Estimates, quotes and contracts
Renovation deposits, payment schedules and lien holdbacks in Canada
How big a renovation deposit should be, how to tie payments to stages, the 10% holdback under Ontario, BC and Alberta lien acts, Quebec legal hypothecs, and worked payment examples.
Pay a renovation contractor in a way that keeps your money behind the work: a modest deposit, stage payments for work completed and inspected, the statutory holdback where your province's lien act requires one, and a final payment only after deficiencies are fixed. In Ontario (Construction Act, s. 22) and British Columbia (Builders Lien Act) the basic holdback is 10% of the value of work and materials; Alberta's Prompt Payment and Construction Lien Act also uses 10%. You release the holdback only when the lien period has passed with no lien registered. Quebec has no statutory holdback, but unpaid workers, subcontractors and suppliers may have a legal hypothec on the property, and the Civil Code lets you withhold amounts to cover such claims.
This guide belongs to the estimating method. The holdback and progress payment calculator does the arithmetic. This is general information, not legal advice; lien deadlines are strict, so consult a lawyer (a notary in Quebec) if a lien is registered or threatened.
How large should the deposit be?
No federal or general provincial rule caps renovation deposits for homeowners, but official guidance points to modest amounts. The Ontario government's guide for home renovation businesses recommends deposits of no more than 10% of the project cost. A deposit can reasonably cover custom-ordered items (cabinets, windows) and the cost of scheduling; it should not fund the contractor's other jobs.
In Quebec, an RBQ-licensed contractor must provide licence security ($20,000 for specialized subclasses, $40,000 for general subclasses, shared among all eligible claimants against that contractor), which can compensate consumers in limited cases, including deposits lost. It is a safety net, not a reason to pay large deposits.
Stage payments
Tie each payment to a completed, verifiable stage, not to dates. An illustrative schedule for a $90,000 basement suite (before tax):
| Stage | Payment | What you check first |
|---|---|---|
| Deposit at signing | 5% | Contract signed, permit applied for |
| Framing and rough-ins done and inspected | 30% | Municipal framing, plumbing and electrical rough-in inspections passed |
| Insulation and drywall complete | 25% | Insulation inspection passed; drywall finished |
| Finishes installed | 25% | Kitchen, bathroom, flooring, doors in place |
| Substantial completion | 15% | Final inspection passed; deficiency list agreed |
Each payment should be reduced by the statutory holdback where it applies, and the final balance should leave enough to cover the deficiency list.
Holdbacks under provincial lien acts
| Ontario | British Columbia | Alberta | |
|---|---|---|---|
| Statute | Construction Act | Builders Lien Act | Prompt Payment and Construction Lien Act |
| Basic holdback | 10% of the price of services and materials supplied (s. 22) | 10% | 10%, kept for the lien period |
| Lien period (summary) | Generally 60 days after completion, abandonment or termination, or after publication of a certificate of substantial performance | Generally 45 days after a certificate of completion, or after the head contract is completed, abandoned or terminated | Generally 60 days after the last work or materials were supplied; longer for some types of work |
Summaries only; they omit exceptions. Manitoba, Saskatchewan, Nova Scotia and other provinces have their own builders' lien statutes with their own percentages and deadlines. Check your province's act or ask a lawyer.
Why the holdback matters
If your contractor does not pay a supplier or subcontractor, that party may be able to register a lien on your home's title for the value of what it supplied. If you kept the holdback and released it correctly, your exposure is generally limited to the holdback. If you paid everything early, you could end up paying twice.
Worked example: Ontario progress invoice
Illustrative, using the calculator defaults. A progress invoice for work completed so far is $30,000 including HST. A $3,000 deposit was paid at signing and is credited against this invoice.
- Holdback: $30,000 × 10% = $3,000.
- Pay now: $30,000 − $3,000 − $3,000 = $24,000.
- Running holdback balance: $3,000, to be released after the lien period.
At substantial completion, suppose the total holdback across all invoices is $10,170 on a $101,700 contract including HST. When the lien period expires (counted from completion, here about 60 days later), and a title search shows no lien, you pay the $10,170. If deficiencies remain, the contract should allow you to withhold a separate, reasonable amount for them, distinct from the holdback.
Quebec: legal hypothecs
Under the Civil Code of Québec, persons who took part in the construction or renovation (workers, subcontractors, suppliers of materials, architects and engineers) may have a legal hypothec on the immovable. Those who did not contract directly with you must give you written notice of their contract (a dénonciation) for the hypothec to cover their work, and the hypothec must be preserved by registering a notice within 30 days after the end of the work. You may withhold from the contractor amounts sufficient to pay claims that could give rise to such hypothecs until the contractor shows they are paid. If you receive a dénonciation, make sure that supplier or subcontractor is paid, for example by joint cheque or against a release.
Releasing the final payment and holdback
- Walk through the work with the contractor and write a deficiency list with dates.
- Confirm final inspections have passed and you have the permit closure documents.
- Wait until the lien period has clearly expired.
- Search title or have your lawyer do so.
- Ask for written confirmation, or statutory declarations where used, that subcontractors and suppliers are paid.
- Pay, and get a receipt.
Mistakes to avoid
- Paying a large deposit in cash.
- Paying ahead of the work to "keep the crew motivated".
- Releasing the holdback early because the contractor asks.
- Treating the holdback as a deficiency fund, or the deficiency amount as the holdback.
- Losing track of the completion date that starts the lien period.
Related guides
The payment schedule should be written into the contract itself; the renovation contract checklist lists the clauses that go with it, and comparing renovation quotes shows how deposit and payment terms fit into choosing between contractors. For a large project with stage payments, see the secondary suite worked example.
FAQ
My contractor says homeowners don't need to hold back. Is that right?
In Ontario, BC and Alberta, homeowners who contract for improvements are generally "owners" under the lien acts, and the holdback rules apply to them. Some prompt payment provisions differ for homeowners, but the holdback concept still applies. Ask a lawyer if in doubt.
Can I agree in the contract to waive the holdback?
Owners generally cannot contract out of statutory holdback obligations, and doing so shifts the risk to you.
What if a lien is registered?
Do not pay the holdback to the contractor. Get legal advice; lien acts provide procedures to vacate a lien, often by paying the holdback into court or posting security.
Sources
- Ontario e-Laws — Construction Act
- Consumer Protection Ontario — guide for home renovation businesses (deposits)
- BC Laws — Builders Lien Act
- Alberta King's Printer — Prompt Payment and Construction Lien Act
- Régie du bâtiment du Québec — licence security
- LégisQuébec — Civil Code of Québec, legal hypothecs
