A holdback clause in a real estate transaction is a provision in the contract that allows the buyer to withhold a portion of the purchase price until certain conditions are met by the seller. The purpose of a holdback clause is to ensure that certain obligations are completed by the Seller. These obligations may include cleaning, repairs, or any other item that the seller must complete.

Whether you’re a buyer or a seller, holdbacks can play a critical role in ensuring a seamless transaction. For buyers, the peace of mind that comes with a well-drafted holdback can be invaluable. This means that any issues found during inspections will be properly addressed. However, not all holdback clauses are created equal. Without a clear and enforceable holdback, buyers could be left out in the cold if sellers fail to make necessary repairs. By understanding the nuances of holdbacks, both parties can rest assured that their interests are protected.

How Holdback Clauses in Real Estate Transactions Work

A holdback clause provides security to the buyer by allowing a specified amount of funds from the purchase price to be held back until predetermined obligations are met. For example, if roof repairs have been requested as part of the purchase agreement, then this sum can safely remain in trust with either party’s lawyer until completion is verified. This helps guarantee that all promised services will take place before full payment must be released.

What are the potential risks associated with a holdback clause?

If you’re purchasing a home with a holdback clause, it’s essential to read the fine print carefully. The clause should specify the reasons for a holdback, the amount of the holdback, and the date by which the work must be completed. Ignoring the details of the holdback clause may result in legal issues down the road. For example, if a seller completes repairs deemed inadequate by the buyer, disagreements may arise about how to proceed with the holdback funds. As with any legal document, it’s essential to consult with an experienced real estate lawyer or real estate agent to ensure you understand the full scope and effect of the holdback clause.

Holdback Clause Example for Repairs

Property inspections can reveal some surprises, from small repairs to major renovations. Luckily, there’s a solution for when a seller can’t complete the repairs before closing. The Buyer can use a holdback clause to withhold a portion of the purchase price until the repairs are completed. This win-win solution ensures both parties can move forward with confidence.

Need an example? Here’s one: let’s say a property inspection revealed a leaky roof. The seller agrees to a holdback clause where $5,000 of the purchase price is withheld until the roof is fixed. Now, the buyer can close on time with peace of mind, and the seller has the time they need to complete the necessary repairs.

Holdback Clause Example for Cleaning

Let’s face it, no one likes moving into a dirty house. But did you know that sellers aren’t required to clean the property before handing over the keys? That’s why buyers may want to consider including a holdback clause in their contract. By doing so, they can ensure that the seller’s obligation to clean is secured.

To ensure a spotless home, the buyer may insist on a cleaning holdback clause in their contract. The clause requires the seller to have the carpets professionally cleaned before handing over the property. Once complete, the seller must provide the buyer with a receipt as proof. The buyer’s lawyer holds back a certain amount of money until this evidence is provided. If the seller fails to provide proof by the set date, the holdback is released to the seller. It’s a smart way to ensure both parties follow through on their promises.

Holdback Clause for Real Property Report

As a buyer in Alberta, you deserve to know exactly what you’re getting into. That’s why you’re entitled to a real property report, a survey that outlines any issues or restrictions on the property you’re purchasing. And if the seller can’t provide that report before closing day, you have options. Depending on the situation, you may be able to insist on a holdback of $1500-$5000 to ensure that all your questions are answered and your investment is protected.


In conclusion, understanding the ins and outs of a holdback clause is essential for both buyers and sellers in a real estate transaction. Holdback clauses are designed to protect both parties by ensuring that agreed-upon repairs or obligations are met before the full purchase price is paid. By understanding the key considerations related to holdback clauses, you’ll be in a better position to make informed decisions about your next real estate transaction. As always, it’s important to consult with an experienced lawyer or real estate agent to help guide you through the process.