Homeowners who hire underground contractors to get a "cash deal" often believe that they are not breaking any laws. After all, it's the contractor who is cheating on taxes, not the homeowner.

However, this doesn't reflect what's really involved in most underground deals. If a contractor isn’t reporting income and paying taxes, they won’t want their name turning up on other government records, such as Workers' Compensation files, or business license applications, or building permits.

In order to remain "invisible" to governments, they must avoid the paperwork required to operate their business properly. And in some cases, when they break the law, the homeowner can end up being responsible.

Building permits and inspection are one example. Most residential construction requires a municipal building permit. This ensures that the plans and construction work will comply with local building codes. Professional contractors know what the building code involves and will ensure that all required permits are in place. In many cases, underground contractors will skip this paperwork, especially with interior work not visible from outside the home.

However, it is the property owner, not the contractor, who is required to meet building code and permit requirements. If a permit is not obtained and the municipality finds out, the homeowner will be considered in violation. If the work does not meet code requirements, the municipality can (and often does) order it to be torn down, at the homeowner's cost.

Underground contractors avoid direct involvement in the permit and inspection process in order to keep their work "off the books". So it's much more likely that permit and code requirements will be violated. When this happens it's the homeowner, not the contractor, who is breaking the law.

There are a number of other laws that can also affect homeowners should they hire an underground contractor. While these vary from province to province, laws concerning to Workers' Compensation coverage, consumer protection against overcharging, security of deposits and prepayments as well as construction liens can all involve risks to homeowners who hire someone who doesn't provide a written contract and proper documentation.

Some provinces also require special licensing and bonding of contractors. particularly if they receive deposits or prepayments from customers.

A contract based on the laws in place in your province is the best way to protect yourself and your family from financial risks. Professional contractors know this-that's why they don't offer "cash deals" done under the table.