Construction Holdback: The 10% Rule Homeowners Must Follow

A construction holdback is the 10% of each payment that Ontario, BC and Alberta law tells a homeowner to keep back from their contractor until the deadline for construction liens has passed. It stops you paying twice when a subcontractor or supplier your contractor never paid claims a lien against your house. The date that matters is the end of the lien period, because money released before then can be owed a second time.

What a construction holdback is

Anyone who supplies work or materials to an improvement on your property can claim a lien on it for their price. Ontario's Construction Act gives that lien to a person who supplies services or materials "for an owner, contractor or subcontractor" (s. 14), so the drywaller your contractor hired can claim against your house even though you never signed anything with them.

The holdback is the fund that answers those claims. Ontario caps an owner's personal liability to lien claimants at the holdback the owner was required to keep (s. 23), and BC and Alberta set similar limits. Pay the 10% out early and the cap stays the same, but you meet it from your own pocket a second time.

The duty applies whether the contract provides for progress payments or payment on completion. Ontario's Act covers any alteration, addition or capital repair, though not routine maintenance, whether or not the job needs a building permit.

Holdback rules in Ontario, BC and Alberta

Ontario: 60 days, and yearly release since 2026

You can pay up to 90% of the price of work and materials supplied without risk unless you have received written notice of a lien first (s. 24). The remaining 10% is due no later than 14 days after the liens that can be claimed against it expire or are dealt with (s. 26).

Since 1 January 2026, section 26 has also required a yearly release: within 14 days after each anniversary of the contract the owner publishes a notice, then pays that year's holdback 60 to 74 days later, unless a lien has been preserved. A renovation paid out before the contract's first anniversary never reaches it; a custom home build signed in 2026 that runs past its first anniversary does.

BC: 55 days and a holdback account

BC's Builders Lien Act measures the 10% on the greater of the work provided and the payments made (s. 4), so money paid ahead of the work counts too: 10% of a large deposit is still held back. A claim of lien must be filed within 45 days of the certificate of completion (s. 20), so when the 55-day holdback period ends (s. 8), the filing window has been closed for 10 days. Where the work and materials under a contract come to $100,000 or more, the owner also opens a holdback account at a savings institution and runs it together with the contractor (s. 5).

Alberta: 60 days from the contractor's certificate

Under Alberta's Prompt Payment and Construction Lien Act, the owner keeps the 10% for 60 days from the certificate of substantial performance, or from completion if there is none (s. 18). The contractor issues that certificate on its own opinion and must post a signed copy on the job site, or send an electronic copy, within 3 days (s. 19 and 20).

Manitoba sets a lower rate. Its Builders' Liens Act has the payer deduct 7.5% of each payment and keep it for at least 60 days after substantial performance is certified, the work is completed or the work is abandoned, whichever comes first (s. 24).

When the clock starts: substantial performance

Every release date runs from substantial performance or completion. In Ontario and Alberta a contract is substantially performed when the work is ready for use as intended and what is left would cost no more than 3% of the first part of the price to finish or fix: the first $1,000,000 in Ontario (s. 2) and the first $500,000 in Alberta.

BC uses the same 3% cost test. On an $80,000 renovation, that is $2,400 of work or less remaining. With no certificate, Ontario's clock runs from completion: the point where the work left is worth no more than 1% of the price or $5,000, whichever is less.

Who signs differs. In Ontario, with no architect or other payment certifier named, the owner and the contractor both sign, and the certificate has no effect until it is published (s. 32). In BC the owner certifies when the contract names nobody else, within 10 days of the contractor's request (s. 7), and in Alberta the contractor issues it alone.

A worked example: an $80,000 renovation

Take an $80,000 main-floor renovation billed in four progress draws, before tax. Each invoice is paid less 10%, and the 10% builds to $8,000 by the last draw. Writing the net amounts into the payment schedule before work starts saves an argument at every invoice.

Say the certificate is signed and published on 15 March, with no lien registered and no written notice of a lien received. In Ontario the contractor's lien expires 60 days later, on 14 May, and the $8,000 is due by 28 May. In BC the holdback period ends on 9 May, and in Alberta the 60 days run out on 14 May.

How to release the holdback

Release is a date check and a title check. Count the days, then confirm nothing is registered against the property: in Ontario a lien is preserved by registering a claim on title in the land registry office (s. 34), and in Alberta by filing a statement of lien at the land titles office. A registered lien keeps the holdback in place until the lien is discharged or otherwise dealt with.

In BC, unpaid workers' compensation premiums are another debt that can follow a contractor to the owner, and a WorkSafeBC clearance letter addressed to you, covering the contract period, clears it. A BC holdback paid after the holdback period discharges the liens unless one was filed in the meantime (s. 8).

What the holdback cannot be used for

Until the lien period ends, the holdback answers to the lien claimants. If the contractor abandons the job or the contract is terminated, Ontario bars spending it on someone else to finish, or on any claim against the contractor, until the liens have expired or been dealt with (s. 30). BC and Alberta draw the same line when a contractor defaults.

A disputed invoice is handled separately: an Ontario owner can refuse to pay the disputed amount by giving the contractor a notice of non-payment within 14 days of receiving the invoice (s. 6.4).