With the passing of the Building Ontario For You Act (Budget Measures), 2024 and the Fighting Delays, Building Faster Act, 2025, the Government of Ontario has introduced significant changes to the Construction Act (Ontario) (the “Act”) which will impact most construction projects in Ontario moving forward.
The Building Ontario For You Act (Budget Measures), 2024 and the Fighting Delays, Building Faster Act, 2025
On November 6, 2024, the Government of Ontario passed an expansive piece of legislation titled the Building Ontario For You Act (Budget Measures), 2024, which announced a number of amendments to the Act, including the imposition of mandatory annual holdback release. A number of these amendments were scheduled to take effect at a later date to be determined by the Government of Ontario. On November 27th, 2025, the Fighting Delays, Building Faster Act, 2025 received Royal Assent, which made some additional amendments to the Act and scheduled a January 1, 2026 date of effectiveness for the amendments under both pieces of legislation.
Key Changes to the Act
The key changes to the Act, which will apply as of January 1, 2026, are as follows:
Mandatory Release of Holdback
The most notable change is that mandatory annual release of holdback will now be required under the Act. The general process will be as follows: (i) within 14 days of the anniversary of the date a contract was entered into, the owner must publish a notice of release of annual holdback; and (ii) at least 60 days but not later than 74 days after the date on which the notice of annual release of holdback is published, the owner must make payment to the contractor of all accrued holdback in respect of services or materials supplied by the contractor during the prior year, unless a lien has been preserved and perfected in respect of the contract.
Within 14 days of receipt of such holdback payment, the contractor shall be required to make payment to each of its subcontractors of all of the accrued holdback in respect of services or materials supplied during the prior year, unless a lien has been preserved or perfected in respect of the subcontract. The 14 day obligation would continue from subcontractor to subcontractor down the construction pyramid.
Lastly, in mandating annual release of holdback under the Act, the Government of Ontario has removed the right to allow for payment of holdback on a phased basis and the ability to withhold holdback pursuant to Section 27.1, and such rights would no longer be applicable under the Act.
Retaining Current Lien Expiry Periods
The Building Ontario For You Act (Budget Measures), 2024 prescribed certain changes to lien mechanics, such that a lien arising from the supply of services or materials to an improvement that is included in a notice of annual release of holdback would expire on the 60th day after the notice is provided.
The Fighting Delays, Building Faster Act, 2025 has repealed this change and liens will continue to expire at the conclusion of the 60 day period following the earlier of: (i) the date the notice of substantial performance is published; or (ii) the date the contract is completed, abandoned or terminated; or in the event that the notice of substantial performance is not published, or for services or materials supplied after the date of substantial performance, the earlier of: (iii) the date the contract is completed; or (iv) the date the contract is abandoned or terminated.
Notice of Termination
A notice of termination will now be required to be published by the owner or contractor within seven (7) days after a contract is terminated, and the date of the notice shall be deemed the date of termination for the purposes of the Act and commencement of lien periods.
Proper Invoices
The definition of “proper invoice” has been amended to provide more detail regarding certain prescribed requirements and to require a contractor to provide any other information that is necessary for the proper functioning of the owner’s accounts payable system that is reasonably requested. Additionally, in the event that an invoice does not meet the proper invoice requirements, owners will now be required to provide notice within seven (7) days of receipt, notifying the contractor of the deficiency and what will be required to rectify the deficiency.
Engineering and Pre-Construction Services
In response to case law, the Act has now clarified that a person supplying a design, plan, drawing or specification will be deemed to have lien rights if the owner retains a holdback in respect of the supply of such design, plan, drawing or specification, unless the owner can prove that the value of the owner’s interest in the land has not been enhanced. This change should provide additional certainty to owners and engineering/design companies or other suppliers of pre-construction services as to whether holdback and lien rights will apply and will allow for more flexibility in contracting.
Transition to Mandatory Holdback
The mandatory annual holdback release regime will apply automatically to any contracts entered into on or after January 1, 2026, and such obligation would be triggered upon the first anniversary of entering into such contract.
For contracts that are entered into before January 1, 2026, there is a grace period, such that mandatory annual holdback release would not apply until the second anniversary of the day the contract was entered into following January 1, 2026. In other words, if the contract is entered into on January 30, 2024, then the obligation would commence on January 30, 2027. All accrued holdback up to such second anniversary would be required to be paid on such date.
Key Takeaways
Moving forward, these amendments will create significant changes to the Act and holdback mechanics for Ontario construction projects. As such, owners, contractors, subcontractors and lenders should be aware of these changes and their impact on their projects.
Notably, owners, contractors and subcontractors may need to make changes to their internal accounting systems and processes, to allow for holdback to be paid on an annual basis moving forward. They will also need to be aware of the changes to the relevant deadlines under the Act, including the timelines for disputing proper invoices and providing notices of termination. Lastly, contracts may need to be revisited to the extent that phased holdback or the ability to withhold holdback per Section 27.1 of the Act are hardwired.
These changes should also be top of mind for lenders who may need to ensure credit agreements comply with the annual holdback release requirements, including as it relates to holdback-related accounts.
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