How to Handle a Dispute With Your Contractor

Despite your best efforts, disputes related to your home renovation can occur. It’s important to handle problems with your contractor before matters escalate. Whether you are dealing with unsatisfactory or incomplete contract work, property damage, or sudden and unexpected expenses, taking the right approach to your renovation dispute can save you additional hassle and help you protect your investment. 

Here’s how to avoid a dispute with your home contractor and what to do if problems arise. 

How to avoid a contractor dispute 

The way to deal with renovation disputes before they start is by communicating clearly and openly from day one. The following points can help prevent disputes with your contractor from occurring: 

Go over the contract in detail 

Your contract is your most important negotiating tool when handling disputes that may arise. It’s important that you and your home improvement contractor start out on the same page and keep lines of communication open throughout your renovation. Check out our guide to reading and understanding your home renovation contract.

Get clarity in project timelines and payment schedules

Before starting your project, talk to your contractor about completion timelines and establish a payment schedule. With COVID-19 (Coronavirus), supply chain disruptions and market irregularities can cause unforeseen delays and expenses. Work with your contractor to tie payments to specific project completion milestones and establish a plan for dealing with sudden changes in the price of materials. It’s not recommended you tie payments to specific dates, as you would be held to making those payments even if there are delays in the work.

Discuss how to deal with disputes in advance 

Most contracts include a clause about dispute negotiation. You may want to request that your contractor communicate any problems with the renovation in writing, rather than over the phone. If you have requirements about health and safety, such as COVID-19 precautions, be upfront about them and include them in your contract. Many contracts will designate a neutral third party to mediate between the homeowner and contractor when a problem arises that can’t be resolved through open discussion. 

Establish a plan for holdbacks

If you’re caught in the middle of a contractor-subcontractor dispute, a holdback protects against a lien on your home under Ontario’s Construction Act and British Columbia’s Builders Lien Act. Other provinces have similar requirements.

How does a holdback work? 

Essentially, you set aside 10 per cent of the price of materials and services as they are provided under the conditions of your contract. This amount can satisfy liens taken out against your property by unpaid suppliers and subcontractors. 

Your contractor should take that 10 per cent out of each invoice and then send you a separate invoice for the holdback after project completion. Keep in mind that the holdback cannot be used as security for issues you might encounter—the money ensures the subcontractor is paid so that they don’t register a lien on your home. It is not meant to protect you from disputes. Therefore, you must still pay this amount if the work related to the holdback has been completed, otherwise a lien may still be registered on your home.

When do you pay your holdback? 

According to Waterloo-based law firm Madorin, Snyder, LLP, you should ask your lawyer to review your property title on the 61st day after the official end of your contract. 

If no liens have been claimed against your property, pay the contractor the amount of the holdback. Stop payments to your contractor and seek legal advice immediately if a lien has been taken out against your property. 

Ask questions before signing your contract 

Ask your contractor questions in advance of starting a home renovation project. For example:

• What will your contractor do if your property is damaged during your renovation?
• Do they carry insurance?
• What is their plan for dealing with project interruptions?
• How will any interruptions affect the payment schedule? 
• If they have to stop working in the middle of your renovation, are you able to recoup payments already made or secure the materials you paid for? 
• If you’re unhappy with the work so far, what rights do you have to terminate the contract after the work has begun?  

Asking the hard questions upfront can be challenging, but it’s worth the effort to prevent a contractor dispute. You can read more about the steps to take with your contractor before signing here. 

What to do when a conflict arises with your contractor

Despite your best efforts, you may find yourself handling a contractor dispute. Maybe everything seems to be going well until you’re blindsided by a supplier’s lien on your property. Accidental property damage, extended timelines for project completion—the headaches could pile on, and you need to take charge. The methods described below can help you resolve your contract dispute in a firm, but friendly, manner.  

Discuss the contract and negotiate 

A watertight contract is the first line of defense in dealing with contractor problems. Review the expectations outlined in the contract and clearly state the issue, citing contractual obligations where necessary. Once all parties are reminded of the conditions of the contract, negotiations should go more smoothly. 

Communicate with everyone

Include suppliers and subcontractors in discussions about problems with your renovation. Contractor-subcontractor disputes shouldn’t go under your radar—they can have major repercussions for your renovation. Have open discussions with as many of the named parties in your contract as possible to ensure you reach a thorough solution to the issue. 

