Ontario’s Construction Lien Act is under review and I was recently asked (and agreed) to participate in the process. However, I didn’t know, and just read in “B.C. Builders Lien Act reform getting underway” by Russell Hixson in the Journal of Commerce, that British Columbia’s Builders Lien Act is currently undergoing a similar review. While the lien legislation of the two Provinces share a lot of similarities, they also have some pretty significant differences. It will be interesting to see how the reviews unfold and whether the proposed (and ultimately implemented) changes take the two acts in the same direction or if, instead, one finds a change (or changes) that the other doesn’t.
There are two ways to introduce evidence given by a witness examined for discovery at trial:
- The party who carried out the examination can use the prior evidence to impeach the witness’ evidence at trial where it differs from the evience given at the examination; or
- The party who carried out the examination can “read-in” portions of the transcript produced at the examination and those “read-ins” become part of the evidentiary record at trial.<img class="alignleft size-medium wp-image-502" alt="Answer" src="http://www.ontarioconstructionlaw.com/wp-content/uploads/2013/10/128-300×225.jpg" width="300" height="225" srcset="http://www.ontarioconstructionlaw.com/wp-content/uploads/2013/10/128-300×225 generic viagra 100mg.jpg 300w, http://www.ontarioconstructionlaw.com/wp-content/uploads/2013/10/128-400×300.jpg 400w, http://www.ontarioconstructionlaw.com/wp-content/uploads/2013/10/128.jpg 500w” sizes=”(max-width: 300px) 100vw, 300px” />
The recent case of Urbacon Building Groups Corp. v. Guelph (City), 2013 ONSC 5773 (CanLII) – which by the way is producing lots of interesting caselaw re construction liens in Ontario – addressed whether an owner rely upon read-in evidence from transcripts of subcontractors’ Examinations for Discovery against the general contractor. The City of Guelph took the position that it could read-in portions of the transcripts of the Examinations for Discovery of Urbacon’s (the GC) subcontractors against Urbacon.
Much to my nerdy delight, Justice MacKenzie cited an earlier Ontario Decision and a B.C. Decision and ruled that (I paraphrase) discovery evidence can only be read in against the party who gave it. One can easily imagine the mischief that could result from one party relying on the evidence given by X against Y when Y may not have had a chance to challenge or counter X’s evidence and I am glad that the door on this risk has been closed just a little further and, in particular, in the context of a multi-party construction lien action.
A Decision (arising from a motion to have a construction lien discharged and security posted returned) in 984499 Ont. Inc. v. 1159337 Ont. Inc. et al. was released by the Ontario Superior Court of Justice on July 2, 2013, and we are – yet again – reminded how forgiving the Ontario courts can be when a lien claimant has arguably failed to comply with some ostensibly fundamental aspect of the Construction Lien Act.
The facts are (whittled down) as follows:
The Plaintiff (a general contractor for a hotel renovation) was unpaid and preserved its lien by registering a construction lien within the required time. The owner posted security with the Court in order to vacate the lien from title and the lien claimant commenced an action. However, the action commenced by the Plaintiff did not:
- expressly seek to enforce a construction lien – against the security in Court or against the land;
- mention the lien claim registered on title, the vacating order, the monies paid into court or perfection of the lien; and
- mention or plead the Construction Lien Act at all other than to plead reliance on the trust provisions of the Construction Lien Act.
The Defendant (owner) brought a motion for a ruling that the construction lien had not been perfected in accordance with the Construction Lien Act because the Statement of Claim was not in the nature of an action to enforce the lien as is required by section 36(3) of the Construction Lien Act and that it could not be an action to enforce a lien because it pleaded the trust provisions of the Construction Lien Act and section 50(2) says that an action to enforce a lien and a trust claim shall not be joined together.
Mr. Justice Whalen dismissed the motion and, relying on Rules 1.04(1) and 26 of the Ontario Rules of Civil Procedure, allowed the Plaintiff to “cure” or “fix” the Statement of Claim to effectively bring it in compliance with the Construction Lien Act.
