Cash-only renovations just aren’t worth the risk

Hiring tradespeople can be the riskiest thing you do as a homeowner. Whether or not it’s safe or dangerous depends on how you do it, and the trend toward under-the-table cash renovations is making the problem worse.

What you might not realize is the hidden risks of cashonly home improvements and construction. It opens you up to financial disaster in a way few people realize.

Cash-only renos are attractive because they save the HST or GST, and this could easily amount to tens of thousands of dollars on a big project. Contractors who ask for undeclared cash payments are looking for lower taxable income at the end of the year. Sounds good for everyone, right? Well, what might seem like a win-win situation actually shifts a huge amount of risk to you as a homeowner — risk that could ruin you financially.

There are three unintended consequences to under-the-table, contract-free renovations. First, you assume legal liability for the safety of workers in your home. If a worker gets hurt or killed on your project, you’re legally responsible, even if you had nothing to do with hiring or supervising them. Essentially you’re the contractor from a legal point of view, except you won’t be insured. That’s a scary thing.

Second, without paperwork in place, you have no recourse if your contractor does shoddy work or runs off with your money. And yes, stuff like this happens. There are crooks in the world, and some of them wear tool belts.

I know an elderly couple who met with a “contractor” to have a garage built. After he moved a few tools onto the building site, he asked for money. “You’ll need to give me a $60,000 down payment,” the guy lied to them. Having more trust than good sense, these inexperienced seniors handed over the outrageous amount of money. That was the last time they saw this guy and their cash. It didn’t help much that they got to keep the few tools he used as part of the ploy.

Homeowner insurance is the third reason cash-only renovations without paperwork are foolish. Years down the road, if a fire breaks out or major pipe bursts, your insurance company might not cover the damages if an investigation shows the work was completed without permits and inspections that are always forgotten with cash-only work.

So how do you do this whole renovation thing properly? First, recognize that cash-only projects are wrong, both morally and legally. You may have every reason to believe the government already takes more money from you than it should, but quality of life in Canada depends on playing by the rules. Look around the globe and you’ll see that the more honest a country is, the better it is to live in.

Diligence is a big part of hiring a competent contractor — even the ones who don’t demand cash. Request references and check with at least three previous clients, asking questions like these: Was the work done well? Did the project unfold on schedule? Would you hire this contractor again? Sit back and listen carefully to the answers. You’d be amazed how few homeowners complete this simple step of diligence and how many pay for their laziness.

As you start your initial search for contractors, begin looking where good contractors already exist. There are several Canadian sources for finding competent tradespeople, but one of the best and largest is the Canadian Home Builders’ Association (getitinwriting.ca, 613-2303060). They’re a non-profit professional organization that’s at the leading edge of educating Canadians on how to hire contractors the right way. Contact the CHBA and they’ll direct you to competent play-by-the-rules tradespeople from all areas and they do it for free. Simple stuff, yes, but sometimes the basics are the most important. Steve Maxwell has been helping Canadians make the most of their homes since 1988. Get videos, articles and home improvement answers at baileylineroad.com.