Ontario Construction Act: Holdbacks, Prompt Payment and Lien Deadlines (2026)

Ontario's Construction Act controls three things that decide whether a contractor gets paid on time: the 10% holdback, the prompt payment clock that starts with a proper invoice, and the short deadlines to preserve and perfect a lien. The rules changed again on January 1, 2026, most notably with mandatory annual holdback release. This guide covers each rule as the current statute reads, with dated examples.

This is general information, not legal advice. The Act has exceptions, transition rules and contract-specific wrinkles, so talk to a construction lawyer before you rely on a deadline, withhold a payment or register a lien.

What is the Ontario Construction Act and who does it apply to?

The Construction Act (R.S.O. 1990, c. C.30) applies to owners, general contractors and subcontractors on improvements to land in Ontario, including renovations and repairs. It was called the Construction Lien Act until the 2017 overhaul, which added prompt payment (Part I.1, in force October 1, 2019) and adjudication (Part II.1).

The latest amendments took effect on January 1, 2026, from Schedule 4 of the Building Ontario For You Act (Budget Measures), 2024 and the Fighting Delays, Building Faster Act, 2025. Prompt payment and adjudication do not apply to contracts entered into (or procured) before those parts came into force, so on a very old job, confirm which version of the Act governs it.

How does the 10% holdback work?

Every payer on a contract or subcontract where a lien may arise must retain a holdback equal to 10% of the price of the services or materials as they are actually supplied (section 22). The holdback stays in place until the liens that could be claimed against it have expired or been dealt with, or until it becomes payable under the new annual release rules.

A few details owners and contractors often miss:

• It applies at every tier. The owner holds back from the general contractor, the general contractor holds back from each subcontractor, and so on down the chain.
• It applies no matter how you bill. The obligation exists whether the contract uses progress payments or payment on completion (section 22(3)).
• Finishing work gets its own holdback. Once a contract is certified or declared substantially performed, a separate 10% holdback applies to work supplied after that date (section 22(2)).
• It does not have to be cash. Some or all of the holdback can be retained as a letter of credit or a demand-worded holdback repayment bond in the prescribed form (section 22(4)).
• Paying 90% is the safe harbour. A payer can pay up to 90% of the price of what has been supplied without jeopardy, unless it has received written notice of a lien (section 24).

In your books, treat holdback as its own line: a receivable for what you are owed and a liability for what you owe your subcontractors. See our glossary entry on holdback.

When must holdback be paid in 2026?

Since January 1, 2026, holdback is released on two tracks: annually on each contract anniversary, and at the end of the job once liens have expired. The old section 26.1 and 26.2 phased-release provisions and section 27.1 were repealed and replaced by a rewritten section 26.

Annual release (section 26(2) to (7)):

1. Not later than 14 days after each anniversary of the date the contract was entered into, the owner must publish a notice of annual release of holdback in the prescribed form, stating the amount it intends to pay and the payment date.
2. At least 60 days but not later than 74 days after the notice is published, the owner must pay the contractor all accrued holdback for services or materials supplied during the year before the anniversary.
3. The contractor must then pay each subcontractor its share of that year's holdback not later than 14 days after receiving it. The same 14-day rule applies between subcontractors.

The owner does not have to pay the annual holdback if a lien has been preserved or perfected on the contract and has not been discharged, vacated or satisfied. Once that obstacle is gone, the holdback must be paid within 14 days (section 26(7)).

End-of-job release (section 26(8)): any remaining holdback is paid once all liens that could be claimed against it have expired or been satisfied. The owner pays within 14 days of that point, and each tier below pays within 14 days of receiving it.

Worked example: holdback on a $500,000 contract

Here is how the numbers flow on a hypothetical job. Amounts are shown before sales tax; how HST interacts with holdback on your invoices is a question to settle with your accountant and lawyer.

A general contractor signs a $500,000 contract with an owner on March 1, 2026. An electrical subcontractor's work is worth $120,000 of that.

Monthly progress billing. In June, the general contractor gives the owner a proper invoice for $50,000 of work supplied. $20,000 of that is the electrician's work.

Step	Amount
Work invoiced for June	$50,000
Owner retains 10% holdback	$5,000
Owner pays general contractor	$45,000
Electrician's share of the work	$20,000
General contractor retains 10% from electrician	$2,000
General contractor pays electrician (within 7 days of being paid)	$18,000

Annual release. By the first anniversary on March 1, 2027, the general contractor has supplied $300,000 of work, so the owner holds $30,000 of accrued holdback. The electrician supplied $80,000 of that, so the general contractor holds $8,000 for the electrician.

