What percentage must be withheld as a Statutory Holdback during payment to a contractor?

In construction contracts, the statutory holdback is a percentage of the payment that must be retained to ensure that work is completed satisfactorily and to protect against claims such as liens from subcontractors and suppliers. In Ontario, the Construction Act stipulates that a holdback of 10% is mandatory for payments made to contractors. This percentage serves as both a financial incentive for contractors to complete their work on time and ensures that there are funds available to address any potential disputes or claims that might arise during the project.

The 10% holdback applies specifically to the value of work completed and is usually released once the project is completed and all conditions of the contract have been met, including the resolution of any liens or claims. This statutory requirement helps maintain fairness in the construction process and ensures accountability among all parties involved.

Understanding the significance of the holdback and its statutory nature is crucial for compliance with legal requirements in construction projects.