Planning for a home renovation is an exciting milestone in one’s life. However, it can turn into a great source of stress both financially and mentally if it is not planned well. Despite the substantial financial burden that comes with starting a renovation project, the decision-making process is often the hardest and the most critical step along the way. After all, that is what determines what the result of the renovation is.
Having a contractor by your side can help you immensely through this journey. It is crucial to find a contractor that is a good fit for you and your renovation goals. In addition, by knowing your rights and responsibilities and having an agreement in place, you can protect yourself from potential disputes that could arise between the contractor and you. Make sure to consider the followings before entering into a construction agreement with a contractor:
1- Get it in Writing!
While it can be tempting to start your home renovation without a written contract, it is important to consider the risks before proceeding. A written contract is your best protection against personal risks such as lawsuits resulting from accidents, work-related injuries, or damages. In addition, it can help protect you from losing any deposits or payments and help you avoid additional charges without your written approval. A definitive agreement would include a detailed scope of work, responsibilities, obligations, renovation insurance, the project timeline, and details on the payments. As with any contract, you should get independent legal advice before signing anything.
2- Pay as the Project Progresses!
Most contractors won’t start a job without getting a portion of the payment upfront as a deposit. After all, there are materials to buy and workers to hire. However, it is important to manage both the initial amount and the remaining payments per the progress of your project. Make sure to pay the contractor gradually and keep track of how far along the project is. You must have a timeline set in your agreement and evaluate the progress accordingly.
3- Check Your Insurance Policies!
Many home insurance policies will have exclusions for substantial construction work, people injured while working for you, or the property is not occupied for a certain length of time. It is important to speak to your insurance agent about these issues before starting any work. Often you will need to get additional coverage during the project and afterward to cover the increased value of your property.
4- Make sure you have WSIB Coverage!
It is important to remember that you are often now the employer of the contractor and subcontractors during a construction project. Therefore, if an accident happens on your property, you can be both liable as the property owner and employer. This coverage is a critical term of the contract between you and the contractor.
5- Termination Clauses
Make sure to protect yourself by including a termination clause in your renovation agreement. Not all renovation projects will reach this stage, but it is important to protect yourself if things don’t go as expected. A termination clause can come in handy when dealing with incompetent or careless contractors or if the progress is unreasonably slow. A failure to include such a clause can lead you to have to pay the contractor the entire value of the contract.
6- Learn About the Rules of Construction Holdback
A holdback is a requirement that all owners, contractors, and subcontractors withhold 10% of the cost of the services or materials they supply on a project. It essentially works like a pyramid, with each party holding back 10% to pay those below them. The holdback is a protection measure to ensure that there is enough money to satisfy any lien claims that may come up. It is important to keep this rule in mind when drafting your agreement and setting the budget for the project.
7- Avoid a Construction Lien During Remodeling
The building process can be complicated and involves many different actors, including owners, contractors, subcontractors, laborers, and material suppliers. Unfortunately, the complexity of the process of construction itself creates an environment where disputes quickly arise.
Construction liens give anyone providing labor or materials with a legal claim on the land where they are working, much like a bank does when it takes a mortgage in return for lending money. If they’re not paid for their work, lien claimants can seek court approval to sell the property to collect on the debt. Anyone who provides material or labor to your property has the right to place a lien. For whatever reason, if a lien is placed, you, as the landowner, are ultimately responsible. Even if a contractor tells you that he/she will be accountable for any liens when it gets to court, the law makes you ultimately responsible.
Getting legal help while drafting your renovation agreement can assist you in preventing these issues from arising or having backup plans in case any aspect of the project does not go as planned.