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

Yes, you absolutely need to understand holdbacks for renovations in Ontario - it's a legal requirement that protects you from construction liens and ensures work is completed properly.

Under Ontario's Construction Act (formerly the Construction Lien Act), you must hold back 10% of the contract value for most renovation projects. This isn't optional - it's the law, and it protects both you as the homeowner and your contractor from potential lien claims by subcontractors or suppliers.

How the Holdback Works in Ontario

The holdback is 10% of the total contract price that you keep until 60 days after substantial completion of the work. For example, if your bathroom renovation costs $30,000, you hold back $3,000. You pay the contractor 90% ($27,000) as work progresses according to your payment schedule, but that final 10% stays with you for the full 60-day period.

This waiting period allows any unpaid subcontractors, suppliers, or workers to file a construction lien if the contractor hasn't paid them. After 60 days with no liens filed, you can safely release the holdback to your contractor.

When Holdbacks Apply in Ottawa

The holdback requirement applies to most renovation contracts over $500 in Ontario, including kitchen renovations, bathroom remodels, basement finishing, additions, and major repairs. It applies whether you're in Kanata, Orleans, Barrhaven, or anywhere else in the Ottawa area.

However, there are some exceptions. If you're paying a contractor less than $500 total, or if the work involves only materials (no labor), the holdback may not be required. But for typical Ottawa renovations ranging from $15,000 bathrooms to $50,000 kitchens, you'll definitely need to follow the holdback rules.

Red Flags to Watch For

Be very wary of contractors who don't understand or try to avoid the holdback requirement. Any legitimate contractor working in Ottawa should be familiar with Ontario's Construction Act and expect you to hold back 10%. If a contractor pressures you to pay 100% before the 60-day period ends, or claims holdbacks don't apply to their work, that's a major red flag.

Similarly, be cautious of contractors who want large upfront payments. A typical payment schedule might be 10% down, progress payments of 25-30% at specific milestones, and then the final 10% held back for 60 days after completion.

Protecting Yourself in Ottawa

Make sure your renovation contract clearly states the holdback terms and payment schedule. The contract should specify what constitutes "substantial completion" - typically when the work is finished and you can use the space, even if minor touch-ups remain.

Keep detailed records of when work was substantially completed, as this starts your 60-day countdown. Take photos and document the completion date. You can check for any filed liens through the Ontario Personal Property Security Registration system during this period.

For more information about Ontario's Construction Act and your rights as a homeowner, visit ontario.ca/consumer or contact the City of Ottawa's Building Code Services at 613-580-2424 if you have questions about permits and regulations for your specific project.

The holdback system protects you from having to pay twice if your contractor fails to pay their suppliers or subcontractors. It's one of the most important consumer protections in Ontario's construction industry, so make sure any contractor you hire in Ottawa understands and respects this requirement.