Holdbacks

There are three types of holdbacks:

1. Builders Lien Holdback — This type of holdback is intended to provide homeowners with protection should sub-contractors or suppliers place liens against the property to secure payment for work performed, and who may not have been paid by the General Contractor, for their services. This allows a period of time, after the project is substantially completed, for them to make any required claim. At times, the general contractor will arrange for these funds to be held in trust by a lawyer. Where there are no sub-contractors or suppliers involved with the project, this requirement will not apply.
   Note: The Builders Lien Holdback funds cannot be used to correct deficiencies. Each province has its own regulations regarding this type of holdback.Verify with your Provincial Authority for such rules and/or regulations in your respective area.

2. Deficiency Holdback — When a project is substantially complete, there will often be a number of items that are incomplete and/or which may need to be corrected. It is a standard procedure to holdback a reasonable amount of money (e.g. cost per item or a percentage of the total cost of the project) to cover the cost for these items. Once these items have been satisfactorily completed, complete payment is forwarded to your contractor.

3. Seasonal or Delivery Holdback — Depending on the time of the year (season) that your project is carried out, there may be items that cannot be completed (i.e. exterior painting, landscaping, etc.) and/or there may be products/material that are not readily available. In these situations, it is standard procedure to holdback payment(s) equalling the cost of the items remaining to be completed.