Finance
What Deductions a Homeowner Can Claim in Quebec
The house you live in gives you no deduction at all, and that is not an oversight by the legislator. Everything …
A major renovation is not planned on the price of the cabinets. It is planned on two calendars: the one for the job site and the one for the money. The two never line up, and it is that gap that empties accounts. Here is where the sum comes from, at what moment each dollar leaves, and what Quebec law leaves in your hands the day it runs short.
Financing a major renovation in Quebec: four taps, four ceilings
The first figure to establish is not the cost of the work. It is your home equity, which the Financial Consumer Agency of Canada (FCAC) defines as the difference between the appraised value of the home and what you still owe on the loans it secures. The ceilings below are calculated on that, never on your job site invoices.
| Source | Ceiling published by the FCAC | How the money arrives |
|---|---|---|
| Second mortgage | 80% of appraised value | lump sum |
| Home equity line of credit | 65% of appraised value | as needed, at a variable rate |
| Home equity loan | 80% of appraised value | lump sum, fixed payments |
| Reverse mortgage | 55% of appraised value | limited to age 55 and over |
The FCAC adds the fees that come with these arrangements, appraisal, title search, title insurance and legal fees, then the warning nobody reads: you could face serious consequences, such as having your home seized, if you cannot repay.
A fifth tap exists, refinancing the current loan, with its own legal ceiling: the calculation is in mortgage refinancing in Quebec. Unsecured credit depends only on your file, and no open official source lets me put a rate on it here.
If the work is added to a purchase, the SCHL (Canada Mortgage and Housing Corporation) has a dedicated product, SCHL Améliorations, whose lending value is the lesser of the as-improved value or the current value plus the cost of the work, supported by cost estimates, plans or a permit. Your quotes therefore do not only serve to budget: they set the amount of the loan. The full comparison with a turnkey purchase is in fixer upper or turnkey home. Put the total amount into the mortgage calculator, because it is the payment with the work included that has to hold.
Financing a major renovation means paying before you are reimbursed
An SCHL advance is paid out after validation: a single one when the cost of the work represents 10% or less of the as-improved value, and up to four staged advances beyond that. The contractor, meanwhile, gets paid during the job. In between, it is you.
| Moment | The money move | Basis |
|---|---|---|
| Before the job starts | The smallest possible deposit | RBQ |
| Before each instalment | Demand the statement of sums already paid to subcontractors | art. 2122 C.C.Q. |
| Lender’s advance | Paid after validation, so after the expense | SCHL |
| End of a phase | The price of that phase becomes payable | art. 2114 C.C.Q. |
| Final acceptance | Holdback for apparent poor workmanship | art. 2111 C.C.Q. |
| Last payment | 10 to 15% of the total cost | OPC |
The trap in article 2114. Where the work is performed in successive phases, it may be accepted in parts, and payment of the price of a part creates a presumption that that part has been accepted, unless the sums paid are to be considered as mere instalments on the price. That last clause is something to write into your contract. Without it, every payment you make to stay afloat looks like acceptance of the phase paid for.
Article 2111 runs the other way: you are not bound to pay before acceptance, and on payment you may retain a sufficient amount to satisfy the reservations made as to apparent poor workmanship, unless the contractor furnishes sufficient security.
The licence bond: a shared ceiling, not a reimbursement
The licence bond is a financial guarantee required of contractors licensed by the Régie du bâtiment du Québec (RBQ), the Corporation des maîtres mécaniciens en tuyauterie or the Corporation des maîtres électriciens. Its amount depends on the category: $40,000 for a general contractor, $20,000 for a specialized contractor.
Those amounts are not yours. The RBQ writes that the bond serves to indemnify all clients who filed compliant claims for the period covered. As soon as a first compliant claim is allowed, a file opens for 6 months, during which other citizens can join it, and if the total exceeds the bond, the money is distributed pro rata to the amounts claimed. A claim received later may receive nothing, and if the bond is exhausted, there is no more compensation.
What it covers is precise: deposits paid for work not performed, failure to complete, defects and poor workmanship noted within the 12 months following the end of the work, court registry fees, bailiff’s fees and the interest awarded in the judgment. What it excludes matters more: the claims of persons who took part in the work, for example a subcontractor the contractor failed to pay, damages caused by a delay, moral injury, punitive damages and lawyers’ fees.
The road is expensive. The RBQ warns that your chances of being compensated drop greatly without a favourable judgment, and it places the courts according to the amount claimed: $15,000 and under at small claims, from $15,000.01 to $74,999.99 at the Civil Division of the Court of Québec, from $75,000 to $99,999.99 at your choice, and $100,000 and over at the Superior Court. On a $150,000 job that goes wrong, you therefore plead in Superior Court, with lawyers’ fees the bond does not reimburse, to go after at best $40,000 shared with others. Verifying the licence beforehand remains the best investment: choosing a renovation contractor sets out the method.
