Risks of a Cash Deal

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A “cash deal” with a contractor is an agreement where you pay cash for work without all the proper paperwork and contract, in order to get a “good deal.” Cash savings can be enticing, but it’s important to understand the potential consequences of agreeing to such terms. Consider the following, then ask yourself - Are you prepared to take these risks in order to save a couple bucks?

1 . Cash Advances

Cash deals often require that some (or all) of the payment for work be paid up front, before the work is complete. When you give a contractor an advance payment without a written contract or receipt for payment, you have no recourse if the work is not completed, and the so called “savings” of the deal actually turn into wasted money.

2. Damages to your Home

Contractors who operate their business properly have comprehensive business insurance to cover their liability in the event that they damage a customer’s home. If the contractor is working “underground” and offering cash deals, it’s possible that he or she does not have appropriate insurance, and you may have to rely on his or her willingness and ability to pay damage costs. Don’t count on your own homeowner’s insurance policy, because without the proper contracts, there’s a good chance the damage may not be covered.

3. Work Place Injuries

In Saskatchewan, if you hire someone who is not enrolled with the Saskatchewan Workers’ Compensation Board, you can be held responsible for medical and rehabilitation costs if that person is injured while working on your property. When hiring a contractor, it’s essential to ensure that your contract includes proof of proper Workers’ Compensation coverage, or equivalent private insurance coverage.

4. Financial Liability to Suppliers

Saskatchewan has lien legislation designed to protect the financial interests of suppliers and sub-contractors involved in construction work. With a cash deal, if your contractor neglects to pay his suppliers of sub-contractors for services and materials used on your home, you could be liable for his outstanding balances with them. When you hire a contractor, your contract should specify that a certain amount of money must be held back from all payments made to the contractor for a specific length of time - usually 30 to 45 days after the work is completed. This ensures that if the contractor fails to pay suppliers or sub-contractors, your financial liability is limited to the amount of money held back.

Cash deals are full of hidden risk. Always insist on a written contract, and ensure the contract includes proof of contractor liability insurance, Workers’ Compensation coverage, a lien hold-back provision, and a clear responsibility for compliance with all other applicable laws and regulations. In addition, be sure to talk with your insurance company before the work begins, as many policies don’t automatically cover construction-related risk.

You can avoid these risks by hiring professional and legitimate renovators who do quality work. Hire a professional member of the Saskatoon & Region Home Builders’ Association, protect your home and your family from risk, and enjoy your renovation for years to come.