How to Hire a Renovator Seminar March 3rd, 2010
Dalhousie Community Association

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PRESENTER: David Litwiller of Litwiller Renovations & Custom Homes

Good evening.

Thank you for joining us this evening.

I’m hoping two hours will be enough time to cover what we have tonight and we will be posting as much of tonight’s comments as we can on our web site early next week. I’ll ask that each presenter introduce themselves for their portion of the presentation. We’ll start with me, the Renovator, then.

I will be discussing some questions you should be asking and The City of Calgary permitting process and the need of getting permits.

John Hallett, Architect will be speaking about blue prints, what should be on them and at what stage they are needed.

Bonnie Pratt with Canada Revenue Agency will be speaking about the perils of working with the underground economy (cash operators).

Doug MacCallum with Re/Max Realty on should you consider moving instead of renovating.

Daniel MacDonald with the Better Business Bureau on how to use The Better Business Bureau when hiring a contractor.

Each presenter will speak for about 10 minutes and I’ll ask that questions from the floor wait until the end of presentations. We will be available for one on one discussions at the end of our presentation.

The City of Calgary will not be participating because they do not want to be seen as endorsing any one particular company. I apologize for any confusion.

I am David Litwiller, President and co/owner of Litwiller Developments Ltd. I started working full time in construction in 1970 (I was 15). I became a journeyman carpenter in 1976. Started the Company in 1977 and have worked through the ups and downs of the industry over the years. We have always managed to pay the bills. When you live in Calgary you can plan on lots of ups and downs.

We are now a company of 12 employees and I am very proud of the work we do and the tight team that we have become.

A couple of information web sites you might want to refer to:
www.calgaryrenovations.com
www.CMHC.ca
www.servicealberta.gov.ab.ca
www.calgary.bbb.org

This entire presentation will be installed on our website by early next week.

As an independent business, why are we conducting this work shop?

When you, the consumer, read or hear of the horror stories that sometimes occur with renovations it makes it that much harder for legitimate, professional renovators to earn your confidence. I said earn, not gain your confidence. The more you understand about the processes needed, the easier your project will be.

None of us here are lawyers. All we’re trying to do is de-mystify some of the issues surrounding renovations.

How can confidence be earned when you’re not really sure of what questions you could or should ask and what answers you should expect? On our web site home page you’ll find a Check list of almost 70 questions that you should feel comfortable asking any renovator.

Here are a couple of easy ones to consider:

• Have They Done This Type Of Work Before?
• Do they have similar and recent projects you can look at?

Never should you feel uncomfortable or invasive when asking questions of the renovator.

Try this one on for size.

Do you have any lawsuits current or pending? If so, why?

Remember, there is always two sides to each story.

I have been finding that people are interviewing several renovators and they are then choosing the “Best Fit” for their particular project. In my opinion the relationship is very important. You don’t need to necessarily “like” the renovator but you do need to be confident in their knowledge and company ability to execute on what they’ve promised.

Speaking of promises, there’s nothing like a clearly written agreement document. It will demonstrate several issues that are very important in any business transaction where one party is offering product/service to another party.

The contractor has:

• truly listened to you
• heard your concerns
• identified quality of products intended for your project
• indicated expected timelines for elements of the project

By putting all issues on paper it goes a long way to understanding each party’s responsibilities and what actual intentions are. Take the written proposal and spend some serious concentration time with it simply in order to know that the contractor’s proposal does, indeed, reflect what you are wanting done. There will always be an element of trust needed but the written word helps clarify intentions.

Check References.

I don’t mean call a provided reference up and ask “How did they do?”

I mean ask questions:

Was progress consistent and concentrated (no weekly gaps in activity)? A day or two here and there might happen for legitimate reasons.

• Were they on budget? If not, why not? Perhaps change orders affected the budget.
• How were change orders handled?
• Why were change orders needed? Was something missed in estimating or did scope of work simply change?
• Did their own team and trade partners respect your home?
• Why did you hire them? What were your processes?
• Would you hire them again?
• May I come over and see their finished product?

When getting close to signing on the bottom line:

• Who are your professional trade partners going to be?
• Is the plumber “uncle Bob?” who is handy with tools or is the electrician cousin “Vinnie”? Windows, cabinets, dry wallers. Who are they? Do you hire from “Cash Corner”?
• How long have you been working with your trade partners?

