Written by Munera Lawyers
Important amendments to Ontario’s Construction Act, RSO 1990, c. C.30, came into force on January 1, 2026, introducing changes that affect holdback payments, prompt payment obligations, adjudication procedures, and how certain construction claims can be litigated.
These amendments aim to improve payment flow within the construction industry and provide more efficient mechanisms for resolving disputes.
New Requirements for Annual Holdback Releases
One of the most notable changes is the introduction of a mandatory annual holdback release for projects that extend beyond one year.
Under the Construction Act, owners must retain a portion of project funds as a statutory holdback to protect parties who may have lien claims. The amendments now require owners to release holdback funds on a yearly basis rather than waiting until the end of the project.
The new process works as follows:
- Owners must publish a notice of annual holdback release on or shortly after the anniversary date of the contract.
- The notice must be published within 14 days of the anniversary and must identify both the amount of holdback to be released and the expected payment date.
- After publication, parties have 60 days to preserve or perfect any construction lien.
- If no lien is registered within that period, the owner must release the accumulated holdback within the following 14 days.
- Contractors who receive holdback funds must then release the appropriate amounts to subcontractors within 14 days.
These rules apply automatically to contracts entered into on or after January 1, 2026. For contracts entered into before January 1, 2026, the annual holdback release requirement begins on the second anniversary of the contract occurring after the amendments came into force.
Most P3 agreements entered before January 1, 2026, will remain subject to the previous rules about permissive annual holdback release. The annual release of holdback regime will apply to project agreements between the Crown, a municipality or a broader public sector organization and a special purpose entity which are entered into on or after January 1, 2026.
Prompt Payment Regime
Payment must be made within 28 days of receiving a proper invoice, unless a notice of non-payment is issued within 14 days.
Recent amendments clarify how invoices will be treated where they do not strictly comply with the statutory requirements of a “proper invoice.” If an owner receives an invoice that appears deficient, the owner must respond within seven days and advise:
- that the invoice does not meet the statutory requirements; and
- how the deficiency can be corrected.
If the owner does not provide this notice within seven days, the invoice may still be deemed a proper invoice for the purposes of the prompt payment regime. In that case, the owner may be required to comply with the payment timelines set out in the Construction Act.
Because these obligations apply throughout the payment chain, contractors and subcontractors must also monitor invoices and notices carefully.
Construction Adjudication
Adjudication remains a central feature of Ontario’s construction dispute resolution system. The amendments introduce several changes designed to broaden access to the process.
Most notably:
- Adjudicators can now be appointed from both the ODACC registry and qualified private adjudicators approved by the Authorized Nominating Authority.
- Decisions issued through adjudication will now be publicly available, promoting greater transparency within the industry.
- The time limit for initiating adjudication has been expanded. Parties may now commence adjudication within 90 days after the contract is completed, terminated, or abandoned, unless the parties agree otherwise.
For subcontractors, the time limit begins when the earliest of the following occurs:
- the main contract ends,
- the subcontract work is completed, or
- the subcontractor last performed services on the project.
Joining Lien and Trust Claims
Another significant development is the ability to bring construction lien claims and trust claims in the same legal proceeding when both arise from the same set of facts. The amendments now allow courts to consider both claims within a single proceeding, which may improve efficiency and reduce procedural complexity in construction litigation.
Preparing for the New Regime
These changes place greater responsibility on owners and contractors to carefully monitor payment timelines, lien deadlines, and adjudication rights throughout the life of a construction project. Understanding these changes is essential for parties involved in construction projects across Ontario.
Those involved in the construction industry who wish to better understand these changes and their obligations under the amended Construction Act may contact Munera Professional Corporation. Our team regularly advises owners, contractors, and subcontractors on construction disputes, lien rights, and litigation strategy.