On paper, all the projects are beautiful and feasible. In action, everything is different. Réno-réalité aims to be a frank testimony on projects that are happy for some or painful for others.
Testimonial: Geneviève* and Jean*, Verdun, Montreal
Professional: Natacha Boivin, lawyer and partner at TCJ, Therrien Couture Joli-Coeur S.E.N.C.R.L
Start of work: Permit application, January 2020
Estimated completion: Fall 2024
Geneviève: We bought the top of a duplex in 2016: bright with a front balcony, a back terrace and a parking space, the Holy Grail!, but with a tiny living room. A few years later, it was read that the neighborhood would encourage landlords to expand by building a mezzanine on their roof (to combat duplexes turned into single-family residences and the housing problems of families in the neighborhood). We estimated a budget. It was expensive, but cheaper than buying bigger in the area. This was our chance! Well, since luck is not our thing, we submitted our permit application at the beginning of 2020 and COVID-19 fell on us.
Genevieve: A cost-plus contract. To tell the truth, we didn’t have much choice, few contractors responded and there was no one left as soon as we mentioned wanting a detailed estimate. We were presented with two turnkey budgets, the low margin if everything goes as planned around $202,000, and the high margin, if we accumulate contingencies, approaching $350,000. The low margin, although above what we had envisaged, was not unrealistic, with a re-borrowing on our mortgage. We were often told that we could end our contract at any time and choose to do certain things ourselves, so that we could stay at our limit and finish later if we ever exceeded the costs. We were certified that at each stage, all the options would be offered to us to choose together according to our budget. We would have invoices every Friday evening to have access to the real cost and stop in time if the money no longer followed. It seemed to us a good compromise despite this kind of contract without “limit” a priori.
During the pandemic, we noticed that many contractors no longer accepted fixed price contracts. Hourly or cost-plus contracts have become increasingly common, but offer less control to consumers unfamiliar with renovation-construction. It is difficult to evaluate in all conscience the time of the works for a neophyte. The fixed price contract, on the other hand, binds both parties. Better balance. If there are unforeseen events or extras, an agreement is made jointly.
Natacha Boivin: In such a cost-plus contract, the risk rests on the shoulders of the client, rather than the contractor. Even if the parties determine a budget together, unless they agree on a guaranteed maximum price, the contractor is under no obligation to respect it. However, it is possible to agree on a sharing of variances from the budget. For example, any savings or overruns of an agreed budget can be split 50/50. This encourages the entrepreneur to remain efficient. Moreover, unless an expert is called in, this effectiveness remains difficult to assess for a client. Is the number of hours spent on a task reasonable? Are we being charged for work that had to be redone because it was done poorly to begin with?
To avoid disputes, the cost price must be well defined, with a list of the elements that make it up. The mark-up on the cost price, which corresponds to the administration and to the profit of the contractor, can meanwhile be a percentage or a fixed amount. It is important to agree on what goes into the markup. For example, is the project manager’s time working in the office included in the markup or in the cost price? If the owner of the company acts as a project manager and site superintendent, what category does his hours fall into? It has to be negotiated.
Genevieve: Initially, we were able to track the budget effectively with itemized invoices. However, when we approached the established limit amount, we quickly realized that we were very far from having a finished mezzanine. We had four walls and a rough floor, basic plumbing… but nothing electrically and, above all, no insulation, exterior cladding or roofing. So the building envelope was not protected. Looking more closely at the invoices, we realized that we had big discrepancies in the expected labor time for the different tasks. We also had extras for the return of over-ordered materials, equipment installed more expensively or in greater numbers than necessary, tasks on our invoices when they should have been part of the subcontractors’ invoices, etc. Then, a systematic delay in invoices made the project more difficult to monitor. We were in the unknown.
Natacha Boivin: The client’s right to unilateral termination, provided for in the Civil Code of Quebec, may be exercised at any time, by notifying the contractor in writing of its decision and summoning the contractor to release the site and provide final billing for work performed up to the date of termination. Unless there is a clause in the works contract providing for a penalty in the event of termination, the contractor can generally only claim payment for work carried out or materials ordered to measure, but not yet installed and impossible to return. He cannot claim the loss of profit.
The client should obtain an expertise (architect, technologist, engineer, depending on the nature of the work) on the quality of the work performed and its value, before entrusting the rest of the work to a third party. If corrective work is required or overbilling is demonstrated, the client must give the contractor formal notice to correct the work and issue a credit for the overbilling, failing which he will have the work corrected by a third party. The formal notice is mandatory to exercise any recourse in the event of a disagreement.
Geneviève: To stem the bleeding from our bank account, we had to end the work before the end. But the essentials had to be finished, including insulating for the winter, even if the mezzanine was not livable. Then, we only asked for one worker to finish the necessary work with us. But that was not enough to combat the forgotten invoices suddenly found and the invoices estimated without justification. It was apparently difficult to assess since the work had stopped before the end. Then came the end-of-contract extras, such as cleaning, which was not done. Finally, we had leaks with each rain until we brought in another roofer at our expense…
Geneviève: First of all, we would clearly wait for more funds. I think that before embarking on a big project, everyone should not only have the funds available for their project, but also a little more so that they can call on legal counsel if things go wrong. Then, we would have accepted the project follow-up proposed by our architect. After analysis, several things did not follow our architect’s plans and partly explain the overrun in labor time to redo everything, i.e. almost $60,000.
Finally, work is now progressing slowly but surely. And failing to go on vacation for lack of money, the couple discovered new skills in construction by finishing their project themselves!