Renovation Deposits: What's Reasonable
and What's a Red Flag

Every week we get a call that goes the same way. The homeowner is mid-project with another contractor. Things have stalled. They paid 40 percent up front. The contractor stopped showing up. Sometimes it is a slow death (one day a week, then one day a month). Sometimes the contractor disappeared completely.

The story almost always traces back to the deposit. A reasonable deposit cannot fund a runaway. An unreasonable deposit can.

Here is what 20 years of running renovations in Ottawa has taught us about deposits, draw schedules, and holdback. None of this is legal advice. It is the industry standard, plain.

What is a deposit actually for

A deposit is for materials and scheduling. Specifically, it should cover:

• The first material orders that have lead times (cabinets, custom windows, structural steel, special-order tile)
• Slot reservation in the contractor's schedule (you are buying their next 8 to 16 weeks)
• Permit fees if the contractor is fronting them
• Initial site setup costs (dumpster, dust protection, temporary power, site security)

It is not for the contractor's working capital. It is not for paying off their last project. It is not for the contractor's truck payment or their down payment on a new shop.

Once you know what a deposit is for, the reasonable amount becomes obvious.

The reasonable range: 10 to 15 percent

For a typical residential renovation, a deposit of 10 to 15 percent of the contract value covers the legitimate up-front costs. On most projects that percentage is enough to:

• Place cabinet orders (cabinet shops typically take 50 percent at order, balance at delivery)
• Lock in the contractor's schedule
• Pay the City of Ottawa permit fee and BCIN drawing costs
• Get site protection and dumpster on site

For larger projects, the deposit percentage often drops to 8 to 10 percent because the absolute dollar amount is already meaningful at that scale.

For very small projects (a modest bathroom refresh), a deposit can sit closer to 20 percent because the absolute dollars matter less and the slot reservation is harder to value precisely.

If a contractor wants 25 percent or more before any work starts, they are using your money to fund their business. Walk away.

What 25 percent or more means

A 25 to 50 percent deposit is the single biggest red flag in residential renovation. The math does not work for any legitimate reason:

• Cabinet shops take 50 percent of the cabinet line, which is typically 15 to 20 percent of the total project. So 50 percent of cabinets equals 7 to 10 percent of total project. That fits inside a 15 percent deposit
• Permits in Ottawa are a small fraction of even a substantial project. That is 1 percent or less
• Site setup is another 2 to 3 percent
• Schedule reservation has zero out-of-pocket cost. It is opportunity cost, not cash cost

Add it all up and a real contractor is out-of-pocket 12 to 18 percent at the start of the project. That is what a deposit covers. Anything beyond that is them holding your money for their own purposes.

What goes wrong with high deposits:

• Contractor uses your money to finish the previous client's project (which they took a deposit on for their previous client's project, etc.)
• Contractor takes deposits on 4 to 6 simultaneous projects, books them all 6 months out, then can only deliver on 2 of them
• Contractor goes under (bankruptcy, illness, divorce) and your deposit is gone with no recourse to recover it
• Contractor decides the job costs more than they bid and uses your deposit to buy time while they renegotiate

The draw schedule is where the real protection lives

After the deposit, the rest of the contract should be paid in milestones tied to verifiable completion. A typical kitchen draw schedule, expressed as a percentage of contract value (assuming a 12 percent deposit):

• Deposit at contract signing: 12 percent
• Draw 1 - rough complete (framing, plumbing, electrical roughed and inspected): 25 percent
• Draw 2 - drywall and tile complete: 20 percent
• Draw 3 - cabinets installed: 20 percent
• Draw 4 - finish trades complete (counter, plumbing finish, electrical finish, paint): 15 percent
• Final payment - on substantial completion and after deficiency list resolved: 8 percent

Every draw should be tied to a verifiable, photographable, inspector-checkable milestone. Not "we are halfway through" or "we are running into your week." Specific items, complete, ready for the next trade.

Cash, cheque, e-transfer, credit card

How you pay matters almost as much as how much.

Cash payments to a contractor: never. Not for any amount, not for any reason. There is no paper trail, no proof of payment, no recourse if something goes wrong. Any contractor asking for cash is either evading taxes or planning to vanish. Both are problems for you.

E-transfer or cheque to the company name (not personal name): yes. Always.

Credit card: rarely available for the full project but reasonable for the deposit if the contractor accepts it. Credit card adds chargeback rights as a backstop.

Wire transfers, crypto, prepaid cards: red flags. Walk away.

The contract clauses that matter most

Beyond the deposit and draw structure, four contract clauses give you real protection:

1. Substantial completion definition: the contract should specify what "substantially complete" means in measurable terms. Without a definition, the contractor decides when they are done
2. Deficiency list and resolution timeline: at substantial completion you walk through with the contractor and document everything that is not right. The contract should specify how long they have to fix it (typically 14 to 30 days). If they miss that window the holdback is released minus the cost of completing the deficiencies
3. Change order process: nothing gets paid that is not in the contract or in a signed change order. Verbal change orders are not change orders
4. Warranty period: minimum 1 year on labour and workmanship, plus manufacturer warranties on materials passed through to you

What an honest contractor will say about deposits

If you ask a contractor "why this deposit amount" and they cannot give you a clear answer, that is a signal. An honest contractor will say something like:

"The 12 percent deposit covers the cabinet order, the permit, site setup, and the first week of crew time. After that we are billing against work completed at every milestone."

If the answer is "well, that's just how we do it" or "it's standard" or anything vague, ask again. If the second answer is also vague, that is your answer about the contractor.

What we do at Dream Touch

For full transparency: our typical deposit is 10 to 15 percent depending on project size and material lead times. Larger projects with significant cabinet or custom window orders sit at 15 percent because the supplier deposits are larger. Smaller projects sit at 10 percent.

Our draw schedule mirrors the example above: deposit, rough-in, drywall and tile, cabinets, finish trades, holdback. The final 8 to 10 percent is held until your deficiency list is resolved and you sign off.

This is not generosity. It is the industry standard for any contractor running a real business with adequate working capital.

If you have been quoted a project elsewhere and the deposit looks high, call us at 613-862-4555. We will give you a second-opinion quote at no cost and walk you through what a reasonable structure looks like for your specific project.