---
title: "Fixed price vs cost-plus contracts for Ontario renovations"
url: "https://www.jarviscontracting.ca/guides/fixed-price-vs-cost-plus"
description: "Fixed price or cost-plus for an Ontario renovation or addition: how each prices risk, the 10% estimate rule, deposits, holdbacks and what to put in writing."
publisher: "Jarvis Contracting"
dateModified: "2026-10-13"
---
# Fixed price vs cost-plus contracts for Ontario renovations

By Jarvis Contracting. Published 2026-10-05, updated 2026-10-13.

A fixed-price contract sets the total before work starts, so the contractor carries the risk of costs running over and builds that risk into the price. A cost-plus contract pays the actual cost plus a fee, so you carry the risk and see every invoice. As of October 2026, if your contract rests on an estimate, Ontario caps the final price at 10% over it unless you agree to new work or a new price ([Ontario, your rights when starting home renovations](https://www.ontario.ca/page/your-rights-when-starting-home-renovations-or-repairs)). Jarvis Contracting works fixed price, and the last section says how.

## Key takeaways

- Ontario says the final price "cannot be more than 10% over the original estimate" unless you've agreed to new work or a new price, as of October 2026 ([Ontario's renovation rights page](https://www.ontario.ca/page/your-rights-when-starting-home-renovations-or-repairs)).
- Ontario recommends a deposit of no more than 10%, which caps it at $18,000 on a $180,000 rear addition, the low end of our 2026 range (calculated; [Ontario's renovation rights page](https://www.ontario.ca/page/your-rights-when-starting-home-renovations-or-repairs)).
- Under either contract you must hold back 10% of the value of work supplied until liens expire, and you can pay up to 90% without risk unless you get written notice of a lien ([Construction Act ss. 22(1) and 24(1)](https://www.ontario.ca/laws/statute/90c30)).
- A contractor's lien expires 60 days after the earlier of publication of substantial performance or the contract being completed, abandoned or terminated ([Construction Act s. 31(2)](https://www.ontario.ca/laws/statute/90c30)).
- Jarvis Contracting works fixed price: the whole project is priced and the contract signed, with a 10% deposit, before design begins, and any change to the price goes through a change order you sign.

## How does a fixed-price contract price risk?

A fixed price moves the risk of overruns to the contractor, and the contractor charges for carrying it. If framing takes longer than planned or lumber costs more than expected, that's the builder's problem, as long as the work is inside the agreed scope.

So the price includes a cushion you can't see. On a RedFlagDeals thread about choosing a builder, one reply warned that fixed prices carry a hefty contingency for exactly this reason (paraphrased; [RedFlagDeals, 2018](https://forums.redflagdeals.com/choosing-builder-custom-home-2206163/)). That isn't a scam. It's the price of certainty, and on a well-drawn job it's often worth paying.

A fixed price is only as firm as the scope behind it. It needs a defined scope: drawings or a detailed written list of what's included, the finish level and the allowances. Read the exclusions and the allowances: an allowance is a placeholder sum for something not yet chosen, like tile or a vanity, and if you pick something dearer, you pay the difference. Unknown conditions are the other gap. Rot under a floor, an old wiring run or a foundation that isn't what the drawings assumed are often carved out of the fixed price and charged as extras.

## How does a cost-plus contract work?

Cost-plus means you pay what the job actually costs, labour, materials and sub-trades, plus a fee to the contractor. The fee is either a percentage of cost or a fixed sum agreed up front.

The appeal is openness: you see the invoices, nothing is padded for risk, and you pay only for what happens. The worry is incentive, and the same RedFlagDeals thread raised it: under cost-plus, the builder has no built-in reason to chase cheaper bids (paraphrased; [RedFlagDeals, 2018](https://forums.redflagdeals.com/choosing-builder-custom-home-2206163/)). A percentage fee makes that worse, since the fee grows with the cost. A fixed fee, or a cost-plus contract with an agreed upper limit, fixes most of it.

Cost-plus also needs more of you. You have to read invoices, ask about variances and make decisions quickly, because time is cost.

