- The key point: your statutory holdback exists regardless of whether you're happy with the work.
- You can generally withhold an amount reasonably connected to the cost of fixing genuinely deficient or incomplete work, provided that: - The work truly falls short of what the contract…
- - Withholding more than the deficiency is actually worth can expose you to a claim for the excess amount, plus potentially interest and costs.
A contractor finishes a job, but the tile is uneven, a system doesn't work properly, or part of the scope was never completed. The natural instinct is to withhold payment for deficient work — and in Ontario, you generally can, but it's worth understanding how this right is different from, and separate from, the statutory holdback the Construction Act already requires.
Mixing these two concepts up is a common and costly mistake. Getting it right protects your ability to get deficiencies fixed without creating unnecessary legal risk of your own.
Here's how the two kinds of "holding back" money differ, and how to approach a deficiency dispute without overreaching.
Two Different Kinds of "Holding Back"
| Statutory Holdback | Contractual Deficiency Withholding | |
|---|---|---|
| What it is | A mandatory percentage retained under the Construction Act | An amount you withhold based on your contract or common-law rights, because of alleged deficient or incomplete work |
| Who it protects | Subcontractors and suppliers further down the chain | You, as the party who hasn't received what you bargained for |
| Is it required? | Yes — it's a legal requirement on contracts for an improvement | No — it's a choice you make in response to a specific problem |
| Can one replace the other? | No — meeting your statutory holdback obligation doesn't excuse you from also withholding a fair amount for deficiencies, and vice versa |
The key point: your statutory holdback exists regardless of whether you're happy with the work. Withholding for deficiencies is a separate, additional step you may be entitled to take on top of — not instead of — the required holdback.
When You Can Generally Withhold for Deficiencies
You can generally withhold an amount reasonably connected to the cost of fixing genuinely deficient or incomplete work, provided that:
- The work truly falls short of what the contract required
- The amount withheld is reasonably tied to the actual cost of the deficiency, not an arbitrary figure
- You've communicated the problem to the contractor rather than staying silent and simply not paying
Courts generally expect a party withholding payment to be able to justify both the existence of the deficiency and the amount withheld — vague dissatisfaction with "the overall job" is a weaker position than a specific, documented list of problems.
Risks of Withholding Too Much
- Withholding more than the deficiency is actually worth can expose you to a claim for the excess amount, plus potentially interest and costs.
- Withholding your entire remaining payment over a relatively minor deficiency can look unreasonable to a court, compared to withholding an amount proportionate to the actual problem.
- Failing to also meet your statutory holdback obligation on top of any deficiency withholding can create separate exposure to unpaid subcontractors or suppliers, regardless of how justified your deficiency complaint is.
A Practical Approach
- Document the deficiency — photos, dates, and a clear written description of what's wrong.
- Get an estimate for the cost to fix it, ideally from an independent source if the amount is significant.
- Communicate in writing with the contractor about the specific problem and the amount you intend to withhold.
- Keep your statutory holdback separate from whatever you withhold for the deficiency itself.
- Get legal advice before withholding a large amount, or before releasing final payment on a disputed project.
Frequently asked questions
Can I just refuse to pay the whole final invoice if I'm unhappy with the work?
Generally, you should withhold an amount reasonably tied to the actual cost of fixing genuine deficiencies, not the entire invoice over a limited problem. Withholding disproportionately can expose you to a claim for the difference.
Does withholding for deficiencies satisfy my statutory holdback requirement?
No. The statutory holdback under the Construction Act is a separate, mandatory requirement that protects subcontractors and suppliers; it isn't satisfied by whatever amount you happen to withhold over a deficiency dispute.
What if the contractor disputes that the work is deficient at all?
This is a common dispute and often benefits from an independent inspection or estimate to support your position. If it can't be resolved directly, it may end up being decided through Small Claims Court, Simplified Procedure, or the Superior Court's ordinary process, depending on the amount involved.
Can the contractor put a lien on my property if I withhold payment for deficiencies?
Potentially, if they believe they're owed money you haven't paid. A construction lien secures a claim to be resolved later — it doesn't automatically mean your deficiency position is wrong, but it does mean the dispute needs to be sorted out, generally through negotiation or in court.
This is a litigation question
Start a file online — flat, published fees, reviewed by a licensed Ontario lawyer before a dollar is owed.