Custom Home Building Contract Ontario: 17 Clauses to Read Before You Sign (So You Don’t Pay for Surprises)
custom home building contract Ontario
If you’re about to sign a custom home contract in Ontario, you’re not just buying a house—you’re buying a process. A good contract makes that process boring (in the best way). A vague contract makes it exciting… like a surprise bill in your mailbox. Below is the straight-talk checklist I’d want any homeowner to read before they sign.
What this article will help you avoid
- “That’s not included” surprises (the classic)
- Allowances that look fine… until you shop
- Change orders you didn’t know were coming
- Timeline drift and “we’re waiting on trades” limbo
- Payment schedules that don’t match reality
Quick truth (builder version)
- Clarity beats “trust me” every time
- Scope is everything
- Selections drive cost and timeline
- Paper protects both sides
Start here: what type of contract are you actually signing?
Most homeowner pain comes from one simple problem: nobody clearly states whether the contract is fixed price, cost-plus, or a hybrid. The words might be in there… but the rules around allowances, markups, and changes are what matter.
| Contract Type | What it means in plain English | Best for | Watch-outs |
|---|---|---|---|
| Fixed Price | Price is set based on drawings + specs + defined inclusions/exclusions. | People who want cost certainty and have plans mostly finalized. | Vague specs create “extra” charges later. If drawings are thin, the “fixed” part gets slippery. |
| Cost-Plus | You pay actual costs + a fee/markup for management/overhead/profit. | Complex customs, uncertain site conditions, or when you want maximum transparency. | You need clear rules on what counts as cost, how often you see statements, and what the fee applies to. |
| Fixed Price + Allowances | Base is fixed, but certain items are “budget placeholders.” | Most custom homes in Ontario (common and workable). | Low allowances are the #1 reason budgets “mysteriously” jump. |
The 17 clauses that matter most (and the questions to ask)
Here’s the homeowner-friendly checklist. You don’t need to become a lawyer. You just need to make sure the contract answers these questions in black and white.
- Inclusions/Exclusions list: What’s explicitly included? What’s explicitly excluded?
- Specs / finishes: Are products named (model/series), or just “nice quality”?
- Drawings referenced: Are the signed plans and revisions attached and dated?
- Sitework boundaries: Who does clearing, excavation, driveway, landscaping, final grading?
- Allowances: What items are allowances (kitchen, flooring, lighting, plumbing fixtures)?
- Markup rules: Does markup apply to materials only, labour only, or everything?
- Change orders: Must they be written and priced before work proceeds?
- Contingency: Is there a contingency line for unknowns (especially rural lots)?
- Start/finish definitions: Is “start” excavation, permit issuance, or contract signing?
- Selections deadlines: When must you choose cabinets, tile, fixtures, etc.?
- Delays: What happens with weather, trade availability, supply chain?
- Occupancy vs completion: Are there defined milestones and inspection signoffs?
- Warranty: What’s builder warranty vs statutory warranty for new homes?
- Inspections: Can you hire your own third-party inspections during the build?
- Documentation: Do you get manuals, photos, as-builts, and permit closeout docs?
- Dispute path: What happens if you disagree—mediation, arbitration, court?
If you want an easy way to spot trouble: read the contract like a stranger wrote it. If you have to assume what it means, you’re about to pay tuition at the School of Real Life.
Allowances: the sneaky budget trap (and how to defuse it)
Allowances aren’t evil. They’re practical when you haven’t picked every finish yet. The problem is when allowances are unrealistically low, or when the contract doesn’t explain how overages are handled.
Ask these questions:
- What exactly is included in the allowance number (supply only, or supply + install)?
- What happens if my selection costs more—do I pay the difference plus markup?
- Are taxes included in allowances?
- Do you have “typical” allowance ranges for homes like mine?
Want a companion read for this topic? Here’s a practical breakdown of what’s typically included vs excluded in an estimate (and why homeowners get surprised): https://buildersontario.com/how-much-does-it-cost-to-build/
Holdbacks, liens, and why 10% isn’t the builder being “difficult”
In Ontario construction, holdbacks are a real thing, and they exist to protect the project from unpaid subcontractors. The contract should explain how holdback is handled on progress payments and when it’s released.
Also: if you’re building a contract home (builder builds on your land), make sure you understand the warranty and licensing pieces. A reputable builder should be licensed and the home should be enrolled appropriately—because “I didn’t know” is not a fun sentence after you move in.
