What is a holdback of funds for an unresolved deficiency and when does my lawyer use one at closing?

A holdback is an amount of the closing funds your lawyer keeps in trust, rather than releasing in full to the other side, as security for something that has not yet been fully resolved by closing day. Rather than delaying the whole transaction over one unresolved item, the deal proceeds, with the holdback protecting whichever side is exposed until the issue is fixed.

Common uses include holding back enough to cover a mortgage payout that has not yet been confirmed, an outstanding repair or condition the seller agreed to address, or an amount tied to an undertaking that has not yet been fulfilled. The amount is usually calculated to reasonably cover the cost of resolving the issue, plus some buffer, and the holdback agreement should specify exactly what triggers release of the money once the deficiency is actually cleared up. This tool lets lawyers manage a real but narrow risk without treating an otherwise-ready closing as though it cannot proceed, which is why it comes up fairly often in Ontario closings that hit a last-minute snag.