My own view is that this Decision is wrong and, like other similar Decisions, is in stark contrast to what I think is a better line of cases in B.C. (under its fundamentally very similar Builders Lien Act) which hold that lien legislation, while being remedial, creates an extraordinary remedy (it allows one party to encumber the property of another before judgment and creates priorities between creditors, etc) that is strictly a creature of statute and so the legislation must be interpreted strictly and the court has no discretion to depart from the express statutory requirements. I have little doubt that if 984499 Ont. Inc. v. 1159337 Ont. Inc. et al. had been decided in B.C., the Defendant’s motion would have succeeded. See, for example, Nita Lake Lodge Corp. v. Conpact Systems (2004) Ltd., a 2006 Decision of the Supreme Court of B.C. in which a $300K+ lien was extinguished solely because the lien claimant failed to properly name the company with which it had contracted and from which it claimed to be owed money.
While, the Ontario Construction Lien Act contains a curative provision at section 6, it does not apply to pleadings and is not so broad as to convert a Statement of Claim that does not seek to obtain or enforce a construction lien into one that does. Similarly, this wasn’t a case where there was some poorly drafted paragraphs but it was still, in substance, a claim to enforce a construction lien as required by the Construction Lien Act such that a Rule 26 amendment could improve the pleading or fix some minor flaws. Rather, it was an action that did not plead material facts to support a finding of a lien or claim a lien as a remedy and so the Plaintiff, in my view, had not perfected its lien as required by section 36 of the Construction Lien Act and the lien should have been discharged and the security returned to the owner.
What an awful Blog post title. My apologies.
The Decision of Madame Justice Pierce in 1188710 Ontario Ltd. v. Gartner, 2012 ONSC 6110 (CanLII) is a good reminder of how judges trying to do perceived justice between parties sometimes finds the law bent (or worse – disregarded) in favour of perceived justice.
The facts of the case aren’t particularly remarkable – contractor does work, owner takes issue with various things and doesn’t pay all invoices, contractor liens, lawsuit follows. Same old story. Sometimes the contractor comes out on top and sometimes it is the owner that prevails. In this case, Pierce J. interpreted the agreement between the contractor and the owners and the evidence that was presented at trial almost entirely in favour the contractor.
The two aspects of the Decision that prompted me to write this short post are:
- Pierce J. found a contractual entitlement to interest and awarded the contractor interest at 5.5% per annum; and
- Pierce J. declared that the contractor has a lien against the Defendants’ property for an amount that includes the interest that she found to be owing.
If Pierce J. had just addressed the issue of interest as one of damages (the contractor’s losses based on interest the contractor had to pay on its line of credit or to its own suppliers) rather than as interest and if the contractor had presented better evidence on this point, I don’t think there would be an issue. However, because Pierce J. expressly found that there was no agreement as to interest (see paras 37 & 40), I think she should have been foreclosed from awarding contractual interest. Nonetheless, she (wrongly in my view) reasoned that a contractual obligation to pay invoices within a specified time implied an agreement to pay interest if payment was not made within that time (see para 44). If Pierce J. were right on this, it would effectively mean that every contract that obliges a party to pay contains an implied agreement to pay interest if payment isn’t made. I don’t think that this is the law and I don’t think this accords with longstanding jurisprudence that parties should, as a general rule, be held to their bargains – if the contractor had wanted to negotiate a contractual entitlement and rate of interest, he could easily have done so.