- Holdback percentage and where it applies (labour/materials).
- Release timing tied to substantial completion and lien period expiry.
- What happens if a lien is registered (how funds are held/discharged).
- Confirm the builder’s licensing status in Ontario (don’t guess).
- Understand warranty coverage basics for new homes.
- Keep a clean paper trail for payments and change orders.
Authority links worth bookmarking: HCRA – Do I need a licence to build or sell in Ontario? | Tarion – What is the new home warranty?
Payment schedules: align them with real milestones (not vibes)
A strong contract ties payments to clear milestones: excavation complete, foundation complete, framing complete, windows/doors installed, rough-ins complete, drywall, finishes, substantial completion, final. What you want to avoid is a schedule that pays too much too early, or a schedule that doesn’t match the way trades actually book time in Ontario.
Good contract language should answer:
- Are draws triggered by completed work or by dates on a calendar?
- Is there a holdback applied to progress draws?
- Who pays for lender inspections/appraisals if you’re financing?
- What happens if you disagree that a milestone is complete?
Related reading (owner-builder reality check): https://buildersontario.com/owner-builder-vs-hiring-a-builder-ontario/
Timeline clauses: Ontario weather and trades don’t care about your Pinterest board
A contract timeline should be realistic about Ontario conditions: frost, snow, spring thaw, road bans in some areas, and trade scheduling (especially HVAC, electrical, and drywall). The contract should clearly define what happens with delays and what you need to provide (selections, approvals, access) to keep the job moving.
- A baseline schedule (even a simple one) with major milestones.
- Selection deadlines (cabinet drawings, tile, fixtures, flooring, paint).
- Clear language for weather delays and supply delays.
- Fast decisions and signed approvals.
- Prompt change order sign-off (or you’ll slow the job).
- Having plan revisions organized (one “current set” only).
Permit timing matters more than most people think: https://buildersontario.com/how-long-does-it-take-to-get-a-building-permit-in-ontario/
Self-qualify before you sign: are you actually “ready” for a custom build?
This is the part most people skip, and it’s where stress is born. A custom build goes smoothly when three things are ready: budget, lot, and design.
- You have a realistic range (not just a wish).
- You understand allowances and what “mid-range finishes” really cost.
- You’ve planned for contingency and upgrades you’ll want later.
Start here: Custom Home Building Calculator
- Access for concrete trucks and trades.
- Septic/well considerations (rural builds).
- Grade, drainage, and soil conditions aren’t “unknowns.”
- Plans are buildable (not just pretty).
- Structural/mechanical thinking is integrated early.
- Window sizes and openings make sense (engineering matters).
If you want a second set of eyes: Send plans for review
- You can make decisions quickly (or assign someone who can).
- You understand that change orders are normal—but must be controlled.
- You and your builder agree on communication cadence (weekly is common).
Want a ballpark first? Ballpark estimate request
“Nice extras” that should be standard in a good builder contract
These aren’t fancy. They’re just the stuff that prevents confusion later. If your contract includes these, you’re usually dealing with a professional operation.
- One “contract set” of drawings attached, dated, and signed by both parties.
- Written change order policy (price + time impact).
- Clear allowance schedule (with realistic numbers).
- Communication rhythm (weekly updates + a decision list).
- Closeout package (warranties, manuals, inspection signoffs).
Where ICF fits into the contract conversation (even if you’re not building ICF)
Even if you’re still deciding on building systems, your contract should spell out the wall system and performance expectations. With higher-performance homes, details matter (air sealing targets, insulation specs, window performance, HRV strategy, etc.).
If ICF is on your radar, these are solid explainers to help you ask better questions during contract negotiation: Is ICF worth it? and Permits for ICF construction.
Next step: how to review a contract without turning it into a 3-month saga
Here’s the efficient path:
- Read the inclusions/exclusions first. If it’s vague, fix that before anything else.
- Confirm contract type (fixed, cost-plus, hybrid) and how allowances/markups work.
- Walk the payment schedule against milestones and holdback wording.
- Run a “change order test”: “If we change windows, what happens?” The contract should answer instantly.
- Get professional eyes where needed (legal review, designer, or an experienced builder/PM).
If you want more context on costs and what drives them in Ontario: https://buildersontario.com/how-much-does-it-cost-to-build/
And if you’re comparing systems and want the “why” behind high-performance wall choices: Benefits of ICF over traditional homes and Building with insulated concrete forms.