Avoiding Financial Disputes with a Contractor
Recent media reports have once again reminded us of the potential for financial loss when hiring a contract for home renovations. Unfortunately, getting money back from contractors who do not show up to do the work is difficult and expensive. Thankfully most contractors are reputable and there are some sensible steps homeowners can take to protect themselves.
- Reputable contractors will not ask for payment of the contract price in advance. Established builders have credit facilities that they use to purchase materials, and they will submit invoices to customers for progress payments as the work proceeds. A deposit is reasonable, but this should not exceed ten percent of the contract price.
- If the homeowner is determined to use a contractor who needs funds to purchase the supplies, the homeowner should deal directly with the supplier .
- Homeowners are required to maintain the ten percent holdback required under the Construction Lien Act. If the entire contract price is paid in advance, the homeowner may have to pay ten percent of the contract price again to any supplier who is not paid by the defaulting contractor if the suppliers register liens against the home.
- Obtaining references from the contractors previous customers will help you pick a good contractor and to weed out the very few scoundrels that exist.
- Seek quotes from several contractors, and ask for explanations of how the work will be done so you can understand any differences in prices obtained. Be wary of prices that seem much lower than most of the other quotes.
- Choose a contractor who has a good reputation and wants to keep it.
Shawn O'Connor
Litigation Partner
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