In 2017 and 2018, Ontario implemented a major overhaul of its construction lien legislation .[i] In 2018 and 2019, when the various changes came into force, Ontario’s Construction Act (the “Act“)[ii] was substantially changed in an attempt to modernize the legislation and address key industry concerns, primarily delayed payments and project delays (i.e. introducing prompt payment regime and interim adjudication).
While substantial, these changes did not come without challenges. As a result, further updates to the Act and its regulations were required and welcomed by the industry. These new changes were introduced through Bill 216 (Building Ontario For You Act (Budget Measures), 2024) and refined by Bill 60 (Fighting Delays, Building Faster Act, 2025).[iii] The proposed changes in Bill 216 officially came into force on January 1, 2026.
The key changes include but are not limited to: (1) mandatory annual holdback release; (2) broadening the scope of adjudication and private adjudication; (3) procedural efficiency; and (4) deeming of a “proper invoice.”
1. Mandatory Annual Release of Holdback
The amendments now require the mandatory annual release of holdback. Contracts no longer need to explicitly provide for an annual or phased release of holdback, and there is no longer a minimum contract value required to trigger it. The annual release provisions apply to any contract extending beyond 12 months.
Key features of the Mandatory Annual Release of Holdback:
- Annual Release: Owners must release accrued holdbacks annually, starting on the first anniversary of the contract. Each payer in the construction pyramid must release the annual holdback once received. For example, once a contractor receives the funds from the owner, they have 14 days to pay their subcontractors their accrued holdback, and so on down the chain.
- Notice Requirements: Owners must publish a Notice of Annual Release of Holdback (Form 6) within 14 days after the annual anniversary of the date the contract was entered into.
- Timing: Holdbacks must be released no earlier than 60 days, and no later than 74 days, after the publication of the Notice of Annual Release of Holdback.
- Lien Expiry: Lien rights do not expire annually. Lien expiry remains tied to substantial performance or completion, not to the annual release of holdback.
- Limitation on Right of Set-off: The only permitted basis for withholding the annual release of holdback is if a lien has been preserved in respect of the contract, or if the contract has been terminated or abandoned by the contractor. This ensures the flow of funds down the construction pyramid and prevents improper withholding. There is no longer a right of the Owner to deliver a notice of non-payment of holdback, as that provision of the Act was repealed.
The amendments to the Act provide for a transition provision as it relates to annual release of holdback for contracts entered into before January 1, 2026. For Pre-January 1, 2026, contracts, the first annual release of holdback date is the second anniversary of the contract date that falls after January 1, 2026. At that time, the owner must release all accrued holdbacks from the original contract date up to that first annual release date. For example, for a contract entered into on April 1, 2025, the owner must release all accrued holdbacks on April 1, 2027. Note that this transition provision does not apply to certain Public-Private Partnership (P3) contracts, which are generally exempt from the new annual release of holdback rules.
2. Broadening the Scope of Adjudication and Private Adjudication
The new adjudication provisions under Part II.1 of the Act and regulations introduce flexibility and expand the jurisdiction of adjudicators. In short, adjudication can now be used to resolve, on an interim basis, almost any dispute arising from an improvement, rather than being restricted to a narrow list of payment-related issues.
Key adjudication changes include:
- Expanded Scope of Disputes: Adjudication is no longer limited to specific non-payment matters. The amendments allow broader issues to be adjudicated, including scope of work disputes, time extensions, delay and impact claims, changes to the contract price, labour and material payment bond claim disputes, and other matters prescribed in the contract/subcontract. The permissible disputes are now outlined in the regulations rather than a rigid list in the Act.
