Breaking the Law
If you enter into a cash deal, you probably believe you are not breaking any laws. After all, it's the contractor who is cheating on taxes, not you. In order to remain "invisible" to governments, however, an underground contractor must avoid the paperwork required to operate their business properly.
In some cases, when the contractor breaks the law, the homeowner can end up being held responsible. The following are some examples.
Building permits and inspections: Most residential construction requires a municipal building permit to ensures it will comply with local building codes. In many cases, underground contractors will skip this paperwork — but it is the property owner, not the contractor, who is required to meet these requirements. If a permit is not obtained and the municipality finds out, it's the homeowner who is breaking the law.
Workers' Compensation coverage: While they vary from province to province, laws concerning 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.
Licensing and bonding: Some provinces also require special licensing of contractors, particularly if they receive deposits or prepayments from customers.
A contract that requires compliance with the laws in your province or territory is a good way to protect yourself and your family from legal or financial risks.