Why the analogy of a girls best friend? In my experience quoting jobs, it is because I usually meet with the woman of the household to quote a project, and it is her that tells me what she wants, and she is also the one that likes it when I say that I work with permits when required. Its the husband (or man of the household) that usually says its not necessary, normally because he's afraid it will be more expensive overall, and take too much time. They're also afraid of Inspectors snooping through the house looking for problems, but that's just not true, I don't care what your friend Jimmy told you about his friends' Dads' brothers' former room-mates' DIY reno-gone-wrong where they were finishing the basement and the Inspector made them tear the house down.
The issue of it taking more time: Using a basement as an example, generally a 4-6 week project, having the work inspected might add a day and a half to the overall time. If scheduled correctly, it actually won't make any difference, the day and a half extra is only because sometimes the inspector is not immediately available. Is 36 hours of a delay really worth the excuse to not get one for a 4-6 week project???
The issue of it being more expensive: A typical permit for a full basement renovation is less than $200, and an ESA (for all electrical) permit is less than $100. The drawings can be done by you or the contractor, you do not need an architect or an engineer (providing you're not taking out anything supportive) If the basement is costing $30,000, why wouldn't you want to ensure that the work being done is watched by a professional and up to code? For 0.33% of the budget?? That's too expensive!!??
Whether the project is being inspected or not, the work should still be safe, made with the same materials, and made with the same care for your home and safety. If a contractor tells you it is significantly more expensive to work with permits and a pain-in-the-tuchas, then I would seriously question his daily work ethic...or simply turn and run.
I often get calls from home-owners that did their own basements, bathrooms, etc, but need me in to check a leak, a plug that doesn't work, lights that flicker, etc. Sometimes easy, but often its an expensive repair, and they did the job without a permit, with an excuse of: "I didn't need one" or "I didn't think I needed one because I did it myself.". Now, you absolutely CAN do the work yourself, AND get the permits yourself. And again, permits are there to make sure you don't end up with unexplained leaks, plugs that don't work, and flickering lights. Inspectors make sure everything is Kosher, no matter who does it, and if they find something done incorrectly, they absolutely will give you the advice needed to correct it; inspectors are there to help you, not hinder you. Still have excuses to not get a permit? Read on.
So what work requires a permit? Here's the link to the City of Toronto's residential building by-laws page for your review. It is important that you know your resources and understand what parts of your home need special attention by the City: http://www.toronto.ca/building/pop_permit.htm
What does not require a permit? Check it out, and read the paragraph at the bottom of the page ;). http://www.toronto.ca/building/pop_no_permit.htm
For YOUR Safety, Not For Our Profit
What do you get with a permit? You get a very experienced and licensed Inspector that works solely for the city (not independantly), coming to your home 3-4 times during a project, to inspect the demolition, the rough-ins, the installs, and the finish (called a Final Occupancy). He/she is there for as long it takes each visit to ensure the work is safe and up to current code requirements before it is allowed to move forward. This is done for YOU and for YOUR home and for YOUR safety and for YOUR future. An experienced contractor should never, ever, ever have an issue with getting or following through with permits.
What if there's a Problem?
So let's say permits are in place and the project is at the point where the first inspection is to take place (The Rough-In). Inspector comes, finds some issues related to the work performed, and won't let it pass until the issues are rectified. A little stressful, yes, but not your problem. Again, its the contractors (if you've hired Sheldon, which you should) responsibility to do the work up to code (its your responsibility to ensure permits are there, however, not necessarily to get them, but to ensure they're in place). And if the contractor says he needs more money because of this, tell him no way, he should have done it right to begin with.
Permits vs Cash Jobs: shouldn't make a difference. The loveliness of cash is so the contractor doesn't have to claim it, but that doesn't mean the work he does should be any different. Sure, when you get a permit there is a record of it, but Building Services don't talk to Revenue Canada! An inspector doesn't give a flying-hammer how the job is being paid for either, so don't let a contractor tell you that cash jobs don't come with permits.
Responsibility: it is those doing the work to ensure what they do is up to Code, however, don't think you as the client should just sit back. In the end, it is your home, your investment, and your project, and subsequently your final responsibility to make sure t's are crossed and I's are dotted. Let's say you're having your basement finished, and because you're afraid of time and money you agree with your contractor to do the work without permits. Let's say a neighbour is nosy and calls the city to check up on you. If no permit is filed, then a representative will come down and ask the job to cease immediately until a permit is applied for. If a penalty or fine is required, it is the homeowner that has to pay, not the contractor.
"What if I ask for permits? How can I be assured my contractor got them and they've passed?" Great question you in the shirt, let me answer: some areas provide each permit with a large display code sign that has to be displayed at the street level of the house and in plain sight. If no sign is provided, actually either way, the permits are required to remain on site, during and after the renovation as they belong to the project and the house, not the contractor. So just ask to see them :). You can also call your local building service division and just ask nicely.
There's responsibility on both ends, and although you may think permits are a pain in the tuchas, if you've done your research on Sheldon...er...your contractor, you should be hiring him because of his experience and workmanship, and therefore, permits shouldn't even come up as a blip on the overall project radar.