Here's how the two compare on the points that matter for an addition or renovation:

| Point | Fixed price | Cost-plus |
|---|---|---|
| Who carries overruns inside the scope | The contractor | You |
| Contingency | Built into the price, hidden from you | Your money, held by you until it's spent |
| When you know the number | At signing, for the defined scope | At the end; you get estimates along the way |
| What you see | The price and the payment schedule | Every invoice, plus the fee |
| Changes | Priced one at a time as change orders | Added to the running cost, plus the fee |
| Needs before signing | A defined scope, drawn or written, with allowances | A trusted builder and a budget estimate |
| Main risk to you | Extras for exclusions, allowances and unknowns | Costs drifting with no ceiling |

Note: This table compares the two structures in general; a real contract can mix them, for example a fixed price with cost-plus pricing for unknown conditions.

## How much contingency should you carry?

There's no universal percentage for a renovation contingency, so we won't print one.

What drives the right number is how much you don't know. An older house with walls still closed, drawings still changing and finishes not yet picked needs more. A fully drawn addition on a newer house needs less. Under a fixed price, the contractor's contingency sits inside the price, but you still want your own reserve for changes you decide to make. Under cost-plus, the whole contingency is yours.

## Can a contractor charge more than the estimate in Ontario?

Not by more than 10%, unless you agree to new work or a new price, as of October 2026 ([Ontario's renovation rights page](https://www.ontario.ca/page/your-rights-when-starting-home-renovations-or-repairs)). The same page says new work should come as a change you "approve and sign", including a new estimate.

That makes the change order the most important page in either contract. Every change should be written down, priced and signed before the work happens, with its effect on the schedule. A verbal "go ahead" on site is how budgets slip, under either model. Any renovation contract over $50 has to be in writing in the first place.

## How much deposit should you pay, and how should payments run?

Ontario recommends a deposit of no more than 10% and warns against large down payments "to pay for materials" ([Ontario's renovation rights page](https://www.ontario.ca/page/your-rights-when-starting-home-renovations-or-repairs)). The risk is real: in July 2026, the Toronto news channel CP24 reported a Brampton owner who paid $33,000, about 90% of the contract, for a basement apartment left unfinished ([CP24, 9 July 2026](https://www.cp24.com/news/canada/2026/07/09/he-just-disappeared-this-contractor-has-a-long-list-of-angry-clients/)).

After the deposit, tie payments to stages you can see: foundation in, framing done, roof on, rough-ins inspected, drywall up. Section 22(1) of the [Construction Act](https://www.ontario.ca/laws/statute/90c30) requires you to retain 10% of the value of services and materials as they're supplied, and section 22(3) applies it whether you pay in instalments or at the end. On a $180,000 contract, that's $18,000 held until the 60-day lien period under section 31(2) has passed (calculated). Section 23 limits your personal liability to lien claimants to the holdback you were required to keep, which is why skipping it is a bad idea.

Since 1 January 2026, section 26 also requires an owner whose contract runs past its anniversary to publish a notice within 14 days of that date. The owner then releases the accrued holdback 60 to 74 days after the notice, unless a lien has been preserved. Our [Greenwood](https://www.jarviscontracting.ca/projects/greenwood) job, a rear extension plus a new top storey, took 10 months including design, permits and construction, so many addition contracts end before their first anniversary, but a long whole-home job may not.

Here's what the contract should say, under either pricing model:

| Clause | What it should say | Where it comes from |
|---|---|---|
| Contractor details | Name, address and contact information | [Ontario's renovation rights page](https://www.ontario.ca/page/your-rights-when-starting-home-renovations-or-repairs) |
| Scope | A thorough description of the work and materials, tied to the drawings | Ontario's renovation rights page |
| Price | A fixed sum, or the cost-plus fee and how costs will be shown to you | Good practice |
| Allowances and exclusions | Each allowance amount, and what happens with unknown conditions | Good practice |
| Changes | Written, priced and signed before the work, with the schedule effect | Ontario's renovation rights page |
| Deposit and payments | Deposit of no more than 10%, then stage payments | Ontario's renovation rights page |
| Holdback | 10% retained until liens expire | [Construction Act s. 22(1)](https://www.ontario.ca/laws/statute/90c30) |
| Dates | Start and completion dates | Ontario's renovation rights page |
| Warranties | What's covered and for how long | Ontario's renovation rights page |
| Sub-trades and cleanup | Which trades are subcontracted, and who cleans up | Ontario's renovation rights page |
| Permits | Who files, who pays the fees and who answers the examiner | Good practice |

Note: This is a checklist of contents, not a template contract; for a large job, have a lawyer read it before you sign.

