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| Balvinder Kumar |
With the most recent changes to the Construction Act that became effective Jan. 1, 2026, an attempt has been made to streamline and broaden the scope of some of the provisions relating to holdbacks, prompt payments and adjudication. These changes were introduced through two bills — Bill 216, Building Ontario for You Act (Budget Measures), 2024 and Bill 60, Fighting Delays, Building Faster Act, 2025 — along with Ontario Regulations 264/25, 265/25, 266/25 and 267/25, which were filed on Nov. 27, 2025. These regulations support the major amendments to the Act introduced through Bill 60. All these regulations either amend or replace O. Reg. 306/18. This article will focus on three major changes that came into force at the beginning of this year.
1. Annual release of holdback and lien period
a. Pre-2026: The Construction Act required the release of the 10 per cent holdback upon substantial performance or completion of the contract.
b. Post-2026: Effective 2026
i. The Act allows the release of the holdback where the owners shall, on each anniversary of the date on which the contract was entered into, publish a notice of annual release of holdback in the prescribed form [s. 26.2(a)]. This notice shall be published no later than 14 days following the anniversary of the effective date of the contract [s. 26.3]. Once this notice is published, the owner shall make the payment of the holdback [s. 26.2(b)]. The owner shall make payment to the contractor of all of the accrued holdback in respect of services or materials supplied by the contractor during the year immediately preceding the anniversary, between 60-74 days after the date on which the notice of annual release of holdback is published [s. 26.4].
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iii. Lien rights do not expire on an annual basis and remain tied to the date when the contract is completed, abandoned or terminated [ss. 31and 33].
iv. The Act also provides for a holdback protection provision. If a contract or subcontract is abandoned or terminated, a holdback shall not be applied by any payer towards obtaining services or materials in substitution for those that were to have been supplied under the contract or subcontract, nor in payment or satisfaction of any claim against the contractor or subcontractor, until all liens that may be claimed against that holdback have expired or been satisfied, discharged or otherwise provided for under this Act [s. 30]. Payers are prohibited from using the holdback for any replacement work or applying the holdback to substitute contractors or suppliers.
2. Prompt payment structure
a. Pre-2026: Did not allow the owner to reject the invoice or make it invalid if it did not meet the necessary requirements under the Act.
b. Post-2026: The amendment sets the deeming proper invoice provision. Proper invoice means a written bill or other request for payment for services or materials in respect of an improvement under a contract, if it contains all the information mentioned in the section and meets any other requirements that the contract specifies [s. 6.1] An invoice that does not meet the requirements referred to in the definition of “proper invoice” under s. 6.1 is deemed to be a proper invoice unless the owner notifies the contractor in writing of the deficiency and of what is required to address it no later than seven days after receiving the invoice [s. 6.2].
3. Adjudication Framework:
The adjudication provisions under Part II.1 of the Act have been amended to widen its scope.
Disputes:
a. Pre-2026: Adjudication was limited to specific non-payment matter disputes only.
b. Post-2026: The adjudication process allows adjudication on an interim basis for any dispute relating to the construction contract between the parties [s. 13.5]. The list of these disputes [s. 19 of the regulations O. Reg. 264/25] includes payment under the contract, including in respect of a change order, payment of a holdback [s. 26 of the Act], scope of work required to be performed under the contract, change in the contract price, an extension of time in the completion of work required to be performed under the contract.
Selection of adjudicators:
a. Pre-2026: Selection of the adjudicators was limited to those registered and certified by the Ontario Dispute Adjudication for Construction Contracts (ODACC).
b. Post-2026: Broadens this to include qualified private adjudicators outside the roster of ODACC provided the private adjudicators are certified by ODACC [s. 13.9 of the Act].
Adjudication process:
a. Pre-2026: Prior to the amendment, the adjudication process could start prior to the completion, abandonment or termination of the contract. This timeline has changed.
b. Post-2026: Pursuant to the amendment’s adjudication process in respect of a contract, the process can now be commenced 90 days after the completion, abandonment or termination of the contract [s. 13.5 of the Act]. In respect of a subcontract, adjudication may commence within 90 days after the earliest of, (a) the date on which the contract is completed, abandoned or terminated [subsection 13.5(3)]; (b) the date on which the subcontract is certified to be completed under s. 33; and (c) the date on which the subcontractor last supplies services or materials to the improvement.
These amendments come with certain transitional rules, and they change the way the construction industry will administer and function. Their impact is yet to be reviewed and analyzed.
Balvinder Kumar practises real estate law (residential and commercial) and is a freelance writer and author with LexisNexis.
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