This guide breaks down the renovation contract red flags in plain language, explains the legal protections homeowners have under the Ontario Consumer Protection Act, 2002, and gives you the exact ten questions to ask before signing any renovation contract.
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Key Takeaways
- Written contract required by law for any renovation work over $50 in Ontario (Consumer Protection Act, 2002).
- 10-day cooling-off period for door-to-door contracts; renovation contracts signed at home should include written cancellation rights.
- Maximum deposit: industry norm 10–15% on signing; anything over 25% upfront is a major red flag.
- Permit responsibility must be in writing — who pulls permits, who pays the fees, who is liable for delays.
- Completion date and liquidated damages for delay should be in every meaningful renovation contract.
The 7 Renovation Contract Red Flags
1. Vague Scope Language
Bad: “Renovate kitchen with new cabinets, counters, and appliances.”
Good: “Demolish existing kitchen including cabinets, counters, backsplash, flooring (excluding subfloor). Supply and install: 12 new semi-custom cabinets per attached drawing dated 2026-04-15, 60 sq ft Caesarstone Calacatta Nuvo countertop, full subway tile backsplash, GE Café 5-piece appliance package per attached spec sheet.”
Vague scope = endless “that wasn’t included” disputes mid-project.
2. No Fixed Price (Cost-Plus Without Ceiling)
Cost-plus contracts (where homeowner pays actual costs + percentage) are legitimate for highly variable luxury custom work, but every cost-plus contract should have a “guaranteed maximum price” (GMP) ceiling. Without a ceiling, homeowners have unlimited exposure to cost overruns.
3. Deposits Over 15%
Industry standard is 10–15% on signing. Subsequent payments should be tied to milestones (demolition complete, rough-in inspection passed, drywall complete, fixtures installed, final inspection). Anyone asking for 25%, 40%, or 50% upfront is borrowing your money — and once they have it, they have leverage.
4. No Milestone Payment Schedule
Vague: “Payment due upon completion of work.”
Specific: “10% deposit on signing. 20% on demolition complete. 25% on rough-in inspection passed. 25% on drywall complete. 15% on substantial completion. 5% holdback released 45 days after final inspection.”
Milestone payments protect both parties — homeowners pay only for work delivered; contractors get paid as they progress.
5. No Permit Responsibility Clause
Who pulls the building permit? Who pays the application fee? Who is responsible if the permit is denied or delayed? Who deals with inspector deficiencies?
Every renovation contract should answer these in writing. Contractors should pull permits — they have the construction expertise to navigate the process. If a contractor pushes “you pull the permit so it’s cheaper,” they’re avoiding liability for code-compliance and inspection responses.
6. No Cancellation Rights
Ontario Consumer Protection Act requires written contracts for any work over $50 to include cancellation rights — typically 10 days for door-to-door contracts, fewer days for in-store. The contract should state explicitly: “The Homeowner has the right to cancel this contract within 10 calendar days of signing, in writing, with no penalty.”
7. No Completion Date or Liquidated Damages
Vague: “Project to be completed in a timely manner.”
Specific: “Substantial completion target: 2026-08-15. Liquidated damages of $250 per day after target date apply, payable to Homeowner, except for delays caused by permit review, weather, or homeowner-requested changes.”
Without a completion date, “we’ll get to it” can stretch into months.
What Should Be in Every Renovation Contract
- Full legal names of both parties + HST registration numbers.
- Property address and project description.
- Detailed scope of work with attached drawings, finish schedule, and specifications.
- Total fixed price (or cost-plus with guaranteed maximum).
- Payment schedule tied to milestones (NOT calendar dates).
- Start date and completion date with liquidated damages.
- Permit responsibility (who pulls, who pays).
- Change order process — written, signed, before work proceeds.
- Lien holdback (10% per Construction Act).
- Dispute resolution: mediation/arbitration before litigation.
- Cancellation rights per Consumer Protection Act.
- Signatures + dates from both parties + witnesses where required.
10 Questions to Ask Before Signing
- Can I see your current WSIB clearance certificate?
- Can you provide a $2M+ general liability insurance certificate naming me as additional insured?
- Will the contract be fixed-price, with a written guaranteed maximum if cost-plus?
- What is the deposit amount, and what milestones release subsequent payments?
- Who pulls the building permit, and who pays the fees?
- What is the substantial completion target date, and what liquidated damages apply for delays?
- What is the change order process — is verbal acceptance acceptable, or must changes be written and signed?
- What workmanship warranty do you provide, and how long?
- Can I see three completed Toronto projects with homeowner contact references from the last 24 months?
Frequently Asked Questions
Is a written renovation contract required by law in Ontario?
Yes — for any work over $50, the Ontario Consumer Protection Act, 2002 requires a written contract that includes cancellation rights, payment terms, and project description.
What’s a normal deposit for a Toronto renovation?
Industry standard is 10–15% on signing. Subsequent payments should be tied to milestones, not calendar dates. Deposits over 25% upfront are a major red flag.
Can I cancel a renovation contract after signing?
Yes. Ontario Consumer Protection Act provides a 10-day cooling-off period for door-to-door contracts. The contract itself should explicitly state cancellation rights.
What is a holdback in a renovation contract?
The Construction Act requires a 10% holdback on every payment to a contractor. The holdback protects sub-trades and suppliers from non-payment by the general contractor. Released 45 days after substantial completion.
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