SUMMER MEANS CONSTRUCTION

Everyone can breathe a sigh of relief; the long and arduous winter that Montrealers were put through has finally come to its end. What does this mean? Summer is surely around the corner! And in the legal sphere, the closer we get to summer means construction is well under way and alas, disputes for construction are inevitably under way as well.

Yes, construction is something everybody deals with; whether you are building a new home, building a pool in your backyard or performing renovations on your home, we are all bound to deal with construction works sooner than later. Disputes are also common for general contractors who perform renovations, home and pool building etc. Due to the presence of construction in the everyday affairs of many people, it will be the purpose of this article to outline the rights and obligations of not only those receiving construction or renovation work this summer, but also the general contractors responsible for producing the renovations.

Who is a general contractor exactly? A general contractor is usually the person overseeing or managing the construction works and who usually deals or contracts with the owner of the property.

The general contractor has the obligation to perform the renovation or construction works subject to the contract binding him with the owner of the property. For example, if a general contractor agrees to renovate Mr. X’s kitchen and estimates that this will cost $15,000; the general contractor will have the obligation to perform the renovations in exchange for the money estimated at $15, 000. Seems logical enough right? But what happens when a general contractor goes over his budget and the renovation works end up costing $25, 000? Since this new sum of money was never agreed upon by both parties, there is the chance of a conflict arising.

The Civil Code of Quebec outlines the different types of work and service contracts. Three different possibilities exist:

1) Contract based on Estimate

The first type of work contract is estimated by the general contractor at the time of the contract. If for any reason there is an increase in the price from the estimate given, it must be justified. What this means is that if a general contractor bills you for more money than was estimated, this increase must be justified and the general contractor must prove that these extra expenses were unforeseen at the time the estimate was given. As a client, you will only be held responsible to pay for services or work that was unforeseen and unexpected by the general contractor.

In this situation, the good faith and reasonableness of the general contractor is essential. You will not be held responsible for expenses that the general contractor knew of but ignored for his own benefit or for expenses that the general contractor did not know of but should have foresaw. A general contractor’s ignorance while giving an estimate is not a valid defence.

For example, a general contractor may be able to charge a client more than the estimate for renovation works if this increase was due to a client changing his mind on the tiles he wanted in the bathroom, assuming these tiles were more costly and harder to install. Since this change was impossible for the general contractor to foresee and raised his expenses, this extra cost would be incurred by the client.

2) Hourly rate and progress of work

Some types of work contracts depend on hourly rates. Therefore, a general contractor may give his rate per hour for the required works and the total cost of the renovation works will evidently depend on the amount of time the work takes. The general contractor in this situation is required, upon request by his client, to keep his client informed about the progress of the work and how many hours have been billed so far.

3) Contract based on fixed price

Finally, other work contracts are regulated by a fixed price agreed upon by both parties. In this situation, both parties agree to a certain amount, X, at the time they sign the contract, for the renovation works required. Therefore, the general contractor may not claim more than X and in turn the client may not pay less than X even if the work required less effort or proved to be less costly than was foreseen.

Therefore, after reviewing the three different types of problems, what can we say about Mr. X’s problem? If the cost of work was estimated at $15, 000 and the extra $10, 000 billed by the general contractor are proved to be justified and unforeseen, Mr. X will have to pay the extra costs. If the $15, 000 estimate given by the general contractor was inaccurate since he should have known that the work would cost more, Mr. X cannot be held responsible.

If Mr. X and the general contractor entered into a contract for renovation works according to an hourly rate, Mr. X will be held responsible for all costs as long as the general contractor kept him updated of the work and expenses at each stage of the process and as long as Mr. X consented to all these works.

Furthermore, if Mr. X and the general contractor entered into a fixed contract of 
$15, 000, the general contractor may not bill Mr. X for any additional sum.

Now, what can a general contractor do if one of his clients refuses to pay him a due sum of money? Faced with this situation, the first thing a general contractor should do is call an attorney specialized in real estate law. At this point, an attorney would probably recommend registering a legal hypothec of construction. A legal hypothec is a legal tool which will prevent the owner from selling the property in question without first paying the general contractor who is owed money. Legal hypothecs of construction are the best way for a general contractor to ensure he will indeed receive his due money for the works he performed. A legal hypothec must be used within a maximum delay of 30 days from the completion of the renovation work, which is why it is paramount that general contractors contact a lawyer as soon as one of their clients refuses to pay for renovation works performed.

Inversely, as the client of renovations works, if a legal hypothec of construction is registered on your property by a general contractor and you believe you do not owe him any money, what should you do? The first step would be to contact an attorney specializing in real estate law immediately. An attorney will be able to help preserve your rights which in this case may be to draft a motion for a radiation of a legal hypothec. This ‘radiation’ of a legal hypothec is basically a process to cancel a legal hypothec of construction which has been registered on a property without a proper legal foundation. A radiation of a legal hypothec can be used in situations where the proper requirements for a legal hypothec have not been met. For example, in principle, a general contractor who registers a legal hypothec of construction on a property for non-payment of renovation work that was consented by the tenant of a property, rather than the owner or the landlord would be considered invalid and may be cancelled through a motion for radiation. Another avenue would be for the substitution of the legal hypotheque with a surety of the same value.

As you have seen, the process for renovation and construction disputes between owners and general contractors may be complex and technical. For this reason and to ensure your rights are protected, it is highly recommended to contact an attorney as soon as a dispute regarding renovations or construction arises. The reason why this should be done as soon as possible stems from the fact that certain issues, such as legal hypothecs, only allow a person a small window of time to act. Therefore, in order to enjoy the summer worry-free, contact a real-estate lawyer immediately if a problem arises to ensure your best interests are secured.

If you are looking for a law firm with reasonable rates, quick and efficient turnaround time for your files and who provides personalized and effective follow-ups, call Schneider Attorneys at (514) 439-1322 ext. 112 or email us at info@schneiderlegal.com

The above noted text should not be construed as providing legal advice or a statement of your claim. The process highlighted above are merely parameters and barometers and do not constitute any warranties and guaranties with regards to your file at hand. We strongly recommend that you seek legal advice with a licensed attorney from the Barreau du Quebec or a notary at the Chambre des Notaires. Each case must be seen and analysed on its merits as the legal process may be complex and cumbersome.

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