What is a Holdback and How Does it Work in British Columbia Construction Projects?

In construction projects, payments are often structured in stages to protect the interests of everyone involved. One of the key tools used in this process is a holdback, which is a portion of funds withheld from payment until certain conditions are met. At Linley Welwood, our construction lawyers can help you understand how holdbacks apply to construction projects and why they matter. That is why we have outlined some important details about what a holdback is and how it works in British Columbia construction projects.

Learn the answers to some of the most commonly asked questions about builders liens.

How Does a Holdback Work in British Columbia?

A holdback serves to ensure subcontractors, suppliers, and workers are properly paid even if disputes arise. In British Columbia, the holdback must be at least 10% of any progress payments under the contract or subcontract. If the value of work or materials exceeds the contract price, 10% of that value must also be retained. This system is designed to create fairness and accountability throughout the construction process.

Purpose of a Holdback

The main purpose of a holdback is to provide assurance that everyone who contributed to the project receives fair compensation. It creates a safety net in situations where there may be disagreements about payment, incomplete work, or additional costs. Since holdbacks are closely tied to builders liens in British Columbia, contractors and subcontractors gain confidence that proper payment mechanisms are in place.

Release of the Holdback

Once the project or a defined phase of work is completed, the holdback funds can be released; however, it is important to note that this typically happens only after a specific waiting period, which allows time for any lien claims to be filed. If no valid claims are made, the withheld funds are released to the contractor or subcontractor. This process helps ensure that the project closes smoothly, with all parties fairly compensated.

Why Holdbacks Matter in Construction

Holdbacks play an important role in maintaining balance and trust within the construction industry. They reduce financial risk for owners while protecting the rights of subcontractors and suppliers. Without holdbacks, disputes over payment could become more common, leading to delays and strained business relationships.

At Linley Welwood, our lawyers can provide guidance on construction law matters, including holdbacks and their impact on projects. Contact us today to learn more about how we can support you with your construction-related legal needs.