Construction Holdback Explained: What Canadian Lien Law Holds Back, for How Long, and Who Releases It

The draws, and what you keep back from each one

To see how this plays out, follow a $60,000 kitchen renovation in Ontario, paid in four equal draws as work is supplied. The contract builds the holdback into the payment schedule from day one. No certificate of substantial performance is published, because this is a household job. To keep the arithmetic clean, the figures leave HST out.

By the time the last cabinet door is hung, you've paid $54,000 and quietly kept $6,000 in reserve. Each invoice also opens a short window worth knowing about. Since January 1, 2026, an Ontario invoice is deemed "proper" unless you point out its deficiencies in writing within 7 days. If a draw invoice is missing information you need, say so that week.

The calendar after the last nail

Once the fourth draw's work is done on Friday, November 27, 2026, the contract is complete and the 60-day clock starts. Here's how the weeks unfold:

• Friday, November 27, 2026 (day 0): The contract is completed and the lien window opens.
• Monday, January 11, 2027 (day 45): In our example, this is when trouble arrives (see below).
• Tuesday, January 26, 2027 (day 60): The 60-day preservation window closes.
• Wednesday, January 27, 2027: You run a title search to confirm nothing is registered.
• By Tuesday, February 9, 2027: If title is clear, the $6,000 holdback goes to your contractor. The deadline is 14 days after the window closes.

That last date is a real obligation. After the January 2026 amendments, Cassels notes that the owner must pay the remaining holdback to the contractor within 14 days after the lien-preservation period has expired, or after any preserved liens are satisfied, discharged or otherwise provided for. Holding on to it "just in case" past that point isn't an option the statute gives you.

What happens when a supplier registers a lien on day 45

Now for the scenario the holdback exists for. On January 11, 2027, the cabinet supplier registers a $9,000 lien on your home's title because your contractor never paid for the boxes and doors. You had no contract with the supplier, and you paid your contractor every draw on time.

Here's where the $6,000 earns its keep. Under Ontario's Construction Act, your personal liability to valid lien claimants is tied to the holdback you were required to retain. The supplier's claim is $9,000, but the fund you're answerable for is the $6,000 you kept back. You don't release that money to the contractor while the lien sits on title, and this is the moment to call a construction lawyer, before any more money changes hands, so the lien is dealt with through the process the Act sets out.

Now imagine a neighbour who did the same renovation and paid all $60,000 as each invoice arrived. Their liability is still measured by the $6,000 they were supposed to keep back, but that money is already in the contractor's account. To clear the supplier's claim against their home, they may have to find up to $6,000 more out of pocket. It's the same kitchen and the same supplier, and one homeowner pays twice while the other doesn't.

Some homeowners finance a kitchen like this through home equity, and the draw schedule matters there too.

If you're weighing how to fund a renovation, our guide to HELOCs explained covers how draws from a line of credit line up with progress payments.

In Ontario, the holdback is no longer your deficiency fund

Many homeowners treat the holdback as leverage: keep the 10% until the contractor comes back to fix the sticky drawer or the chipped tile. In Ontario, that approach largely stopped working on January 1, 2026. As Loopstra Nixon explains, owners lost the option of giving a notice of non-payment of holdback. Holdback money can now be used against a contractor's claims only in the narrow situation where the contract has been abandoned or terminated and the lien period has expired.

So if you want a reserve for deficiencies, build one into your contract as its own line: a clearly defined amount, tied to a written deficiency list, released when those items are done. Keep it separate from the statutory holdback, which has its own job and its own release date. The same January 2026 amendments also made annual holdback release mandatory on Ontario contracts that run longer than a year. That's worth knowing if your project is a large addition or a whole-home renovation that crosses an anniversary.

Contract wording has been doing a lot of work for Ontario homeowners this fall.

Our earlier piece on renovation contracts signed before September 8 covers what your province says about mid-job price increases, which pairs naturally with a well-drafted payment schedule.

No holdback, but a clock you still need to watch

If you're renovating in Quebec, the holdback table above doesn't describe your situation, and that's by design. Quebec's civil law has no statutory holdback. Instead, the people who work on or supply materials for your renovation hold a legal construction hypothec, a security right against your property for the value they added to it.

The timing is what homeowners need to keep in mind. As the Association des consommateurs pour la qualité dans la construction explains, the builder must register the hypothec at the Registre foncier du Québec within 30 days after the end of the work. To keep it alive, they must then register a prior notice or publish an action against the owner within six months after the end of the work. The hypothec also requires that the work actually added value to the building.

Dénonciation is your early-warning system

Quebec gives homeowners a different tool in place of a holdback: knowing who's on your job. A subcontractor or supplier who didn't contract with you directly must dénoncer their contract to you in writing, giving the approximate value and their potential right to a hypothec, before doing the work. When a dénonciation arrives, you know exactly who could later make a claim against your home, and you can make sure they're paid, for example by asking for proof of payment or paying jointly, before you settle the final invoice.

Quebec clients also have a separate right to hold back a sum sufficient to correct defects or poor workmanship. That comes from the law of contracts rather than lien law, and it's worth knowing when the final walkthrough turns up problems.

Put the holdback in the contract, not in a conversation

The easiest time to handle the holdback is before any money moves. Alberta's consumer guidance on hiring a contractor recommends that your contract include a clearly itemized payment schedule that shows any holdback provisions. That's sound advice anywhere in Canada. When the percentage, the draw stages and the expected release date are written into the schedule, nobody is surprised when draw one comes in 10% lighter than the invoice.

A few practical details make the release smoother later:

• Name the statute and the percentage in the payment schedule, so the holdback reads as a legal requirement rather than a negotiating position.
• Tie each draw to a stage of work you can see and photograph, since the holdback is calculated on work as it's actually supplied.
• Agree on how completion will be recorded, such as a signed note or an email confirming the last contracted item is finished, so both of you are counting from the same day.
• Ask your contractor for a list of major subcontractors and suppliers. It makes a later lien far easier to understand, and in Quebec it tells you whose dénonciation to expect.

When a lender is advancing the money

If your renovation is funded by a construction mortgage or staged advances, your lender may handle the holdback for you. In British Columbia, for example, the Builders Lien Act allows a savings institution that disburses the mortgage money to retain the holdback on the owner's behalf. Ask your lender at the outset whether it holds back from each advance, so you aren't holding back twice or not at all.

A tariff surprise on cabinets or vanities is one more reason to keep your payment records tidy while the kitchen comes together.

Our report on the 25% surtax on imported wood cabinets and vanities explains how it's been lifting renovation quotes this year.