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July 2013 - Hammer Home News
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Dear Friends,
What a beautiful month it has been, hope you have all been enjoying your summer! This month I am taking a great article from a wonderful Lawyer I work with, Michael Abrams from Kelly Santini LLP Business Group. The article discusses the importance of home renovation contracts. Check out these great points to consider when hiring a renovation company.
Homeowners embarking on large-scale renovations or additions can often find themselves venturing into uncharted territory, especially when it comes to the contract with their builder or general contractor. Most projects start with a great deal of excitement, but that excitement can turn into disillusionment quickly when the expectations of the homeowner do not materialize. So take the time, before the project starts, to have the conversation with your general contractor to “hammer” out the details of the contract.
Some of the common areas of dispute that can be either avoided or addressed more smoothly by being covered in a well-prepared contract include:
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Addressing holdback requirements pursuant to the Construction Lien Act. The basic holdback is 10% of the services and materials supplied in each invoice provided by the general contractor.
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Material being used for the project. For example, does the contract price include the bathroom medicine cabinet? Once the materials are specified, what level of finishing is expected? For example, there is vast price range for faucets. The homeowner may be expecting something high end, but if the quality level s not discussed and documented in the contract, the general contractor may select a standard option.
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Ordering and who is responsible for paying for and supplying materials such as tiles.
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Ending the project. What happens if either you or the general contractor is unable or unwilling to complete the project? When can the homeowner terminate the contract?
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Late payments. What actions can the general contractor take if the payments are late?
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Do both you and your general contractor have the same understand that the dollar figures being discussed include (or exclude) the Harmonized Sales Tax (“HST”)? If you have set a budget, make it clear if this figure includes the HST and your contingency.
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When and by whom will the work be inspected?
To avoid discrepancies, each significant change to the original contract should be documented in writing and signed by you and the general contractor. Commonly, this is called a Change Order. Change orders is another aspect of the contract that should be discussed before the first hammer is swung.
If you are using a construction mortgage to finance the project, you will need to familiarize yourself with your lender’s requirements for progress draws and appraisals. It is important to align the contract payment dates with these draw dates so that you have timely access to the funds over the course of the project. It is also important to remember that your lender will also withhold 10% of the funds being advanced to you in compliance with the Construction Lien Act until 45 days after the project has completed. This is to ensure sub-contractors or suppliers, who could put a lien on your home, are paid in full.
Homeowners may become emotionally invested in the renovation of their house and they may fear challenging the general contractor for fear of souring the relationship. But to protect themselves and have a finished project they expect, homeowners need to ensure the project, particularly large-scale ones, have a written contract. It is worthwhile having an experienced lawyer review the contract on your behalf. His or her detached assessment of the contract and ability to negotiate provisions with the general contractor will help avoid unpleasant surprises to ensure your excitement remains.
Also, did you know that substantial renovations of 90% of the existing house may qualify for an HST rebate? Major additions that change the nature of the house and include renovations to the existing structure may qualify as well. To learn about this HST rebate, click here for the Canada Revenue Agency info sheet.
Hope you enjoyed this great article. Have a great summer and hope to see you again soon!
Sincerely
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This Month's Trivia Question:
What Oscar-winning 1999 best picture about two neighboring American families was filmed in the interior of two actual homes located 12 Miles apart?
The first five individuals to respond correctly will win a $10.00 gift card to Starbucks. Email your answers to rachel@rachelhammer.com
Last Month's Trivia Question:
What is one of the most common ways for making the interior of a home more appealing to buyers?
The Answer was: Painting! Repainting walls with light neutral colors makes it easier for a buyer to visualize how the home will look with their possessions.
Congratulations to Chantal, Chandra, Marilyne, Jamie and Cassandra were the first five to attempt to answer last month and win a $10.00 gift card to Starbucks.
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