2026 Changes to Holdback – Amendments to the Construction Act

As of January 1, 2026, the Construction Act (Ontario) (“Act”) was amended including, without limitation, as to how basic holdback is dealt with.  This is a significant change that all owners, contractors and subs should be aware of. Below are some of the changes to the Act. 

Mandatory Annual Release of Basic Holdback

• Annual release of accrued 10% basic holdback is now mandatory for contracts longer than one year.  This replaces the prior regime where annual/phased release was optional.
• Owners must publish a Notice of Annual Release of Holdback within 14 days after each contract anniversary.
• Owners must then pay the accrued holdback no earlier than 60 days and no later than 74 days after the notice is published, provided no lien is preserved or perfected.
• No notice of non‑payment of holdback is permitted anymore.
• Contractors and subcontractors must pay the holdback down the chain within 14 days of receipt. Annual release no longer triggers lien expiry.
• Lien timelines remain tied to substantial performance, completion, termination, or abandonment, as before.

Transition Rules for Existing Contracts

• Contracts entered into after January 1, 2026: annual release applies immediately.
• Pre‑2026 contracts: first mandatory annual release occurs at the second anniversary following January 1, 2026, at which time all accrued holdback to date must be released.

Limits on Withholding / Set‑Off Against Holdback Expanded

• Section 30 is amended to clarify that set‑off against holdback is only permitted where a contract or subcontract is terminated or abandoned, and only after lien periods expire.

Adjudication: Narrower Timing, Broader Flexibility

New time limits to commence adjudication

A party must start adjudication no later than 90 days after:

• contract completion, termination, or abandonment, or
• for subcontracts, the later of subcontract completion or last supply.

New Statutory Notices Introduced

Key new notices include:

• Notice of Annual Release of Holdback (new mandatory form)
• Notice of Contract Termination, which must now be published within 7 days of termination

 

It is strongly recommended that owners, contractors, and subcontractors consult with legal counsel to confirm whether new contracts are in conformity with the amendments, as well as seek timely advice when faced with any of the deadlines now implicated – especially annual contract anniversaries.  The new law applies to all pre-2026 contracts starting on their second anniversary following January 1, 2026.

The foregoing should not be considered to be legal advice and should not be relied upon as such. Please consult a lawyer to get advice and an opinion on your unique circumstances.