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Contracts, Permits, and Insurance: do I need to bother?

Almost everyone has heard of Murphy's Law: "Whatever can go wrong, will." While my own experiences in the renovation industry have been very positive, it is true that anyone involved in renovating their home must be mindful of insurance, permits, and the contracts they enter into, just in case Murphy is right.

Before allowing anyone to begin renovating your home, it is critical that you have a written contract. Without this document, any arbitration or litigation will be based on your word against your contractors. Furthermore, there have been cases that judges have thrown out, since both parties obviously conspired to do the work without documentation to make tax evasion possible. If you are hiring a close friend or family member (often not a great idea), I would suggest a contract would be even more important. There can be very difficult dynamics involved when doing business with friends or family, and having everything in writing can make the process much easier.

Besides stating the total cost of the project, a contract ought to have a complete description of the work to be performed, the start and completion dates, who isresponsible for getting permits, a payment schedule, the name and address of the client and the renovator, and insurance responsibilities, as well as a numerous other more minor issues. For further information, the Ottawa-Carleton Home Builders Association (613-723-2926 or www.ochba.com) offers an excellent free sample contract and a folder entitled "Get it in Writing."

Depending on the nature of your renovation, and what municipality you live in, you may or may not need a municipal building permit. Ultimately, it is the home owners responsibility to ensure that all required permits are obtained. It would be wise to check with your local municipal building department before undertaking any renovations. If you do proceed without a permit when you should have had one, you risk receiving a stop work order, and possibly a large fine. After that, the process of obtaining a permit will likely take even longer than usual, and, in the meantime, your home may be in considerable upheaval. Furthermore, even if you "get away" without a permit, it may come back to haunt you when you go to sell your home. Sellers are now required to fill in a "Vendor Disclosure Statement" for the benefit of purchasers. Included in that disclosure are questions about renovations you may have done to your home, and whether or not permits were taken out. While selling a house, most people would dearly like to avoid problems fouling up their closing day.

As well as municipal building permits, if your project involves changes to your house's plumbing, a plumbing permit will also be required by the municipality. Some municipalities (including Ottawa and Nepean) have a "Master Plumber" licensing requirement and will only issue plumbing permits to a licensed Master Plumber or to a homeowner who is doing his own work (with his own hands!). Most renovations also involve some electrical work, which means a permit (issued by Ontario Hydro [now the Electrical Safety Authority (ESA)]) is required. Insist that electrical permits be taken out. I personally would not want to give my insurance company a possible "loophole" to avoid payment should my home burn down.

Speaking of insurance, you will want to contact your broker and advise him of the work that will be done to your home. Many homeowner policies do not cover construction related risks, and you may need to add a "rider" to your policy. Professional renovation contractors always carry liability insurance and pay into Workers Compensation for their workers, and should be happy to provide you with proof of this. If you hire someone whose worker is not covered and there is an accident, that worker may be able to sue you.

A final caution. If you act as your own general contractor by hiring several sub-contractors yourself, you will be considered to be the "Constructor" by the Occupational Health and Safety Act. This will give you significant legal duties and more risk than if you hirea general contractor to act as your "Constructor." If you are undertaking a significant renovation, or are unsure of your responsibilities, contact your lawyer first before entering into a contract.