• The owner must publish its notice of annual release by March 15, 2027 (14 days after the anniversary).
• If the owner publishes on March 10, 2027, it can pay the $30,000 no earlier than May 9, 2027 (60 days after publication). The 74-day limit lands on Sunday, May 23, and Monday, May 24 is Victoria Day, so the last day to pay moves to Tuesday, May 25, 2027 (Legislation Act, 2006, section 89).
• If the general contractor receives it on May 15, 2027, it must pay the electrician's $8,000 by May 29, 2027 (14 days).

None of that happens while a preserved lien on the contract is outstanding. Holdback on the final months is released under the end-of-job rules.

What must a proper invoice contain?

A proper invoice is a written bill or request for payment that contains the information listed in section 6.1 of the Act, plus any other requirements the contract specifies. It matters because the 28-day payment clock only starts when the owner receives one.

Under section 6.1(1), a proper invoice must include:

1. The contractor's name and address.
2. The date of the invoice and the period, milestone or other contractual payment entitlement it relates to.
3. Information identifying the contract or other authorization, such as a contract number, contract line item number or purchase order number.
4. A description, including quantity where appropriate, of the services or materials supplied.
5. The amount payable and the payment terms.
6. The name, title, mailing address and telephone number of the person to whom payment is to be sent (or the office or department's name, mailing address and telephone number).
7. Any other information necessary for the proper functioning of the owner's accounts payable system that the owner reasonably requests (added January 1, 2026).
8. Any other information that may be prescribed by regulation.

Three other rules apply:

• Monthly by default. Proper invoices are given monthly unless the contract says otherwise (section 6.3(1)).
• No pre-approval gate. A contract term that makes giving a proper invoice conditional on prior certification by a payment certifier, or on the owner's prior approval, has no force or effect (section 6.3(2)).
• Revisions need the owner's agreement. You can revise a proper invoice only if the owner agrees in advance, the invoice date does not change, and the revised invoice still meets the requirements (section 6.3(5)).

How does prompt payment work in Ontario?

The owner must pay a proper invoice within 28 days of receiving it, and each payer down the chain must pay the tier below within 7 days of being paid. To withhold, a payer must give a timely notice of non-payment in the prescribed form stating the amount and all of the reasons.

Owner to contractor (section 6.4). To dispute any part of the invoice, the owner must give a notice of non-payment within 14 days of receiving it. Any undisputed portion is still due on day 28, less holdback (section 6.2).

Contractor to subcontractor (section 6.5).

• If the contractor is paid in full, it pays each subcontractor whose work was in that invoice within 7 days of receiving payment.
• If the owner pays only part, the contractor pays subcontractors from what it received, within 7 days, following the rateable rules in section 6.5(3).
• If the owner does not pay, the contractor still has to pay its subcontractors within 35 days of giving the proper invoice to the owner, unless it gives them a notice of non-payment that includes an undertaking to refer the matter to adjudication within 21 days.

The contractor's notices are due within 7 days of receiving the owner's notice, or before the 35-day deadline if the owner gave none. Subcontractors paying their own subs follow the same pattern (section 6.6), with a fallback deadline of 42 days.

Interest. Late amounts accrue interest at the prejudgment interest rate under the Courts of Justice Act, or the contract rate if it is higher (section 6.9).

Example timeline. A general contractor gives the owner a proper invoice on October 1, 2026.

Deadline	Date
Owner's deadline for a deficiency notice (7 days)	October 8, 2026
Owner's deadline for a notice of non-payment (14 days)	October 15, 2026
Owner's payment deadline (28 days)	October 29, 2026
If paid October 29, contractor pays subs by (7 days)	November 5, 2026
If unpaid, contractor's fallback deadline to pay subs (35 days)	November 5, 2026

That example assumes the owner received the invoice the day it was given and that no deadline lands on a holiday. To get the dates for your own invoice, including when a deadline falls on a Sunday or a statutory holiday and moves to the next day that is not a holiday, use our free Ontario prompt payment calculator.

What is adjudication and how does ODACC fit in?

Adjudication is a fast, interim dispute process: an adjudicator decides within about a month and the losing party pays within weeks, even if the dispute later continues in court or arbitration. Ontario Dispute Adjudication for Construction Contracts (ODACC) is the Authorized Nominating Authority that administers adjudications and trains and qualifies adjudicators.

