Hiring a Contractor - The Deposit

When considering hiring a contractor to do work you might ask yourself:

Am I required to leave a deposit?


Is a contractor [even] allowed to take a deposit?

In the world of home improvements it is not a rare occurrence for contractors to ask for a deposit to cover materials, hold your reservation, or whatever the case may be. Certainly they are allowed to do this – with a couple caveats of course. First and foremost the contractor asking for the deposit (at least in Alberta) must be a Licensed Prepaid Contractor. According to the government of Alberta a Prepaid Contracting Business is one which:

• Solicits, negotiates or concludes prepaid contracts in person at any place other than the sellers’ place of business, and

• Accepts money before all the work is done and /or the services are provided In order to qualify for this license a contractor must meet a couple criteria:

• Completes an application;

• Submits an original, signed security (either a general surety bond, cash security agreement, cash, an irrevocable letter of credit or a term deposit) for a determined amount;

• pays an annual licensing fee;

• And provides a copy of their sales contract or invoice with a copy of the “Buyer’s Right to Cancel” schedule


On top of all of this, the sales contract or invoice must contain certain information:

• The buyer’s name and address

• The seller’s name, business address, telephone number and fax

• Salesperson’s name • Description of the goods or services

• The date

• A statement of cancellation rights

• Itemized price of goods or services

• If the work is to take place in the future there should be a commencement date/completion date As you can see there are a lot of hoops to jump through in order to become a license pre-paid contractor.

Some requirements like line item description of services are just industry best practices and a good contractor will see the value in doing them prepaid or not. This is all in an effort to protect the consumer. There are also a lot of reputable contractors that provide detailed line item quotes and require no deposit. If it is my money these are the ones I want to deal with.

Thanks for reading,



For more information on Prepaid Contractors and Licensing visit http://www.servicealberta.gov.ab.ca/1254.cfm