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Underground economy in home renovations risky business

Francine Orr / TNS

Legitimate contractors take out all necessary permits and ensure that a licensed tradesperson does the necessary work.

Manitobans love great deals. With online Black Friday sales still on and Cyber Monday sales coming up next week, you don’t have to look very hard to see how much we love bargains. We all know someone who has driven across town in order to get what they think is the best deal. We’re famously known for our frugality and proud of it.

However, sometimes what appears to be a great deal is not a really a deal at all, but is a recipe for disaster instead. Feeding the underground economy with your renovation work is a perfect example. Everyone has a friend of a friend who is handy with a hammer. But do you really want this stranger using that hammer on your most valuable possession — your home? The typical rationale for an under the table renovation goes a lot like this: "I’m getting a really good price. I’m paying cash with no questions asked. I’m saving a ton on taxes, permits, manpower and other expenses." But in the long run, are you really saving money?

A cash deal with no receipt and no contract means there is no record of the work being done. If your contractor cuts a few corners and uses sub-standard materials, there’s no record or recourse because there was no formal agreement. If the workmanship was shoddy or some damage was caused to your house, again, there is no formal record of the work ever taking place. If you encounter problems a month or two down the line, don’t bother calling the person who originally did the work. Technically, he or she was never there.

Legitimate contractors take out all necessary permits and ensure that a licensed tradesperson does the necessary work. Do permits cost money? Yes. Do licensed tradespersons cost more than do-it- yourselfers? Likely. However, hiring a legitimate contractor who takes out the required permits, combined with having a written contract for the work being done, are your best insurance should something ever go wrong. If you don’t take out a permit or you take it out in your name rather than have the contractor pull the permit on your behalf, then you become the prime contractor by default. That means that you are responsible for any problems that are encountered during or after the work is completed. It also means that you are on the hook for any injuries that may happen to workers on the job. Licensed tradespersons spend years honing their skills. Just because a friend owns a pipe wrench does not mean that they can (or ever should) hook up a furnace. Having work done in your home without a permit can also hamper your ability to sell your home down the road. These are all things to consider if you are thinking skipping the permit will save you a few bucks.

Also keep in mind that the person that you are paying cash to do some renovation work is likely not declaring this income. We all pay when that happens. When they don’t pay PST or GST, the rest of us pay for them. Government costs don’t go down, so we all pay a little bit more when someone decides to live in an underground economy. Activities such as failure to file appropriate taxes, failure to register a business, falsifying employment status or workers, skimming or only declaring partial income and moonlighting by doing cash deals on the side result in honest taxpayers being burdened with more than their fair share.

So, if your contractor tells you that you can save a few bucks by utilizing any of these tactics, consider the real and potential cost that you will likely face down the road. The underground economy in renovations is risky business. Manitobans who want a true deal don’t put themselves at risk. The best way to know you’re dealing with a reputable contractor is by hiring a RenoMark renovator. RenoMark renovators take out all appropriate permits, provide you with a written contract, warranty their work, and ensure that the work done in your home is done safety. Protect yourself from potential risk on your home renovation by hiring a RenoMark renovator.

Lanny McInnes is president of the Manitoba Home Builders’ Association.

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