Closing Holdbacks: Define the Purpose, Release Terms, and Next Steps
What a holdback is intended to do
A negotiated closing holdback keeps an agreed amount from being released immediately while a defined issue is addressed. It can arise in different circumstances, but it is not a universal solution for every defect or dispute. The reason for the arrangement should be clear to the parties.
Put the arrangement in writing
The terms should identify the funds, holder, issue to be resolved, evidence required, release instructions, and what happens if the matter remains disputed. A short informal understanding can leave uncertainty about who decides whether the obligation has been satisfied and how the money may be distributed.
Consider the transaction and financing
A proposed holdback can affect the seller’s proceeds, lender requirements, and other closing instructions. It should be discussed with the relevant parties before completion. A purchaser cannot simply assume the right to retain funds outside an agreed or otherwise lawful arrangement.
Keep the supporting record
Provide the agreement, evidence of the concern, proposed terms, and relevant correspondence. We can review the legal implications and discuss the wording needed for the circumstances. Once an arrangement is signed, keep records of the work or documents needed to implement its release provisions.
Let’s discuss your next step
Contact Maki Law for practical guidance on your property transaction or construction matter.
416-991-4775 · contact@maki.law
136A Avenue Rd, Toronto, Ontario M5R 2H6
MAKI LAW
Address
136A Avenue Rd
Toronto, Ontario M5R 2H6
Contact
416-991-4775
Fax: 416-981-3420
contact@maki.law
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General information only. Contact our office for advice about your circumstances.