How should I structure payments to my contractor during the renovation?

In Ottawa, never pay more than 10% upfront to any contractor, and structure payments tied to completed work milestones - this protects you under Ontario's Construction Lien Act and gives you maximum leverage.

The safest payment structure follows Ontario's legal framework designed to protect homeowners. Here's exactly how to structure it:

Start with Minimal Down Payment
Legitimate contractors in Ottawa should only ask for 10% down maximum, and many reputable ones ask for nothing upfront. This covers initial material orders. If a contractor demands 25%, 50%, or full payment upfront, that's a major red flag - walk away immediately.

Tie Payments to Completed Milestones
Structure your contract with specific, measurable completion points. For a bathroom renovation, this might be: demolition complete (15%), rough plumbing/electrical complete and inspected (25%), drywall and tiling complete (30%), fixtures installed (20%), final cleanup and walkthrough (10%). For kitchen projects, milestones could include: demolition and prep (15%), rough work and ESA inspection (20%), drywall and flooring (25%), cabinet installation (25%), final fixtures and completion (15%).

Understand Ontario's 10% Holdback Rule
Under Ontario's Construction Lien Act, you must hold back 10% of the total contract value for 60 days after substantial completion. This isn't optional - it's the law. This holdback protects you if subcontractors or suppliers aren't paid and try to place liens on your property. Many Ottawa homeowners don't know this rule, but it's crucial protection.

Payment Method Matters
Always pay by cheque or bank transfer - never cash. Write cheques to the business name exactly as it appears on their WSIB clearance certificate and insurance documents. This creates a clear paper trail and ensures you're dealing with a legitimate, registered business.

What the City of Ottawa Building Department Recommends
When you pull permits through ottawa.ca/building (613-580-2424), they provide consumer protection guidelines. They specifically warn against large upfront payments and recommend the milestone approach. If your project requires permits - which most renovations in Ottawa do - the contractor should factor inspection schedules into the payment timeline.

Red Flags to Avoid
Be extremely wary of contractors who demand payment for materials before delivery, ask for cash only, want the full amount upfront "to secure your spot," or pressure you to pay before work begins. In Ottawa's competitive market, legitimate contractors understand proper payment structures and won't push back on reasonable terms.

WSIB and Insurance Verification First
Before structuring any payments, verify the contractor's WSIB clearance certificate at wsib.ca/clearances and confirm their liability insurance is current. Never make payments to uninsured contractors - you could be liable for workplace injuries.

The key is maintaining leverage throughout the project while being fair to legitimate contractors. This payment structure protects you under Ontario law while ensuring quality contractors can manage their cash flow appropriately.

For complex projects requiring multiple trades, verify each contractor through our directory at https://justynrookcontracting.com/directory to ensure they're properly licensed and insured before establishing any payment terms.