Ontario’s Construction Act Amendments Effective January 1, 2026: A Practical Guide
Effective January 1, 2026, there will be significant amendments to the Construction Act coming into effect. Bill 60, Fighting Delays and Building Faster Act, 2025 (“Bill 60”) amends the Construction Act to impose clearer obligations and timelines around holdback release, invoicing, adjudication, and statutory notices. These changes were first introduced through Bill 216, Building Ontario for You Act (Budget Measures), 2024 but have been refined in Bill 60.
The most impactful changes brought about by these amendments will undoubtedly be the new statutory framework for holdback release. However, the amendments will also affect obligations relating to invoicing, adjudication and terminating contracts.
The purpose of this article is to provide a summary of the key amendments coming into force and some practical guidance for owners, contractors and subcontractors.
Mandatory Annual Holdback Release
Under the amended Construction Act, owners must release accrued basic holdback on an annual basis for contracts that extend beyond one year. This replaces the current regime which provides for the release of the holdback after substantial performance of the contract with the option for annual or phased holdback release arrangements.
The key timelines under the new holdback regime are as follows:
a) Owners must publish a notice of annual release of holdback within 14 days after each anniversary of the date the contract was entered into;
b) After publication of that notice, the owner must pay the accrued basic holdback at least 60 days but not later than 74 days after the notice is published provided no lien has been preserved or perfected in that period;
c) Owners will not have the option of giving a notice of non-payment of holdback; and,
d) Contractors and subcontractors must then pay accrued holdback down the chain within 14 days of receiving their annual holdback payment, provided no lien has been preserved in respect of the relevant subcontract.
Transition Rules for Annual Holdback Release
The amendments relating to mandatory annual holdback release apply to all contract entered into after January 1, 2026.
For contracts entered into before January 1, 2026, the first annual release of holdback under the new regime does not occur until the second anniversary of the contract date that follows January 1, 2026. At that first release point, the owner must pay all accrued holdback to date, then continue with annual releases afterward. This transition rule gives existing contracts a one-year runway before the new annual release.
Lien Rights Remain Unchanged
A central concern in the industry was whether mandatory annual holdback release would impact lien rights. The amended statute decouples annual holdback release from lien expiry.
Lien preservation, perfection, and expiry timelines remain anchored to the existing triggers under the Construction Act such as publication of a certificate of substantial performance, completion (or abandonment or termination) rather than annual holdback notices.
This means that early holdback release does not extinguish lien rights relating to work done prior to the holdback release.
Other Notable Changes to the Construction Act
Notices of Termination
The amended Construction Act clarifies that where a contract is terminated, the owner must publish a written notice of termination within 7 days of the termination event. The date of that notice becomes the reference point for calculating lien expiry periods going forward.
Adjudication Timelines
The amendments also clarify adjudication timelines by stating that adjudication is available until 90 days after a contract is completed, terminated or abandoned or, in the case of a subcontract, 90 days after the date of last supply or the date the subcontract is certified as complete.
Proper Invoice Requirements
A “proper invoice” under section 6.1 of the Construction Act now includes any information reasonably required for the owner’s accounts-payable system. Critically, if an owner does not provide written notice of deficiencies in the form of invoice within 7 days of receiving the invoice, the invoice is deemed proper.
Key Takeaways
While the amendments will provide clarity to parties involved in the construction industry, they will almost certainly require owners and contractors to adjust their internal practices, particularly around the release of holdback.
With respect to the annual release of holdback, this should ease cash flow concerns on the part of contractors or subcontractors but could require owners to have to adjust their own projections and lending arrangements to budget for the annual release of holdback. Further, on some projects, the annual release of holdback may require other contractual mechanisms such as deficiency or warranty holdbacks to ensure that the owner is holding enough funds to secure the performance of the work towards the end of the project.
It is important that owners, contractors and subcontractors review their processes and contracts and ensure that training is provided for the new legislative regime.