The next part is that there seemed to be some very loose (it seems to have been given just in oral testimony at trial) evidence that the contractor had suffered some sort of losses based on having to dip into his line of credit and charges from his own suppliers as a result of the owner not paying all of his invoices (see para 100, for example). It was this evidence that Pierce J. used to determine the rate of “interest” that the contractor should be entitled to (5 browse around here.5% was the contractor’s rate on his line of credit…so Pierce J. somehow made that the contractual rate of interest “agreed to” between the contractor and the owner). I wouldn’t be so offended by this had Pierce J. just characterised the amount payable as damages rather than interest. However, even then, the problem would be that she found as a fact that, “Unfortunately, there is no evidence about how much [the contractor] had to draw on his line of credit for this project, or how much interest he paid.” In effect, she awarded damages in the absence of any evidence of the proven quantum of those damages.
I think that there should have been found to be no agreement as to interest and so only pre-judgment interest payable to the contractor pursuant to the Courts of Justice Act. Further, should Pierce J. have been inclined to find a breach of an obligation to pay on the part of the owner, she could have still found damages to have resulted from the breach but she should have then found (on the evidence described by the Decision) that the contractor did not adduce sufficient evidence to support his claim and then awarded no damages on the basis that quantum had not been proven. Instead we are left with, in my view, a bad Decision (on this point) that could come back to haunt other litigants arguing this sort of contractual interest dispute.
Lien for Interest
On the second point, section 14(2) of the Construction Lien Act expressly says that, “No person is entitled to a lien for any interest on the amount owed to the person in respect of the services or materials that have been supplied by the person, but nothing in this subsection affects any right that the person may otherwise have to recover that interest.” As such, Pierce J. erred in law by including the interest she awarded the contractor in the declared amount of the lien she declared the contractor to have over the owner’s lands. The interest should have been included in the money judgment but should not have been included in the value of the lien.
I recently learned that, when it comes to securing the release of a construction lien for work done to the common elements from an individual condominium unit by paying security into Court, the Ontario Construction Lien Act and the Ontario Condominium Act don’t play particularly well together. The problem is that neither piece of legislation has a clear and express mechanism for the owner of a condominium unit to pay money into Court as security to clear title to the unit where a construction lien attaches to the unit but arises from work done to the common elements of the condominium corporation.
Where the work is done to an individual unit (i.e. a kitchen renovation) and the construction lien is registered against that unit, section 44(1) of the Construction Lien Act provides a simple mechanism for the owner to clear title (to sell or refinance, for example). However, the Construction Lien Act provides no such simple mechanism where the work was done to the common elements (i.e. a roof replacement or elevator repair) and the contractor and its subcontractors have registered the full value of their alleged liens against title to all of the units comprising the condominium corporation.
I had occasion to argue this issue in Court recently and cobbled together an argument using:
- sections 11, 13, 14, 18(2), and 23(6) of the Condominium Act;
- sections 44(2) and 44(4) of the Construction Lien Act; and
- the Decision of Master Polika in Associated Mechanical Trades Inc. v. Kurzbauer,  O.J. No. 4688 (S.C.J.)
to argue that the proper amount to be posted as security to clear title to individual units should be the unit’s proportionate share of the lien (determined by the unit’s interest in the common elements as established by the declaration) and that same proportion of the unit owner’s potential exposure to the security costs contemplated by section 44(1) of the Construction Lien Act. The lawyer opposing my motion had a couple of different theories of what security my client ought to post in relation to each unit. At the end of the day, Mr. Justice Reilly agreed with my argument. However, if the legislation – either the Condominium Act or the Construction Lien Act – were amended to provide a clear mechanism to address this problem, costly Court hearings such as the one I recently argued could be avoided and it could be as simple to clear title by positing security for condominium units as it is under section 44(1) for non-condominium properties.
On a closing note, the B.C. legislature seems to have recognized this need and provided a solution. The B.C. equivalent of Ontario’s Condominium Act is the Strata Property Act and its equivalent of Ontario’s Construction Lien Act is the Builders Lien Act. Under the Strata Property Act, Division 5 of Part 5 (sections 86-90) plus section 166 provides what is pretty much a complete mechanism for an owner of an individual strata lot to remove a builders lien arising from work to common property upon payment into Court of the strata lot owner’s proportionate share of the lien. I can’t see any good reason why the Ontario legislature shouldn’t follow suit to enact similar provisions in Ontario since this seems to be the combined, though not clearly articulated, intent of sections 11, 13, , 14, 18(2), and 23(6) of the Condominium Act and sections 44(2) and 44(4) of the Construction Lien Act.
