A holdback is money we are holding in trust for you until you have met a release condition.
What is a holdback?
A holdback is an amount of money held in trust and released when a term of a contract has been met.
Holdbacks are meant to ensure you do the things you agreed to into your contract. We hold some of your money in trust until you have proven that you have done the task in question.
An example might be that a seller agrees to pay for the professional cleaning of the house before they move out. The buyer doesn’t completely trust the seller, and asks for a holdback of $1,000.00. If the seller can prove to the buyer that she had the property professionally cleaned, she gets the $1,000.00. If not, the $1,000.00 is given to the Buyer, who can use it to pay for her own cleaner to come to the property.
Some common examples of holdbacks include holding money to:
- ensure you pay your final meter readings
- prove that you have paid your property taxes
- make sure your final strata fees are paid
- pay for cleaning or repairs you were supposed to do, but didn’t do
How do I know if I need one?
When you buy or sell property, you make a contract with the other party that sets out the agreements you have with each other.
You might need a holdback if:
- your contract requires one
- you are supposed to pay a bill for some work on the property before closing
- the utilities for the property are paid quarterly or semi-annually
- there are outstanding taxes or utilities owing
Certain items such as taxes, utilities and strata maintenance fees might have automatic holdbacks created for them because they affect both the buyer and the seller.
How do I get my holdback funds back?
You have to be able to prove that you have done the thing you agreed to do. If the holdback is set out in your contract, you need to follow the terms set out in your contract.
- provide proof of payment of the outstanding bills
- show documentation proving the work you were required to do
- provide pictures of repairs you fixed, or areas you cleaned
Generally speaking, if there is no provision in the contract for a holdback, one cannot be imposed. If there is no provision in the contract, you may be able to come to an agreement about
Once you prove that you have done the thing you agreed to do, the holdback funds should be released to you.
Your notary will tell you if a holdback is required. Contact us if you have questions about your contract.June 9, 2020 10:32 pm