Can my lawyer hold funds for repairs after closing?
Lawyer holding your repair money after closing? Here’s exactly how to get it released — fast.
Quick answer
Yes. In Ontario, including Milton, a lawyer can hold funds for repairs after closing — but only when there’s a written agreement or clear legal direction. That money sits in the lawyer’s trust account and is released only on agreed conditions. If you’re a Milton home seller, this affects your net proceeds, your tax reporting, and your timeline for moving on. Know how to control the process or you’ll leave money on the table.
Why this matters for Milton home sellers
You worked to get your home sold. You planned taxes, closing adjustments, and moving costs. When a lawyer holds funds for repairs after closing, your cash flow changes instantly. That holdback can delay your access to final funds. It can also affect capital gains calculations and how you report proceeds to CRA. Milton sellers need clear agreements up front to avoid surprises.
How a lawyer holdback works in Milton, Ontario
- The buyer and seller include a holdback clause in the Agreement of Purchase and Sale (APS) or sign a separate written agreement.
- The seller’s or buyer’s lawyer deposits the agreed funds into their trust account.
- The trust funds are released only on conditions set in writing: receipts for repairs, third-party inspection, time expiry, or mutual instructions.
- Lawyers must follow the written instructions and Law Society of Ontario trust rules. They can’t release trust funds without authority.
That’s the practical path: written agreement → trust holdback → release conditions.
Legal framework and lawyer duties
Ontario lawyers are officers of the court. They:
- Must keep client funds in trust.
- Must follow the retainer and written instructions.
- Must obey the APS and any escrow/holdback agreement.
- Cannot disburse trust funds without authorization.
If you’re a seller, read the APS and your lawyer retainer. If the buyer is holding back money, the seller’s lawyer should demand a written escrow agreement stating who controls the funds and when they’ll be released.
Common holdback scenarios for home sales in Milton
- Final inspection reveals incomplete repairs.
- Developer or builder agrees to post-closing fixes.
- Items promised in the APS aren’t finished at closing (e.g., landscaping, appliances, warranty work).
- Municipal compliance or permit issues that need repair after closing.
In Milton and Halton Region, older homes can trigger last-minute holdbacks when property standards or permit paperwork is incomplete. Expect them. Plan for them.
Drafting the holdback: what sellers must insist on
If a buyer requests a repair holdback, sellers should insist on these clear items in writing:
- Exact dollar amount and the reason.
- Clear release conditions (receipts, inspection certificate, time limit).
- A firm expiry date (30, 60 or 90 days typical).
- Who pays interest on trust funds, if any.
- Dispute resolution: arbitration or mediation steps.
- Retainer terms for the lawyer holding the funds (fees and accounting).
Don’t accept vague language. Vague equals delay and lost cash.
Financial and tax considerations for Milton home sellers
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Net proceeds and capital gains: Your taxable capital gain is based on the final proceeds you actually receive. If a holdback reduces your immediate proceeds but is later released to you, the final amount matters for your capital gains calculation. Keep documentation of the holdback and release.
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HST: Most resale homes are exempt from HST. New homes and substantial renovations may trigger HST implications. A repair-funded holdback rarely changes HST rules — but if the repair money funds taxable work on a new-build or a commercial portion, check with a tax advisor.
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Land Transfer Tax and closing adjustments: Holdbacks don’t change the land transfer tax paid at closing. They do, however, affect your short-term available cash after adjustments and credits are dealt with.
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Receipts and invoices matter. For any tax reporting or future disputes, invoices that match the holdback release conditions are critical.
If taxes matter to you, get a tax advisor or accountant involved early.
Practical release mechanics: what to expect
- Provide the invoices or contractor receipts specified in the agreement.
- Arrange for the buyer (or their lawyer) to inspect finished work, or supply a third-party inspector’s certificate.
- Lawyer confirms conditions satisfied, then disburses funds from trust.
- Lawyer accounts for trust fees and sends final closing statement showing the disbursement.