There’s nothing particularly new or ground-breaking about the recent Ontario Superior Court Decision in Sierra Excavating v. Olszewski and TD Bank, 2012 ONSC 2271 (CanLII) but it is an interesting little case that highlights the importance of seeing the forest for the trees early in the litigation process. What forest? The legal costs. What trees? The legal principles at play and the parties’ perceived rights.
The facts are a bit lengthy but not complicated and are, in summary form, as follows:
- As a result of water intrusion into their basement, the owners of a single family house in Caledon, Ontario hired an excavation contractor to excavate around portions of the foundation of their home and carry out some work to waterproof the foundation and stop the leaks.
- The contract price was $19,576.13.
- The contractor carried out the work but leaks persisted.
- A couple of subsequent attempts by the contractor to repair the leaks failed, the owners refused to pay, and the contractor registered a construction lien and sued for the $14,576.23 claimed to be owing under the contract.
- The owners had another contractor remove and re-do the work (successfully – the leaks were fixed) and the owners counterclaimed for $40,000 for the higher cost of the second repair.
- The Judge found largely in favour of the owners, ruling that the contractor had not done what it was hired to do and so was not entitled to a lien (or further payment) and would have to pay the owners $21,466.20 in damages for their cost to have the work re-done and done properly.
What I find important enough about this case to write this little blurb has almost nothing to do with the facts or the Judge’s decision – it has to do with highlighting how easy it can be for litigants to end up in a four-ish year legal battle (capped off with a three-ish day trial) that must have cost tens-ish of thousands of dollars in litigation costs (lawyers and experts) over what was never realistically more than a $20,000-ish fight, regardless of which side won or lost. That is not, in my opinion, a happy outcome, even for the “victorious” owners. At the end of the day, I would imagine that most, if not all, of what the owners were awarded will probably be gone in litigation costs and, between paying the Judgment, its own lawyer and expert, and some amount of the owners’ legal costs, the contractor is probably out somewhere north of $40,000 (on a $14,000 claim!). Would either side have predicted its financial outcome in 2008 when the lawsuit was commenced? I don’t know for sure but I doubt it.
This case, and countless others like it, exemplifies the need for both prospective Plaintiffs and Defendants in construction litigation to think very hard before they “dig in” for a long fight over what is, in the context of litigation, not a lot of money. Some people and companies are rich enough to have the privilege of throwing economics out the window in favour of principle – most, however, are not.
From a lawyer’s perspective, this case bolds, underlines, and then highlights the need to have very frank and very clear discussions with our clients about the potential course and costs of litigation – particularly when there are relatively small amounts of money is dispute – so that our clients can make informed decisions about how they want to proceed and how aggressive they want to be in trying to settle their disputes. Sometimes “small money” litigation will still go the long, expensive distance but at least the end result will then be no surprise to our clients.
On a closing note: I am not being in any way critical of the parties’ lawyers in this case – I don’t know either of them and obviously have no idea about how the litigation proceeded, whether there were attempts at settlement, or as to the overall dynamics of the litigation over its four year course. To the contrary, my point is that the economics of virtually any “small money” construction litigation has the potential to get away from the parties over time and this case is just yet another example of this all too common problem.
In the age of Twitter and electronic media, it’s old news by now (the last of the amendments came into force last summer) but, in the interest of one-stop-shopping, I figured I ought to throw up a brief post summarizing the “recent” amendments to the Construction Lien Act.
