Using home inspectors as insurance for a home purchase- Think again

For many people buying a new home is one of the most significant financial decisions they will make in their life. To safeguard this investment, many people choose to hire home inspectors. What happens when a home inspector misses something was the subject of a recent case in Saskatchewan known as Smith v Hawryliw.

In this case extensive mould and fire damage was discovered in a home months after the buyer had moved in. As the buyer had retained a home inspector prior to purchasing the property, the home inspector was sued. In defending the claim, the home inspector relied on a limitation of liability clause that was contained within the Home Inspection Agreement. This clause limited the home inspector’s liability to the amount paid by the buyer for the home inspector’s services. In arguing that this limitation clause should not apply, the buyer claimed that the home inspector had an obligation to bring the clause specifically to her attention before she signed the agreement. The judge, however, rejected this argument holding that the clause was written in plain language and was right above the buyer’s signature line on the agreement.

As the fee for a home inspection will often amount to only a few hundred dollars, any type of clause that limits a home inspector’s liability to the amount of its fee will significantly impact a buyer’s ability to recover costs expended to repair items that were missed during a home inspection. Given this, a home inspector should not typically be looked to as “insurance” on a home purchase. Rather, if a buyer has serious concerns or reservations about purchasing a home, especially with things like a home’s foundation or structure, other professionals (ex. engineers) should be looked to for assistance instead.

For more information, please contact Jared D. Epp at 306.933.1326 or email j.epp@rslaw.com 

 

Cash Flow Concerns: How to Collect Payment in the Midst of COVID-19

Introduction

Over the past year much of the focus of the Saskatchewan construction industry has been on the impact that new prompt payment legislation will have on the timeliness of payment on construction projects. Cash flow is never far from the mind of any prudent business owner. However, a focus and concern with cash flow is perhaps never more evident than now, given the global, and increasingly local, rescheduling and shutdown of various construction projects.

In considering your ability to collect on outstanding invoices, it is critical that the payment terms of your contract be reviewed. Although contract terms, like force majeure, may justify a suspension of work or an adjustment to schedule, they do not necessarily suspend or modify a party’s payment obligations. Rather, the exact contract language needs to be reviewed. Absent specific contractual language excusing a party’s payment obligations, payments are still required to be made.

However, what is legally required, and what will, in practice, actually happen are, of course, two different things. A contractual right to be paid, though important, may not change the fact that certain companies will either not be able to pay or will, in an act of self-preservation, simply choose not to pay. In these types of circumstances, a few different collection options should be considered:

  1. Register a lien. Although a lien may not result in immediate payment, it provides security, in the event the project fails or is not completed, for future payment. It also ensures, in the event a future progress draw is made, that enough funds are withheld to satisfy the lien claim in the future. Although it is best practice to ensure a lien is registered in Saskatchewan within 40 days of substantial completion, liens can still be registered after this date and, in many circumstances, will remain enforceable.
  2. Determine whether or not a project is secured by a labour and material bond. Labour and material bonds are secured by insurance companies. As companies cease meeting their obligations, the ability to receive payment from an insurance company under a bond may, in certain cases, represent the best option available to collect payment. As labour and material bonds have predetermined pay-out amounts, it is important to submit your claim for payment as soon as possible. All L&M bonds have cap limits, and after the insurance company has paid out the amount of the bond, additional claims cannot be processed.
  3. Determine whether or not the project is secured by a performance bond. Although a performance bond is often put in place for the benefit of the owner, in the event a general contractor defaults, the ability of an owner to rely upon insurance to complete a project may be beneficial, given the possibility of the insurer using existing subcontractors to complete the work.

  4. File a lawsuit. Although lawsuits typically do not lead to quick payment, if your claim for payment is not defended, you may have the ability to register and then enforce a judgment. As judgments, once registered, exist for 10 years, this also may give your company a long-term option to satisfy a debt.

  5. Be mindful of trust obligations in the lien legislation. Saskatchewan’s lien legislation imposes trust obligations on project financing, and on funds paid between the owner, contractor and subcontractors. During times of cash flow crisis, it may be tempting for parties to pay money out of the project chain. This may result in a breach of trust obligations under the lien legislation, and could lead to personal liability for directors and officers as well. The lien legislation provides lien claimants a right to certain information from the owner, so use these tools to find out what’s happening in the project payment chain.

Like any situation, the best approach depends on your particular circumstance. However, all options should be explored given the uncertainty that is COVID-19.

For more information, please contact:

Misty M. Alexandre

306.933.1352

Email: m.alexandre@rslaw.com

Jared Epp

306.933.1326

Email: j.epp@rslaw.com

Jared Epp Contributes to Construction Contract Administration Program

Construction Specifications Canada (CSC) offers quality education programs for the betterment of the construction community. Included in their offerings is the Construction Contract Administration (CCA) program.The objective of the CCA program is to improve construction contract administration by providing education related to the administration and enforcement of contract requirements during the construction phase of the project.

Jared Epp supported the program by instructing three modules of this program:

  • Changes in the work
  • Contract law and dispute resolution
  • Bid change mechanisms

 

 

Bidding and Tendering Law with Alexandre and Epp

Misty Alexandre and Jared Epp jointly presented “Don’t Get Burned by Bid Law – Top Tips to Avoid Disqualified Bids” as a Lunch and Learn session for the Saskatoon Construction Association on February 28, 2020.  Topics covered included the basic principles of bidding and tendering law along with how to avoid common but completely avoidable errors that result in disqualified bids.

Lawyers Jared D Epp