By Laura Armstrong
A contractor going bankrupt mid-renovation is a “nightmare” situation for homeowners, experts say.
If a construction company goes bankrupt mid-project, homeowners aren’t likely to see their money again, said Toronto real-estate lawyer Mark Weisleder.
“As far as going after the contractor, there’s very little (homeowners) can do,” he said.
The problem can get even worse for homeowners if subcontractors haven’t been paid. Once an independent contractor has worked on someone’s land, they have an automatic right to register a lien — a type of security interest granted over an item of property to secure the payment of a debt — against its owner, Weisleder said.
“(Homeowners) know (subcontractors) are doing work on their property, and that’s why they’re responsible for payment,” he said.
Weisleder said he has seen homeowners lose double the money or even the property itself when faced with the cost of both their lost payments and liens.
Employees working for a bankrupt company are protected under Ontario’s Employment Standards Act, said Toronto employment lawyer David Whitten. Under the act, directors of a bankrupt company are personally liable for unpaid wages for up to six months. If the company has no money, the directors’ personal assets will be seized.
The act does not cover independent contractors, forcing them to file a lien, he said.
If employees find themselves in that situation, they should file a complaint with the Ministry of Labour, keeping in mind the ministry can only pay out a maximum of $10,000 per person, Whitten said.
“If you’re owed more than $10,000, if you get that close, consider whether you should still be providing services,” he said.