Definition of “improvement”
The definition of “improvement” at section 1 of the Construction Lien Act has been amended and now expressly includes the installation of industrial, mechanical, electrical or other equipment on the land where the equipment is essential to the normal or intended use of the land.
It will be very interesting (for construction law nerds like myself, anyway) to see how far the courts will go in extending lien rights to installed equipment. See my other post on this here.
Under this amendment (new section 33.1 of the Construction Lien Act), condominium developers will be required to publish notice of their intention to register the condominium declaration in accordance with the Condominium Act in a construction trade newspaper (the Daily Commercial News) five to fifteen days prior to registration.
This amendment will provide unpaid persons having liens notice of the pending registration of the condominium declaration so that they can preserve their lien rights before the lands and premises are legally divided into separate condominium units and title is transferred to homebuyers.
Prior to the registration of the declaration, the condominium improvement can be liened in the normal manner, even if the work of the person having a lien is to parts of the project which, after registration of the declaration, will be common elements. This amendment will provide an opportunity to avoid the much more expensive and time consuming requirement of liening the common elements of a condominium after the declaration has been registered.
Check out one of my colleague’s comments on this change here.
Affidavit of Verification
Prior to these amendments (to sections 34 and 40(1) of the Construction Lien Act), a claim for lien had to be verified by an Affidavit of Verification which was typically sworn by the lien claimant. In an effort to keep pace (or at least not fall out of sight) with the new(ish) electronic registration system for land titles documents, verifying a claim for lien by Affidavit will no longer be required.
Also, instead of cross-examining the deponent of the Affidavit of Verification, the lien claimant, the agent or assignee of the lien claimant, or a trustee of the workers’ trust fund (as the case may be) will be subject to cross examination.
Under these amendments (to sections 44(9) and 47(2) of the Construction Lien Act), a lien claimant whose lien is sheltered under a certificate of action that has been vacated from title by Court Order will still be able to proceed with an action to enforce its sheltered lien as if the Order to vacate had not been made.
These amendments were introduced to facilitate the vacating of liens by Court Order while, at the same time, protecting the rights of sheltered lien claimants.
In 2010, the Ontario Legislature passed the Open for Business Act, 2010, which included several changes to the <a title="Construction Lien Act" href="http://www.e-laws.gov.on viagra generic online.ca/html/statutes/english/elaws_statutes_90c30_e.htm” target=”_blank”>Construction Lien Act. When I learned of the coming amendments, the one that interested me the most was an amendment to the definition of what is an “improvement” under the Construction Lien Act.
In 2007 (and under the former definition), the Ontario Court of Appeal upheld a trial judge’s ruling that the transporter and installer of a 100,000 square-foot, 500,000 ton automotive assembly line (built off-site, disassembled, transported, reassembled on-site, and fastened to the building with 2,000 to 3,000 bolts) did not have lien rights, because the installation of the assembly line did not fall within the old definition of an “improvement” as it was “portable”. The Court of Appeal refused to interfere with the trial judge’s finding that the assembly line was portable and the appeal was dismissed. I’m not kidding. (See Kennedy Electric Limited v. Dana Canada Corporation, 2007 ONCA 664 (CanLII) and Kennedy Electric Ltd. v. Rumble Automation Inc., 2004 CanLII 47787 (ON S.C.)).
The construction industry (and more than a lawyer or two) was surprised by the Court’s interpretation and so too, it seems, did the Ontario Legislature disapprove because the definition of “improvement” at section 1 of the Construction Lien Act was amended to now expressly include the installation of industrial, mechanical, electrical or other equipment on the land/building/structure/works where the equipment is essential to the normal or intended use of the land/building/structure/works.
This amendment came into force in October, 2010 and I’ve been keeping an eye on the reported caselaw but have yet to see a decision that gives a meaningful interpretation to the new definition and that tests the boundaries of what sort of “other equipment” might constitute an improvement and what “essential to the normal or intended use” means. At one extreme, the new definition could be interpreted to extend to, for example, dishwashers or water softeners installed in homes. At the other extreme, the Courts might be more conservative and the new definition might be fairly narrowly applied to large scale, purpose built equipment (like the equipment in the Kennedy Electric case). It’s something to think about. As soon as I see something on this, I’ll put something up here.
