The last 10% of an Ontario renovation payment has a specific legal job. It is not a thank-you bonus, a contractor loyalty point, or money the homeowner invents after noticing one crooked switch plate. Under the Construction Act, a holdback helps protect the owner and the construction payment chain when lien rights exist.
What the 10% holdback is
Section 22 of Ontario's current Construction Act generally requires each payer under a contract or subcontract where a lien may arise to retain a basic holdback equal to 10% of the price of services or materials as they are supplied. The obligation applies even when the contract uses progress payments or says payment is due on completion.
Swipe to compare
| Amount | Purpose | Common confusion |
|---|---|---|
| Deposit | Funds paid near contract start under agreed terms | Assumed to be the holdback |
| Progress payment | Pays for agreed completed milestones or supplied work | Paid by calendar instead of evidence |
| Contingency | Homeowner budget for uncertainty or approved changes | Handed to the contractor automatically |
| Statutory holdback | Retained against construction-lien exposure | Used as a general deficiency reserve |
A contract should show how the 10% is calculated on each payment and how HST is treated. It should also describe a separate deficiency or closeout process if the parties want one. Asking the statutory holdback to perform every job is like hiring one bucket as accountant, lawyer, and ladder.
Why subcontractors can matter to the homeowner
Construction liens protect people who supply services or materials to an improvement, even when they contract with someone below the owner in the payment chain. A homeowner may have paid the general contractor while a subcontractor or supplier remains unpaid. The holdback is part of the statutory protection for that risk.
This does not mean a homeowner should call every supplier every Friday. It means payment records and statutory steps matter. Use a written contract, identify the contractor's legal name, pay traceably, keep invoices and change orders, and understand who is supplying major work. Cash with no receipt is wonderfully light to carry and terrible at answering questions.
When the holdback can be released
The release date is not simply the day the contractor says the job is done. The Act ties lien expiry and holdback release to defined events and procedures. Those can include certification or declaration of substantial performance, contract completion, abandonment, termination, last supply, and published notices. The applicable route depends on the project.
Ontario amended its holdback and lien rules effective in 2026. Current provisions include specific notice and timing mechanics, and not every old government article or contractor template reflects them. Use the current Act and legal advice for the actual release calculation. A forty-five-day line copied from a 2017 article is not a time machine.
- Identify the contract and improvement covered by the holdback.
- Confirm the event that started the relevant lien-expiry period and whether required notice was published.
- Search title and investigate any written notice or known claim as counsel advises.
- Do not release if a lien has been preserved or perfected unless it has been satisfied, discharged, or otherwise provided for under the Act.
- Document the release calculation and payment.
Substantial performance is not the same as perfect completion
Construction law uses substantial performance as a defined threshold, not a mood. A project can be substantially performed while finishing work and deficiencies remain. The Act also addresses a separate holdback for finishing work supplied after substantial performance. Do not invent the threshold from a percentage typed into the payment schedule.
The contract should still have a practical closeout list: required inspections, ESA or fuel records, manuals, warranties, keys, cleanup, deficiency correction, and final documents. Those obligations sit beside the statutory holdback rules. One does not erase the other.
What not to do with the holdback
- Do not pay it early because the contractor offers a small discount.
- Do not treat it as permission to withhold unrelated amounts indefinitely.
- Do not spend it on a replacement contractor after termination without legal advice; the Act restricts how holdback may be applied while lien exposure remains.
- Do not confuse a warranty claim months later with the statutory lien holdback.
- Do not assume a signed waiver can erase the Act. Construction lien rights are not casual contract decorations.
A payment schedule that stays readable
Tie progress payments to completed, observable milestones. On each invoice, show the gross value of supplied work, approved changes, applicable HST, previous payments, current 10% holdback, and net amount due. Reconcile it to the contract every time. Ten small clear calculations beat one grand finale called balance owing.
Ontario's home renovation consumer guide also emphasizes written contracts, detailed scope, estimates, payment terms, and receipts. Our renovation quote guide covers the contract before work starts; the change-order guide covers changes after it does.
Call a lawyer before the money moves when
- The contract is terminated, abandoned, seriously delayed, or disputed.
- A subcontractor, supplier, or contractor threatens or registers a lien.
- You receive written notice of a lien or a demand involving the holdback.
- The contractor asks for early release, a waiver, a bond, or an unusual holdback arrangement.
- The project is large, phased, longer than a year, or has unclear substantial-performance documentation.
- You want to use withheld money to pay somebody else or correct defaulted work.
The lazy smart move is a short legal review before a risky payment, not a long legal fight after it. Hold the right amount, keep the file tidy, and release it through the current statutory process. The last 10% should be boring money. Boring money sleeps well.
