The statutory holdback is a slice of every payment that the person paying you is required by law to keep back, set aside, and only release after the lien deadlines have passed. It is not your contractor being difficult: it is a fund the legislation forces them to hold so that, if anyone below them goes unpaid, there is money there to satisfy a lien. In most provinces the holdback is 10 percent. Manitoba is 7.5 percent. Prince Edward Island can be 15 or 20 percent. Quebec mandates no holdback at all. Understanding it stops you from panicking when 10 percent of your invoice does not arrive on time.
Who holds it, and why
Every payer in the construction pyramid (owner to contractor, contractor to subcontractor, and so on down) holds back the set percentage from each payment they make to the tier below. The owner holds back from the contractor, the contractor holds back from you, and you hold back from anyone under you. The point is to keep a protected pot of money in reserve. If a subcontractor is not paid and registers a lien, the holdback fund is what that lien attaches to, so the owner is not forced to pay twice for the same work.
In several provinces the holdback must be kept in a separate trust account above a threshold, and directors or officers who let it be diverted can be personally liable. That trust protection is real money in your favour: it survives even if the company above you goes under.
The holdback percentages
- 10% in Ontario, British Columbia, Alberta, Saskatchewan, Newfoundland and Labrador, Northwest Territories, Nunavut and Yukon.
- 7.5% in Manitoba, the lowest standard rate in the country.
- 10% dropping to 2.5% in Nova Scotia: the full 10 percent is held until 60 days after substantial performance, then it reduces to a 2.5 percent finishing holdback kept until 60 days after total completion.
- 10% private, 5% Crown in New Brunswick.
- 15% or 20% in Prince Edward Island: 15 percent where the work exceeds $15,000, and 20 percent for contracts of $15,000 or less.
- None mandated in Quebec. Quebec relies on contract terms and the legal hypothec instead; the public-sector prompt-payment regulation permits a contractual holdback up to 10 percent but does not require one.
When the holdback is released
The holdback is not released until the lien period has run out, because releasing it early would defeat its purpose. As a rule of thumb it comes free a set number of days after substantial performance or completion, once no liens are registered. The exact trigger tracks the lien deadline in your province (see Lien Deadlines by Province). In Saskatchewan, for example, the owner may release once 40 clear days have passed since the certificate of substantial performance and no lien sits on title.
Ontario now also has a mandatory annual release for contracts running longer than 12 months: the owner must publish a notice within 14 days of each contract anniversary and release that year's accrued holdback within 60 to 74 days, unless a lien is registered. This stops your holdback being trapped for years on a long job.
Worked example: a $50,000 subcontract in Ontario
You invoice $50,000 of work. At a 10 percent holdback, the contractor pays you $45,000 now and holds back $5,000. That $5,000 is not lost: it is your money, parked. Once the project reaches substantial performance and the 60-day lien window closes with no liens registered, the $5,000 is released to you. If you are not paid it when it is due, the holdback fund is exactly what your lien would secure.
Common mistakes
- Treating the holdback as a deduction. It is not a discount or a penalty. It is your money held in reserve and owed to you on release.
- Forgetting to claim the release. Holdback does not always flow automatically. Diary the release date and chase it.
- Not holding back from your own subs. If you fail to retain the holdback from the tier below you, you can be left personally exposed when they lien.
- Assuming Quebec works the same. Quebec mandates no holdback, so do not expect a statutory 10 percent to be sitting there.
Common questions
How much is the holdback?
In most provinces the statutory holdback is 10 percent of the contract value. Manitoba is 7.5 percent. Prince Edward Island can be 15 percent, or 20 percent on smaller contracts. Quebec mandates no holdback at all.
When is the holdback released?
It is released after the lien period expires with no liens registered, which is tied to substantial completion under your province's lien Act. Check the specific trigger for your province.
Who holds the holdback?
The party above you in the chain holds it back from each payment: an owner holds back from the general contractor, and a general contractor holds back from its subcontractors. It is released once the lien period passes clean.
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