Es — paying a deposit to a contractor before work begins is standard practice. What matters is how much, when, and what protections are in place before you hand over any money.
“A deposit is reasonable and expected. What’s not reasonable is a contractor who needs 50% upfront before they’ve lifted a hammer. Legitimate contractors have supplier credit and cash flow to begin a project. A large upfront deposit demand is often a sign that a contractor is financially stretched — or worse, that they’re planning to take your money and not finish the job.”
— Marcus Chen, licensed general contractor and member of the Canadian Home Builders’ Association with 16 years of experience in residential renovation
Table of Contents
What’s a Reasonable Deposit?
A standard deposit for residential renovation work typically falls between 10% and 25% of the total project cost. This covers the contractor’s initial costs — securing materials, scheduling trades, and holding your spot in their schedule.
For smaller projects (under $5,000), a flat deposit of a few hundred dollars is common. For larger projects, the percentage tends to decrease as the total value increases.
Anything above 30–35% upfront is worth questioning. Anything above 50% is a red flag.
What Should a Deposit Cover?
Ask your contractor specifically what the deposit is for. Legitimate purposes include:
- Ordering materials with long lead times
- Scheduling and holding subcontractors
- Securing your start date in their schedule
- Initial site preparation costs
If the contractor can’t explain what the deposit is for, that’s a problem.
How to Protect Yourself
Get a receipt. Every payment — including the deposit — should be documented with a receipt that specifies the amount, the date, and what it covers.
Pay by cheque or e-transfer, not cash. Cash payments leave no paper trail. A cheque or electronic transfer creates a record that’s useful if a dispute arises.
Tie the deposit to a written contract. Don’t pay a deposit before a contract is signed. The contract should specify the full payment schedule, the scope of work, and what happens if either party backs out.
Understand your cancellation rights. In many regions, consumer protection legislation gives you a cooling-off period after signing a home renovation contract — typically 10 days. Know your rights before you sign.
Red Flags Around Deposits
- Asking for more than 50% before work begins
- Asking for payment in cash only
- No written contract before requesting a deposit
- Pressure to pay immediately before you’ve had time to review the agreement
- No receipt provided after payment
Payment Schedules: What Good Looks Like
A well-structured payment schedule for a typical renovation might look like this:
| Milestone | Payment |
|---|---|
| Contract signed | 10–15% deposit |
| Rough work complete and inspected | 25–30% |
| Project substantially complete | 25–30% |
| Final walkthrough complete, deficiencies resolved | Remaining balance |
The final payment should always be withheld until you are satisfied with the completed work.
Related Questions
- Questions to Ask a General Contractor Before Signing Anything
- Questions to Ask When Getting a Renovation Quote from a Contractor
- What Should a Contractor Quote Include?
- Questions Before Making Final Payment to a Contractor
- Red Flags When Hiring a General Contractor