Key rules:

• What can go to adjudication. A party to a contract or subcontract can refer a dispute about any prescribed matter, or any matter the parties agree to, to adjudication (section 13.5).
• Deadline to start. For a contract, the notice of adjudication cannot be given more than 90 days after the contract is completed, abandoned or terminated, unless the parties agree otherwise. For a subcontract, it is 90 days after the earliest of that date, the date the subcontract is certified complete, or the date the subcontractor last supplied (sections 13.5(3) and (3.1), in force January 1, 2026).
• Decision. The adjudicator must decide no later than 30 days after receiving the required documents, extendable by up to 14 days with the parties' consent (section 13.13).
• Payment. A party ordered to pay must do so no later than 15 days after the determination is communicated (section 13.19(2)), subject to holdback.

ODACC publishes its fee schedule on its site. Adjudication and liens are separate processes, so ask your lawyer how a pending adjudication affects your lien deadlines.

What are the lien preservation and perfection deadlines?

A lien must be preserved within 60 days of a triggering event, and a preserved lien must then be perfected within 90 days after the last day it could have been preserved. Miss either deadline and the lien expires.

Preservation (sections 31 and 34). You preserve a lien by registering a claim for lien on title in the land registry office, or, where the lien does not attach to the premises (for example, some public land), by giving a copy of the claim to the owner.

The 60-day clock starts on different events depending on who you are:

• General contractor: 60 days after the earlier of publication of the certificate or declaration of substantial performance, or the date the contract is completed, abandoned or terminated. For work supplied after substantial performance, or where there is no certificate, the trigger is completion, abandonment or termination.
• Subcontractor or supplier: 60 days after the earliest of publication of the certificate of substantial performance, the date you last supplied services or materials, the date the contract is completed, abandoned or terminated, or the date your subcontract is certified complete.

Since January 1, 2026, a notice of termination must be published within 7 days after a contract is terminated, and the publication date then counts as the termination date for lien purposes (section 31(6) and (7)).

Perfection (section 36). You perfect a preserved lien by starting a court action to enforce it and, where the lien attaches to the premises, registering a certificate of action on title. The deadline is the end of the 90-day period after the last day the lien could have been preserved.

Example. A drywall subcontractor last supplies on November 10, 2026, and no certificate of substantial performance has been published. The 60-day preservation period runs to about January 9, 2027, and the 90-day perfection period after that to about April 9, 2027. Day counting and any earlier trigger can change these dates, so involve a lawyer well before them.

What tools help you track holdbacks, invoices and lien dates?

Track three things per job: each proper invoice date with its 7, 14 and 28-day deadlines, holdback retained and owed by contract year, and each lien trigger date with its 60 and 90-day deadlines. Any of these options works if someone keeps it current.

A spreadsheet. One row per contract or subcontract with the contract date, each invoice date, amount supplied, 10% holdback, anniversary date and last-supply date. Add formula columns for the deadlines (invoice date plus 28, anniversary plus 14, last supply plus 60, and so on). It costs nothing, and deadline reminders are up to you.

Accounting software. General accounting tools let you post holdback to separate receivable and payable accounts so your balance sheet shows what is owed in both directions. You would still track lien and notice dates separately. Our best accounting software for Canada and best invoicing software for contractors reviews compare the main options.

Trades-specific software. GetMarkup, which is built by Methodical Studio, the publisher of NorthVetted, states that its invoices are formatted to qualify as proper invoices under section 6.1, and its Plus plan includes holdback tracking for Ontario and BC contracts and a lien deadline tracker by province. Plus is CAD $89/month at regular price (Solo is CAD $49/month and a Free plan is $0), plus GST/HST, and new accounts get a 28-day Plus trial with no credit card required. It was showing a 50% introductory discount on the first three months of monthly plans when we checked. We make it, so weigh that accordingly; see GetMarkup vs Jobber vs FreshBooks for how it compares.

Whatever you use, record when you last supplied on each job. If you pay subcontractors, you also need payment records for T5018 reporting.

Before you register or perfect a lien, send or answer a notice of non-payment, or start an adjudication, speak to a construction lawyer. A missed lien deadline cannot be undone.

Sources

• Construction Act, R.S.O. 1990, c. C.30 (Ontario e-Laws), sections 6.1 to 6.9, 13.5 to 13.19, 22 to 27, 31, 34, 36 and 87.4 (checked September 2026)
• Ontario Dispute Adjudication for Construction Contracts (ODACC) (checked September 2026)
• Alberta.ca: Prompt payment rules for construction industry (checked September 2026)
• Saskatchewan Construction Dispute Resolution Office: Prompt Payment Legislation Process (checked September 2026)
• GetMarkup home page (checked September 2026)
• GetMarkup pricing (checked September 2026)