What is the statutory holdback in Ontario construction law?

In Ontario, contractors and property owners must hold back 10% of the value of work completed under the Construction Act (formerly Construction Lien Act) for a minimum of 60 days after substantial completion.

This statutory holdback is a critical consumer protection that applies to virtually all construction projects in Ottawa and across Ontario, whether it's a small bathroom renovation or a major home addition.

How the 10% Holdback Works in Ottawa

When you hire a contractor in Ottawa, you're legally required to withhold 10% of each progress payment until 60 days after the work is substantially complete. For example, if your contractor completes $20,000 worth of kitchen renovation work, you pay $18,000 immediately and hold back $2,000. This continues throughout the project.

The holdback period starts when the work is "substantially performed" - meaning the work is ready for use or is being used for its intended purpose, even if minor deficiencies remain. Your contractor should provide you with a Certificate of Substantial Performance.

Why This Protects Ottawa Homeowners

The holdback serves as security for potential lien claims from subcontractors, suppliers, or workers who may not have been paid by your general contractor. Even if you've paid your contractor in full, unpaid subcontractors can still place liens on your Ottawa property. The 10% holdback helps ensure funds are available to satisfy legitimate claims.

After the 60-day period expires without any lien claims being filed, you can release the holdback to your contractor. However, if liens are registered against your property during this period, you cannot release the holdback until those liens are resolved.

Ottawa-Specific Considerations

For projects requiring City of Ottawa building permits, the holdback period often aligns with your final inspection timeline. Contact Ottawa Building Code Services at 613-580-2424 to coordinate final inspections before releasing holdbacks on permitted work.

Many Ottawa homeowners make the mistake of paying contractors in full upon completion, not realizing they've lost this important protection. Always discuss the holdback schedule upfront and include it in your written contract.

What to Watch For

Be wary of contractors who demand full payment immediately or claim the holdback doesn't apply to smaller projects - it applies to virtually all construction work in Ontario. Legitimate contractors understand and expect the holdback requirement.

If a contractor pressures you to release the holdback early, this could be a red flag indicating potential payment issues with their subcontractors or suppliers.

Official Resources

For detailed information about Ontario's Construction Act and holdback requirements, visit ontario.ca and search for "Construction Act." For complex projects or if liens are filed, consider consulting with a construction lawyer familiar with Ontario law.

The 10% holdback is one of your strongest protections as an Ottawa homeowner - use it properly and don't release it prematurely.