The best protection for a renovation deposit in Canada is structural: keep the deposit small (10 to 15 percent), tie every subsequent payment to completed work you can see, and put the schedule in a written contract. Verify the contractor's licence (RBQ in Quebec, licensing bodies in other provinces), insurance, and references before any money moves. If a contractor demands 40 percent or more upfront, that is the single strongest warning sign in the industry.
Why deposits go wrong
The renovation deposit scam is consistent across provinces: a contractor collects deposits from several homeowners, starts none of the jobs or abandons them early, and disappears or declares bankruptcy. Recovery through courts is slow and usually partial. Prevention is worth far more than any remedy.
The checklist before you pay anything
- Licence: verify it directly with the provincial regulator, not from a photocopy
- Insurance: ask for proof of liability coverage and confirm it is current
- References: call two past clients, and ask specifically about the end of the project, not the start
- Contract: scope, schedule, payment structure, and what happens on delay, in writing
- Deposit size: 10 to 15 percent is normal; resist anything above 25 percent unless custom materials justify it
Payment structures that protect you
Progress payments are the homeowner's main tool: pay in stages, after each stage is done and you have looked at it. Never let the money get ahead of the work. Holdbacks help too: Canadian construction law lets you retain a percentage (typically 10 percent) until the lien period expires.
The emerging option is escrow-style milestone payment: your full payment sits in a regulated neutral account from day one, the contractor can see it is funded, and each completed stage releases its payment automatically. You cannot lose the deposit to a contractor who disappears, because they never hold your money before the work is done. The contractor cannot get stiffed after delivery either, which is why serious contractors accept the structure willingly. Both sides trade leverage for certainty.