You hired a contractor for a major renovation and everything went very well. Shortly after, though, you receive formal notices from suppliers who claim that they have not been paid. Yet you gradually paid for everything by cheque, as planned, and you have all the proper receipts. Upon delivery, the contractor even marked “paid in full” on his last bill and your bank has confirmed that your cheques were cashed.
What happened? It’s hard to believe that you may have to pay construction or renovation bills that you thought you already paid for. Nevertheless, this is what might happen to you if you ignore a letter that may seem insignificant: a disclosure notice.
A disclosure notice is a letter notifying you that your contractor has appointed a third party as a supplier for the project. This could be, for example, a door and window supplier or a roofer. If your contractor does not pay them, you may have to do it for him/her.
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Here are five precautions to take to prevent this nightmare from happening to you:
- Pay attention to your courier deliveries at the beginning of your project and take note of the disclosure notice, even if it does not have this name.
- When you give a cheque to the contractor for specific materials or services, be sure to write it in the name of the contractor AND the supplier — as a rule, the contractor will not cash it without paying his supplier.
- If the contractor indicates that he has already paid the supplier, get a receipt from the supplier.
- If the contractor himself gives you a receipt or other proof of payment issued by the supplier, call them to confirm.
- If in doubt, talk to a lawyer or notary who can advise you.
Too many people don’t know that it’s not enough to write “door and window payment” on the cheque for peace of mind. You need to include the name of the contractor and his supplier, whose identity you’ll know from the disclosure notice.
If you neglect this detail and your contractor does not pay his suppliers, they will come to you to collect what’s owed to them. If there are many of them, you may have to pay a second time for a substantial part of the project costs.
And, you cannot refuse to pay. Suppliers have a powerful tool known as a construction lien in Ontario or legal construction hypothec in Quebec, that should not be taken lightly. If either of these are implemented by a supplier on your premises, it will prevent you from selling your house before they are paid, since part of it legally belongs to them. Essentially, they piggybacked a mortgage on your house to be paid first upon its resale. Your creditors may not appreciate it.
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