How do I protect myself financially when hiring a contractor?

Protecting yourself financially when hiring a contractor in Ottawa requires following Ontario's Construction Lien Act holdback rules, verifying insurance and licensing, and structuring payments properly.

The most important financial protection in Ontario is the 10% holdback requirement. Under the Construction Lien Act, you must hold back 10% of each payment for 60 days after substantial completion. This protects you if the contractor doesn't pay subcontractors or suppliers, who could otherwise place a lien on your property. For a $50,000 renovation, you'd hold back $5,000 until the lien period expires.

Payment Structure Protection

Never pay large amounts upfront. A legitimate contractor should ask for no more than 10-15% down, with the bulk of payments tied to completed milestones. Be wary of contractors demanding 50% or more upfront - this is a major red flag. Structure payments around completed work phases: 10% to start, 25% at rough-in completion, 25% at drywall completion, 30% at substantial completion, and final 10% after the 60-day lien period.

Essential Verification Steps

Before any money changes hands, verify the contractor's WSIB clearance certificate at wsib.ca/clearances. This protects you from liability if workers are injured on your property. Check their liability insurance - they should carry at least $2 million in coverage. For electrical work, verify their ESA license at esasafe.com/contractor-locator. For gas work, confirm TSSA certification at tssa.org.

Contract and Documentation Protection

Get everything in writing with a detailed contract specifying materials, timelines, change order procedures, and payment schedule. The contract should include their business license number, insurance policy numbers, and WSIB account number. Take photos before work begins to document existing conditions.

Red Flags to Avoid

Never hire door-to-door contractors or those demanding full payment upfront. Be suspicious of quotes significantly below others - they often lead to change orders that inflate the final cost. Avoid contractors who can't provide local references, proper licensing, or insurance documentation. Cash-only deals are another warning sign.

City of Ottawa Resources

If disputes arise, contact the City of Ottawa Building Code Services at 613-580-2424 if permit work is involved. For consumer protection issues, reach out to ontario.ca/consumer or consider mediation services before legal action.

Banking Precautions

Pay by cheque or credit card rather than cash - this creates a paper trail. Credit cards offer additional dispute resolution options if problems arise. Never wire money or pay through untraceable methods.

Following these financial protections, combined with proper contractor vetting, gives Ottawa homeowners the best defense against contractor scams and project disputes. The key is taking time upfront to verify credentials and structure payments properly rather than rushing into agreements.