Our Expert in Canada
The Ontario Construction Act changes that took effect on January 1, 2026, represent the most significant overhaul of construction payment and dispute-resolution law in the province in decades. Driven by amendments under Bill 60 and supported by new regulations including O. Reg. 264/25, the reforms introduce a comprehensive prompt payment regime, broaden access to adjudication for a wider range of project participants, and mandate an annual release of holdback that fundamentally alters cash-flow dynamics on every Ontario construction project. Whether you are an owner, general contractor, subcontractor, surety or in-house counsel, the compliance decisions you make now will determine whether you capture the benefits of faster payment cycles, or face costly disputes under an enforcement framework that carries real teeth.
Before diving into the details, here is a 30-second checklist of what changed when the 2026 amendments came into force under the Construction Act, R.S.O. 1990, c. C.30:
Industry observers expect these changes to accelerate payment timelines significantly, but only for project teams that update their contracts, invoicing procedures and internal controls before disputes arise. The sections below break down each pillar of reform with the timelines, checklists and drafting guidance that construction law practitioners are advising clients to implement immediately.
The prompt payment framework hinges on the concept of a proper invoice Ontario contractors must issue before any payment deadline begins to run. Under the amended Construction Act, a proper invoice must contain prescribed information to be valid. The following checklist summarises the required fields:
| Required Field | Description |
|---|---|
| Contractor/subcontractor name and address | Legal name and registered address of the invoicing party |
| Date of invoice | The date the invoice is issued |
| Project identification | Information identifying the improvement and the premises |
| Description of services/materials | A description of the services or materials that were supplied |
| Amount payable and payment terms | The amount owing and the contract payment terms |
| Name and address of recipient | The party to whom the invoice is addressed |
| Any other prescribed information | Additional content required by regulation (e.g., HST number, purchase order reference) |
If an invoice does not include all prescribed content, the recipient is entitled to return it with a notice of non-compliance, which stops the payment clock. Practitioners note that even minor omissions, such as a missing project identifier, can reset the entire timeline. Getting the proper invoice right on first submission is the single most important operational step under the new regime.
Once a compliant proper invoice is received, the Act imposes strict construction payment deadlines on each level of the contractual chain. The payment waterfall operates as follows:
| Payment Stage | Deadline | Key Notes |
|---|---|---|
| Owner pays general contractor | 28 days from receipt of proper invoice | Owner must issue a notice of non-payment within 14 days if disputing; otherwise, payment is due in full |
| General contractor pays subcontractor | 7 days after GC receives payment from owner | Cascading obligation, GC cannot delay beyond 7-day window once funded |
| Subcontractor pays sub-subcontractor | 7 days after sub receives payment from GC | Same cascading timeline applies down the contractual chain |
Where an owner fails to pay or issue a proper notice of non-payment within the prescribed window, the invoice amount is deemed payable and interest accrues at the rate prescribed by regulation. The deemed-invoice mechanism described by Norton Rose Fulbright means that silence or administrative inaction by the payer is no longer a neutral event, it is an automatic trigger for payment obligations and potential adjudication.
Accounts-payable departments must redesign their workflows to meet the new construction payment deadlines. The following step-by-step AP playbook reflects what experienced practitioners are recommending to clients:
Failing to issue a timely notice of non-payment is one of the most consequential errors under prompt payment Ontario rules. Early indications suggest that many disputes reaching adjudication in Q1 2026 have involved missed notice windows rather than substantive valuation disagreements.
One of the most significant Ontario Construction Act changes is the broadening of adjudication Ontario parties can access. Prior to January 1, 2026, adjudication under Part II.1 of the Act was limited in scope. The 2026 amendments, reinforced by O. Reg. 264/25, expand eligibility so that virtually any party in the construction pyramid, including subcontractors, sub-subcontractors, suppliers and, in certain circumstances, sureties joined to the proceeding, can refer a payment dispute to an adjudicator. Joinder provisions now permit related parties to be brought into the same adjudication, reducing the risk of inconsistent outcomes across parallel disputes on the same project.
