10% contract holdback in Quebec: how it works and when it is released

What is a contract holdback?

It is a portion of each payment that the client keeps until an event specified in the contract, for example the acceptance of the work. It is also called a guarantee holdback. Three holdbacks should be distinguished:

• Contract holdback. Source: a contract clause (covered public contracts: regulation, s. 20). Amount: set in the contract (covered public contracts: 10% maximum of the amount due). Release: according to the contract (covered public contracts: as soon as the work is accepted, s. 21).
• Holdback for apparent defects. Source: Civil Code, art. 2111; regulation, s. 22. Amount: a sum sufficient to cover the reservations. Release: after the repairs (regulation, s. 24: as soon as the public body declares itself satisfied).
• Holdback for claims of subcontractors and suppliers. Source: Civil Code, art. 2123; regulation, ss. 25 and 26. Amount: a sum sufficient to pay the claims concerned (Civil Code, art. 2123; regulation, s. 26); section 25 of the regulation also allows withholding an amount already paid to the contractor for work done by a subcontractor. Release: not until the contractor has provided a release (Civil Code, art. 2123).

For the last two, the client cannot withhold if the contractor provides sufficient security (Civil Code, arts. 2111 and 2123; regulation, ss. 22, 25 and 26).

Is the 10% holdback mandatory in Quebec?

No, not on a private contract. The Civil Code contains no holdback percentage. Instead, it sets two basic rules: the client is not required to pay the price before the work is accepted (art. 2111), and the contractor can only demand progress payments if the agreement provides for them, after providing a statement of the amounts paid and still owed to its subcontractors and suppliers (art. 2122).

Subject to the rules for public contracts, covered below, the percentage, the frequency of deductions and the time of release are therefore up to the contract. Read these clauses before signing and simulate them with the contract holdback calculator.

How does the holdback work on a public contract?

Construction work contracts of public bodies that require an RBQ (Régie du bâtiment du Québec) licence are governed by the Act respecting contracting by public bodies (LCOP, s. 3). Its prompt payment rules (chapter V.2) are detailed in the Regulation respecting prompt payment and the expeditious settlement of disputes with regard to construction work (CQLR, c. C-65.1, r. 8.001), in force since September 8, 2025. For the holdback:

• Cap: the public body may withhold part of any amount owed to the contractor to secure performance of the contract, without exceeding 10% of the amount due (s. 20).
• Condition: this right and its terms, including the percentage and the conditions for claiming it, must be set out in the public contract (s. 20).
• Subcontractors: the general contractor may in turn withhold from its subcontractors, without exceeding the percentage applied to it, and only if a written agreement provides for it (s. 20).
• Schedule: the general contractor sends its payment application on the 1st day of the month (a subcontractor, no later than the 25th); the public body may refuse no later than the 21st day and pays no later than the last day of the month of receipt; the general contractor pays its subcontractors no later than the 5th day of the second month following receipt of their application (ss. 5, 10 and 15).

Which contracts are covered? The rules apply gradually based on the contract value (s. 94). Status as of October 13, 2026:

They do not apply to contracts already under way on the date they become applicable to their category (s. 90), nor to contracts entered into in an emergency where the safety of persons or property is at stake (s. 32). Section 4 of the LCOP lists the public bodies: government departments, government agencies, school service centres, CEGEPs, universities, health and social services institutions, among others. Municipalities are not named. Reread the tender documents for your contract; the SEAO guide explains where to find them.

When is the holdback released?

Covered public contract: the contractor may claim the holdback as soon as the work is accepted (s. 21), by including it in a payment application (s. 27). If the public body is slow to accept the work, the contractor may send it a written notice requiring it to do so. The body then has 60 days to accept the work or state its reasons; otherwise, the contractor may claim the amount and the work is deemed accepted (s. 21).

Two exceptions: the body may keep a sum sufficient for reservations about apparent defects, unless the contractor provides sufficient security (s. 22). It may also withhold the entire final payment as long as certain documents are missing, including the CNESST certificate and the subcontractors' final releases (s. 28).

Private contract: the Civil Code sets no date; the contract clause decides. The legal benchmarks are the acceptance of the work, by which the client declares that it accepts the work with or without reservation (art. 2110), the one-year warranty against poor workmanship (art. 2120) and the legal hypothec deadlines covered below. Have the release date or event written into the contract.

