Building a New Home?

Then Get it in Writing!

If you own land and plan to hire a contractor to build your new home, here’s some advice – Get it in Writing! You should have a written contract that fully defines the work you’re paying for and exhibits that the contractor is operating their business properly. Without this, you could face serious risks if something goes wrong. Here’s why:

As the property owner, you may be responsible for the construction work that is carried out on your property. You could face notable legal and financial problems if the proper measures are not in place and documented in a written contract.

In some provinces homeowners are billed for injury and recovery costs if someone they hire is injured and does not have Workers’ Compensation coverage. You are responsible if your construction project does not comply with local building codes. Without a written contract, you will have difficulty taking action against a contractor whose work is incomplete or badly done.

Whether you hire a general contractor or act as your own, you need proper protection in case something goes wrong on your land.

There are three aspects to this protection:

1. You need a clear and thorough written agreement with any contractor you hire, covering all aspects of the work to be done. This contract needs to describe the work in detail, including: materials, work schedule, pay wage and pay schedule. Work drawings and specification lists are typically included in this contract.

2. Your contract should provide proof that the contractor is protecting you from a number of potential risks. This includes:

•Business liability insurance in case your home is damaged, there is an accident, or if something is stolen from the work site

•Workers’ Compensation coverage for all workers. In provinces where this is not mandatory for self-employed workers, you should require proof of equivalent private disability coverage.

•Assignment of responsibility for obtaining required permits and inspections

•A Business number or GST/HST number

•A valid license, if your municipality requires licensing of contractors      

•Lien holdback arrangements that conform to provincial requirements, to limit your responsibly for debts that the contractor incurs while working on your home

•Coverage from a new home warranty provider

3. You need to talk with your homeowner insurance representative before any work begins, to make certain your policy covers the risks related to your project  – many homeowners’ policies do not automatically provide sick coverage

Some consumers try to save money by hiring contractors “under the table”, without a contract and with all payments made in cash. Unfortunately, they often have little idea of the significant financial risks involved in such “underground” cash deals. The price is lower for a reason – the consumer is not protected. Reputable contractors who are in business for the long term don’t work this way. Any contractor who offers a special “cash discount” on work done without a proper contract should be avoided. The risks are simply too great.

Each municipality has different requirements for permits, zoning and land use. You can always talk to your local building department.

For more information on building a new home and hiring a contractor, www.pkhba.com/members