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About Holdback

Last reviewed: October 2026

What holdback is

Under Ontario's Construction Act, every payer on a project (owner → general contractor → subcontractor → sub-subcontractor) must retain 10% of the price of work and materials as they're supplied (s. 22(1)). It applies whether you're paid in instalments or at completion.

Why it's required

Holdback creates a fund that unpaid subcontractors, suppliers and workers can claim against through a lien if someone above them doesn't pay (s. 21). An owner who retains the proper holdback limits its liability to lien claimants to that amount (s. 23).

Since January 1, 2026, holdback money is also held in statutory trust (ss. 7, 8, 8.1).

Two kinds of holdback

  • Basic holdback: 10% of the work up to substantial performance.
  • Finishing holdback: a separate 10% retained on work done after substantial performance (s. 22(2)).

When holdback is released

There are three routes.

a) Annual release (new from January 1, 2026)

  1. Contract anniversary
    Each anniversary of the contract (see the transition rules below for the first one).
  2. Within 14 days after
    The owner publishes a Notice of Annual Release of Holdback (Form 6) (s. 26(3)).
  3. 60–74 days after publishing
    The owner pays the accrued holdback (s. 26(4)).
  4. Within 14 days of being paid
    Each contractor and subcontractor pays its own subcontractors (s. 26(5)–(6)).

A preserved or perfected lien can block payment. Then holdback is released within 14 days after the lien is resolved (s. 26(7)).

Transition: contracts entered into before January 1, 2026 start at the second contract anniversary after January 1, 2026. For example, a contract dated October 30, 2025 has its first release anniversary on October 30, 2027. Contracts entered into on or after January 1, 2026 start at the first anniversary.

The optional annual or phased release under former ss. 26.1–26.2 was repealed.

b) Substantial performance

  1. Certificate published
    A certificate of substantial performance (Form 9) is published, and the 60-day lien period starts (s. 31).
  2. 60-day lien period
    Liens expire or are dealt with.
  3. Within 14 days after that
    The owner pays the remaining basic holdback (s. 26(8)).
  4. Contract complete
    Finishing holdback stays until the contract is complete and its liens expire (s. 27).

c) Subcontract certified complete

  1. Certified complete
    A subcontract can be certified complete (Form 10, s. 33).
  2. After its lien period
    That subcontractor’s holdback may be released early (s. 25). This is permitted, not required.

The owner's former “notice of non-payment of holdback” option to refuse payment was repealed on January 1, 2026.

Billing holdback as a subcontractor

  • Track the holdback retained on every progress invoice.
  • Know your contract date, and watch for the owner's annual notice and any certificate of substantial performance.
  • Once the release date arrives, send a holdback invoice or release request for the accrued amount.
  • Expect payment within 14 days of the contractor being paid.

HST: HST on holdback becomes payable when the holdback is paid or becomes due, whichever is first (Excise Tax Act s. 168(7)). Confirm the treatment with your accountant.

How Drawline helps

  • Holdback retained is calculated and shown on every invoice.
  • The holdback still held is tracked for each project.
  • Estimated release dates appear in the project tracker.
  • You can record holdback received when it's paid.

Create a free account to try it.

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