Toronto Condos: What is a Holdback?
May 12, 2011
So what happens if between the time that you purchased your new home/condo and the time that you actually close on it there is damage done to the property you’re looking forward to calling home? Well, the best thing is to have your lawyer hold back an agreed amount of funds from the total amount owing from the purchase price until the repairs have been completed to the satisfaction of all parties or other resolution of the deficiency.
An example of this would be… let’s pretend that in the condo that you have just bought, there has been water damage due to either a leak above or maybe a leaky washing machine in your soon to be suite since you last saw the suite but before closing. Obviously you want to have the damage repaired and you don’t want to pay for it. Let’s say the owner is willing to fix the damage prior to the closing date… of course, you’re going to want some form of formal confirmation that the repairs have been completed… and to your satisfaction. The best protection for you as a buyer is to instruct your lawyer to hold back some money from the purchase price until you have satisfied yourself with the repairs and that you won’t be held responsible for an damages that may have been caused to other suites in the building. Once you’re satisfied, the funds are released.
Other reasons for instructing your lawyer to hold back funds could be to ensure that a future special assessment is paid or that a final utility (hydro/gas) bills and any arrears are paid in full after the time of closing otherwise these can become the responsibility of the new owner.