The Money You Hold Back | The 10% Holdback
The 10% Holdback
Section 4 is the shortest important sentence in the Act. Ten percent of every payment stays behind, and the way it is calculated catches people out.
What section 4 actually says
The payor must retain a holdback equal to 10% of the greater of two amounts: the value of the work or material as they are actually provided under the contract, and the amount of any payment made on account of the contract price.
The phrase that matters is the greater of. If a trade has done $100,000 of work and you pay them $60,000 this month, the holdback is 10% of the larger figure, so $10,000. The Act ties the holdback to work performed, which stops an owner from shrinking the protected fund by simply paying less.
This runs on every progress payment under any construction contract in BC. There is no small-project exemption, so a four-unit multiplex is covered the same way a tower is.
Who you hold back from, and who you do not
The holdback is retained by whoever is making the payment, at each level of the chain. The owner holds back from the head contractor. The head contractor holds back from each subcontractor. Each of those is a separate holdback obligation.
You do not retain a holdback from workers, from suppliers of material only, or from architects and engineers. Those parties may still have lien rights, but the money you keep back is not taken out of their cheque.
The practical consequence for an owner is that retaining the holdback from your general contractor does not automatically protect you from a subcontractor's claim. It protects the fund, and the fund is what a claimant looks to first.
Why paying in full is the expensive mistake
An owner who pays the general contractor 100% of a draw has not saved any money. They have released the fund that exists to satisfy an unpaid subcontractor's claim.
If that subcontractor then files against your title, you can end up paying twice: once to the general who did not pass the money down, and once again to clear the lien. Retaining the statutory 10% is what caps that exposure.
This is the single reason the holdback exists. It is a fund held for people you may have no contract with at all.
Best For
- ✓ Owners paying a general contractor directly on a small multiplex build
- ✓ Anyone running progress draws against a construction loan
- ✓ Self-managed builds where no payment certifier is involved yet
Usually Fails When
- ✕ You calculate 10% of the payment when the work performed was worth more
- ✕ You pay a draw in full because the trades seem to be getting paid
- ✕ You assume a no-lien clause in the contract replaces the holdback
What To Verify Before Spending Money
- → That each draw retains 10% of the greater of work performed or amount paid
- → That the holdback is recorded separately rather than left in a general balance
- → That your lender's draw schedule accounts for the retained 10%
Frequently asked questions
How is the 10% builders lien holdback calculated in BC?
The holdback is 10% of the greater of two figures under section 4 of the Builders Lien Act: the value of the work and material actually provided, or the amount of the payment made on account of the contract price. If a trade performed $100,000 of work and you pay $60,000, the holdback is $10,000 rather than $6,000, because the Act uses the larger of the two amounts.
Does the 10% holdback apply to small residential projects?
Yes. The BC Builders Lien Act contains no small-project exemption for the section 4 holdback, so a fourplex or a single-family build is covered on the same terms as a large commercial project. Any construction contract in British Columbia with progress payments carries the 10% holdback obligation on each payment made.
Who is required to retain the builders lien holdback?
Whoever makes the payment retains the holdback, at every level of the contracting chain. The owner retains 10% from the head contractor, and the head contractor in turn retains 10% from each subcontractor it pays. These are separate obligations under section 4, so retaining your own holdback does not discharge the general contractor's duty to retain theirs.
Do you hold back 10% from suppliers and engineers?
No. Section 4 of the BC Builders Lien Act does not require a holdback to be retained from workers, from those supplying material only, or from architects and engineers. Those parties can still have lien rights under the Act, but the 10% is not deducted from what you pay them on a given invoice.
What happens if I pay a contractor the full draw with no holdback?
You release the fund that exists to satisfy claims from people further down the chain. If a subcontractor was not paid by your general contractor and files a claim of lien against your title, you may end up paying twice: once to the general and again to clear the lien. Retaining the statutory 10% is what limits that exposure.
Is the holdback the same as a deficiency holdback?
No. The 10% builders lien holdback is a statutory requirement under section 4 of the Builders Lien Act and exists to protect unpaid trades. A deficiency holdback is a contractual amount retained until defects are fixed. They serve different purposes and a contract may provide for both, so check whether your agreement stacks one on top of the other.
Does a no-lien clause remove the need for a holdback?
No. Section 42 of the Builders Lien Act makes void any agreement that purports to waive the operation of the Act, so a no-lien clause does not stop a subcontractor from registering a claim. Relying on that clause instead of retaining the 10% holdback leaves you with neither the contractual protection nor the statutory fund.
Can the holdback be reduced by agreement with the contractor?
No. The 10% figure in section 4 is a statutory minimum and section 42 voids agreements that purport to waive the Act. Parties may agree to retain more than 10% as a matter of contract, but an agreement to retain less does not remove the obligation or protect the owner from a claim by an unpaid subcontractor.
Official Sources Referenced
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