Renovation Disputes

There are generally three things we look at whenever a prospective client calls us about suing in the Small Claims Court regarding a home renovation gone wrong.  Is a case winnable; Is it collectable; and is it affordable to retain us.

Is it Winnable
During our initial consultation we will listen to the fact situation you find yourself in and determine if you have a winnable case based on applicable legal principles, your contract and the Ontario Consumer Protection Act.  Please note that providing an assessment is an ongoing process and our assessment may change as more information becomes available to us during the course of a proceeding.

Is it Collectable
In addition to determining if a case is winnable we also want to explore what are the chances of recovering on a judgment if a matter proceeds all the way to a trial.  If the contractor is a long-established business with many employees and a commercial address then chances of recovery are probably good.  If, however, the contract is a single individual, who has not business address, does not own a home and only has a cell phone for a business presence then collecting on any judgment could be poor.

Is it Affordable to Retain Us
The last thing that we look at is if it is affordable to retain us.  The Ontario Small Claims Court can hear matters up to $35,000 and can award a successful party up to 15% of the claim amount towards their legal fees. The Alberta Small Claims Court can hear matters up to $50,000. Generally speaking, we can offer provide some type of legal assistance for matters greater than $5,000. For matters under that amount it is generally not cost-effective to retain us.

A word of caution: Home renovation cases are among the most difficult and time-consuming type of cases the Ontario Small Claims Court has to hear.  They often involve multiple issues, legions of deficiencies or incomplete work, dozens or even hundreds of photographs and competing assessments from various contractors, inspectors and even engineers.  All of this makes for a very difficult case for a try judge to adjudicate upon.

We say this not to dissuade you from litigation but rather as a cautionary note and something to take into account when looking to settle a matter without the need to go to trial.

While not always the case, be prepared for the contractor to file a counter claim if you ultimately decide to sue them.  We see this most often in cases of alleged deficiencies.  The homeowner sues for the costs to fix and/or finish the job and the contractor counter sues for the amount left owing on the contract.  It is then left to the judge to determine who is owed how much and why.  Only after such a determination can the claim or counterclaim be properly disposed of.

If you find yourself in a situation where a renovation contract has not been completed as agreed and litigation looks like your only option then we have a few suggestions:

• Take pictures of the incomplete or deficient work.
• Get at least three quotes to fix and/or finish the job.
• Put the contractor on notice that litigation is pending if a resolution is not reached.
• Consult a legal representative before undertaking any legal action.
• Do NOT post any negative on-line reviews as this can interfere with any resolution.

Ideally, you wish to avoid having any problems in the first place and many problems can be avoided by hiring the right building renovator.  As a paralegal firm that practices in the Ontario Small Claims Court we are not necessarily specialists in advising what to look for in a home renovation contractor, however, after having dealt with hundreds of such cases over the past 20 years we have naturally developed some insight into this.  Here are some things to look for:

• A building renovator license if so required by your municipality.
• A standards certificate from any manufacturers if so available (e.g. some manufacturers of tiles, siding or stones provide training and certification to those contractors who wish it).
• Business insurance and a WSIB number.
• A registered business name and/or active corporation.
• A registered HST number.
• A physical address listed on their website or business cards (not a post office box).
• A telephone number that is routinely answered.
• References from satisfied customers that can be verified.
• Positive reviews on Google and Homestars.
• A Better Business Bureau profile with a positive rating.
• A written contract compliant with Ontario’s Consumer Protection Act that clearly specifies the scope of work, price and completion date.
• A deposit not greater than 50% of the total cost of the project.
• Payments accepted by credit card or by cheque payable to the business name.

Too often, a potential client comes to us after their contractor has abandoned the job in an unfinished state after taking nearly 100% of the money in cash and all they have is a first name, a cell phone number (which is not answered) and none of the checks listed above.  In such instances there may be very little that we can do.  Consequently, one of the best ways to protect yourself with respect to a home renovation job is to follow the checklist listed above.  While it does not and cannot guarantee a problem-free experience it greatly increases your chances of having one.

Before you commit to any particular contractor, you may also wish to determine if a municipal building permit is required for your scope of work and, if yes, who is going to be responsible for obtaining it.

Ontario’s Consumer Protection Act requires the building renovator to draft and present you with a written contract in advance of any work to be completed.  At a minimum the contract requires the following:

• The legal business name, address and telephone number of the building renovator.
• Your name and address.
• An accurate and sufficiently detailed description of the work to be completed.
• The total price for the aforesaid work.
• A timeline for the commencement and completion of the work.
• The date the contract is entered into.

If the contract is entered into at your home, the contract is also supposed to set out your 10-day cancellation rights under the Consumer Protection Act.

In any event, you are supposed to be provided with a written copy of the contract that you can keep for your records.

