The ten per cent holdback is not optional
Under Ontario's Construction Act the basic statutory holdback is ten per cent of the price of the services or materials as they are actually supplied. It sits in subsection 22(1) of the Act, it applies to a homeowner as an owner of an improvement, and it is the mechanism that protects you from a subcontractor's lien when the general contractor has been paid and the subcontractor has not.
Practically, it means every progress payment should be ninety per cent of the amount certified, with the other ten per cent held. Ask for the payment schedule to show the holdback as a separate line so there is no argument about whether it was deducted.
The rules on releasing it changed. As of 1 January 2026, amendments brought in by Bill 216 make annual payment of accrued holdback mandatory rather than discretionary, with the owner publishing a Notice of Annual Release of Holdback and paying within a defined window, described in practitioner guidance as no earlier than sixty and no later than seventy-four days after publication, and contractors then paying subcontractors within fourteen days of receiving it. This is a summary from legal commentary rather than from the statute text, so confirm the mechanics with a lawyer before relying on the exact days on a large project.
HST at thirteen per cent, and the rebate that does not apply
Renovation labour and materials in Ontario carry HST at thirteen per cent, and there is no general renovation rebate for a homeowner. That thirteen per cent is real money on a $70,000 basement and it should be in the budget from the first conversation rather than appearing on the final invoice.
The GST/HST new housing rebate reaches only a substantial renovation, which the Canada Revenue Agency defines by a ninety per cent test: generally, ninety per cent or more of the interior of an existing house has to be removed or replaced. Only livable areas count, so a finished basement and attic are in and a garage and crawl space are out.
The CRA is explicit that renovating a basement, or adding a garage or a deck, by itself does not meet the definition. A major addition can qualify where it is combined with substantial renovation such that the result looks like a newly built house, and converting non-residential property to residential use can qualify too. If a contractor offers to do the job without charging tax, understand what you are giving up: no invoice, no warranty you can enforce, and no paper trail at exactly the point you would need one.
Where Tarion stops
The Tarion new home warranty covers newly built homes in Ontario, freehold, contract and condominium, built by a builder licensed by the Home Construction Regulatory Authority, with coverage in one year, two year and seven year periods and maximum limits that depend on when the agreement of purchase and sale was signed.
It does not cover a renovation of an existing home. Tarion's own list of exclusions names defects in materials, design and work supplied by the homeowner, and alterations, deletions or additions made by the homeowner. A basement finish, a kitchen, a bathroom or an addition on a house you already own falls outside it.
That leaves three real protections on a renovation: the permit and its inspections, a written warranty from the contractor, and the statutory holdback. Get the warranty in writing, with a term, a scope and a named party, and ask whether it is transferable if you sell. A verbal assurance on a doorstep is not a warranty.
WSIB, and who is covered on your property
Since January 2013 WSIB coverage has been compulsory in construction for independent operators, sole proprietors, partners in a partnership and executive officers of a corporation, with limited exemptions. If somebody is injured in your basement, that coverage is what stands between you and a claim.
There is a home renovation exemption, and it is narrower than people assume. It applies where the work is on an existing private residence occupied by the person who directly retains the contractor, or by a member of that person's family, and where the contractor gives estimates and invoices in their own name and is paid directly by that occupant.
Critically, WSIB's own policy states that the exemption does not extend to subcontractors hired by the main contractor, because they lack the direct relationship with the homeowner. So a general contractor may be exempt while the crews they bring are not. Ask for a WSIB clearance certificate for the general contractor and confirm how the subcontractors are covered.
A short checklist before you sign
A written fixed-price or clearly structured contract, with a scope, a schedule, an allowance list and a payment schedule that shows the ten per cent holdback as its own line. Thirteen per cent HST stated separately. Permit responsibility named: who applies, who pays, who arranges inspections.
Proof rather than assurances: a WSIB clearance certificate, a certificate of liability insurance with limits, the certificate of qualification for the electrician and the plumber, the BCIN or PEO or OAA credential of whoever signs the drawings, and the engineer of record for any structural element.
A written warranty with a term and a scope, and a change-order process that requires your signature and a price before extra work happens. Almost every renovation dispute in this city comes down to a change that nobody priced and nobody wrote down.