How much should I hold back from my contractor?

In Ontario, you must hold back 10% of the contract price under the Construction Act (formerly Construction Lien Act) - this is mandatory for all construction contracts over $500.

This holdback protects you from potential liens if your contractor doesn't pay their subcontractors or suppliers. Here's exactly how it works in Ottawa:

The 10% Holdback Rule

You withhold 10% of each progress payment throughout the project, not just at the end. So if your contractor invoices $10,000 for completed work, you pay $9,000 and hold back $1,000. This continues for each payment until the project is complete.

The holdback period runs for 60 days after substantial completion of the work. During this time, unpaid subcontractors or suppliers can register liens against your property. After the 60-day period expires with no liens registered, you release the holdback to your contractor.

Ottawa Payment Best Practices

Beyond the legal holdback, structure your payments to protect yourself:

• Never pay large amounts upfront - legitimate contractors don't need significant money before starting
• Tie payments to completed milestones - pay for work actually done, not work promised
• Keep receipts and document everything - photos, invoices, change orders
• Final payment after final inspection - don't release final funds until you've done a thorough walkthrough

Red Flags to Watch For

Be cautious if a contractor:

• Demands full payment upfront or unusual payment terms


• Pressures you to waive the holdback requirement


• Asks for payment in cash only


• Won't provide proper invoices or documentation


• Rushes you through the payment process

Protecting Your Investment

For larger projects in Ottawa, consider having your contractor provide:

• WSIB clearance certificate (wsib.ca/clearances)


• Proof of liability insurance


• Written contract detailing payment schedule


• Proper permits through City of Ottawa (613-580-2424)

The 10% holdback isn't negotiable - it's Ontario law designed to protect homeowners. Any contractor who objects to following this legal requirement should raise immediate red flags about their legitimacy and business practices.

For questions about specific payment disputes or lien issues, contact the Ontario Consumer Protection office or consult with a construction lawyer familiar with Ontario's Construction Act.