Last Updated: August 22 2026
If I’m a homeowner in Ontario, can I legally pay a construction final invoice in full on project completion without keeping a 10% holdback?
Caruso Legal Services can help you understand Ontario’s statutory construction holdback rules so you avoid costly breach-of-contract and holdback-related liability. Under the Ontario Construction Act, owners must retain a 10% holdback from payments due until lien claim time expires, and the obligation applies even if the contract says partial payments or payment on completion, plus an owner can be personally liable to lien claimants if the required holdback is not properly kept (see Construction Act, R.S.O. 1990, c. C.30, ss. 22-23). If you’ve already paid in full, get quick next steps on whether you should still secure holdback, document substantial performance, and respond to any lien notices; call (289) 271-0488 to discuss your situation.
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Statutory Required Payment Holdbacks
Why It Is That Paying the Final Invoice In Full Upon Project Completion Is Actually Illegal
There are likely few times when paying an invoice in full is against the law. Indeed, failing to pay an invoice in full is usually against the law by constituting as a breach of contract; however, in the realm of construction or renovation, meaning projects to improve a property, paying in full without retaining a holdback may be, and likely is, unlawful.
Note: Please contact Caruso Legal Services by phone at: (289) 271-0488 to discuss any specific questions that you may have.
The Law
The Construction Act, R.S.O. 1990, c. 30, formerly known as the Construction Lien Act, statutorily requires the owner of a construction project or renovation project involving improvements to property, whether residential, commercial, industrial, agricultural, or other type, to holdback ten (10%) percent from payments due until the expiry of the time in which a lien may be preserved. Furthermore, where a project owner fails to properly holdback payment as statutorily required, the project owner may be held liable for payment to any and all subcontractors, subtrades, suppliers, among others, who were unpaid by the contractor or subcontractors along the chain of supply. Specifically, the Construction Act states:
Holdbacks
Basic holdback
22 (1) Each payer upon a contract or subcontract under which a lien may arise shall retain a holdback equal to 10 per cent of the price of the services or materials as they are actually supplied under the contract or subcontract until all liens that may be claimed against the holdback have expired or been satisfied, discharged or otherwise provided for under this Act.
Separate holdback for finishing work
(2) Where the contract has been certified or declared to be substantially performed but services or materials remain to be supplied to complete the contract, the payer upon the contract, or a subcontract, under which a lien may arise shall retain, from the date certified or declared to be the date of substantial performance of the contract, a separate holdback equal to 10 per cent of the price of the remaining services or materials as they are actually supplied under the contract or subcontract, until all liens that may be claimed against the holdback have expired or been satisfied, discharged or otherwise provided for under this Act.
When obligation to retain applies
(3) The obligation to retain the holdbacks under subsections (1) and (2) applies irrespective of whether the contract or subcontract provides for partial payments or payment on completion.
Permissible forms of holdback
(4) Some or all of any holdbacks may, instead of being retained in the form of funds, be retained in one or more of the following forms:
1. A letter of credit in the prescribed form.
2. A demand-worded holdback repayment bond in the prescribed form.
3. Any other form that may be prescribed.
Personal liability
23 (1) Subject to subsections (2), (3) and (4), an owner is personally liable for holdbacks that the owner is required to retain under this Part to those lien claimants who have valid liens against the owner’s interest in the premises.
Limitation
(2) Where the defaulting payer is the contractor, the owner’s personal liability to a lien claimant or to a class of lien claimants as defined by section 79 does not exceed the holdbacks the owner is required to retain.
Same
(3) Where the defaulting payer is a subcontractor, the owner’s personal liability to a lien claimant or to a class of lien claimants as defined by section 79 does not exceed the lesser of,
(a) the holdbacks the owner is required to retain; and
(b) the holdbacks required to be retained by the contractor or a subcontractor from the lien claimant’s defaulting payer.
How determined
(4) The personal liability of an owner under this section may only be determined by an action under this Act.
As prescribed by the Construction Act, a ten (10%) percent holdback is statutorily required of each party involved in any property improvement project such as construction projects or renovation projects. Accordingly, the project owner must holdback ten (10%) percent from the full payment when paying the general contractor; and subsequently, the general contractor must then do the same when paying subcontractors, and so on throughout all levels within the labour and material supply chain involved with the project. Once the project is finished or once a Certificate of Substantial Performance is issued and the risk of a lien being placed upon the improved property expires, which is typically sixty (60) days afterward, the holdback requirement ends and payment of the holdback money becomes due.
Infrequent project owners as laypeople, such as homeowners, may be unaware that upon completion of a the project work, whether the project involves a pool installation, roofing shingle replacement, landscape upgrades, replacing kitchen cabinetry, basement wall waterproofing, or other improvements and renovations, that the ten (10%) percent holdback requirement is mandated by law. Failure to perform the statutory holdback constitutes as a breach of trust whereas the Construction Act creates a trusteeship and the failure to act in accordance with the trusteeship, the homeowner, among others, may be found liable for breach of trust.
Conclusion
Owners of projects, along with everyone throughout the supply chain, from contractors to subcontractors, and so on, are required to holdback ten (10%) percent of payment upon the completion or issuance of a Certificate of Substantial Completion. Generally, the holdback provision expires after sixty (60) days.
NOTE: A great many online searches such as “lawyers close to me” or “top lawyer in” often highlight an urgency for prompt and competent legal assistance instead of a particular job title. In Ontario, paralegals who are licensed fall under the regulation of the same Law Society that governs lawyers, granting them the authority to represent clients in certain types of litigation matters. Key aspects of this role include advocacy, legal analysis, and procedural expertise. Caruso Legal Services provides legal representation within its licensed authority, focusing on strategic planning, evidentiary organization, and compelling advocacy, all aimed at securing efficient and favourable outcomes for clients.