You, the customer, should have no problem calling some of the key trade partners and asking how they like working with the renovator. Does the renovator pay their bills in a timely fashion? You can be held liable for unpaid bills.

For me, these are a couple of very important messages:

Check References and Get It In Writing !!!

City of Calgary Planning and Building
Permits and why are they needed?

You, as the homeowner, are responsible to ensure your project has the proper permits

If you enquire at the City Planning and Building department you will essentially be told you need a permit for almost anything and everything you want to do. Personally, I do not have a problem with that.

If you don’t have a permit, will your insurance cover an accidental fire? Will they cover any kind of accident involving the neighbor’s children? If the business agreement between you and your renovator deteriorates you will probably have some very interesting explaining to do if you wind up in court.

Some of the permits that you’ll need to consider:

• Building Permit
• Electrical Permit
• Plumbing/gas Permit
• Fireplace Permit
• Development permit
• Deck permit under certain circumstances
• Basement development

Expect permits to take anywhere from same day and up to 12 weeks.

One of the newer rules at the City is whenever you/we move or change a wall in your residence we must have an engineer’s instruction and approval to do so. Remember a couple of years ago there was a story about a house that collapsed due to inexperienced workers on site. Another similar story just last year.

When permits are applied for and followed as they must be, you receive the third set of eyes needed to ensure you are getting building code approved trade practices. As an example, only a certified Master Electrician can pull an electrical permit or you the homeowner can pull a homeowner’s permit. What you can not do if you pull your own electrical permit, is hire the work to be done by others.

www.servicealberta.gov.ab.ca/1018.cfm#anchor5

Consumer Tip Sheet – Home Renovations Contractor Checklist:

• A Detailed Description of the work to be done (include blueprints if appropriate).
• A statement of the Type and Quality of Materials to be used.
• A statement of any Work that is To Be Subcontracted, eg; plumbing & wiring
• A statement that identifies who is Responsible for getting all necessary Permits and ensuring that Inspections and Approvals by local authorities will be done at the proper times. (The homeowner is ultimately responsible for making sure necessary permits are in place before work starts)
• A statement that all work will be done according to Local Codes
• A statement that the contractor is responsible for Removing All Debris as soon as construction is completed.
• A clearly itemized Payment Schedule including any holdback provisions under the Builder’s Lien Act.
• A statement of all Warranties explaining what is covered, for how long and what will be done if there are problems.
• A Certificate of Insurance showing the contractor’s public liability and property damage insurance.
• If the renovations involve a substantial amount of money, you may want to consider Additional Protection such as a Performance Bond in the event the contractor fails to complete the work.
• The contractor’s Workers’ Compensation Board number. ( We’ve been providing a certificate of clearance at the start of our projects and at completion).
• A statement outlining any Cancellation Rights.
• A statement outlining how Problems will be Resolved.
• Your Signature and that of the Sales Representative.
• The date the agreement is signed and where the agreement is signed

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PRESENTER: John Hallett, architect

John, an architect, is well versed in City of Calgary requirements and he has been dealing with the permit process on a daily basis for many years. (John’s speech to be installed Wednesday March 17th)

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PRESENTER: Bonnie Pratt from the Canada Revenue Agency

The Underground Economy

It goes by many names. The black-market, moonlighting, shadow or phantom trades, working under the table, or doing jobs for cash. The list goes on and on. Despite the many names, the concept is simple.

The underground economy exists wherever people or businesses ignore tax laws to gain an unfair advantage. By undercutting the competition and refusing to report their full income, they are breaking the law. You need to report your income from all sources—even if you’re paid in cash or bartered services.

Have you ever worked for cash? It could be something as simple as painting a house or building a deck on the side. Have you ever decided not to offer a receipt or ring a sale into the cash register? Have you ever worked a construction site "off the books?"

If the answer is yes, then you are not only hurting yourself, but also your family and friends.

Did you know?

Every time someone goes underground, everyone else ends up paying more. With less tax collected, the government has less money to spend on the services and benefits that you, your family, and community rely on every single day.

Where your tax dollars go

Everything that the tradespersons of Canada build, the entire infrastructure of our country, requires tax dollars. Schools and universities, roads and bridges, airports and hospitals, are all paid for with tax dollars. Taxes also fund police services, our military, and are used to protect our airports and borders.

