By Vatsa Modi
While constructing or renovating your property can be an exciting process, many details require careful attention. In Ontario, the legal aspects of construction/renovation agreements are crucial to ensuring both homeowners and contractors are protected. This blog post covers key elements of these contracts, including whether a written agreement is necessary, the enforceability of verbal contracts, and other important considerations.
1) Do Homeowners Need a Written Contract?
In Ontario, there is no mandatory requirement that homeowners must enter into a written contract for construction or renovations. However, according to the Consumer Protection Act, 2002, S.O. 2002, c. 30, Sched. A (the “CPA”), a future performance agreement shall be in writing if the total potential payment obligations exceed a prescribed amount of $50.00.[1] According to the CPA, a future performance agreement is any consumer agreement in respect of which delivery, performance, or payment in full is not made when the parties enter the agreement, such as a construction and/or renovation agreement.[2] As such, homeowner should ensure that there is a written contract with the contractor to safeguard their rights.
Even if the CPA does not mandate certain minor renovation to have a written contract, it is crucial that a homeowner insists on having one in place in the event of any dispute. A written contract helps avoid common misunderstandings and provides both parties with a clear outline of what is expected in terms of timelines, costs, and milestones.
2) Are Verbal Contracts Enforceable?
Just like a written contract, a verbal contract must contain the following essential elements for it to be binding: 1) offer and acceptance, 2) intention to create legal obligations, 3) consideration (e.g. money or services), 4) parties must have legal capacity to enter into a contract, and 5) the purpose of the agreement must be legal.
While verbal contracts are generally enforceable in Ontario, they come with challenges. The main problem with verbal agreements is the difficulty of proving the terms and conditions if a dispute arises. For construction or renovation projects, this can be problematic because the scope of work, costs, and deadlines can easily be misunderstood or misremembered by either party. As such, it is always advisable that a homeowner enters into a written agreement and if a contractor seeks to avoid such an agreement, the homeowner should avoid that sort of contractor all together.
3) Are Unwritten Extras Enforceable?
As a construction or renovation project progresses, it may result in additional tasks and changes known as “extras.” Extras refers to extra work outside the scope of the contract, for which an additional charge is made by the contractor.[3] An extra is treated as a new contract and just like the contracts above, these extras can sometimes be a point of contention if they are not properly documented. For example, if the contractor performs additional work not outlined in the original contract, and there was no written agreement on the cost or scope of the extras, it can lead to confusion and disagreements.
To protect both parties, it is important that any changes or additional work be agreed upon in writing.
4) Who is Responsible for Insurance?
Insurance is an important consideration in any construction or renovation project and should be incorporated within the contract. In Ontario, generally, the contractor is responsible to maintain a builder’s liability insurance. However, it is prudent for the homeowner prior to the commencement of any project to verify the contractor’s insurance coverage and/or modify their own home insurance policy to cover the construction or renovation in case of any accidents or damages.
5) What Warranties Are Homeowners Entitled to?
Homeowners in Ontario are entitled to certain warranties when it comes to construction and renovations, and these are designed to protect the homeowner in case of faulty workmanship, materials, or hidden defects. As per the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 (the “Warranties Act”), homeowners for new homes are provided warranty for one (1) year that their home is constructed in a workmanlike manner, free from defects in material, is fit for habitation, is constructed in accordance with the Ontario Building Code and is free of major structural defects.[4] According to Warranties Act, this warranty is extended up to seven (7) years for major structural defects.[5]
Aside from this statutory warranty, it is typical that a contractor may offer a warranty of their services and work for a certain period of time, while the manufacturer of the materials (such as windows or doors) may provide a longer warranty on the materials themselves. Once again, to ensure the homeowner is aware of the warranties that they are provided with, it is pertinent to incorporate it in to written contract.
Conclusion
In Ontario, a construction/renovation agreement should be clear, well-documented, and signed by both the homeowner and contractor. While verbal contracts may be enforceable, it is better to have a written contract that outlines all the specifics, including the cost, timeline, payment schedule, and responsibilities of both the homeowner and contractor. This way the written contract is a clear reference point if any issues arise, making it easier to resolve disputes without costly litigation.
If you are about to begin a home project, consult with a legal professional to ensure your agreement is properly structured so you can avoid future disputes and proceed with confidence, knowing your legal interests are safeguarded.
[1] Consumer Protection Act, 2002, S.O. 2002, c. 30, Sched. A, s. 21; and O. Reg. 17/05: General at s. 23.1.
[2] CPA at s. 1.
[3] D & M Steel Ltd. v. 51 Construction Ltd., 2018 ONSC 2171, 2018 CarswellOnt 5226 at para 57.
[4] Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31, s. 13(1).
[5] Ibid at 13(4) and R.R.O. 1990, Reg. 892: Administration of the Plan s. 4.6 and 5.9.