For most people, long gone are the days where a house is purchased in early adulthood and is lived in, virtually unchanged, for 20, 30, even 40, years. We are, more and more, a society and culture that encourages “upgrading” and “improvement”. Many of us will, at some point, hire a contractor to carry out some kind of construction project – whether for a small bathroom renovation all the way up to a large six figure renovation.
There are a lot of fantastic contractors and builders out there that do excellent work and this article is, in no way, a slag on contractors generally. Unfortunately, when trying to tell the good from the bad, one thing you can count on is that they will all – good ones and bad ones – tell you how skilled, professional, and “detail” and “quality” oriented they are. However, another thing you can count on is that, when it’s your home and hard earned money is at risk, a two month delay, a 30% or 40% budget overrun, or an un-level floor/poor paint job/etc. (you get the idea), will test your anger management limits. If the contractor then refuses to acknowledge the problem and stops communicating with you, you’ll quickly see those limits as little dots in your rear-view mirror.
Seasoned and experienced owners or developers undertaking large construction projects or working in new construction usually take steps to get the proper “legalities” taken care of – they negotiate contracts that are either standard form or are drafted by their lawyers, they hire consultants to oversee and review the work as it progresses, they make sure they are complying (more or less) with the Construction Lien Act, and so on. However, on smaller projects and renovations, and for less experienced homeowners, these safeguards and up-front precautions are far too often overlooked and it amazes me how little legal protection and planning many people seek even when there are tens or hundreds of thousands of dollars at stake.
Sometimes a project goes well and the homeowner gets what he or she bargained for without any conflict. These are the happy stories. However, too often, homeowners are getting into costly disputes with their contractors and either get a poor finished product or spend a small fortune in legal fees fighting for what they feel they are entitled to. Fortunately, while construction can be a risky game for the uninformed and uninitiated, there are some things that homeowners can do to reduce the chances of things going sideways and improve their position if they do.
If you are a homeowner and are considering embarking on a renovation or construction project, the following are a few things you should think about before you sign on the so-called “dotted line”:
- Budget some amount of money for legal advice and assistance when you are in the early stages of planning your project. The amount of your budget will probably depend on the overall cost and nature of the project. You should consider this as part of the actual construction budget. If things go well (the happy story) and some of this money doesn’t get used, great! However, if things begin to capsize (the unhappy story), you’ll be glad to have the funds available to deal with the problem.
- Research the contractor(s) you are considering using. The internet is a great resource for this (Google, chat rooms, the Better Business Bureau, etc) and your lawyer can also carry out searches to investigate whether there has been past litigation involving the contractor. Ask the contractor for two or three references for previous clients and call them (before agreeing to anything) – if people were unhappy, they’ll be eager to tell you about it. If the contractor can’t (or won’t) give you a reference, run, don’t walk.
- Make sure that you have a well drafted contract in place that clearly sets out each party’s rights and obligations. There are many different project delivery methods available (fixed price, cost plus, project management, and so on), each with its own advantages and disadvantages. Regardless of which delivery method you choose, it should be clear as to who does what and when and for how much, and what the consequences will be if things that have been agreed upon do not happen. Note: “well drafted” does not necessarily mean “long” or “complicated”. Depending on the type and size of the project, an adequate contract might only be a page or two long.
- Consider having a schedule to the contract (unless it is set out right in the body of the contract) that clearly expresses exactly what is (and is not) included in the price. Too frequently, disputes arise because the homeowner thinks she is getting, for example, premium quality paint in an eggshell finish and the contractor plans on using standard builders’ grade flat paint. If the contract is silent on this, the contractor is going to charge the homeowner more to use the paint that she thought was included. A contract that sets these sorts of things out in detail can avoid this very, very common problem.
