Prompt payment and holdback in Ontario

What the Construction Act requires on payment, and what changed on January 1, 2026.

Updated November 13, 2026

Short answer

Under Ontario’s Construction Act, an owner pays a proper invoice within 28 days, and a contractor pays its subcontractors within 7 days of being paid. The owner retains 10% of each payment as holdback. Since January 1, 2026, accrued holdback has to be released every year on longer projects, and an invoice is deemed proper unless the owner objects in writing within 7 days.

The payment clock

Step	Time
Contractor gives a proper invoice	Monthly, unless the contract says otherwise.
Owner objects to the form of the invoice	In writing within 7 days of receiving it, saying what is missing and how to fix it. Otherwise it is deemed a proper invoice.
Owner disputes an amount	A notice of non-payment within 14 days of receiving the proper invoice.
Owner pays the contractor	Within 28 days of receiving the proper invoice.
Contractor pays its subcontractors	Within 7 days of being paid.
Holdback	10% of the value of the work as it is supplied, retained by the owner and by each contractor down the chain.
Annual holdback release	On each anniversary of the contract. The owner publishes a notice within 14 days after the anniversary.

A summary of the rules that apply to most private contracts. The Act and its regulations govern, and a contract can add terms of its own.

What changed on January 1, 2026

Annual release of holdback: Mandatory. Owners release accrued holdback on each anniversary of the contract, and the earlier optional annual and phased release rules were repealed.
Contracts from before 2026: The first annual release falls on the second anniversary of the contract that follows January 1, 2026.
Deemed proper invoices: An invoice is proper unless the owner objects in writing within 7 days. The owner can still dispute the amount.
Notices: Notices, including the notice of annual release, are published on Daily Commercial News, Link2Build or Ontario Construction News.
Adjudication: More kinds of dispute can be adjudicated, private adjudicators are allowed, and adjudication can start after a contract ends.
Liens and trust claims: Can now be brought in the same proceeding.

A worked example

A contractor gives the owner a proper invoice for $100,000 of work done in a month, before HST. The owner retains 10% holdback, $10,000, and pays $90,000 within 28 days.

If $40,000 of that invoice is a subcontractor’s work, the contractor retains its own 10% holdback on it, $4,000, and pays the subcontractor $36,000 within 7 days of being paid.

Under the annual release, the holdback retained in the contract’s first year is released after the first anniversary, rather than at the end of the project.

Questions

How long does an owner have to pay a contractor in Ontario?

28 days from receiving a proper invoice, unless the owner gives a notice of non-payment within 14 days.

What is holdback?

10% of the value of the work, retained by the owner and by each contractor down the chain, so that there is money to answer liens. Since 2026 it is released every year on projects that run past their first anniversary.

Do the 2026 changes apply to a contract signed in 2025?

The annual holdback release does, starting on the second anniversary of the contract that falls after January 1, 2026. The changes to prompt payment and adjudication applied from January 1, 2026 to contracts where those parts of the Act apply.

How long is there to preserve a lien?

60 days, counted from the dates the Act sets, such as the publication of a certificate of substantial performance or the last supply of services or materials. Speak to a construction lawyer as soon as a lien is possible.

Sources

Checked against these sources on November 13, 2026. This page is general information about building in Ontario. It is not legal advice, and the rules change, so confirm the current requirement for your project.