Ontario’s Construction Act — the statute governing liens, holdbacks, payment disputes, and adjudication in the construction industry — has been through significant amendment cycles over the past several years, and the changes that came into effect in January 2026 built on reforms already introduced in earlier phases. For property owners, developers, and anyone contracting for construction work in Ontario, the current framework is meaningfully different from what existed even five years ago.
Understanding how the Construction Act works in its current form is essential for anyone who wants to manage construction risk properly — and avoid the very expensive mistakes that lien claims and payment disputes can create.
The Core Purpose of the Construction Act
The Construction Act (formerly the Construction Lien Act) serves two primary purposes. First, it gives contractors, subcontractors, and suppliers the right to register a lien against a property if they are not paid for work or materials provided to improve that property. Second — through the prompt payment and adjudication framework introduced in the recent amendments — it creates a structured process for resolving payment disputes faster than traditional litigation allows.
For property owners, this means that the people who improve your property have legal rights against the property itself, not just contractual claims against the general contractor. An unpaid subcontractor can register a lien against your property even if you have already paid the general contractor in full.
The Holdback Requirement
One of the most important protections for property owners under the Construction Act is the statutory holdback. Property owners (and each party in the construction chain) are required to hold back 10% of the value of work or services completed, until the lien period has expired and any liens have been resolved.
The holdback is not optional. Failing to maintain the required holdback exposes a property owner to liability for paying twice — once to the general contractor and once to a lien claimant who was not paid.
Properly managing the holdback — knowing when it can be released and in what amount — is a legal question that your real estate lawyer can help you navigate, particularly on complex projects with multiple prime contractors and subcontractors.
Lien Rights: Who Has Them and for How Long
Under the Construction Act, the following parties have the right to register a lien:
- General (prime) contractors
- Subcontractors at any tier
- Suppliers of materials
- Equipment lessors
- Architects, engineers, and other design professionals
Liens must be registered within 60 days of the date the contract or subcontract was completed, abandoned, or the last services were provided — whichever is earliest. The 60-day period sounds generous, but it can pass quickly on multi-phase projects where the completion date is not always obvious.
Once a lien is registered, it must be ‘perfected’ — preserved through court action — within 90 days of registration. A lien that is not perfected is vacated.
Prompt Payment: What Changed
The prompt payment regime, introduced through earlier Construction Act amendments and refined in the 2026 changes, requires payment to flow through the construction chain within defined timelines:
- Owner must pay the prime contractor within 28 days of receiving a proper invoice
- Prime contractor must pay subcontractors within 7 days of receiving payment from the owner
- Each party in the chain owes payment downward within 7 days of receiving payment
If payment is disputed, the dispute must be documented with a Notice of Non-Payment served within 14 days of receiving the invoice. Failure to serve a proper Notice of Non-Payment means the invoice is deemed to be a proper invoice and must be paid.
The prompt payment framework is designed to prevent cash flow problems that have historically caused disputes and insolvencies in the construction industry. For property owners, the key takeaway is that invoices need to be reviewed quickly and disputes documented promptly — informal delays are no longer legally defensible.
Adjudication: Faster Dispute Resolution
One of the most significant innovations of the reformed Construction Act is the introduction of statutory adjudication — a fast-track dispute resolution process for construction payment disputes. Adjudication is not arbitration and not litigation. It is an expedited process where a trained adjudicator issues a binding interim decision within approximately 30 days of the matter being referred.
Adjudication is available for disputes about the amount of a proper invoice, non-payment on a certificate, the valuation of work, and other defined payment disputes. The decision is binding and enforceable pending a final resolution through the courts or arbitration.
For property owners who find themselves in a dispute with a contractor about the amount owed, adjudication may provide a faster and cheaper resolution than litigation — but the timelines are compressed and the process requires prompt legal engagement.
What the 2026 Amendments Modified
The January 2026 amendments to the Construction Act included refinements to the prompt payment notice requirements, clarifications to the definition of a ‘proper invoice,’ and adjustments to the adjudication process that addressed several procedural issues that had arisen in early adjudication proceedings. They also extended certain prompt payment obligations to public sector construction contracts, bringing a broader range of government-funded projects under the framework.
Practical Advice for Property Owners
- Retain a lawyer before starting any significant construction project — the Construction Act’s requirements begin from day one of the contract
- Ensure your construction contracts properly address holdback, invoicing procedures, and dispute resolution
- Track invoice receipt dates carefully — the prompt payment clock starts ticking immediately
- Do not ignore a lien registration. A lien on title can prevent refinancing, sale, or other dealings with the property until it is resolved
- If a lien is registered, consult your lawyer immediately about whether to vacate the lien (by posting security equal to the lien claim) or challenge it
Final Thoughts
The Construction Act creates a complex web of rights and obligations for every party in a construction project. Property owners who think of it as purely a contractor’s statute are mistaken — its holdback rules, prompt payment requirements, and lien provisions directly affect how owners must manage their construction projects and their finances throughout. Experienced legal counsel from the start of a project is the best protection against Construction Act liability.
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Disclaimer: This article is intended for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please consult a qualified Ontario lawyer.
This article is provided for general information only and does not constitute legal advice. For advice about your specific situation, please contact Goldstone Law PC directly.