## Which contract suits your job?

A fixed price suits a job with a defined scope and a lender or a budget that needs one number. That's most additions.

Cost-plus suits a job where the unknowns are large and can't be priced fairly up front: a century house with walls still closed, a repair whose extent you'll only see once you open it, or a project you want to start before every decision is made. It works best with a builder you already trust, a fixed fee and an agreed ceiling.

Check what's outside both prices. In Whitby, in Durham Region, Ontario, the 2026 permit rate for additions is $22.37 per m2. For a 1,000 sq ft addition that works out to about $2,078 (calculated from [Whitby's 2026 Schedule N](https://media-003-ca.cdn.govstack.com/whitby-ca/media/5aqjt5ww/2026-building-permit-fees-schedule-n.pdf)), and a minor variance adds a $1,526 application ([Whitby's minor variance application](https://media-003-ca.cdn.govstack.com/whitby-ca/media/txxlnw3w/pl-application_minorvariance.pdf)). The contract should say who pays them.

## How we work

We work fixed price. We design and build under one contract, with design in-house: Ceara Jarvis leads design through Juliette Interiors, we draw the permit drawings, and James Jarvis runs construction. The whole project is priced and the contract signed, with a 10% deposit, before design begins. Design then works to that price, and any change to the price goes through a change order you sign, so the number you signed only moves when you sign again. Our [design-build](https://www.jarviscontracting.ca/design-build) and [process](https://www.jarviscontracting.ca/process) pages set out the steps. If you're still choosing how to hire, read [design-build vs an architect plus a general contractor](https://www.jarviscontracting.ca/guides/design-build-vs-general-contractor) first, and take the checklist in [questions to ask a contractor](https://www.jarviscontracting.ca/guides/questions-to-ask-a-contractor) to every meeting.

## Questions

### Is fixed price or cost-plus cheaper for a renovation in Ontario?

Neither is reliably cheaper for an Ontario renovation. A fixed price includes a contingency for risks the contractor carries, so you pay for certainty. Cost-plus has no built-in cushion, so it can come in lower, but nothing stops it running higher if the job grows.

The more complete your drawings and scope, the less the fixed-price cushion needs to be, and the stronger the case for a fixed price.

### Can a contractor charge more than the estimate in Ontario?

A contractor in Ontario can't charge more than 10% over the original estimate unless you agree to new work or a new price, as of October 2026. The province says new work should come as a signed change to the contract, with a new estimate.

Get every change in writing, priced, before the work is done.

### What is a fair fee on a cost-plus renovation contract?

There's no credible published figure for a typical cost-plus fee on an Ontario renovation, so we won't give one. Ask each builder for the fee in writing, and ask whether it's a percentage of cost or a fixed sum.

A fixed fee eases the incentive problem, since the builder earns the same however much the job costs.

### Do I have to hold back 10% on a renovation in Ontario?

Yes. Section 22(1) of Ontario's Construction Act requires each payer under a contract where a lien may arise to retain 10% of the value of services and materials supplied, whether you pay in stages or at the end.

You release it once the lien period has passed: for a contractor, 60 days after the earlier of publication of substantial performance or the contract being completed, abandoned or terminated.

### How much deposit should I pay a contractor in Ontario?

Ontario recommends a renovation deposit of no more than 10% of the contract, as of October 2026, and warns against large down payments for materials. On a $180,000 addition, that's $18,000 at most.

After that, pay in stages tied to work you can see and that's been inspected where an inspection applies.

### What is an allowance in a renovation contract?

An allowance is a placeholder sum in a renovation contract for something not yet chosen, such as flooring, tile or light fixtures. If what you pick costs more than the allowance, you pay the difference, and if it costs less, you should get a credit.

Low allowances make a fixed price look cheaper than it is, so compare them line by line across quotes.