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Ontario Construction Act: Liens, Holdback and Prompt Payment
Ontario construction law
Liens + holdback + payment
Current January 1, 2026 regime
Ontario Construction Act: Liens, Holdback, Prompt Payment, Trust Funds and Adjudication
Many people still search for the “Construction Lien Act,” but Ontario’s current statute is the Construction Act. It covers much more than liens. It regulates statutory holdback, trust funds, proper invoices, prompt-payment deadlines and interim construction adjudication.
1Current name: Construction Act
2Lien preservation and perfection
310% statutory holdback
428-day prompt payment
5Interim adjudication
SEO and redirect decision:
This is the broad Construction Act overview. Publish it at /construction-act-ontario/. Redirect both older “Construction Lien Act” URLs to this clean page. Keep /construction-lien-in-ontario/ as the separate detailed lien-and-deadlines guide.
Legal warning: this article explains the framework but does not calculate a lien, holdback, prompt-payment or adjudication deadline. Transition rules, contract dates and statutory triggers matter. Contact an Ontario construction lawyer immediately when money, title or a deadline is involved.
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The Free Scan and Full Review assess construction completeness and commercial risk. They do not preserve a lien, issue a statutory notice or provide legal advice.
“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.
LiensSecurity for qualifying unpaid services and materials
Holdback10% retained under Part IV
Prompt paymentProper invoice and payment deadlines
Trust fundsRestricted use of project money
AdjudicationFast interim-binding dispute process
Official sources: Ontario Construction Act, O. Reg. 304/18 and Ontario Dispute Adjudication for Construction Contracts.
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.
60 daysModern general period to preserve after the applicable statutory trigger
90 daysGeneral perfection period after the last possible preservation date
Not an invoice clockThe triggering date can arise from several statutory events
Transition mattersOlder improvements may remain under an earlier regime
The deadline differs by claimant and can be affected by substantial performance, completion, abandonment, termination, last supply, subcontract certification and annual holdback-release notices.
Use the dedicated guide: Construction Lien in Ontario explains preservation, perfection, homeowner exposure, title problems and vacating a lien. It remains separate from this broad Act overview.
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.
| Illustrative invoice | Basic holdback | Amount before other deductions | What still requires checking |
|---|---|---|---|
| $100,000 before HST | $10,000 | $90,000 | HST, deficiencies, prior payments, written lien notices and lender reserves |
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.
Notice
Within 14 days after the anniversary
The owner publishes the prescribed notice of annual release of holdback, Form 6, stating the amount intended to be paid and the intended payment date.
Publication
Construction trade news website
O. Reg. 304/18 requires the notice to be published on a construction trade news website.
Owner payment
At least 60 and no later than 74 days
The owner pays the accrued holdback for the preceding year within the statutory window after publication, unless a preserved or perfected lien prevents release.
Downstream
Contractor and subcontractor payments follow
The Act establishes corresponding downstream holdback-payment deadlines.
Transition rules are technical. Contracts and project agreements already in progress when the new provisions came into force can be affected by section 87.4 and O. Reg. 384/25. Do not assume every pre-2026 contract follows an identical first-anniversary procedure.
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.
7 daysFrom receipt to identify a deficient invoice in writing under the 2026 deeming rule
14 daysOwner’s deadline to give a prescribed notice of non-payment for a disputed proper invoice
28 daysOwner’s general deadline to pay the undisputed proper-invoice amount
7 daysGeneral contractor-to-subcontractor payment deadline after receiving corresponding payment
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.
Contract clause to check: identify where proper invoices are delivered, who receives them, what additional information is required, whether invoices are monthly or milestone-based and who must issue a notice of non-payment.
Does the contract use the correct invoice and payment process?
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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.
Owner trust
Project funds cannot be used inconsistently
Amounts received by an owner for financing an improvement, subject to statutory deductions, can constitute a trust for the contractor.
Contractor trust
Money is held for unpaid downstream parties
Amounts owing to or received by contractors and subcontractors on account of the project can constitute trust funds.
Records
Accounting matters
Contractors and subcontractors have statutory recordkeeping duties relating to trust funds.
2026
Holdback amounts expressly included
The current provisions expressly address holdback amounts owed to or received by contractors and subcontractors.
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.
Interim-binding does not mean meaningless. The decision binds the parties unless the matter is later determined by a court or arbitration, or resolved by written agreement. It can be enforced while the underlying project continues.
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.
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Ontario Construction Act FAQ
Is it the Construction Lien Act or the Construction Act?
The current name is the Construction Act. People still use the older name because liens remain an important part of the statute, but the Act also covers holdback, trusts, prompt payment and adjudication.
How long do I have to register a construction lien?
The modern general preservation period is 60 days after the applicable statutory trigger, followed by a general 90-day perfection period. The trigger and transition rules require legal analysis.
What is the 10% holdback?
It is the basic statutory holdback each payer must retain from the price of services or materials as they are actually supplied where a lien may arise.
What changed on January 1, 2026?
Major changes included mandatory annual release of accrued basic holdback, new proper-invoice deeming rules, express trust treatment of holdback amounts and updated adjudication administration.
What happens if an invoice is missing required information?
Under the current deeming rule, it can still become a proper invoice unless the owner gives written notice of the deficiency and what is needed to correct it within seven days after receipt.
Does the owner always have 28 days to pay?
Where the prompt-payment provisions apply, the owner generally pays the payable amount under a proper invoice within 28 days or gives the prescribed notice of non-payment within 14 days. Holdback requirements still apply.
What is adjudication?
It is a faster, interim-binding process for eligible construction disputes. ODACC administers Ontario adjudications under the Act.
Can a contract waive the Construction Act?
No. The Act states that an agreement is not binding to the extent it provides that the Act does not apply or that its remedies are unavailable.
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.
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Reviewed July 29, 2026. General educational information only. This page does not issue notices, calculate deadlines, preserve liens, commence adjudications or provide legal advice.
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