Milestone payments split a construction or renovation contract into stages, with a payment tied to the completion of each one. A typical Canadian renovation schedule looks like: 10 to 25 percent deposit at signing, 25 percent at rough-in, 25 percent at drywall or finishing, and the balance at substantial completion. The contractor is never working too far ahead of the money, and the client never pays too far ahead of the work.
Why both sides benefit
For the contractor, milestones cap the exposure. If the client stops paying at stage three, you stop working, and you have only lost the labour since the last payment rather than the whole job.
For the client, milestones cap the risk of paying for work that never happens. A large upfront payment to a contractor who disappears is the single most common renovation horror story in Canada.
Where milestone schedules still fail
The schedule is only as good as its enforcement. Three failure modes come up constantly:
- The client delays the final payment after the last milestone, because the work is done and the leverage is gone
- The parties disagree on whether a milestone is actually complete, and the contract has no defined resolution process
- The client runs out of money mid-project, and the contractor finds out at invoice time instead of before starting the stage
The stronger version: funded milestones
The fix for all three failure modes is the same: the money is committed before the stage begins. In a funded milestone structure, the client deposits the contract amount into a neutral account at the start. As each milestone is approved, that stage's payment releases automatically. A defined dispute window (for example five business days to raise a specific objection) replaces the open-ended "reviewing the invoice" delay.
Banks have offered this to large commercial projects for decades through letters of credit and construction holdbacks. It has simply never been accessible to a contractor doing a $30,000 kitchen.