Communicate in writing

Written communication (including email) establishes a paper trail throughout your contractor dispute. It keeps both parties accountable for their claims and complaints and can be used as evidence in arbitration or small claims court. 

Work with a mediator

Contracts will often include a mediation clause. If the contractor and homeowner have a dispute, they agree to take it to a third-party who will help negotiate a solution satisfactory to all parties. Your mediator cannot decide anything in your case-their role is to collaborate and find a compromise. 

Hire an arbitrator

If mediation fails, a contractor-homeowner dispute may move on to arbitration. Like a mediator, an arbitrator is a neutral third party who works with you and your contractor to resolve the dispute. Unlike a mediator, the arbitrator can make legally binding and enforceable decisions about your case. This is usually the final step before moving onto small claims court or provincial court. 

Provincial guidelines for contractor disputes

When dealing with contractor disputes, the last thing anyone wants is to go to court. Even if you win your case and get your legal fees reimbursed, you’re still left with an unfinished or poorly done home renovation. Consider the province-specific options below for addressing a dispute with your contractor via a regulatory body or small claims court before you sue.  

Tip: One option is to structure your payments, so that money paid in advance for work not yet completed is an amount less than the small claims court’s limit in your jurisdiction. 

Otherwise, if something goes wrong, it may take a lot longer and be more expensive for you to recover these costs. You can still go to Small Claims Court for those costs, but you will have to give up the amount of money over the limit in Small Claims Court, as well as any future right to get this money in any other court.

If you live in any of the following provinces, here are some tips on how to address a dispute with your contractor: 

Alberta 

The Provincial Court of Alberta recommends writing a demand letter containing the date, the names and addresses of all parties involved, the dollar amount owed, the reason money is owed, and a deadline for payment. They suggest that the letter specifically state your intention to file a Civil Claim in Provincial Court Civil. 

Suing a contractor in Alberta can be especially tricky; in a recent court case, a homeowner withheld payment for contract work done on his farmhouse. He claimed that the work was substandard and that he had to hire a second contractor to re-do the project. The court found in favour of the contractor and ordered the homeowner to pay him for work completed. 

Hopefully, your demand letter will spur your contractor to resolve the dispute without bringing it to trial. If not, be sure you save it as evidence for your civil claim. 

British Columbia 

As in Ontario and Quebec, try sending a demand or complaint letter before taking your case to court. Apply to small claims court if you are seeking less than $35,000 in your contractor dispute. A Civil Resolution Tribunal was recently established to resolve claims of less than $5,000. You can also use the solution explorer for construction disputes on the Civil Resolution Tribunal site to determine the optimal method for handling your contractor problems. 

Manitoba 

In Manitoba, Small Claims Court hears civil claims of less than $15,000. If you are seeking more than that amount, it is strongly suggested that you obtain a lawyer’s services before filing a claim in the Manitoba Court of Queen’s Bench.

Ontario

You have the right to seek recourse for unsatisfactory or incomplete contracting work in Ontario. Start out by getting your documentation in order. According to Ontario law firm Legal Eagle, a claim for defective renovation work has the greatest chance of success when you provide proof of mistakes in the contract work and proof that you offered the contractor an opportunity to correct these mistakes. If your contractor does not address the issue to your satisfaction, even after you have expressed your complaint in writing, it would be best to obtain legal advice and seek mediation before going to court.

The next step doesn’t have to be the Superior Court of Justice. In Ontario, you can apply to the small claims court if you are seeking less than $35,000 in redress. 

Québec

Writing a demand letter will encourage your contractor to resolve the issue without taking it to trial. In Quebec, you can also file a complaint with the Régie du bâtiment or contact the Office de la protection du consommateur for assistance in resolving your contractor dispute. 

If you wish to go to court, claims under $15,000 can be handled by the small claims court in Quebec.   

Key takeaways for dealing with contractor disputes

Home renovations are a major investment of your time, money, and energy. They affect one of your biggest investments—your home. You can protect your investment by going into a renovation informed and prepared, avoiding costly contractor disputes whenever possible, and addressing problems immediately when they arise. 

Open lines of written communication, a contract with clear expectations, and working with contractors who are licensed, verified, and insured will all contribute to a successful home renovation with a minimum of conflict. 

Submit your project to find qualified and verified local contractors for your home renovation.

This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates.