What is a holdback, and do I need one for renovations in Ontario?

Yes, you absolutely need a holdback for renovations in Ontario - it's required by law under the Construction Lien Act and protects you from potential liens on your property.

In Ontario, including Ottawa, a holdback is 10% of the contract value that you must legally withhold from your contractor until 60 days after the project is substantially completed. This isn't optional - it's mandatory protection for homeowners to ensure subcontractors and suppliers get paid even if your main contractor doesn't pay them.

How the Holdback Works in Ottawa

When you hire a contractor for any renovation work in Ottawa, you pay 90% of each progress payment and hold back the remaining 10%. For example, if your bathroom renovation costs $30,000, you'll hold back $3,000 throughout the project. After the work is substantially complete, you wait 60 days before releasing this holdback amount.

The 60-day period starts when the work is "substantially performed" - meaning the project is essentially complete and ready for normal use, even if minor finishing touches remain. During this period, any unpaid subcontractors or suppliers can register a lien against your property. If no liens are registered within 60 days, you can safely release the holdback to your contractor.

Why This Protects Ottawa Homeowners

Without proper holdbacks, you could face liens on your Ottawa property even if you paid your contractor in full. If your contractor doesn't pay their electrician, plumber, or lumber supplier, these parties can place a lien on your home to secure payment. The holdback system ensures there's money available to satisfy these potential claims.

This is particularly important in Ottawa's active renovation market, where projects often involve multiple trades and suppliers. Even reputable contractors sometimes face cash flow issues or disputes with subcontractors.

What to Watch For

Some contractors may pressure you to skip the holdback or accept a reduced amount, claiming they're "bonded" or "trustworthy." Don't agree to this - it's illegal and removes your protection. Red flag contractors often push for full payment upfront or upon completion without mentioning holdback requirements.

Make sure your contract explicitly states the holdback terms and that progress payments reflect the 90%/10% split. Keep detailed records of all payments and the substantial completion date.

Ottawa-Specific Considerations

For larger renovations requiring City of Ottawa building permits, coordinate your holdback release with final permit inspections. The City's Building Code Services (613-580-2424) can confirm when work meets code requirements, which helps establish your substantial completion date.

If you're dealing with ESA electrical permits or TSSA gas permits, ensure all final inspections are complete before considering the work substantially performed.

For disputes or lien issues, contact Ontario's consumer protection services or consult with a construction lawyer familiar with Ontario's Construction Act. The 60-day clock is firm, so don't delay in addressing any problems that arise during the holdback period.