In addition, tax dollars help pay for services and social programs that benefit everyone in Canada, including you and your family.

Some of the programs that each of us relies on at different times in our lives would include Employment Insurance (EI), the Canada Pension Plan (CPP), the Canada Child Tax Benefit (CCTB), Old Age Security (OAS), and GST/HST Credit payments, to name a few.

You may not always agree with how your tax dollars get spent, but refusing to pay isn't an option.

Even if you haven't reached the stage where you are considering buying a house, starting a business, or retiring, you need to think about it now. They all require a responsible track record and proof of income. Without them, you are out of luck!

Working under the table can be hazardous to your career.

Problems caused by working under the table

The best advice about working under the table is—DON'T GO THERE! Don't dig a hole you can't climb out of.

The trades aren't the only industry undermined by the underground economy, but you know it happens. You should also know you have the most to lose.

Your career rests on your reputation. Imagine trying to find a job or start a new business if any of the following were true:

• You owed thousands of dollars in fines and penalties;
• All your assets—like tools and trucks—were seized;
• Your name appeared in the paper as a convicted tax cheat;
• You wound up in jail; or
• Prospective employers and clients knew you were subject to greater scrutiny and enforcement in the future?
• But perhaps the most compelling reason to pay your fair share of taxes is that they form the foundation of a strong and resilient economy, even when times are tough.

A strong economy means investors have the confidence to spend. Investment means more construction and more work for you and all tradespersons.

On the personal side of things, you need to shy away from working under the table. If you were ever hurt while working for a boss who pays you cash, this could mean not being able to claim Workers’ Compensation or Employment Insurance. No more income! Cash employers don't offer medical insurance or dental plans. You’ll be on your own.

DON'T GO THERE!

• Drawbacks of working under the table
• Difficulty securing personal or business loans;
• No health benefits or insurance;
• No coverage by Workers' Compensation;
• Reduced Canada Pension Plan benefits at retirement; and
• Constant threat of prosecution.
• Convictions

Read about the latest criminal convictions in your province for failing to file income tax returns when required.

Will you do it for cash?
Are you paid in cash? The government can still find out about it.

Voluntary Disclosures Program
Allows taxpayers to come forward and correct inaccurate or incomplete tax information.

Informant Leads Program
To report suspected tax evasion, contact the office in your region.

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PRESENTER: Doug MacCallum of Remax Realty

Should one spend money fixing a home before selling and what sort of budget should you consider when renovating?

Yes, you have to spend time and money on your home to get top dollar in this competitive real estate market. My opinion, 7 out of 10 homes are not properly prepared to sell.

A Seller gets two first impressions to share with any Buyer! The first one is when the Buyer and Realtors first drive up to the home and the second is when they open the front door. A Seller may not be able to persuade the neighbours to keep the street tidy, but a Seller can make sure the front yard is tidy and welcoming. The dust should be washed off the siding and the windows should be sparkling clean. the Shrubs trimmed back and flowers added in the Spring and summer. Sidewalks straighten, and edged.

Buyers know within 30 seconds of opening the front door of any home if it is inviting enough to want to check out the rest of the home. Not only does it have to look good, it also has to smell good!

Buying is all about emotions.

As for a Budget, you should build a budget around a 25 year cycle similar to the Condo Reserve Fund Study that condos must do. Prior to 2006 I would tell my clients a budget for any home, be built on 1-2% of current market value of your home each year. Now that the " Bust boom of 1982-Alberta correction in home values", ( Jan 2007-May 2007 ) is over, I would suggest to homeowners consider building a budget of .5 to 1% a year. This is just a "maintenance budget" to cover every component of a home, not limited to but including interior, exterior painting, kitchens, bathrooms, roofing, landscaping and broadloom replacements, fences, decks, furnaces, hot water tanks etc...

A "Remodelling budget" is over and above the norm for the neighbourhood on any and all components of a home and additions. One needs to consider this is a personal project and the market may not give a substantial return on the Investment. Therefore anything personal, should be looked upon as long term enjoyment and you need to consider a minimum of 4-5 years of staying put and enjoying the remodelling. The bigger the projects, the longer one should commit staying in the home. 1986 till now, homes are 4 times their current value. What will happen to your home in the next 25 years? Where will labour and material costs go? One only has to look back in time, to plan for the future.

