Holdback
A holdback is a portion of each progress payment that an owner is required to retain for a set period, protecting against liens from unpaid subcontractors and suppliers.
Also known as: Construction holdback · Lien holdback · Retainage (US)
Holdback is the Canadian mechanism that sits between a contractor finishing work and being paid for all of it. On each progress claim, the owner keeps back a percentage — commonly 10%, though the figure and the rules are set by each province's construction or builders' lien legislation — and releases it after a defined period has passed without a lien being registered.
For the contractor, the practical consequence is cash flow. A job billed to 100% is not a job paid to 100%, and the holdback on a large project can be the difference between a comfortable quarter and a tight one. Tracking it per project, rather than discovering it at closeout, is the whole discipline.
The related trap is billing the holdback twice: once implicitly across progress claims and again as a release at the end. Progress billing that treats holdback as its own line, released once, avoids it.
Canadian holdback and US retainage are not the same thing
In Canada, holdback is set by provincial statute: the percentage, the holdback period and how it is released come from the province's construction or builders' lien act, so it is a statutory obligation rather than a term the parties set. In the US, retainage is mostly a contract term: the parties negotiate the percentage and the release, within whatever limits a state or a public owner sets. The arithmetic looks the same; the source of the obligation does not.
How to book it
Holdback is money earned and invoiced but not yet due. Keep it out of the amount due now on each draw, track it as a separate receivable per job, and bill it once on a release invoice when the holdback period has run. Tax is the part to confirm: in BuildersBridge tax is charged on each draw in full and the release carries none, and when tax on holdback becomes payable is a question for your accountant.
Worked example: holdback on three draws
| Invoice | Before tax | Holdback retained | Due now, with GST |
|---|---|---|---|
| Progress draw 1 | $2,622.08 | $262.21 | $2,490.97 |
| Progress draw 2 | $2,091.08 | $209.11 | $1,986.52 |
| Final draw | $7,837.10 | $783.71 | $7,445.25 |
| Holdback release, after the holdback period | $1,255.03 | $1,255.03 |
| Province | Statute | Basic holdback | Holdback period |
|---|---|---|---|
| ON | Construction Act (Ontario) | 10% | 60 days |
| BC | Builders Lien Act (British Columbia) | 10% | 55 days |
| AB | Prompt Payment and Construction Lien Act (Alberta) | 10% | 60 days |
| SK | Builders' Lien Act (Saskatchewan) | 10% | 40 clear days |
| MB | Builders' Liens Act (Manitoba) | 7.5% | 60 days |
Sources for the provincial rules: ON, BC, AB, SK, MB. Other provinces and territories are not encoded in BuildersBridge yet. This is general information, not legal advice: release timing, notices and lien rights depend on the statute and the contract, so check the official source or a lawyer.
In Canada vs the United States
The American equivalent is retainage, which is contractual rather than statutory in most states — the parties negotiate it. In Canada it is legislated, the percentage and the release period come from your province's act, and they differ between provinces. Check the legislation that applies to your work; this is a general description, not legal advice.
Related
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