When can I release the holdback to my contractor?

In Ontario, you can release the 10% holdback to your contractor 60 days after substantial completion of the work, provided no liens have been filed against your property.

Under Ontario's Construction Act (formerly the Construction Lien Act), you're required to hold back 10% of the contract value as protection against potential liens from subcontractors or suppliers who may not have been paid by your general contractor. This holdback period gives unpaid parties time to file a lien if necessary.

The 60-Day Rule in Ottawa

The 60-day clock starts ticking from the date of "substantial completion" - not when the last tiny touch-up is done, but when the work is essentially complete and you can use the space for its intended purpose. For example, if your bathroom renovation is functionally complete on January 1st (you can use the bathroom), the holdback can be released on March 2nd, even if the contractor comes back to fix a small scratch on the vanity.

Steps to Release Holdback Safely

First, verify that no liens have been registered against your property by searching the Land Registry Office records. You can do this online through Ontario's OnLand system or visit the Land Registry Office. In Ottawa, you can also call ServiceOntario at 1-800-267-8097 for guidance on property searches.

Second, ensure all permits related to your project have received final approval from the City of Ottawa. For electrical work, confirm your ESA (Electrical Safety Authority) inspection is complete and approved. For gas or HVAC work, verify TSSA (Technical Standards and Safety Authority) approval. You can check permit status through ottawa.ca/building or by calling 613-580-2424.

What Happens If There Are Issues

If a lien is registered during the 60-day period, do not release the holdback. The lien must be resolved first - either through payment, negotiation, or legal proceedings. If you release the holdback after a lien is filed, you could still be responsible for paying the lien claimant separately.

Getting It in Writing

When you do release the holdback, get a signed receipt from your contractor acknowledging final payment and completion of all work. This document should state that all subcontractors and suppliers have been paid in full. Many contractors will provide a statutory declaration confirming this.

Red Flags to Watch For

Be cautious if your contractor pressures you to release the holdback early, claims they need it to pay suppliers, or suggests the 60-day rule doesn't apply to your project. These are standard tactics used by contractors experiencing cash flow problems. The holdback law exists specifically to protect you from these situations.

For complex projects or if you're unsure about lien searches, consider consulting with a construction lawyer familiar with Ontario's Construction Act. The Law Society of Ontario's referral service (1-855-947-5255) can help you find qualified legal assistance in Ottawa.

Remember, this 60-day protection period costs you nothing but could save you thousands if payment disputes arise between your contractor and their suppliers or subcontractors.