Vancouver Real Estate Buyers Safety: Hold Backs in the Contract of Purchase and Sale

Hold Backs in Vancouver Real Estate

Far too often Sellers in Vancouver agree to do things that they don’t end up doing. In a Vancouver Real Estate transaction this could result in a Buyer being responsible for thousands of dollars in repairs or future payments if a Seller does not do what they agree to do.

A Hold Back is a very good way to ensure that what a Seller agrees to in an Accepted Offer actually gets done.

What is a Hold Back?

A hold back is when the Buyers Lawyer keeps some (or “holds back”) of the money the Buyer is paying the Seller for a specific purpose for a set period of time AFTER the Buyer has bought the property. At the end of the period of time for the Hold Back, the money can be released by the Buyers Lawyer to the Seller if the money is not used for the specified purpose.

Why use a Hold Back?

Often in a Contract of Purchase and Sale, the Seller is responsible for repairs to a property before the Completion Date or payments to a third party after the Completion Date as part of the deal.

A hold back ensures there is sufficient money for any future payments the Seller fails to pay as well as if the Seller doesn’t do the required repairs before the Completion Date. A Buyer does not have to rely on the Sellers word, but can have tangible evidence that money is held by the Buyers Lawyer set aside for the agreed work or payments.

Hold backs can be very good to use with Sellers who are overseas or are difficult find as well as those who have not been acting in good faith. Suing a Seller is VERY expensive and time consuming. It is far easier and simpler to have money set aside when the Contract of Purchase and Sale is negotiated to absolutely ensure the that what the Seller agrees to actually occurs.

Hold Backs are often used in new construction. I’ll discuss Hold backs soon in a series of Videos on how to buy a pre-construction property in Vancouver.

Buying Your First Home? Check out my series of videos for First Time Home Buyers!

Looking for Tips on Selling a Condo in Vancouver? Check out the videos on How to Sell a Vancouver Condo!

I STRONGLY ENCOURAGE comments, questions, and anything else you have to say in the comment section below!


  Comments: 13

  1. I think using Holdback is a great idea. With that buyers can assure that their seller will do whatever they had talked about.

  2. what happens if the buyer holds 10% back to have seller vacate property within 30 days, and before that 30 days the Seller Dies?
    what happens to the $$$.

    BTW, there was an amendment in escrow that said “if buyer passes away prior to the 30 days, the $$ that is held is authorized to go to a “certain Person”… can escrow issue the check? or does it go to probate?

  3. Hi Lauren,

    Good to hear from you and thank you for taking the time to comment.

    In Canada we don’t use the escrow system, so I’m not really sure of the answer to the question.

    I would hate to be in that situation, but it sounds like it could be a real mess.

    What are your thoughts?

  4. What if a seller does everything they’re supposed to, but the buyer doesn’t pay the holdback – and the buyer is a lawyer, so he has control of the funds that are supposed to be in trust?

  5. Hi John,

    Good to hear from you and thank you very much for commenting!

    Please note – I am not a lawyer and I am not giving legal advice.

    My understanding is that the hold back would be a fundamental part of the contract.

    The Sellers Lawyer would presumably receive written evidence of the existence of the hold back upon Completion from the Buyers Lawyer. (implementation of the hold backs are handled by the conveying lawyers/notaries, not us Realtors)

    The hold back funds are held in a Trust account (I probably should mention this in the original post!) and there are only three things that can happen to money held in a lawyers trust account

    1) pay the Seller if they do what the contract states

    2) pay the Buyer if the Seller doesn’t do what the contract states

    3) Paid into court in the event of a legal dispute (Confirm all these details with your lawyer)

    If a Buyers Lawyer refuses to pay the funds as directed by the contract, the Buyers Lawyer runs two risks.

    1) Presumably, the Buyers Lawyer could be in violation of their trust account rules, which if I understand correctly are stringent and could result in serious penalties from the Law Society (?)

    2) the Buyers would be in breach of contract because of their Lawyers failure to release the funds as directed in the contract which would result in the Buyers Lawyer being in breach of their duties to the Buyer under the lawyer client relationship.

    So from the way I see it, if a Buyers Lawyer doesn’t pay the hold back, it would be very expensive and painful for the Buyers and their Lawyer and could quite possibly involve other Lawyers, a Judge, a Court Room, LOTS of stress and overall unhappiness for the Buyers and their lawyer.

    That said I am not a lawyer and I am not giving legal advice, so if you are in this situation or have questions on this type of issue. PLEASE CONSULT A LAWYER!

    What are your thoughts?

    • Bobby Ringuette

      Hi Mike, I’m a builder in BC and we went through this exact scenario. Now the buyers Laywer held back money from the purchase. There was work done by a third party directly paid by the buyer. But held money on our end. The work has been completed yet they are still not releasing money. I feel like the buyer is in breach also should we have had to holdback our money even though the work done wasn’t coordinated by us?

  6. I worked for several financial institutions in last 20 years and buyer cannot act as a lawyer in his/her own transaction as it is a conflict of interest and a risk for financial institution. He/She must use a third party lawyer or financial institution will not release the funds.

  7. Hi Roger,

    Good to hear from you and thank you very much for commenting!

    You bring up a very good point!

    I hope I didn’t create the perception that Buyers should do their own hold back.

    I want to be very specific that the Buyers Lawyer is responsible for the Holdback.

    How did you find my video blog?

    Looking forward to hearing from you!

  8. Hello Mike

    If the seller’s notary authorized releasing the holdback to us, would doing so could prejudice further recovery from our seller. Our building has issues and I am sure they are aware of it.

    Could we still get recovery from them and if so, what are the options to do so? Sue them in court?

    The completion date was 14 months ago and we have since move in shortly after the possession date by the way.

    Not sure what “prejudice further” means in this context.

    Could you clarify?



  9. I am in a situation where I bought a pre-build from a Developer. I had my second walk through and noted further deficiencies, in particular a patio door not being able to lock, the hot and cold lines reversed in a shower. My closing is quickly approaching, can I legally do a holdback. I have emailed the Developer wanting confirmation that these two things have been fixed but I can’t seem to get a response.

    • Hi Chrystal,

      Good to hear from you.

      We can definitely help you with this.

      Give me a call at 604-763-3136 and we can help you with this.


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