What is the legal construction hypothec, and what are its deadlines?

It is a security on the building in favour of the architect, engineer, materials supplier, worker, contractor and subcontractor, for the work requested by the owner (Civil Code, art. 2726). It exists without publication, secures the added value given to the building (art. 2728) and ranks ahead of any other published hypothec for that added value (art. 2952). Its deadlines:

1. End of the work: generally understood as the time when the work is completed and ready to be used for its intended purpose (a concept from art. 2110, whose application to the legal hypothec deadline can be debated: ask a lawyer for advice).
2. 30 days after the end of the work: the hypothec exists even if not published. To preserve it, a notice describing the building and stating the amount of the claim must be registered before this deadline expires and served on the owner (art. 2727).
3. 6 months after the end of the work: the hypothec is extinguished, unless the creditor publishes an action against the owner or registers a prior notice of the exercise of a hypothecary right (art. 2727). The registration may be cancelled if no action has been published within six months of the registration or of the end of the work, whichever is later (art. 3061).

If you did not contract with the owner (subcontractor, supplier), your hypothec is limited to the work, materials or services that follow the written disclosure of your contract to the owner; a worker does not need to disclose theirs (art. 2728). The owner may apply to have the hypothec of a contractor without the appropriate licence cancelled, unless the owner knew (Building Act, s. 50). These deadlines are strict and depend on the end-of-work date: confirm them with a lawyer before acting.

The link with the holdback: at the time of payment, the client may withhold from the price a sum sufficient to pay the claims of the workers and of those who disclosed their contract with the contractor to the client, as long as the contractor has not provided a release (Civil Code, art. 2123).

What are the consequences for invoicing and cash flow?

Fictional example: a $200,000 contract before taxes, invoiced in five payments of $40,000, with a 10% holdback. Each payment leaves $4,000 with the client: you collect $36,000, and $20,000 remains pending until release. If you pay your subcontractors and suppliers on the full amount, you are financing that $20,000. At a fictional rate of 8% per year for six months, that costs about $800, a cost to build into your price (see margin and markup).

On the invoice: show the gross amount of the work, the holdback and the net amount payable, to avoid disputes. On the tax side, Revenu Québec states that the GST and QST on the amount withheld are collected on the earlier of the following dates: the day the amount is paid or the day it becomes due. Have your accountant confirm how it is handled in your books.

How can SubmitX help you?

The contract holdback calculator is free: it calculates the amount withheld on each payment. In SubmitX, the accounting module handles progress billing and holdbacks, with GST and QST (see Features). The trial lasts 7 days, no credit card.

Frequently asked questions

Is the 10% holdback mandatory in Quebec?

Not for a private contract: the Civil Code sets no holdback percentage, it is the contract that provides for it. For a covered public contract, the public body may withhold at most 10% of the amount due, if its contract provides for it (regulation, s. 20).

When is the holdback released?

Covered public contract: the contractor may claim it as soon as the work is accepted (regulation, s. 21). Private contract: according to the contract clause, since the Civil Code sets no date.

What are the deadlines for the legal construction hypothec?

It exists without publication for the 30 days following the end of the work; a notice must be registered before that deadline to preserve it. It is extinguished six months after the end of the work, unless an action is published or a prior notice of exercise is registered (Civil Code, art. 2727).

Sources

• Civil Code of Québec (LégisQuébec, up to date as of August 12, 2026): arts. 2110 to 2123, 2726 to 2728, 2952 and 3061.
• Act respecting contracting by public bodies, CQLR, c. C-65.1 (up to date as of August 12, 2026): ss. 3, 4 and chapter V.2.
• Regulation respecting prompt payment and the expeditious settlement of disputes with regard to construction work, CQLR, c. C-65.1, r. 8.001 (up to date as of June 1, 2026): ss. 5, 10, 15, 20 to 33, 90 and 94.
• Building Act, CQLR, c. B-1.1 (up to date as of August 12, 2026): s. 50.
• Conseil du trésor, guide to the regulation (November 2025): in force on September 8, 2025.
• Revenu Québec, "When the GST/HST and QST must be collected".

Last checked: October 13, 2026 (sources consulted that day). The amounts in the examples are fictional.

This is not legal advice. For your situation, consult a lawyer.