Construction Act changes in Ontario are (finally) here: Annual holdback release and how will it impact your project

Since the 2024 amendments to Ontario’s Construction Act under Schedule 4 of Bill 216 (Building Ontario For You Act (Budget Measures), 2024)¹ received royal assent, project owners and construction companies have been holding their breath for the amendments to come into force. We wrote about the changes to the adjudication regime that Bill 216 planned to bring in here.

A year later, the legislature has now introduced Bill 60 (Fighting Delays, Building Faster Act, 2025)², which further amends or repeals some of the Bill 216 amendments. How it all comes into force is a little confusing:

• Bill 60 received royal assent on November 27, 2025, and most of the amendments in this bill took effect on that date. 
• However, changes contemplated in Bill 60 relating to separating annual holdback release from lien expiry, and the transitional P3 rules will only apply as of January 1, 2026.³ 
• The remaining changes originally set out in Bill 216 (such as the ones we discussed in the update linked above) will also come into force on January 1, 2026.⁴ 

For simplicity: all changes will be in force as of January 1, 2026.

So, what are the changes and how/when will they impact your contract? We will be publishing updates on some of the discrete changes to holdback release, lien expiry, termination notices, adjudication, and proper invoices, among others. For now, we’ve included a teaser below of the most significant changes coming into force in January 2026. The balance of this update will focus on the incoming changes to holdback and lien period triggers.

Annual holdback release ≠ annual lien expiry

Bill 216 introduced the concept of mandatory annual holdback release, and would have required owners to publish notice of pending annual holdback release in a construction trade news website (new Form 6) within 14 days of each contract anniversary, and then pay accrued holdback within 14 days after the expiry of a 60-day lien period. It effectively sought to create a new lien period applying to liens arising from work included in the annual holdback release notice. The potential introduction of a new lien period was met with a lot of criticism and concern by industry stakeholders due to complications it would introduce to lien rights expiry as well as holdback pools on complex, long-term projects.

Bill 60 keeps the concept of annual holdback release but no longer ties the expiry of lien rights to it on a rolling basis. Bill 60 instead amends sections 26 and 31 of the Construction Act to:

• Confirm that mandatory annual holdback release operates independently from lien timelines; and 
• Reaffirm that lien preservation and expiry timelines run from the existing established triggers – publication of a certificate of substantial performance, the completion, abandonment, or termination of contracts, or where applicable, date of last supply. 

Takeaway: Effective January 1, 2026, the Construction Act will require owners to publish notice and release basic holdback annually, while ensuring that liens do not expire upon the release of annual holdback. Construction stakeholders will therefore gain earlier access to payment, while still being subjected to the familiar lien rights’ framework governing the Construction Act. 

Expanding section 30 holdback prohibitions

In situations of a contractor or subcontractor defaulting on a contract, section 30 of the Construction Act prevents payers from applying project holdback to a substitute contractor or materials supplier, and also prohibited the use of holdback to cover claims made against the defaulting contractor or subcontractor. These prohibitions applied until all liens that could be claimed against the holdback expired, were satisfied, or otherwise discharged. 

Bill 60 expands the section 30 holdback prohibitions to clearly apply to situations where a contract or subcontract is abandoned or terminated, confirming that holdback cannot be used to hire a subsequent contractor, at least not until all potential liens have expired, been vacated or discharged. 

Takeaway: Effective January 1, 2026, section 30 will safeguard holdback against being used in more scenarios, such as abandonment or termination, providing greater protection for potential lien claimants down the construction pyramid.  

Transition provisions for annual holdback release and P3 contracts 

The upcoming changes to the Construction Act, along with lien modernization amendments brought in 2018, may require owners and contractors to navigate multiple transition provisions. Under section 87.3, procurement processes initiated or contracts signed before July 1, 2018, remain governed by the former Construction Lien Act, affecting only a few large legacy projects, mostly in the P3 world. 

For contracts procured or signed on or after July 1, 2018, but before January 1, 2026, subsection 87.4(4) introduces a phased transition. This regime begins on the second anniversary of the contract date following January 1, 2026, triggering notice and payment obligations for all holdback accrued prior to that date. For example, consider a contract signed on June 18, 2025. The second anniversary is June 18, 2027, and that is the day annual holdback release will first trigger under that contract, starting the notice and payment process for all previously accrued basic holdback up to that date.

All contracts signed after January 1, 2026, are immediately subject to the new holdback rules, and the annual holdback process will begin on the first anniversary after the contract was entered into.

Most P3 agreements entered before January 1, 2026, will remain subject to the previous rules about permissive annual holdback release (subsection 87.4(5) of the Construction Act).

Takeaway: Effective January 1, 2026, the holdback obligations of parties will depend on the timing of their contracts, but parties in a P3 agreement entered before January 1, 2026, will continue to be governed by existing arrangements.

Conclusion

Bills 216 and 60 introduce significant amendments to the Construction Act’s holdback provisions, including mandatory annual holdback release independent of lien timelines, expanded holdback protections, and transitional rules. All parties to the construction pyramid and other industry stakeholders should consider these changes to ensure their interests are safeguarded and operational procedures are consistent with the new holdback rules.

The authors would like to thank Matteo LeClair, articling student, for his contribution to preparing this legal update.