Building or renovating a home can be one of life’s biggest expenses.
It’s expensive and potentially even more expensive if something goes wrong.
Between 2022 and 2024, the Better Business Bureau (BBB) received hundreds of complaints about general contractors in Canada.
Then, there are home improvement scams, frequently ranked in BBB Scam Tracking Risk Reports as one of the riskiest scams Canadians face. Maybe it starts with an unsolicited knock on the door or a call from a worker offering to fix your roof or driveway. It may seem like a good deal until you pay the deposit, but the worker disappears.
Other times, homeowners and builders simply don’t see eye to eye.
Contract disputes can become heated and lead to financial losses for both parties. Maybe it’s due to shoddy workmanship or a fussy, unrealistic homeowner who changed plans mid-project. How do you protect yourself from all this?
Experts say get a contract. And make it detailed.
1. Get it in writing
One of the most important things you can do to protect yourself, many experts say, is to have a contract that clearly defines roles and responsibilities.
Melanie McGovern, director of public relations and social media for the International Association of Better Business Bureaus Inc., said landlords will want to have a written agreement that includes timelines, costs and estimates.
“So if something goes wrong, you can refer to that document,” he said.
It is recommended that you have it reviewed by an attorney, especially if it is a contract for an expensive project.
“Don’t sign anything until a lawyer reviews it, and don’t pay a deposit before you do,” said Scott Fash, executive director of BILD Alberta.
Claudia Simmonds, executive director of the Canadian Home Builders Association of New Brunswick (CHBA-NB), said it’s also important to make sure the contract addresses the project.
“Sometimes builders present a contract that is ‘their contract.’ It’s what they need. So what owners need to do with that contract is make sure their interests are protected as well,” he said, adding that too many transactions are a handshake, with nothing in writing.
“Because homeowners are downright intimidated by the builder and because there is a shortage of builders right now,” he said.
Peter Di Scola, owner of Salerno Custom Homes and president of the Ontario Home Builders Renovation Council, said a big part of the contract is the scope of work.
“I always tell my potential clients that if we get the scope right, we won’t have to look at the contract too much because, other than the milestone payments, everything else will be fine,” he said.
He said a contract should describe what happens if there is negligence on the part of either party or if something goes wrong.
“A contract should also stipulate what happens when things go wrong,” he said.
The Canadian Home Builders Association has tips and lists on what homeowners should ask for and include in a contract.
2. Ask lots of questions and do your homework.
Experts point out that hiring a contractor should be viewed like a job interview.
Search for the contractor online. Do they have a profile on the Better Business Bureau? Are they members in good standing of any home builder associations in their jurisdictions or professional organizations? Are they willing to provide references and what do those previous clients say about your work? Do they have previous projects that you can visit?
BBB notes that bad contractors will be reluctant to share this information and scammers won’t wait for you to do your homework.
“You have to make sure you’re thoroughly vetting the company and then make the decision from there,” McGovern said. “The cheapest offer is not always the best offer.”
Other key questions to ask include: Does the contractor offer a warranty? Do they have liability insurance and occupational health and safety coverage, such as Workers’ Compensation Coverage?
“Request a copy of those documents. If they are a legitimate builder, there should be no problem,” Simmonds said.
In New Brunswick, for example, homeowners can search for contractors on WorkSafe NB to verify compliance.
In provinces, like Alberta, that has a new registry of home construction licenses, people can search for companies that way.
The Canadian Home Builders Association offers the RenoMark program for renovators. RenoMark-certified renovators must meet a set of standards, including offering a minimum two-year warranty on all work, a minimum of $2 million in liability insurance, and having up-to-date Workers’ Compensation coverage.
3. Review the warranty
Discuss warranty agreements before signing.
Depending on the province you live in, third-party new home warranty coverage may be mandatory on new homes. But it is available to contractors in all provinces and is considered a valuable safety net because it protects the homeowner from potential structural problems or if the builder goes bankrupt. The length of the warranty varies depending on the work, but for new homes it could guarantee coverage for certain aspects of a home for up to 10 years.
“Make sure they are enrolled in a new home warranty program if they build homes,” said Kevin Lee, executive director of the Canadian Home Builders Association.
Third-party new home warranty coverage is currently mandatory for new homes in British Columbia, Alberta, Ontario and Quebec. In other provinces, professional associations may require their members to provide the guarantee, or banks may require it to finance a new home, but it is not legislated.
Many view a third-party warranty for new homes as a valuable safety net when building.
A fact sheet connector on new home warranty in Alberta advises that contracts detail any warranty arrangements that have been decided upon, including the builder’s responsibility to provide or obtain a warranty.
He also notes that builders typically provide some basic warranty coverage, usually called a “builder’s warranty,” but it may not be the same as a new home warranty.
4. Watch for warning signs
Offers without contracts
Experts emphasize that one of the most important ways to protect yourself from fraud or a dispute is to have a contract that details the project and responsibilities. It is there to protect both parties.
Cash Only Offers
Simmonds said if a contractor offers to do the work at a discount for cash, “alarm bells should ring.” It could mean they are trying to evade taxes. Make sure you get a receipt with any transaction.
Pressure to sign
McGovern said one of the biggest red flags is when contractors pressure clients to sign a contract right away.
“Reputable contractors will give you time to review a contract and decide if it is right for you. They will answer your questions. They will be proud of their inclusion in the BBB,” McGovern said.
“If they’re pressuring you to sign right away, start right away. I need this money, I need cash, that’s when you say, ‘I’m going to check you out before I sign anything.'”
Demanding too much money up front
Another thing to watch out for is when contractors demand too much money up front.
Generally, a deposit is not unusual. It could be between 20 and 30 percent, depending on the project.
“The higher it is, the more questions you should ask. So why? What are these funds used for? How are they contributing to the project?” Di Scola said, noting that a person does not have to agree with it. It’s a negotiation.
“As a consumer, you have the ability to negotiate with the contractor and say, ‘I’m not comfortable with 30 percent because the value, in my opinion, appears to be only 20 percent,’” he said.
McGovern said you should always put a down payment, but not too much.
“Asking a lot of questions is really important because if they don’t answer, if they’re evasive, if they just demand money, that’s a big red flag,” he said.
Contractors trying to deter
Lee said people should be wary of contractors who try to tell them something isn’t necessary. Home warranty coverage. Construction permits. Whatever it is, it may be very compelling because Lee said it will apparently cost you less money.
“But with each one you skip, you’re putting your house, your money, and your investment at risk in order to save a couple of dollars, which could also end up costing you an incredible amount of money.” said.
5. Be cautious and trust your instincts
Julie and John Ridley were defrauded of more than $45,000 when they paid a contractor to build a second story above their garage, but the project was never completed.
“I have a good judgment on character, so when it all started, when things weren’t going well, when you weren’t working but the money was still coming out the door, I had that, I was like ‘uh, something’s wrong.’ ”Julie said.
He wants to remind homeowners to be careful with their decisions.
“If you feel that little twinge in your stomach that says, ‘I don’t know, this is uncomfortable,’ listen to it,” he said.
Di Scola also pointed out an important question to ask when doing a project: do you like the person?
“You’ll have to work with that person for months,” he said.
“You really have to get along with that person and you have to be able to communicate with that person,” he said, adding that there is a lot of value in that.
