Holdback
Understand holdbacks in Canadian construction financing — what they are, how they work, and why they’re used.
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
- Construction Loan
- Lien
- Draw Schedule
- Hard Costs (Construction)
- Encumbrance
6525 Mississauga Road and its surrounding context. (RBC Capital Markets & CBRE)
Property details for 6525 Mississauga Road. (RBC Capital Markets & CBRE)
National average resale-price growth and housing-starts growth, smoothed over three months. The comparison illustrates the cycle; it does not establish how much a price change causes construction to change.
Trailing 12-month starts in centres of 50,000 or more remove the usual monthly seasonality. Ownership combines the homeowner and condominium categories; rental is shown separately.
Six-month averages of provincial starts, expressed at annual rates. The smoothing reduces the influence of individual apartment projects.
The same August benchmark compared with two different starting points. Three-month changes are not annualized.
Average sale prices show the difference in purchase costs across markets. They do not measure affordability relative to local incomes or construction costs.
Newfoundland and Labrador remains above its pre-pandemic sales pattern, but August activity was below last year. Historical lines retain their original release vintages.
Average and median describe different aspects of the same month’s transactions. Both are affected by the mix of homes sold.
Category averages compare different homes and locations; the gaps are not estimates of the cost to upgrade an otherwise identical property.
The five categories shown account for 5,000 of the board’s 5,057 sales. The remaining 57 transactions were in other housing categories.
Monthly observations are not seasonally adjusted. Active listings count properties available at month-end; they are not construction inventory.
Average and median prices share one dollar axis. These unadjusted transaction measures do not control for changes in the homes sold.
TRREB’s 416/905 categories compare the apartments sold in each area. The difference does not isolate a location premium for equivalent units.
5680 Oak Street in Vancouver and its surrounding context. (MCMP Architects)
Ground-level renderings of the tower proposed for 5680 Oak Street in Vancouver. (MCMP Architects)