Deficiency Holdbacks on a New Condo Closing in Ontario: How They Work

Walk into your new condo unit for the pre-delivery inspection, and it's rare that everything is flawless — a scuffed cabinet, a misaligned outlet cover, an appliance that hasn't been tested. Most of these get listed, most get fixed after you move in. But what stops the builder from simply losing interest in the fix list once you've already closed and paid? Often, it's a holdback: an amount of money kept back from the builder at closing until the listed deficiencies are actually repaired.

This article explains how that holdback typically works, what it's meant to accomplish, and — importantly — how it differs from another Ontario holdback concept that sounds similar but isn't the same thing.

Why Money Gets Held Back at All

Once you've closed on a new condo purchase and paid the builder in full, your leverage to get outstanding deficiencies fixed drops considerably. A holdback addresses that imbalance: instead of releasing 100% of the funds at closing, an agreed amount stays with your lawyer (or is otherwise secured) until the listed items are actually repaired, giving the builder a real incentive to come back and finish the work.

Where the Deficiency List Comes From: The PDI

The pre-delivery inspection (PDI) is the walkthrough that happens before you take occupancy, where you and a builder representative go through the unit together and record what isn't finished, working, or otherwise complete. This list becomes the reference point for what the holdback is meant to secure — the documented basis for what the builder still owes you in terms of repair work, separate from the purchase price itself.

Because the PDI list is the foundation for everything that follows, it's worth reviewing carefully and in person rather than treating it as a formality. Items not recorded at the PDI can be harder to pursue later.

How the Holdback Amount Gets Set

There's no single fixed formula that applies to every new condo closing in Ontario — the amount is typically negotiated between the parties' lawyers, often with reference to a reasonable estimate of what it would cost to complete or repair the outstanding items. Because this is negotiated rather than set by a fixed statutory percentage, the amount, and how firmly a builder will agree to it, can vary meaningfully from project to project and from lawyer to lawyer.

This is exactly the kind of detail where having your own lawyer negotiate on your behalf, rather than relying solely on the builder's standard closing documents, makes a practical difference.

Not to Be Confused With the Construction Act Holdback

Ontario's Construction Act also uses the word "holdback" — but for something entirely different. That statutory holdback requires payers on a construction project to hold back a set percentage of the contract price (currently 10% of the price of the services or materials as they're actually supplied, as of mid-2026 — verify the current figure before relying on it) as work is completed, to protect unpaid subcontractors and suppliers further down the payment chain. It has nothing to do with your unit's deficiency list, and the two shouldn't be assumed to work the same way or use the same figures. Your deficiency holdback is a closing arrangement between you and the builder about your unit specifically; the Construction Act holdback is a statutory protection running through the construction payment chain generally.

What It Takes to Get the Holdback Released

• The listed deficiencies need to actually be completed, generally confirmed through a follow-up inspection.
• Both sides, or their lawyers, typically need to agree the work is done before funds are released.
• Any items that turn out to be more complex than expected, or that are disputed, can delay release until they're resolved.
• The mechanics of exactly how and when release happens should be clearly spelled out in your closing documents — worth confirming with your lawyer rather than assuming.

If the Builder Disputes the Deficiencies

Disagreements happen — over whether an item was properly recorded at the PDI, whether a repair actually resolves the issue, or whether something is a deficiency at all versus normal variance in a newly built unit. Where the parties can't agree, resolving the dispute is a matter for the lawyers involved, and can ultimately become a legal dispute like any other contractual disagreement.

Frequently asked questions