Construction holdbacks in Quebec

A construction holdback in Quebec is a share of each payment that the client keeps until the work is finished, often 10%. On private jobs, that percentage comes from the contract, not from a statute. The Civil Code lets the client hold back for apparent defects or unpaid subcontractors, and public contracts cap the holdback at 10%.

What is a construction holdback?

On each progress invoice, the client pays for the work done, minus a percentage it sets aside. Those amounts build up from one invoice to the next and are paid at the end, once the conditions in the contract are met.

The holdback is a guarantee. It gives the client some assurance that the work will be finished, that defects noted at acceptance will be fixed and that subcontractors and suppliers will be paid. It also runs down the chain: the owner holds back from the general contractor, who holds back from its subcontractors.

For the contractor, it is money already earned that has not come in yet. On a $200,000 contract with a 10% holdback, $20,000 before tax is waiting at the end of the job. Without close tracking, that balance gets forgotten, especially once the crew has moved on to the next project.

Is 10% required by law?

On private contracts, no. No Quebec statute requires a 10% holdback on a private construction contract. The figure is a common practice that the parties write into the contract or the general conditions. They can agree on 5%, 10%, a holdback that drops as the job goes on, or no holdback at all.

So the percentage, what it is calculated on and the release conditions all depend on what you signed. Read those clauses before you bid, not after the first invoice.

Public contracts covered by the prompt payment regime are different: the holdback is capped at 10% and is only allowed if the contract provides for it. More on that below.

What the Civil Code allows without a clause

Even with no holdback clause, the Civil Code of Québec gives the client two rights.

Article 2111: apparent defects and poor workmanship

The client pays when the work is accepted. At that point, it can keep back enough to cover the reservations made about apparent defects or poor workmanship until they are fixed. It loses that right if the contractor gives it sufficient security. The amount kept should match the reservations, not a percentage picked out of the air.

Article 2123: subcontractors and workers

The client can keep back enough to pay the workers, and the subcontractors and suppliers who gave it notice of their contract, until the contractor hands over a release. That is why your subcontractors' releases matter as much as your own invoices when it is time to collect.

Public contracts: the prompt payment regime

Quebec's Act respecting contracting by public bodies (s. 21.48.19 and following, added in 2022) and the regulation on payments and the rapid resolution of disputes, in force since September 8, 2025, govern payments on certain public construction contracts. A pilot project ran from August 2, 2018 to August 1, 2021. The regime does not apply to private contracts.

According to the Conseil du trésor's guide, the public body pays no later than the last day of the month in which it receives the payment application. The general contractor pays its subcontractor no later than the 5th day of the second month after receiving the application, and a first-tier subcontractor pays its own by the 10th day of the second month.

The holdback to secure performance cannot exceed 10% of the amount due, and only if the contract sets it out with its terms. The general contractor can hold back from its subcontractors, but not at a higher percentage than the one applied to it. It can claim the holdback as soon as the work is accepted. If the public body is slow to accept work that is ready for use, the contractor can send it written notice, and the body then has 60 days to accept the work or explain why it will not.

When and how to claim the release

On private jobs, the release date and conditions are in the contract. The contract may tie payment to acceptance of the work, to the subcontractors' releases and to the legal hypothec deadlines running out. Get the claim ready as the work wraps up, not three months later.

1. Reread the holdback clause: percentage, conditions, required documents, payment deadline.
2. Get the end of work and the acceptance confirmed in writing, with the list of reservations if there are any.
3. Fix the reservations and have them lifted in writing.
4. Collect the releases from your subcontractors and suppliers.
5. Send a written payment application for the held balance, with a holdback statement invoice by invoice, then note the date and follow up when it comes due.

On a public contract under the prompt payment regime, the claim follows the schedule in the contract and the regulation.

How it ties in with the legal hypothec

The holdback and the legal construction hypothec protect the same people from two sides. The hypothec exists without registration and lasts for the 30 days after the work ends (arts. 2726 to 2728 C.C.Q.). To keep it, a notice has to be registered at the land registry and served on the owner. It is extinguished six months after the end of work unless an action is registered. Subcontractors and suppliers who did not contract with the owner must have given the owner written notice of their contract.

For the owner, keeping the holdback while those deadlines run and releases are missing is one way to stay protected. For you, it means the end-of-work date matters twice: it starts the hypothec clock and it brings the holdback payment closer. Our legal hypothec guide covers the deadlines in detail.

Worked example on a progress invoice

Fictional example: a $200,000 private contract before tax, with a 10% holdback in the contract. This month, the contractor bills $50,000 of work. The table compares two ways of calculating the holdback. The contract decides which one applies.

If all four invoices on the contract follow the first column, the total holdback reaches $20,000 before tax by the end of the job.

Be careful with taxes. How GST and QST apply to the held portion depends on your contract and on how you invoice. This guide does not settle that question: when the tax becomes payable and how to record it are things to confirm with your accountant or with Revenu Québec.

How OKTO PSA tracks holdbacks

In OKTO PSA for construction, each contract carries its holdback percentage, the release date and conditions, and the balance to release. Until the date is known, the holdback stays in a "To be set" state, so it cannot drop off the list. The client sees the same holdbacks in their portal.

Progress billing, an option, bills progress line by line. A reminder goes out 30 days after the end of work, a delay you can adjust, which is useful for the legal hypothec. Documents required from subcontractors, such as releases, are tracked in the project, and the project cannot be closed while any are missing. OKTO PSA does not produce legal documents and does not replace your accounting software. See progress billing and holdbacks for the details, and change orders for tracking extras. You can also see what the client sees in the client portal, or try the interactive demo.

This guide is not legal or tax advice. The examples are fictional. For your own situation, talk to a lawyer, your accountant or the body concerned, such as Revenu Québec or the Secrétariat du Conseil du trésor.

Sources: Civil Code of Québec, arts. 2111, 2123 and 2726 to 2728, Act respecting contracting by public bodies, Québec.ca, prompt payment and dispute resolution, Secrétariat du Conseil du trésor, guide to the regulation, Revenu Québec, calculating taxes, checked on October 27, 2026.