The construction legal hypothec ranks ahead of your lender
Article 2724 of the Code civil lists the only claims that give rise to a legal hypothec, and the second on the list is that of persons who took part in the construction or renovation of an immovable. Article 2726 names who benefits from it, from the architect to the subcontractor by way of the supplier of materials, and adds that it exists without its being necessary to publish it.
What it secures is not the invoice, it is the added value. Article 2728 limits it to the increase in value added to the immovable by the work, materials or services, and, for those who did not contract with you, to what follows written notice of the contract to the owner. The amount of that added value gets argued, and it gets argued in court.
The calendar comes from article 2727: it subsists for 30 days after the end of the work without publication, it is preserved by registering within that period a notice designating the immovable and stating the amount of the claim, and it is extinguished six months after the end of the work unless the creditor publishes an action or registers a prior notice of the exercise of a hypothecary right.
That leaves the article that explains the reaction of the lender and the notary. Article 2952 gives these hypothecs a rank ahead of any other published hypothec, for the value added to the immovable. Your bank published its own. The unpaid supplier’s ranks ahead of it. And the bond, as the RBQ says, does not indemnify the claims of persons who took part in the work: the two protections do not overlap.
Overruns: what you owe, and what you can refuse
The most expensive clause in your contract is the one that says how the price is established. The Code civil treats the two cases differently.
The lump sum contract. Article 2109 is blunt: you pay the agreed price, and the contractor may not claim an increase on the grounds that the work cost more than expected. The lump sum price remains the same despite changes to the originally contemplated conditions of performance, unless the parties have agreed otherwise. That reservation is the door change orders come through: sign them before the work, not after.
A price based on an estimate. Article 2107 reverses the burden: the contractor must justify any increase, and you are bound to pay it only to the extent that it results from work, services or expenses that the contractor could not have foreseen when the contract was entered into. Something a professional should have foreseen is not unforeseen. And where the price follows the value of the work performed, article 2108 obliges the contractor, at your request, to account for the progress and the expenses already incurred.
The Office de la protection du consommateur (OPC) goes the same way: the contractor cannot bill more than the amount indicated at the outset, and must obtain your authorization before carrying out unplanned work. Billed anyway, you can pay under protest by writing the mention on the cheque, then demand letter, small claims and a complaint to the Office.
As for the contingency reserve, no open official source puts a figure on a typical overrun percentage in Quebec, so you will not get one here. The only official signal remains the SCHL’s, which asks the lender to assess your financial capacity to cover cost overruns. The arrangement therefore assumes you have money outside the loan.
When the money runs short: the three exits, and their price
Resiliate. Article 2125 allows you to unilaterally resiliate the contract, even if the work is under way, with no reason to give. Article 2129 sets the price: you pay, in proportion to the agreed price, the actual costs and expenses, the value of the work performed before the notification, and that of the property supplied which you can use. The contractor returns advances received in excess of what was earned.
Phase it. Article 2114 becomes a cash flow tool rather than a trap if the split is written down in advance: one phase accepted, paid, released, then the next when the money is there.
Sell. A registered legal hypothec will have to be settled before signing at the notary. And if the job went very far, taxation changes regime: the Canada Revenue Agency speaks of substantial renovation when all or substantially all of the existing building has been removed or replaced, with foundations, exterior walls, load-bearing walls, floors, roof and staircases excluded from the calculation. All or substantially all is read as 90% or more, and only the living area counts. I am a broker, not a tax specialist: the calculation is in house flipping in Montreal, and what comes back in the price is in your renovation will not add what you think.
Frequently asked questions
My contractor is asking for a 50% deposit. Is that normal? No law sets a percentage. The RBQ recommends the smallest possible deposit, and the OPC recommends paying in instalments according to progress with a final payment of 10 to 15% at the end. A deposit of half the price is also, exactly, the sum the bond would have to cover if the company disappeared.
Does the $40,000 bond reimburse me if my contractor walks away? Not necessarily. It indemnifies all clients who filed compliant claims for the period, the file stays open 6 months to let other clients join, and the split is pro rata. Exhausted, it gives nothing more.
I paid my contractor and a supplier is claiming its invoice from me. If it had given you written notice of its contract, article 2728 opens a legal hypothec for the added value, and article 2952 makes it rank ahead of your lender’s. Call a notary or a lawyer the same day: it is the immovable that is targeted.
Can I stop the job if I run out of money? Yes, article 2125 allows it during performance. But article 2129 says what you will have to pay: the actual costs and expenses and the value of the work performed, in proportion to the agreed price.
To go further, read choosing a renovation contractor and fixer upper or turnkey home in Quebec.
Major work before or after a transaction in Laval or Montreal? Write to me: we put numbers on the cash outflow and on what comes back at resale before the contract is signed.
Georges Matar
Residential Real Estate Broker · RE/MAX DU CARTIER INC.
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