Get a Realtor to show you the current Values in your neighbourhood. Homes in all communities have entry level prices, average or median price levels and homes at the upper level. Where is your home on that scale? Budgets can be built on Remodelling renovations and built from good MLS resources info from Sales in your neighbourhood. Analyzing a market place is a specialty, look for individuals who have strong real estate analytical skills and not just sales skills to work up a proper budget. If you talk to parties who enjoy talking demographics and real estate statistics in neighbourhoods, you may have found the person to consult with. Knowledge, Experience in this field yields sound Advice!

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PRESENTER: Daniel MacDonald with the Better Business Bureau

FINDING A DEPENDABLE AND TRUSTWORTHY CONTRACTOR

People contact us about a variety of marketplace issues and types of industries, but hiring contractors to perform renovations is one of the most popular topics. So let’s get to the reason we’re all here – how do you find a contractor you can trust?
There are several factors to consider:

1. Talk to friends and neighbours. If you live in a rural area and were solicited at your door, check with the RCMP. Ask the contractor for references including complete street address and phone numbers of previous customers. Call those references and ask the sorts of questions that David mentioned.
2. Ask the contractor if they are members of any associations. There are a number of associations that may be applicable. For example: The Home Builders Associations, Mechanical and/or Electrical Contractors Associations or Roofing Contractors Associations to name a few. If so, contact the association to confirm that the membership is in good standing. Also, inquire if the association is able to assist you, should a dispute arise between yourself and the contractor.
3. Check the names of contractors you are considering with the BBB – if they are BBB Accredited Businesses, they have contractually agreed to address complaints filed in writing with the BBB, have met our Standards for Trust and agree to continue upholding them. Accredited or not, BBB has more than 20,000 Reliability Reports on businesses in southern Alberta and the East Kootenays, detailing company information and complaint history.
4. As David mentioned, get a detailed written estimate - and from more than one company. The estimate should indicate start date, completion date, full details of the work and material, and the complete cost. By soliciting multiple estimates, and requiring details about materials, you can make an apples-to-apples comparison and a more informed choice about which contractor is right for you.
5. Check with City Licensing to ensure that the contractor is properly licensed.
6. Find out whether or not the contractor charges a deposit. This applies to ANY PAYMENT MADE TO THE CONTRACTOR PRIOR TO THE COMPLETION OF THE CONTRACT. If charging a deposit, the firm is required to carry a bond through an insurance company and a Pre-paid Contractors license with Service Alberta. The bond covers situations in which there has been default, negligence, misrepresentation, theft, or fraud. For further details or to check if a contractor has a Pre-paid Contractor's License, go to servicealberta.ca.
7. Find out whether the contractor carries liability insurance. Contractors are NOT obliged by law to carry liability coverage, so damage done to your property or your neighbour's property by the contractor may not be repaired if no coverage exists. Ask the contractor for the name of their insurance company and their policy number and then verify with the insurance company.

A home owner cannot be sued, unless he did something to make him liable for a worker injured on his property. However, if you are concerned if a contractor carries Workers Compensation Board coverage, check with the WCB in Calgary.
Ask for a written copy of the contractor’s warranty, and review it carefully for answers to the following questions:

• Does it cover the materials supplied, the labour involved in the installation or both?
• Who is supplying the warranty - the contractor or the manufacturer of the materials?
• How long does the warranty last and is it transferable to new home owners in the event of a house sale?

Remember, when a contract has been solicited, negotiated or signed in your own home, the Direct Sales Cancellation regulation lets you cancel it in writing within ten days of receiving a copy of the contract. For more details on this and other regulations of the Fair Trading Act, call Service Alberta toll free at 1(877) 427-4088.

Once you’ve gone ahead with the project, there are a few more pieces of advice that BBB would offer:
Protect yourself from liens. If a contractor does not pay his suppliers and subcontractors, liens may be placed on your property. Therefore, before you make a final payment at the conclusion of the work, check your property title record at the nearest private registry. Then, depending on the outcome, do one of the following:

• If no lien has been registered, pay the contractor the amount of the bill, less 10 percent. Withhold this 10 percent for 45 days after the work has been completed. After 45 days, check your title record at a private registry, and if no lien has been registered, pay the 10 percent holdback money.