If all goes well, the contractor will commence work on the agreed upon date.  While we do not recommend constantly looking over the contractor’s shoulder all the time it doesn’t hurt to ask for updates with respect to the progress of the work.  Sometimes unexpected things come up that could result in the contractor looking for more money.  You should note that if you were provided with an estimate beforehand then the building renovator may only increase their price by up to 10%.  If there was no estimate then, absent exceptional circumstances, the contractor should be bound to the contract price.

If work is going as planned then payments should be made in accordance with any agreed upon payment schedule.  If there are issues then they should be documented in writing.

One of the leading types of home renovation complaints is the contractor has abandoned the job after receiving a significant amount of money and doing very little work. Too often in such cases we are confronted with a situation where very little is known about the contractor (e.g. a first name and a cell phone only).  If there is a written contract and the building renovator has missed the deadline to complete it then the homeowner may wish to put the contractor on notice of the default and afford them the opportunity to return to the job site to finish the work.  This is not necessarily required, however, as failure to complete a project on time may be considered a material breach by the court.  From a pragmatic aspect, however, and if one is looking to avoid litigation, then it may be a prudent course of action.

If the contractor has indeed left, or has neglected to return after being the afforded the opportunity to do so, then the home owner is well within their rights to hire another contractor to finish the job.  Before doing that, however, and in possible anticipation of having it sue the original contractor, the homeowner should obtain three quotes from other contractors to finish the project.  This is because the court needs to be satisfied that the costs of completion that are incurred are actually reasonable.

Any amounts spent over and above the original contract price to finish the job would then become the responsibility of the original contractor.  For example, if a homeowner entered into a contract for a $50,000 renovation with a $30,000 deposit and the contractor then abandoned the project mid-way through then the contractor would be responsible for any costs over and above the $50,000 to finish the job.  Consequently, if the homeowner had to hire another contractor to finish the job for a further $30,000 then the homeowners total expenses are $60,000 which is $10,000 more than the initial contract price.  The initial contractor could then be sued for this amount since the homeowner is entitled to be put into the same position as they would be had the initial contract been competed as agreed.

Sometimes the work of the contractor is not of good quality and it is discovered either by the homeowner themself, by a building inspector or a third party. This can create a difficult situation.  If the work is being reviewed by a municipal inspector then specific deficiencies may be identified and their remediation monitored and reviewed by the same inspector.  However, in situations where there is no such inspection (and not all work requires municipal inspections) then a homeowner may need to call in another contractor or a specialist.

If the contractor’s work is found to be deficient then technically the contractor has the first to remedy it unless the deficiency is of such an extreme nature that it constitutes a material breach of the contract.  If it is not a material breach and the contractor can and does remedy the deficiency then all is well and good.  It is only in situations where the contractor refuses to remedy the deficiency or it is a material breach that serious problems arise.

In situations where it is not a material breach and the contractor refuses to remedy it then this should be documented in writing.  Specifically, the deficiency should be identified and a deadline for remediation should be set failing which another contractor will be hired to undertake the work and any extra costs will be borne by the initial contractor.

In situations of a material breach the problem should be identified and explained by way of another contractor, expert or engineer and a demand for any additional costs made (or at least have the contractor put on notice for them if they are not readily known at the time).

There is a saying that good fences make for good neighbours.  We also say that good contracts make for good business relationships.  In order to avoid any confusion or ill will it is highly recommended that any changes to the project be properly discussed, negotiated and committed to writing by way of a change order.  Too often we see situations where a contractor demands payment at the end of a project for changes made by the homeowner and the prices are far more than what the homeowner anticipated. A dispute ensues and litigation sometimes follows.

Technically speaking, the contractor should be putting forward written change orders as they occur and if this is not happening the homeowner should request it or, perhaps, undertake it themselves.

Where situations warrant, a good contractor will properly explore the prospective job site in advance of making a quote or a contract.  Often in these cases, the contractor does not look for more money.  However, some contractors, through accident or design, end up looking for more money part way through the project.  Absent some exceptional circumstances, the contract price put forwarded by the contractor would still apply.

Where we most often see requests for more money are from contractors who were not properly vetted and satisfied all the criteria in our checklist.  Often these are small contractor operations who do not have a lot of money on hand and are either poor at quoting for projects or else are not able to execute them well.  In either event, they find themselves short on money and therefore without the means to finish the project.  This puts the homeowner in a difficult position.

If the work is generally of good quality and the additional amount requested is within 10% of the contract price then the homeowner may wish to pay it.  (It should be repeated that under the Consumer Protection Act a contractor may increase their price by up to 10% of a quoted price.)

If, however, very little work has been done and the contractor is looking for the balance of the contract price then this can be harder to determine how to address the situation.  The contractor has already been exposed to have cash flow issues and there is no guarantee that further payments will result in further work.  In fact, we have seen situations where the contractor took additional monies and then disappeared altogether.  One potential way to manage such a request is to agree to pay for any materials or subtrades directly.  For example, if the work involves a delivery of tiles then the homeowner could pay the supplier directly as opposed to paying the contractor.

If, however, the request is excessive and the homeowner will not acquiesce to it then this will could create a situation where the contractor ends up being in breach of the contract.