Deposits & Draws: How Garden Suite Payment Schedules Work
How you pay for a garden suite matters almost as much as what you pay. Here’s how a fair milestone-based payment schedule works, and the red flags in a bad one.
Why the Payment Schedule Matters as Much as the Price
Two contractors can quote the identical price for the identical suite and still expose you to very different risk, depending entirely on how and when they ask to be paid. A payment schedule that front-loads a large deposit before meaningful work happens puts your money at risk if the relationship goes wrong early. A schedule that ties payments to completed, inspected milestones keeps your exposure roughly matched to the value already delivered at every point in the project. Before you compare a single dollar figure between quotes, it is worth comparing the payment structure attached to it, because the structure is where your financial risk actually lives, far more than the total price on the cover page.
A Fair Milestone Structure: 10/30/30/30
A payment structure we use, and one worth benchmarking any other quote against, breaks into four milestone payments: roughly 10 percent at contract signing to secure design finalization and scheduling, 30 percent once the foundation is complete and inspected, 30 percent once framing and the building envelope are enclosed, and the final 30 percent at substantial completion, after final inspections and your walkthrough. Each payment lines up with a visible, verifiable stage of construction rather than an arbitrary calendar date, so you are never paying significantly ahead of the value actually built into the project at that point. The same four milestones also give you four natural checkpoints to review progress, ask questions, and confirm the schedule is still tracking where it should be.
What Protects You: Holdbacks, Inspections, and Lien Rights
Ontario’s Construction Act requires a statutory holdback, generally 10 percent of the contract value retained for a defined period after substantial completion, specifically to protect owners against unpaid subtrades or suppliers who could otherwise register a lien against your property. A well-structured contract respects this holdback rather than pressuring you to release it early, and it ties every draw to a completed, often municipally inspected, stage of work rather than a contractor’s self-reported progress. These protections exist in law regardless of what your contract says, but a contractor who understands and openly discusses them is telling you something useful about how they run their business, and how seriously they take their own subtrades getting paid on time.
Red Flags in Other Payment Schedules
A few patterns are worth treating as serious warning signs. A deposit above roughly 15 to 20 percent of the total contract before any physical work begins is unusually high and shifts risk heavily toward you. A schedule with payments due on fixed calendar dates rather than completed milestones lets a slow-moving project get ahead of its payment schedule. Vague milestone language, “substantial progress” instead of a defined, inspectable stage, gives a contractor room to request payment before the work actually justifies it. And any request to pay in cash, or to skip a written, milestone-based contract entirely, should end the conversation regardless of how attractive the price looks or how much time pressure you feel to sign quickly.
How Draws Align With Actual Work Completed
The reason milestone-based payment works is that it keeps the money changing hands roughly in step with the value being created. Foundation work is complete and verifiable before that draw is due; framing and enclosure are visibly finished before the next one; the suite is genuinely done, inspected, and walked through before the final payment clears. This alignment protects you from paying for work that stalls partway through, and it protects a legitimate contractor by ensuring cash flow arrives as real costs, materials, labour, and subtrade payments, come due on their end, which is exactly why a well-designed schedule tends to work smoothly and predictably for both sides over the life of the project.
Financing and Draw Schedules: Making Them Work Together
If you’re funding the project through a HELOC or a construction draw mortgage, your lender’s draw process and your contractor’s payment schedule need to be coordinated from the start, since lenders typically release construction financing against inspected milestones of their own, sometimes requiring a separate progress inspection before releasing funds. A contractor experienced with financed projects will structure their payment milestones to align cleanly with typical lender draw triggers, which avoids the awkward situation of owing a contractor payment before your lender has actually released the corresponding funds. Raising this with both your broker and your builder before construction starts saves a lot of mid-project scrambling.
What to Ask Before You Sign
Before signing any garden suite contract, ask for the payment schedule in writing, broken down by milestone rather than by date, along with a clear description of what condition each milestone requires the work to be in before payment is due. Ask how the statutory holdback is handled and confirm it is not being waived or worked around. And ask what happens, contractually, if a milestone is delayed through no fault of yours. A contractor who answers these questions clearly and without hesitation is showing you exactly the kind of transparency that should carry through the rest of the project, from the first draw to the final walkthrough.
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