It's not very often that you see home builders and renovators welcoming a visit from the tax man, but the unlikely alliance has created a new strategy for fighting Canada's underground economy in the residential construction industry.
A new consumer education campaign called Get It In Writing aims to show consumers that hiring a contractor on a "cash deal" can result in potential legal and financial problems. The campaign is a partnership between the Canadian Home Builders' Association (CHBA) and the Canada Customs and Revenue Agency.
"Extensive research found that most consumers are unaware of the significant risks they face if they hire an underground operator who does not carry liability insurance or Workers' Compensation coverage, or who does not provide an enforceable written contract and warranty," says Get It In Writing literature. "Consumers simply don't realize that in the event of a workplace accident or incomplete or substandard work, an ´underground deal' could leave them facing significant financial losses."
The home builders say that underground construction activity in Canada is a "big problem, involving billions of dollars each year." It says that in many areas of the country, 50 per cent or more of all home renovation projects take place "underground".
For legitimate contractors, the unfair competition from underground operators means lower profits and lost jobs. Governments lose billions of dollars in revenues, the campaign says, resulting in higher taxes and fees for legitimate companies. The underground economy also effects the bottom line for building material retailers, insurance companies, Workers' Compensation boards, new home warranty programs and municipalities.
Homeowners who hire contractors on cash deals usually assume that the contractor is cheating on his taxes, and don't seem to have a problem with that. However, homeowners also assume that it's the contractor who is taking all the risks of being caught, and the education campaign says that isn't true.
In a cash deal, consumers have no accountability from the contractor, and no assurances that building codes are being followed, building permits are being issued, or that proper inspections of the work are being carried out. This could create major problems for the homeowner long after the contractor has packed up his tools and left, it points out.
Underground contractors often do not have business liability insurance that protects homeowners if their home is damaged, or of there is an accident on the site, or there is damage or injury to a third party such as a neighbour, or if something is stolen. If a worker is injured on the project and is not covered by Workers' Compensation Insurance, homeowners face an increased risk of claims.
Although nobody likes paperwork, much of it is designed to protect the consumer. For example, lien regulations in each province require homeowners to hold back a certain amount of payments, to protect the consumer if the contractor fails to pay suppliers or subcontractors. Having a written warranty specifies what is covered and for how long, and for new homes, there are new home warranties in most provinces that offer additional consumer protection.
The Get It In Writing campaign will distribute literature through building materials retailers, home shows, consumer seminars and via a new web site at www.HiringAContractor.com. The site will soon include the results of recent court cases, in a section called What Happened to Others.
There are also plans to get provincial governments involved, as well as building materials retailers, insurance brokers, utilities and municipal permit offices.
The campaign has hired Jon Eakes, a home improvement television personality, to be its spokesman at home shows and other events. At the CHBA annual conference this week in London, Ontario, Eakes told builders that the campaign will only be successful if local home builders get behind the message and promote it heavily in their own communities.
Everyone loves a bargain, and getting consumers to look past the price of the job, to the potential consequences of hiring an underground contractor, may be tough. But with this many players on board to spread the message, Canadians will be hearing a lot more about Get It In Writing during the next two years.