Construction Contract Red Flags in Ontario

Why it matters: The trade name on the truck may not be the legal corporation responsible for the work, insurance, warranty and money.

What to require: Legal name, business name, address, HST number, corporate number where applicable, signing authority and the same entity on invoices and insurance.

Why it matters: Ontario builders and vendors of new homes, including contract/custom homes on land owned by the homeowner, generally require HCRA licensing.

What to require: Current Ontario Builder Directory profile, correct licence category, Tarion enrolment and the applicable Warranty Information Sheet.

Why it matters: “Plans supplied by owner” does not establish which drawings were priced or which revision controls.

What to require: A contract-document schedule listing drawings, specifications, quotation, inclusions, exclusions, allowances and engineering by date and revision.

Why it matters: Those phrases do not identify product, quantity, quality, performance or responsibility.

What to require: Brand/model or performance specification, quantity, installation standard, finish level and who supplies each item.

Why it matters: Permits, design, rock, dewatering, utility fees, septic, driveway, grading and landscaping can move the budget dramatically.

What to require: A signed exclusions and assumptions schedule with owner responsibility and a reasonable planning amount where possible.

Why it matters: A $30,000 flooring allowance means little without square footage, material-only versus installed treatment, delivery, waste, HST and markup.

What to require: Allowance type, quantity, supplier basis, inclusions, overage formula, credit formula, markup and selection deadline.

Why it matters: “Rock, water and unsuitable soil extra” gives no included quantity, rate, evidence or approval process.

What to require: Assumed conditions, investigation records, included quantity, unit rates, documentation and advance notice.

Why it matters: A fixed price may legitimately change for defined events, but not through an unlimited right to raise the price whenever costs increase.

What to require: Specific adjustment events, evidence, notice deadline, calculation, cap or owner cancellation option where negotiated.

Why it matters: Ontario has no universal statutory maximum deposit for every construction contract. A large unsecured deposit can be difficult to recover if the contractor fails.

What to require: Purpose, due date, refundability, ownership of ordered materials, deposit protection where applicable and the correct payee.

Why it matters: Paying for work not yet supplied increases insolvency exposure and may not match the lender’s progress advance.

What to require: Objective milestones, supporting invoices, inspection rights, proper-invoice process, holdback and enough time for lender funding.

Why it matters: Ontario’s Construction Act requires 10% basic holdback where a lien may arise and now includes mandatory annual-release procedures.

What to require: Each invoice states whether amounts are before or after holdback, who publishes required notices and how deficiency rights remain separate.

Why it matters: The parties later fight about authorization, scope, markup, credits and delay.

What to require: Written description, price or pricing method, markup, credit, schedule effect and signatures before work whenever practical, plus an emergency procedure.

Why it matters: Ontario does not impose a universal 20% or 25% change-order markup. The agreement controls.

What to require: Percentage or fixed fee, what it applies to, whether credits reverse markup and whether HST is added before or after.

Why it matters: “Equal or better” can hide lower performance, appearance, warranty or resale value.

What to require: Objective equivalency criteria, written notice, supporting data, owner approval for visible or performance-critical items and credit rules.

Why it matters: “Approximately 12 months” gives no starting condition, baseline schedule, extension event or reporting duty.

What to require: Commencement conditions, target dates, excluded days, notice, mitigation and documented schedule extensions.

Why it matters: Those milestones can trigger different payment, lien, lender, municipal and warranty consequences.

What to require: Separate definitions and payment conditions for occupancy, substantial performance, final completion, deficiencies and Tarion possession where applicable.

Why it matters: A one-day disputed payment should not automatically allow abandonment while serious builder default has no owner remedy.

What to require: Material-default definition, written notice, reasonable cure periods, emergency rights, accounting, site turnover, document delivery and takeover rights.

Why it matters: Clauses may attempt to waive Construction Act remedies, limit all warranties, require distant proceedings or make the homeowner pay every legal cost regardless of outcome.

What to require: Lawyer review of waiver, indemnity, limitation, personal guarantee, arbitration, adjudication, lien, trust, consumer and warranty clauses.