When a homeowner signs a renovation contract in BC, the payment schedule does more than manage cash flow. Under the BC Construction Act, specific holdback requirements apply to residential construction contracts. Understanding those requirements protects both the homeowner and the contractor when the project closes.
What the BC Construction Act Requires
The BC Construction Act requires that the property owner retain a statutory holdback of 10% from every payment made to a contractor during a project. The holdback is not optional, and it is not a penalty. It exists as a fund available to satisfy any builders liens that arise from unpaid subcontractors or suppliers.
The holdback is kept by the homeowner until the lien period expires. Under the Act, subcontractors, material suppliers, and workers have 45 days from substantial completion to file a builders lien against the property. After the 45-day window closes with no liens registered, the holdback can be released to the contractor.
If a lien is filed during that window, the holdback cannot be released until the lien is resolved or formally discharged.
Typical Milestone Payment Structure
Most renovation contractors in Metro Vancouver use a draw schedule tied to observable construction milestones. The exact structure varies by scope, but a standard residential renovation follows this pattern:
Deposit (15 to 25%): Paid at contract signing to cover initial material procurement and project mobilization. A deposit above 10% of the contract value creates some risk for the homeowner if the contractor defaults before work begins. Larger deposits are reasonable for projects with high upfront material costs (custom cabinetry, stone, specialty tile), provided the contract specifies what happens to the deposit if the project does not proceed.
Rough-in draw (20 to 25%): Due when framing, rough plumbing, and rough electrical are complete and the rough-in inspection has passed. The building inspector's sign-off gives the homeowner an objective checkpoint: work cannot close in without passing inspection, which means the milestone has an external verifier.
Mid-project draw (20 to 30%): Due at a defined mid-project milestone: drywall closed, tile set, or cabinetry installed. The trigger should be specific enough in the contract to avoid a dispute about whether the milestone was reached.
Completion draw (10 to 20% minus the holdback): Due when the project is substantially complete. This draw covers the remaining balance above the 10% holdback. "Substantially complete" for a kitchen renovation typically means the space is functional: cabinets installed, appliances connected, tile grouted, even if minor touch-up items remain.
Holdback release (10%): Released after the 45-day lien period expires with no liens registered.
The Lien Window and Holdback Release
Substantial completion triggers the 45-day lien window. Subcontractors who have not been paid have until the end of that period to file a lien. Material suppliers have 45 days from the date they last delivered materials.
The holdback release at day 46 (assuming no liens) is the final payment in a properly structured renovation contract. Some contracts refer to the holdback as part of the "final payment due on completion." That language is imprecise. A homeowner who pays the holdback immediately on completion is releasing it before the lien period has run, which eliminates the protection the holdback provides.
The correct language: "10% holdback retained from each draw, released 45 days after certificate of substantial completion, subject to no liens registered on title."
What a Contract Should State Explicitly
Renovation contracts that leave out holdback terms create disputes at project close. A well-structured contract specifies:
The draw schedule by milestone with dollar amounts and the 10% holdback calculation applied to each draw. The definition of substantial completion for the specific scope. The trigger date for the lien period. What happens to the holdback if a lien is filed during the window. Whether permit closure is required before the holdback release.
Contracts that say "final payment within 30 days of completion" without addressing holdback create ambiguity that only resolves badly. Is the holdback included in the final draw? Does the 30-day period start from completion or from lien expiry? These questions should be answered before work begins.
Protecting Yourself as a Homeowner
The 10% holdback is your primary protection. It covers you when a general contractor receives payment and does not pay a subcontractor or supplier. If a tile supplier files a lien for $8,000 of unpaid materials on a project where you have already paid the contractor in full, the holdback fund is what stands between you and a lien on your property.
Beyond the holdback, homeowners can further protect themselves:
Request a subcontractor and supplier list before construction begins. Knowing who is working on the project makes it easier to verify lien risk at project close.
Ask for statutory declarations at each draw. A statutory declaration is a legal document signed by the contractor confirming all subcontractors and suppliers have been paid to that point in the project. Not every contractor offers these routinely. Requesting one before each draw is reasonable on projects above $100,000.
Check title before releasing the holdback. A title search through the Land Title Office (or a lawyer) confirms no liens have been registered before you release the final 10%. The cost is $10 to $20 and takes an hour.
Wait for the permit to close. A closed permit with a final inspection passed is confirmation the work is complete to code. Do not release the holdback before the permit is closed on any project that required one.
How Line-Item Quotes Enable Clean Draw Schedules
A draw schedule only works when the trigger milestones are observable and objective. "20% at rough-in" means nothing if rough-in is not defined in the contract.
A line-item quote by trade makes this precise. When the quote separates plumbing rough-in from electrical rough-in as distinct priced line items, the draw milestone can be tied to a specific inspectable scope. The homeowner knows what to expect at each milestone before the project starts.
Every RenoPro estimate is line-item by trade. The draw schedule in each project contract is built directly from the estimate: draw milestones correspond to trade completion events that both parties can observe. The trigger for each draw is objective. The holdback calculation is stated explicitly in the contract from day one, not worked out at project close.
If your renovation scope warrants a draw structure discussion before the site visit, that is part of the initial conversation.
Get a line-item quote and see what a transparent payment schedule looks like in practice. Current renovation cost ranges are at the pricing guide. For renovation financing, see how to finance a home renovation in Vancouver.