- A holdback is money set aside at or around closing until a condition is met, and the reason determines when it is released.
- Construction law requires payers to hold back 10% until liens expire or are satisfied.
- A buyer from a non-resident seller may hold back 25% of the proceeds (50% for certain property types), less any certificate limit, if no certificate of compliance has been issued.
Few things surprise sellers and buyers more than learning, close to closing, that some of the money will not be paid out right away. A holdback can feel like an obstacle, but it usually exists for a clear reason, and in most cases there is a defined point at which the money is released.
This article explains the common types of holdbacks in an Ontario real estate transaction, why they exist and what typically triggers their release. Your own agreement and facts control the answer, so confirm the details with your lawyer.
What a holdback means
A holdback is an amount that is kept back instead of being paid out in full. Someone, often a lawyer or a brokerage, holds it until a condition is met. Some holdbacks come from a statute. Others are agreed between the buyer and seller, such as money kept back to cover repairs or unfinished work. Those agreed holdbacks are contractual, so the terms of your agreement decide how much is held and when it is released.
Common types of holdbacks
| Type | Why it is held | When it is released |
|---|---|---|
| Deposit held by a brokerage | The brokerage first deducts the commission owing | The balance owing to the seller is released only when the transaction is completed, or with mutual written consent of both parties |
| Construction holdback | Payers on a construction contract hold back 10% of the price of services or materials | After liens have expired or been satisfied |
| Non-resident seller | The buyer may become liable for the seller's tax if no certificate of compliance has been issued | When the CRA issues a certificate of compliance after payment or acceptable security is provided |
| Agreed holdback for repairs or unfinished work | Set out in the agreement between buyer and seller | As the agreement says |
Construction holdbacks
If work was done on the property, such as a renovation or a new build, the Construction Act requires each payer on a construction contract to hold back 10% of the price of services or materials until liens expire or are satisfied. A contractor's lien generally expires 60 days after the certificate of substantial performance is published, or after the contract is completed, abandoned or terminated. The final holdback is paid within 14 days after liens have expired or been satisfied.
The holdback rules were amended recently and further changes have been proposed, so the current version of the Act should be checked for your situation.
Sales by non-residents
If the seller is not a Canadian resident, the sale of Ontario real estate is taxable Canadian property. The seller must notify the CRA on Form T2062 within 10 days of the sale, and late notice carries a penalty of $25 a day, with a minimum of $100 and a maximum of $2,500. The CRA issues a certificate of compliance (T2068) once payment or acceptable security is provided.
Without that certificate, the buyer may become liable for the seller's tax. For that reason, the buyer can hold back 25% of the proceeds (50% for certain property types), less any certificate limit. Sellers who may be non-residents should raise this with their lawyer early, because the certificate can take time.
What to do next
- Ask your lawyer which holdbacks, if any, apply to your deal and who will hold the money.
- Check the agreement of purchase and sale and any amendments for repair or completion holdbacks.
- If work was done on the property, gather contracts and invoices and ask about construction liens.
- If the seller is a non-resident, ask about Form T2062 and the certificate of compliance before closing.
- Ask your lawyer to show the held amount on the closing statements, with the condition for release in writing.
If a holdback is disputed, keep your messages and documents and get legal advice before agreeing to release or keep any funds.
Frequently asked questions
Why is my commission taken out of the deposit?
When a brokerage holds the buyer's deposit in trust, it first deducts the commission owing. The balance owing to the seller may be released only when the transaction is completed, or with the mutual written consent of both parties.
How long does a construction holdback last?
The 10% holdback is kept until liens expire or are satisfied. A lien generally expires 60 days after the certificate of substantial performance is published, or after the contract is completed, abandoned or terminated, and the final holdback is paid within 14 days after that.
Can a buyer hold back money if the seller lives outside Canada?
Yes, where no certificate of compliance has been issued, the buyer can hold back 25% of the proceeds (50% for certain property types), less any certificate limit. The buyer may otherwise become liable for the seller's tax.
Who decides how much is held back for repairs?
Repair or unfinished-work holdbacks are agreed between the buyer and seller, so the amount and release terms depend on what the agreement says. A lawyer can review the wording before you sign.
Sources
- RECO – For the Record: Brokerage leadership edition (October 2025) — reco.on.ca
- Construction Act, R.S.O. 1990, c. C.30 (e-Laws document) — Ontario e-Laws
- CRA – Disposing of or acquiring certain Canadian property — canada.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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