** The Builders' Lien Act (Chapter B12, 15a) makes allowance for a "holdback". However, if you plan to withhold 10% of your payment for 45 days, you should mention this to your contractor when you are discussing the work to be done and prior to signing the contract or,

• If a lien has been registered, do not pay any money for the work or materials until the lien claim has been settled. Talk to a lawyer for advice on the best way to settle the claim and remove the lien from the title record. There are two ways to remove liens. First, you can pay the money claimed or negotiate a smaller amount to settle the claim. Once paid, make sure the discharge papers are filed. The second way to remove a lien is to go to court.

Before making the final payment and signing a completion certificate or any other document that releases the contractor from further responsibility, make sure everything you have been promised is complete.

Following these steps can help you hire the right contractor for your job, and increase the chances that you’ll be happy with the result. For more details, advice, or to check out a business, I’d encourage you to visit our website at calgary.bbb.org. I also have some handouts at the back with some general BBB tips on navigating the marketplace.

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Questions asked after presentation

When is it more economical to rebuild instead of renovate?
Doug McCallum answered. Having the ratio of 1/3 land: 2/3 home, determine the value of your property and decide how much to invest. Also keep in mind the value and selling prices of your neighbourhood, you don’t want to be too high.

What is cosmetic and what is a renovation?
Cosmetic would fall under paint, flooring, window coverings… A renovation would fall under walls being moved, window sizes changing or being added, complete bathroom or kitchen re-do, additions, and basement developments.

Is it better to use a general contractor, or independent contractors?
That is totally up to the individual customer and the scope of work to be completed. A general contractor has the knowledge, and working relationships with many trade partners, as well as experience with the ups and downs of renovations. Time may be an issue for some home owners, as it can be a lengthy process to check references, prices, and to be available to supervise the work.

Do you need workers compensation?
General contractors and sub-trades should all have WCB and provide you with a letter of clearance. A home owner may be liable for any injuries that occur on their property if WCB is not used.

Is an architect required when building a new kitchen with no structural issues?
This is customer preference, an architect can help you resolve some of your design issues, introduce new materials, and provide an overall design visual for you to work from. A kitchen designer or interior decorator can also be helpful in assisting you in your design choices.

What is the most appropriate way to go about renovating to sell?
Start with your real estate professional, they can help determine the property value, and subsequently the amount needed to renovate. Then contact a general contractor, or your sub-trades and start pricing your renovation. Renovating for resale is not a good money maker, paint, cleaning, flooring, and possibly countertops can make you money but a major renovation in my opinion (David Litwiller) is typically not a money maker.  Also Doug MacCallum (Remax) said he did renovate to sell once, and wouldn’t be doing it again, as it was a long process for not a lot of profit.

Do ‘as built’ plans require permits?
Typically as built plans are needed as a part of building proposed plans with thorough and accurate plans in place. The customer will then expect a thorough and accurate quote. The city of Calgary can also assist with questions regarding as built plans and information as to which permits your renovation will require.

How much are permits?
Depends on the type of permit being applied for. A simple plumbing or electrical permit can be approximately $80.00 to $85.00 and building permits for larger projects can run to several thousand dollars.

When is a building permit needed?
All projects will need to be looked at individually before really answering this one. A complete interior re-do should only need a building permit. A large addition or second floor addition will most likely require a development permit as well as a building permit. Honesty with your enquiries is probably the best policy.

CMHC website has excellent information on all kinds of construction related issues. www.CMHC.ca

Why should I contact Service Alberta?
Service Alberta confirms legal contracts (invoicing), manages bonds and provides licenses to contractors. If a contractor is asking for a deposit they MUST be registered with Service Alberta.  www.servicealberta.gov.ab.ca

Lien Fund Hold Back?
You the home owner, are responsible for ensuring a Lien Fund is in place and being handled properly. If you do not ensure the lien fund process is followed you could be liable for ALL unpaid bills pertaining to your project. When following the lien process you will only be liable for a maximum 10% of the project values. If you have any doubts or reservations about this process please seek legal council.

Renovating a Condo?
You will require approval to renovate from your condo association, as well as building permits.

Which is more economical, to build up or out?
This again is a customer preference, depending on the lot size, the existing house, and the customer’s personal needs. An architect, or your general contractor, may be able to better determine your cost impact to the style of renovation you require.

If you are interested in joining us for our next How to Hire Workshop in October please let us know and we will contact you when we have confirmed where and when the workshop will occur.

Thank you,

David Litwiller, President
Litwiller Renovations & Custom Homes

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