Holdback
The BrokerFold Team — Product + Engineering
Last reviewed
A holdback is money kept back — held in a lawyer’s or brokerage trust account — instead of being paid over at closing, released only when defined conditions are met. Real estate uses the word in two distinct senses: negotiated holdbacks that solve closing-day problems in resale deals, and the statutory holdback that construction-lien law imposes on building projects.
The negotiated holdback
It’s the deal-saving tool for “almost done”: rather than delay closing over an incomplete repair or a pending test, the parties agree in writing that a sum stays in trust, what event releases it, who gets what if the event never happens, and by when. Drafting is everything — a holdback without a release mechanism and a drop-dead date just converts a closing problem into a longer trust dispute. Done well, it lets imperfect deals close on schedule with the incentive pointed at whoever owes the fix.
The statutory holdback
Construction-lien legislation in every province requires payers on construction contracts to retain a percentage of each payment for a set period after completion, preserving a fund against which unpaid subcontractors can claim. New-build buyers meet it inside their builder’s paperwork; owners running major renovations meet it directly, and paying a contractor 100% along the way waives none of a subcontractor’s rights against the property. This one is law, not negotiation.
Why it matters for your practice
Holdbacks are how experienced agents keep closings on schedule when reality is late. Knowing to propose one — and knowing that the construction version is mandatory — is the difference between a delayed deal and a managed one.
Frequently asked questions
When would a resale deal use a holdback?
When something is unresolved at closing but not worth delaying for: an unfinished agreed repair, a tenant not yet out, a septic or well test pending, an insurance claim in progress. The lawyers hold an agreed amount in trust with written release conditions; the deal closes on time and the money enforces the promise.
What's the construction lien holdback?
A separate, statutory creature: on construction projects, provincial lien legislation requires the payer to hold back a percentage of each payment (10% in Ontario and BC) for a defined period after substantial completion, protecting subcontractors' lien rights. Owners building or heavily renovating meet it through their lawyer; it isn't optional and it isn't negotiable.
Keep reading
- Real estate trust account A trust account holds other people's money — deposits, rents — separate from a brokerage's own funds, under strict provincial rules and audits.
- Completion vs possession date In BC a sale closes in stages: the completion date moves title and money, the possession date hands over keys, and the adjustment date splits the bills.
- Occupancy permit An occupancy permit is the municipality's sign-off that a building may lawfully be lived in — when it's required and how it differs from condo occupancy.