Construction Act Holdback in Ontario: The 10% You Now Get Back Every Year

The Construction Act holdback used to be money you saw at the end of a project. Sometimes it arrived years after your crew had packed up. Since January 1, 2026, that is no longer the rule in Ontario. Owners must now release accrued holdback every year on the contract anniversary. The same amendments also tightened the clocks that decide whether your invoice is paid in 28 days or sits in an inbox until spring.

The operator consequence is immediate. A subcontractor who does not understand the new proper-invoice rule, the annual release window and the 60-day lien deadline is leaving 10% of every contract in someone else’s account. Worse, he may lose the legal right to recover it. Consequently, the paperwork discipline that used to be optional on small jobs is now the difference between being paid and being owed.

What the Construction Act holdback actually is

Under section 22 of the Act, every payer on an improvement must hold back 10% of the value of the services and materials supplied. The owner holds it back from the general contractor. The general holds it back from each sub, and so on down the pyramid. Its purpose is security. If a trade further down is not paid and registers a lien, the holdback is the fund that lien attaches to.

That 10% is not a discount, a deposit or a negotiating position. It is trust money. The 2026 amendments made the express trust treatment of holdback clearer. In practice, a general who spends the holdback on payroll is spending money the Act says belongs to the trades below him. The operators who get burned are the ones who quote as if the full contract value will arrive on completion. Then they discover that 10% is legally sitting somewhere else.

What changed on January 1, 2026

Two bills came into force together. Between them, they rewired the timing around the Construction Act holdback and progress payment. The table below shows the pieces that matter to a small contractor or sub.

Rule	Before January 2026	Now
Holdback release	At substantial performance or completion, unless the contract chose annual or phased release	Mandatory annual release of all accrued holdback on each contract anniversary
Release mechanics	Contract-specific	Owner publishes a Notice of Annual Release within 14 days of the anniversary. Payment follows between day 60 and day 74 unless a lien is preserved
Flow-down of released holdback	Contract-specific	Contractor must pass the sub’s share down within 14 days of receiving it
Proper invoice	Owner could reject a deficient invoice at any point, restarting the clock	Invoice is deemed proper unless the owner gives written notice of the deficiency within 7 days
Owner payment deadline	28 days from proper invoice, or notice of non-payment within 14 days	Unchanged, but harder to reset because of the deeming rule
Flow-down of progress payment	7 days after the contractor is paid	Unchanged
Adjudication window	Closed once the contract was complete	Open until 90 days after completion, abandonment or termination
Adjudicators	Roster only, through the authorized nominating authority	Roster or a private adjudicator the parties agree on
Lien deadlines	60 days to preserve, 90 days to perfect	Unchanged

The transition rule that catches people

For contracts signed on or after January 1, 2026, the first annual release falls on the first anniversary, so during 2027. For contracts signed earlier, the first release is deferred to the second anniversary after the amendments. That also lands in 2027. Either way, 2027 is the year the annual release cycle starts across Ontario. The projects that have not built a notice-and-pay routine by then will find out the hard way.

Where the Construction Act holdback goes wrong on real jobs

Take a drywall subcontractor in Hamilton on a 40-unit townhouse build. Her contract with the general is $220,000, so $22,000 in holdback accrues over the job. In the old world she would invoice monthly and get paid 90% each time. Then she would chase the last $22,000 whenever the general felt like certifying the subcontract complete. Under the new rules, the owner must publish an annual release notice and pay within the 60-to-74-day window. The general must then pass her share down within 14 days.

However, none of that happens automatically for her. If she has not submitted proper invoices, the general has no clean record of what accrued. If another trade registers a lien before day 60, the release stalls. Furthermore, if she has a genuine dispute about the amount, the 90-day adjudication window is now her fastest route, but only if she starts it in time. Operators who keep every invoice, notice and payment date in one place can act inside these windows. Operators working from a phone’s photo roll cannot. With SendWork attaching each invoice and its paid date to the job record, the date that starts a 28-day or 60-day clock is on file rather than reconstructed from memory.

The 60-day lien deadline is the one that ends everything

The Act gives you 60 days to preserve a lien by registering it against title. The clock runs from your last day of supply or from publication of substantial performance. You then have a further 90 days to perfect it by starting an action. Miss the 60 days and the lien is gone, along with your claim on the Construction Act holdback fund. Adjudication is fast and prompt payment is helpful. Neither replaces a lien as security against an owner who simply refuses to pay.

Our read is that the annual release will improve cash flow for trades on long projects. It will also expose weak record-keeping faster. The release notice names an amount and a date. If your own records cannot confirm that amount, you are negotiating from the general’s spreadsheet, not yours.

The operator checklist

• Diarize every contract anniversary on jobs that will run more than a year. Expect a release notice within 14 days of it.
• Submit a proper invoice every cycle with the fields the Act requires, and keep the delivery record. The 28-day clock starts on delivery, not approval.
• Watch the 7-day deficiency window. If no deficiency notice arrives, the invoice is deemed proper and the clock is running.
• Track holdback accrued per job as a separate line, so you know what the annual release should contain.
• Know your last supply date on every job. The 60-day preservation window runs from it.
• Do not let completion close the file. You now have 90 days after completion to start an adjudication.
• Check the transition rule on legacy contracts. Projects that started before October 2019 still run on the old timelines.

Construction Act holdback: the operator takeaway

The 2026 amendments moved the Construction Act holdback from a distant, end-of-project event to an annual obligation with fixed dates. The deemed-proper invoice rule also removes the old excuse for delay. That is good for trades, provided their own records are strong enough to use it. For most small operators, the priority is not learning adjudication procedure. It is getting a proper invoice out on time and knowing which day started which clock. A clean invoicing rhythm also keeps the GST/HST side straight, which is the other place Ontario contractors get caught.

The statute itself, including the holdback, prompt payment and adjudication parts, is published on Ontario’s e-Laws site under the Construction Act. Any figure or deadline in this article should be checked there before you rely on it for a specific dispute.

What can wait is the fine print on private adjudication and multi-contract consolidation. Those matter on large projects with lawyers on both sides. The anniversary date, the proper invoice and the 60-day lien window matter on every job, including the small ones.

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