What is a reasonable deposit for a contractor?

A reasonable contractor deposit in Ottawa is typically 10-15% of the total project cost, with a maximum of $1,000 for smaller jobs under $10,000. Never pay more than 20% upfront, and be extremely cautious of contractors demanding large deposits or full payment before starting work.

Understanding Ontario's Legal Framework

Under Ontario's Construction Act, contractors can legally request up to 10% of the contract value as a deposit, though many established contractors work with less. For projects over $50,000, the 10% holdback rule applies - meaning you should retain 10% of each progress payment for 60 days after substantial completion to protect against liens. This legal framework exists specifically to protect homeowners from contractors who take large deposits and disappear.

Typical Deposit Structure in Ottawa

For smaller renovations ($5,000-$15,000), expect deposits of $500-$1,500 to cover initial material orders. Mid-sized projects ($15,000-$50,000) typically see deposits of $1,500-$5,000, often tied to specific material purchases like kitchen cabinets or specialty fixtures. Large renovations or additions ($50,000+) may warrant deposits up to 10% of the contract value, but should be clearly tied to material procurement and mobilization costs.

Red Flags to Avoid

Be extremely wary of contractors requesting deposits over 20%, demanding cash payments, or pushing for payment before permits are secured. Legitimate contractors understand that materials can be returned if a project falls through, and they have established credit with suppliers. Door-to-door contractors often demand large upfront payments - this is a common scam in Ottawa neighborhoods.

Best Practices for Ottawa Homeowners

Always verify the contractor is properly licensed through ESA (for electrical work) or TSSA (for gas work), carries WSIB coverage, and has valid liability insurance. Write deposits by cheque or e-transfer to a business account, never cash. Ensure your contract clearly states what the deposit covers - typically material orders and initial mobilization. For significant deposits, consider having materials delivered to your property rather than paying the contractor directly.

Payment Schedule Recommendations

Structure payments based on completion milestones rather than time periods. A typical schedule might be: 10% deposit, 25% at rough-in completion, 25% at drywall completion, 25% at substantial completion, and 15% final payment after deficiencies are addressed. This protects both parties and ensures work progresses before additional payments are made.

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