Ontario Construction Act: Liens, Holdback and Prompt Payment

“Construction Lien Act” or “Construction Act”?

The current name is the Construction Act. Ontario’s reforms changed the statute’s name and modernized lien and holdback rules. Prompt-payment and adjudication provisions came into force on October 1, 2019. Further amendments came into force on January 1, 2026.

The older name remains a useful search phrase, but the page should not imply that a separate “Construction Lien Act 2025” remains in force.

Official sources: Ontario Construction Act, O. Reg. 304/18 and Ontario Dispute Adjudication for Construction Contracts.

Which rules apply to your contract?

Three sets of rules are in play, and the date of the main contract (owner and GC) — or when its procurement started — decides which one governs, even for a sub who signed later:

• Before July 1, 2018: the old Construction Lien Act — 45-day lien deadlines, no prompt payment, no adjudication.
• July 1, 2018 to December 31, 2025: the Construction Act — 60 days to preserve, 90 to perfect; prompt payment and adjudication for contracts procured from October 1, 2019.
• January 1, 2026 onward: the amended Act — mandatory annual holdback release, tighter proper-invoice rules, a 90-day adjudication window after completion, and lien and trust claims combined in one action.

1. Construction liens

A person who supplies qualifying services or materials to an improvement may have a lien under the Act. The lien can operate as a charge against statutory holdback and certain unpaid contract amounts, and it may attach to an interest in the land.

The deadline differs by claimant and can be affected by substantial performance, completion, abandonment, termination, last supply, subcontract certification and annual holdback-release notices.

2. The 10% statutory holdback

Each payer under a contract or subcontract where a lien may arise must retain a basic holdback equal to 10% of the price of services or materials as they are actually supplied. The obligation applies whether the agreement uses progress payments or one payment at completion.

The statutory holdback is not simply a permanent deficiency fund. Contract rights for incomplete or deficient work should be addressed separately.

3. Mandatory annual holdback release

Under the current regime, the owner must address accrued basic holdback after each anniversary of the date the contract was entered into.

4. Proper invoices and prompt payment

Where the prompt-payment provisions apply, a proper invoice starts the statutory payment process. The Act identifies required invoice information and permits contracts to require additional accounts-payable information within statutory limits.

From January 1, 2026, an invoice that does not meet the proper-invoice requirements is deemed proper unless the owner identifies the deficiency and what is needed to correct it in writing within seven days after receipt.

The downstream rules are more detailed when the owner pays only part of the invoice or does not pay. Contractors and subcontractors may need prescribed notices and, in some circumstances, adjudication.

5. Construction trust funds

The Act’s trust provisions are separate from lien rights. In general terms, certain amounts received or owing on account of an improvement are trust funds for the benefit of contractors, subcontractors and suppliers who remain unpaid.

A party can lose the lien remedy and still face or pursue a contract or trust claim. They are different legal routes with different proof and limitation issues.

6. Interim construction adjudication

Adjudication provides a faster, interim-binding process for eligible construction disputes. It is administered by ODACC, Ontario’s authorized nominating authority.

Disputes that may be referred can include:

• valuation of services or materials;
• payment under the contract or subcontract;
• approved, disputed or proposed change orders;
• notices of non-payment;
• set-off and holdback issues identified by the current Act;
• other matters agreed by the parties or prescribed.

The January 1, 2026 regime includes current rules for registry adjudicators and private adjudicators under the Act and O. Reg. 264/25.

7. What an owner should have in the construction contract

• Complete scope, exclusions, allowances and contract-document list
• Proper-invoice delivery address and required information
• Payment dates aligned with lender draw timing
• Statutory holdback shown separately on invoices
• Annual holdback notice and administration responsibility
• Written change-order pricing and schedule procedure
• Evidence supporting each progress payment
• Trust, records and statutory-declaration requirements where appropriate
• Adjudication, court, arbitration and negotiation clauses that do not attempt to waive the Act
• Separate deficiency, set-off, final-payment and warranty provisions

See What Should a Good Construction Contract Include? and Home Construction Loan Draw Schedule.

Contract Centre and related guides

Ontario Construction Act FAQ

Not legal advice. This page is a plain-language overview. Always confirm the current statute, regulations, transitional rules and project-specific deadlines with an Ontario construction lawyer.