Holdback

Understand holdbacks in Canadian construction financing — what they are, how they work, and why they’re used.

Holdback

July 29, 2025


What is a Holdback?

A holdback is a portion of construction financing or payment withheld by the lender or owner until specific milestones are met or work is satisfactorily completed.

Why Holdbacks Matter in Real Estate

In Canadian construction, holdbacks protect owners and lenders by ensuring contractors complete work and pay subcontractors.



Key points:
  • Often required by provincial lien legislation
  • Typically 10% of each progress payment
  • Released after lien periods expire and deficiencies are resolved



Understanding holdbacks helps manage cash flow and reduce risk of contractor default or liens.

Example of a Holdback in Action

The lender applied a 10% holdback on each draw until the project passed inspections and lien periods expired.

Key Takeaways

  • Portion of funds withheld during construction
  • Protects against incomplete work or liens
  • Typically 10% of each progress payment
  • Released after work is complete and lien period ends
  • Required by law in many provinces

Related Terms

Additional Terms

Public Realm Improvements

Public realm improvements are enhancements to public spaces such as sidewalks, parks, plazas, and streetscapes, often funded or contributed by. more

Mortgagee in Possession

A mortgagee in possession is a lender who takes control of a property after borrower default, but before foreclosure or power of sale. The lender. more

Lease Surrender Agreement

A lease surrender agreement is a negotiated contract between a landlord and tenant that ends a lease before its scheduled expiration. Terms may. more

Green Infrastructure

Green infrastructure refers to natural or engineered systems that manage stormwater, reduce heat, and improve sustainability in developments.. more

Escrow Holdback

An escrow holdback is a portion of funds withheld at closing and held in escrow until specific conditions are met, such as completion of repairs,. more

Underused Housing Tax

The Underused Housing Tax (UHT) is a federal annual 1% tax on the value of vacant or underused residential property owned by non-resident,. more

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