What is the holdback requirement under the Construction Lien Act?

Under Ontario's Construction Lien Act, property owners must hold back 10% of the value of work and materials for 60 days after substantial completion of the project. This applies to all construction projects in Ottawa and across Ontario, regardless of size.

How the Holdback Works in Ottawa

The holdback requirement is straightforward but critical for protecting yourself. When your contractor completes work, you pay 90% of the final amount immediately, then hold the remaining 10% for exactly 60 days. This holdback period gives any subcontractors, suppliers, or workers who weren't paid by your contractor time to register a lien against your property.

For example, if your Ottawa bathroom renovation costs $30,000, you'd pay $27,000 upon completion and hold back $3,000 for 60 days. If no liens are registered during this period, you release the final payment.

Why This Protects Ottawa Homeowners

The holdback protects you from having to pay twice for the same work. Without it, if your contractor doesn't pay their subcontractors or suppliers, those parties can place liens on your Ottawa property - even though you already paid your contractor in full. The 60-day holdback period allows these potential lien claimants to come forward before you make final payment.

What Happens During the 60 Days

During the holdback period, anyone who provided labor or materials but wasn't paid can register a lien at the Ottawa Land Registry Office. If liens are registered, don't release the holdback until those disputes are resolved. If no liens appear after 60 days, you can safely release the final 10% payment.

Calculating the Holdback Period

The 60-day clock starts ticking from "substantial completion" - when the work is essentially finished and you can use the space, even if minor deficiencies remain. For major Ottawa renovations, this might be when your kitchen is functional again, not when the contractor fixes a small scratch on the cabinet.

Common Ottawa Contractor Payment Structures

Many Ottawa contractors build the holdback into their payment schedule automatically. A typical structure might be: 10% deposit, 40% at rough-in stage, 40% at substantial completion, and 10% after the 60-day holdback period. This protects both you and legitimate contractors who pay their trades properly.

Red Flags to Watch For

Be wary of Ottawa contractors who demand full payment upon completion or claim the holdback doesn't apply to smaller jobs. The Construction Lien Act applies to all construction work in Ontario, regardless of project size. Contractors who push back on holdbacks may not be properly managing their subcontractor payments.

Official Resources

For detailed information about Ontario's Construction Lien Act, visit ontario.ca and search for "Construction Act." The City of Ottawa Building Code Services (613-580-2424) can also provide guidance on how holdbacks work with permit requirements for your specific project.

Remember: the 10% holdback for 60 days isn't negotiable - it's Ontario law designed to protect property owners throughout Ottawa and the province.