Construction holdback, province by province

Holdback is a part of every progress payment the payer keeps back while the job is under way. It exists because of builders’ liens. A sub-trade or supplier who is not paid can claim a lien against the owner’s land even though the owner never hired them. The holdback is the owner’s protection: in the common-law provinces, an owner who has kept back the right holdback and pays it out only after the lien period runs out has, in general, limited its exposure to the amount of that holdback.

For a general contractor it works in both directions. Your client holds back from you, which is a big part of your profit sitting in someone else’s account until the end of the job. And you, in turn, are usually expected to hold back from your own sub-trades, for the same reason the owner holds back from you.

Holdback is not a deposit, not a deficiency allowance and not a warranty reserve. It is a statutory amount with a statutory release date. Mixing it up with any of those is how builders end up arguing about the wrong number.

Each row was read from the act itself on the date at the top of this page. Periods run from different events in different places: a certificate of substantial performance, a certificate of completion, completion itself, or abandonment. Read the section before you rely on a date. Special rules for public work, oil and gas, and finishing work after substantial performance are left out unless noted.

Manitoba is 7.5 percent. Section 24(1) of The Builders’ Liens Act says the payer must "deduct 7.5% of each payment" and keep it for at least 60 days. A lot of templates, accounting setups and US-built software default to 10, which in Manitoba over-holds by a third and leaves the extra in the wrong place.

Prince Edward Island is higher, not lower. Section 14 of its Mechanics’ Lien Act sets 20 percent, dropping to 15 percent where the value of the work and materials is over $15,000. The only version the province publishes online is an office consolidation current to 1 January 2009, so confirm the current figure with the PEI Legislative Counsel Office or your lawyer before you rely on it.

Yukon and Nunavut are 10 percent, but both acts say "in the absence of a stipulation to the contrary", so the contract can change it.

Ontario rewrote its release rules. From 1 January 2026 the old sections on paying holdback at substantial performance (26.1 and 26.2) and on notices of non-payment of holdback (27.1) are repealed. In their place, section 26 makes the release yearly.

Within 14 days after each anniversary of the contract, the owner must publish a notice of annual release of holdback. At least 60 and no more than 74 days after that notice, the owner pays the contractor the holdback for the year just ended, unless a lien has been preserved or perfected. The contractor then has 14 days to pay its subs their share. Holdback still owing at the end of the job is paid within 14 days after the liens have expired or been dealt with.

If your contract was signed before 1 January 2026, section 87.4 sets out how the first annual release applies to it. Read it, or ask your lawyer, before you plan cash flow around a release date.

In most provinces, money a contractor receives on a job is held in trust for the subs and suppliers on that job until they are paid. Using this month’s draw on Job A to make payroll on Job B can be a breach of trust, and several acts make directors personally liable for it.

Holdback accounts are a separate idea: some acts require the owner to put the holdback itself in a dedicated account. Whether one applies depends on the province and the size of the contract.

• Ontario: owner’s trust (s. 7), contractor and subcontractor trust including holdback (s. 8), and trust money must go through a bank account with records kept (s. 8.1).
• British Columbia: money received by a contractor or subcontractor is a trust fund for those engaged on the improvement (s. 10). Owners must open a holdback account unless the work is under $100,000 or the owner is government (s. 5).
• Saskatchewan: trusts at owner, contractor and subcontractor level (ss. 6 to 8), and a holdback trust account in most cases (s. 38), with exemptions including contracts on a house.
• Manitoba: contract money received is a trust fund (s. 4). A holdback account is required above a prescribed amount (s. 24(3)), set at $200,000 by Regulation 127/89.
• Alberta: the trust is narrower, covering money paid after a certificate of substantial performance (s. 22).
• New Brunswick: owner and contractor trusts (ss. 11 and 14), with directors personally liable (s. 17).
• Nova Scotia: owner and contractor trusts (ss. 44A and 44B).
• Northwest Territories: contractor and subcontractor trust (s. 9), deposited to a bank account (s. 10).
• Newfoundland and Labrador, Prince Edward Island, Yukon and Nunavut: we found no trust provisions in the lien acts themselves. Ask a lawyer whether other law applies to your situation.

Ontario’s section 22(1) puts the duty on "each payer upon a contract or subcontract". BC’s section 4(1) names "the person primarily liable on each contract, and the person primarily liable on each subcontract". In those provinces, you hold back from your subs the same way your client holds back from you.

Not every act is written that way. Manitoba’s section 24 and New Brunswick’s section 34 speak of the contract with the owner. Even so, the commercial logic is the same everywhere: if you pay a sub 100 percent and that sub has not paid its own supplier, the supplier’s lien lands on your client’s property and the argument lands on you. Most builders hold back from subs at the same rate they are held back, and release it on the same timeline. Ask your lawyer how your province’s act applies to your subcontracts.

Before you release a sub’s holdback, check the lien registry for the property and collect whatever your contract requires, commonly a statutory declaration that the sub’s own workers and suppliers are paid.

Substantial performance is the event that starts most of these clocks. Most acts define it with a sliding test: the work is ready for use, and what is left to finish costs no more than a set percentage of the contract price. The bands differ, so a $1.5 million job can be substantially performed in one province and not in the next.

• Ontario: 3% of the first $1,000,000, 2% of the next $1,000,000, 1% of the balance (s. 2).
• British Columbia, Alberta and Saskatchewan: 3%, 2% and 1% on $500,000 bands.
• Manitoba, New Brunswick and Newfoundland and Labrador: 3%, 2% and 1% on $250,000 bands.
• Nova Scotia: a flat 2.5% of the contract price (s. 13).
• Northwest Territories: 3%, 2% and 1% on $1,000,000 bands, set by regulation.
• Prince Edward Island, Yukon and Nunavut: no percentage test in the act. Periods run from completion.
• In BC the release clock runs from a certificate of completion. In several provinces it runs from a certificate of substantial performance that has to be given or published in a set way. If nobody issues the certificate, the clock may run from completion instead, which can be much later.

Quebec has no builders’ lien act and no statutory holdback for private work. The Civil Code gives the architect, engineer, supplier of materials, workman, contractor and subcontractor a legal hypothec on the building for work the owner asked for (art. 2726). It exists without being published, but only for 30 days after the work is completed. To keep it, you register a notice within those 30 days and serve it on the owner, and it is extinguished six months after completion unless you take the next legal step (art. 2727).

It secures only the increase in value given to the building. And if you do not have a contract with the owner, as a sub-trade usually does not, it covers only work and materials supplied after you gave the owner written notice of your contract (art. 2728). That notice, the dénonciation de contrat, is the step sub-trades most often miss.

What clients do withhold in Quebec comes from the contract and from articles 2111 and 2123: amounts for defects noted at acceptance, and enough to pay workers and subs who gave notice until the client has proof they were paid. Public bodies have their own withholding rules. Ask a Quebec lawyer or notary about any real hypothec question.