Timeline note: Trust lawyers will not release funds without signed authorizations and matching paperwork. Expect 7–14 business days after submission, sometimes faster with clear invoices.
What if your lawyer refuses to release funds?
A lawyer cannot unilaterally hold funds beyond the written agreement or retainer. If a lawyer refuses to release funds:
- Ask for the written basis (retainer, escrow agreement, or court order).
- Request a written accounting and the release conditions.
- If unsatisfied, escalate: mediation, then civil claim or application to the court for directions.
- As a last resort, file a complaint with the Law Society of Ontario if you suspect professional misconduct.
Keep records. Digital copies of the APS, retainer, release emails, invoices, and inspection reports are essential.
How a holdback affects your closing day cash flow
Don’t assume “closing = full proceeds.” Holdbacks reduce the immediate net to seller. If you planned to use sale proceeds for moving, buying another home in Milton, or paying taxes, plan for holdbacks by either:
- Negotiating a smaller holdback, or
- Asking the buyer for proof they’ve secured their funds, or
- Structuring a short, defined holdback period.
A controlled holdback keeps your sale clean and predictable.
Negotiation tactics Milton sellers can use
- Offer a lower holdback if the buyer agrees to accept contractor-certified completion within 30 days.
- Offer a partial cash holdback and a performance bond for larger repairs.
- Get a neutral inspector or engineer to certify completion.
Be firm. In Milton’s competitive market, your leverage depends on the listing conditions and how fast you want to close.
Local issues in Milton, ON to watch for
- Municipal permits and property standards in Halton Region can create post-closing obligations. Confirm permits before closing.
- Older Milton homes may require electrical, HVAC, or roofing fixes that trigger buyer holdback requests.
- Local contractors: insist on licensed contractors and itemized invoices to speed release.
Use local knowledge. Buyers and lawyers in Milton understand common red flags. Anticipate them and avoid last-minute holdbacks.
Bottom line: control the trust, control the cash
A lawyer can hold funds for repairs after closing — that’s normal. The difference between a smooth release and a cash nightmare is the paperwork. Written agreement, clear release conditions, and good invoices move money fast. Poor documentation delays funds and creates tax headaches.
If you’re selling in Milton, ON, be proactive. Insist on precise holdback language. Keep copies of every invoice. Get a tax advisor involved if the numbers are material.
Tony Sousa is the Milton real estate advisor who helps sellers structure holdbacks, review legal language, and protect net proceeds. If you want a practical strategy to close on time and keep your money, call or email for a no-nonsense consult: tony@sousasells.ca | 416-477-2620 | https://www.sousasells.ca
FAQ — Quick answers Milton sellers need
Q: Can a lawyer in Ontario hold money without my consent?
A: No. Lawyers must have written authority in the APS, a separate escrow agreement, or a court order. Your retainer also sets terms.
Q: Does a holdback change my capital gains tax?
A: Only the final proceeds matter for capital gains. Keep documentation of holdbacks and releases. Talk to an accountant for specifics.
Q: How long is a reasonable holdback period?
A: 30 to 90 days is typical. Longer requires justification and precise release triggers.
Q: Who pays legal fees for trust accounting?
A: The party whose lawyer holds the funds usually charges retainer/trust fees. Clarify billing in the retainer.
Q: Can I force release of funds faster?
A: Provide exact invoices, a third-party inspection certificate, and a signed release instruction. If the lawyer still stalls, use mediation or court directions.
Q: Does HST apply to repair holdbacks?
A: Generally no for resale homes. HST applies to new builds and certain substantial renovations. Confirm with a tax specialist.
Q: What documents speed up release?
A: Itemized contractor invoices, proof of payment if required, inspection certificates, photos, and a signed release instruction from both parties.
Q: Who should I call in Milton for help?
A: A real estate agent experienced in Milton closings and a tax professional. If you need hands-on help, contact Tony Sousa at tony@sousasells.ca or 416-477-2620.
If you want a checklist to avoid holdback surprises at closing, email tony@sousasells.ca and get a free Milton seller’s closing checklist tailored to your property.