- Once you have that well drafted contract in place, follow it! If a dispute arises, it is more difficult to earn the sympathy of the court if the other party is not the only one that has not abided by the agreed terms. More than one lawsuit has been lost because both parties completely disregarded the terms of their contract.
- Get some advice on your rights and obligations under the Construction Lien Act. In many cases, knowing (and following) what the Construction Lien Act says about what you have to do (i.e. retaining a proper holdback for the appropriate amount of time and performing some due diligence searches before releasing the money) can save you from significant liability at the end of the project if workers, suppliers, or trades are not paid (whether directly by you or by your contractor). This legislation is there, in part, to protect owners.
- If the size of the project warrants it, either work some terms into your contract(s) for third party reviews of the work and spend a bit of money on a consultant (i.e. an architect or engineer) to do periodic reviews to point out any deviations from the specifications, design, or the Building Code, or hire someone to do this outside the contract but for your own benefit and protection. If a dispute arises, this third party can provide valuable evidence. If no dispute arises, the third party reviews can provide you with almost as valuable peace of mind
- Make sure that either you or the contractor is taking care of whatever permits are required click this site. building permits add to the cost and “red tape” of the project but for many projects they are required and, for the most part, they are there to protect you. That said, do not assume that the building permit or inspection process will act as a general quality control for the work being done. Inspectors are generally only inspecting for general compliance with the Building Code’s minimum standards – not to ensure that everything is being done properly or in accordance with the contract. There’s a big difference.
- Consider whether you want a dispute resolution clause in your contract. Sometimes there is no such clause, sometimes there is a mandatory mediation or arbitration clause, and sometimes there is a clause making mediation or arbitration optional. I am generally not a fan of mandatory arbitration clauses for smaller projects primarily because of the potential cost involved, but there are times where it might be appropriate. This is something to raise and discuss with your lawyer.
- If you have a lawyer retained from the outset of the project, he or she will be familiar with the project and contract and, in the event that a dispute arises, will be able to jump right in without nearly as much briefing to assist in resolving things. Let your lawyer know if you sense that a problem might be on the horizon (i.e. if your contractor seems to be falling behind, the materials on site don’t match what you requested, etc). Sometimes an early letter can help keep things on the rails when they might otherwise go off (potentially saving you a lot of money if a full-scale dispute can be averted).
- Most construction litigation is won and lost on the “paper trail”. Keep a very accurate and complete project file where you keep everything to do with the project (i.e. contracts, drawings, quotes, documents supporting agreed changes to the scope of work, etc). Where things are discussed orally on site or in meetings, confirm what was discussed or agreed in writing (the speed and ease of e-mail makes this a no brainer). Keeping a comprehensive project file will:
- keep you better organized in dealing with the contractor(s) and other involved parties throughout the project (never a bad thing);
- only take a little more time than not doing it; and
- if a dispute arises during the course of the project and arbitration or litigation is required, possibly mean the difference between winning or losing the dispute and will invariably save you money in legal fees because your lawyer will have better evidence to work with.
While I strongly believe that the above suggestions can go a long way toward reducing problems and putting you in a better position if problems arise, they will not guarantee you 100% protection. Even where sophisticated owners and contractors make heroic efforts to protect themselves and negotiate detailed contracts believed by everyone to be clear and bullet-proof, long and costly litigation can still occur.
Taking the time to follow the above suggestions and, perhaps, investing couple of thousand dollars for legal advice and services at the outset of a smaller project may be a hard pill to swallow for the eternal optimist who can’t imagine that a serious dispute could arise on his or her project (“My contractor seems like a really nice guy. I trust him.”), but most clients that I’ve represented over the years, after things went wrong and where they didn’t exercise this sort of up front effort and diligence, would almost certainly say that, with the benefit of hindsight, they would have done things differently.