- Private Adjudicators: Parties can now select a private adjudicator, provided they are certified by the Ontario Dispute Adjudication for Construction Contracts (“ODACC“), even if they are not on the official ODACC roster. Parties may still choose to appoint a registry adjudicator from the roster if preferred. This change addresses industry concerns regarding the availability of adjudicators with specific construction expertise. Notably, the regulations set a minimum rate for private adjudicators at $1,000 per hour.[iv]
- Timelines and Corrections: Prior to January 1, 2026, adjudications could only be commenced prior to the completion, abandonment or termination of the contract. This has now changed. The timeline to commence adjudication has been extended up to 90 days after the date the contract is completed, abandoned, or terminated. Furthermore, parties may now request corrections to an adjudicator’s determination to fix errors or injustices caused by oversight within five days of the decision.[v]
- Publication of Adjudication decisions: ODACC will now publish anonymized determinations of adjudicators on their website. There will now be a body of precedents for Ontario’s construction industry, which may allow for some guidance on future disputes, consistency and predictability of the outcome on similar facts/disputes and it may also ensure fairness.
3. Procedural Efficiency: Joinder of Claims
The amendments correct a procedural inefficiency that previously prevented lien actions from being joined with a breach of trust action. The regulations under the Act[vi] now expressly permits a party to join a lien claim with a claim for breach of trust under Part II of the Act. This aims to streamline litigation by allowing related claims to be heard together, significantly reducing the need for separate and costly proceedings.
4. Modernization of Notices and Invoicing
To reflect modern industry practices, the regulations under the Act[vii] updates publication requirements. The definition of a “construction trade newspaper” has been modernized to a “construction trade news website.” The Daily Commercial News, Link2Build, and Ontario Construction News are now specifically designated as authorized platforms for publishing notices, including the new mandatory Notice of Annual Release of Holdback.
Furthermore, the amendments streamline the payment process by introducing a deeming provision for proper invoices. Pre-January 1, 2016, Owner’s were not obligated to advise a contractor that the ‘proper invoice’ was invalid or rejected as it did not meet the requirements of a ‘proper invoice’ under the Act. This became problematic as it indirectly resulted in the delay in timelines for payment and timelines for notice of non-payment to be given. Now, an invoice will be deemed a “proper invoice” if the owner does not provide a written notice of deficiency within seven days of receipt of the invoice. The definition of a proper invoice has also been amended to fix some of the previous mandatory requirement concerns and also broadened to include any information reasonably requested by an owner’s accounts payable system.
Time will Tell
Time will tell how these changes will play out in practice. The January 1, 2026, changes represent more than just technical adjustments, they will materially affect how projects are administered, how disputes are resolved, and how cash flows through the construction pyramid. Is the industry, especially owners, prepared for annual release of holdback and what that means and risks that follow if the procedures set out in the Act are not followed? Will we see a rise in adjudications in light of private adjudications? Will the publication of adjudicator’s decisions result in avoidance of arbitrary decisions, fairness or will it encourage ‘adjudicator’ shopping? The only constant right now for the construction industry is change. We anticipate that these changes are not the last that we will see to the Act and its regulations.
To learn more, contact one of our construction lawyers at Pallett Valo for any guidance or assistance you may need to better understand the changes to the Construction Act and its regulations.
[i] Changes were implemented through the Construction Lien Amendment Act, 2017 (Bill 142) and associated regulations. Key portions of the changes came into force on July 1, 2018, and others (i.e. Prompt Payment and Adjudication) came into force on October 1, 2019.
[ii] Construction Act, R.S.O. 1990, c. C.30, s. 26; see also O. Reg. 267/25, s. 2(2).
[iii] Bill 60, Fighting Delays, Building Faster Act, 2025, S.O. 2025, c. 12, Sched. 2.
[iv] O. Reg. 264/25, Adjudications Under Part II.1 of the Act, s. 21.
[v] O. Reg. 264/25, s. 19(1) and s. 33.
[vi] O. Reg. 265/25, s. 1.
[vii] O. Reg. 266/25, amending O. Reg. 304/18 General, s.1 revokes the definition of ‘construction trade newspaper’ in section 1 of O. Reg. 304/18. Section 1(2) amends Section 1 of the regulation to add the definition of ‘construction trade news website’ to mean the following websites: 1. The Daily Commercial News; 2. Link2Build; 3. Ontario Construction News.