order special products such as windows or kitchen cabinets. In such cases, a deposit of 10% to 50% of the cost may be required.

After
Once the work has been completed, inspect it all, taking note of what’s not right; for example, ill-fitting joints or poorly installed ceramics. Retrace your steps with the contractor. He may argue, but be firm; after all, you are only asking for what was agreed upon. You won’t want to be too exacting, but you don’t want to be taken advantage of either. Be steadfast in your decision to not pay until all the work has been done.
And what if the contractor does only a part of the work? Pay for that part only. You should make the final payment only when all the work has been executed to your satisfaction. Only then should you sign the certificate of completion for the work. That’s when the guaranty provided for you by law – which protects you for one year against minor defects and for five years against major defects – is applicable.

The contract should consist of:

• The contractor’s name and address.

• The numbers of licenses and required permits.

• The start date for the work.

• The completion date for the work. Have the following written into the contract: “The work shall be completed before or at the latest by (date); if not, the vendor is obligated to refund the deposit.”

• The guaranty – The contractors may subscribe to a renovation-guaranty program from the Association Provinciale des Constructeurs d’Habitations du Québec (APCHQ) or the Association de la Construction du Québec (ACQ).

• The declaration in which the contractor agrees to abide by the municipal  regulations and the National Building Code standards.

• The number of the contractor’s liability-insurance policy and the name of his insurer. The contractor must be protected by public-liability insurance. If he is not, you are at risk of being held responsible for damages that could be sustained to your property, your neighbour’s property or even to someone who becomes the victim of an accident on the premises.

• A detailed description of the work to be done, including what kind of material and how much of it is to be used. Include this estimate as an appendix to the contract.

• Total cost and terms of payment.

• Especially when major renovations are involved, a clause stating that the  amount of the contract includes the costs of construction-debris clean-up once the work is completed.