The adjudication process follows a compressed timeline designed to produce interim binding decisions quickly. The typical procedural flow is set out below:
| Step | Action | Timeline |
|---|---|---|
| 1 | Claimant delivers notice of adjudication to the respondent | Day 0 |
| 2 | Authorized Nominating Authority (ANA) appoints adjudicator | Within 7 days of request |
| 3 | Claimant submits documents and submissions to adjudicator | Within 5 days of appointment |
| 4 | Respondent delivers response | Typically within 5 days of receiving claimant submissions |
| 5 | Adjudicator issues determination | Within 30 days of appointment (extendable to a maximum of an additional 14 days with consent) |
| 6 | Losing party must pay adjudicated amount | Within 10 days of determination |
The entire process, from notice to decision, is designed to conclude within approximately 30 to 46 days. Industry observers expect the compressed timelines to push parties toward earlier resolution, since the cost of a full adjudication is modest relative to arbitration or litigation but the outcome is enforceable immediately on an interim basis.
An adjudicator’s determination is binding on an interim basis. If the losing party fails to comply, the successful party can enforce the decision as if it were a court order by filing with the Superior Court of Justice. This enforcement mechanism gives adjudication decisions practical teeth that earlier voluntary processes lacked.
Critically, commencing an adjudication does not extinguish lien rights. A party may preserve and perfect a construction lien under Part IV of the Construction Act while simultaneously pursuing or defending an adjudication. Similarly, adjudication does not preclude a subsequent arbitration or court proceeding on the same dispute, the adjudication decision remains binding only until a court, arbitral tribunal or subsequent agreement of the parties resolves the matter finally.
For practical enforcement purposes, parties should:
The introduction of a mandatory annual holdback release is among the most consequential amendments for project cash flow. Under the prior regime, owners retained the statutory holdback (typically 10% of each progress payment) until the project reached substantial performance, which could lock up significant capital for years on large projects. The 2026 amendments require owners to release accumulated holdback on an annual basis, calculated from the anniversary of the date when holdback obligations first arose on the project.
The release is triggered once the applicable lien period for the work done during that annual cycle has expired without any liens being preserved. If a lien has been preserved, the owner may retain sufficient holdback to cover the lien claim but must release the balance. This mechanism means that subcontractors and suppliers should see holdback funds returned far earlier in the project lifecycle, a material improvement for firms that previously carried working-capital shortfalls throughout multi-year projects.
The 2026 amendments also strengthen the statutory trust provisions that protect subcontractors and suppliers. All amounts received by an owner, contractor or subcontractor on account of the contract price constitute a trust fund for the benefit of those below them in the contractual chain. The reforms clarify that trust obligations attach to holdback amounts during the annual retention period, meaning that owners cannot commingle or use holdback funds for unrelated purposes without risk of a trust breach claim.
For subcontractors, the practical effect is twofold: faster access to holdback through the annual release cycle, and stronger legal remedies, including potential personal liability for directors, if trust funds are diverted. Canadian construction lawyers are advising subcontractors to request annual trust-fund status reports from owners and GCs to verify that funds are being held in compliance with the Act.
The lien framework under the Construction Act has been recalibrated to align with the annual holdback release cycle. Under the previous rules, lien preservation and perfection timelines were anchored to project milestones such as substantial performance or contract completion. The 2026 amendments retain these anchors but add an annual-cycle dimension: because holdback is now released annually, the lien window for each annual tranche opens and closes independently.
This means that a subcontractor who fails to preserve a lien within the prescribed period for a given annual holdback release may lose recourse against that tranche of funds, even if the project is still ongoing. The likely practical effect will be that subcontractors must track lien deadlines on a rolling annual basis rather than waiting for a single project-wide triggering event.
The following comparison table summarises how the three core obligations interact under the 2026 regime:
| Obligation / Right | Timing / Deadline | Who Is Affected |
|---|---|---|
| Prompt payment (proper invoice) | 28 days from owner receipt of proper invoice; 7-day cascading payments downstream; 14-day notice-of-non-payment window | Owner, Contractor, Subcontractor |
| Adjudication right | Notice of adjudication at any time during the dispute; ANA appointment within 7 days; determination within 30–46 days; 10-day compliance window | Claimant, Respondent, Surety (if joined) |
| Annual holdback release | Release triggered annually once the lien period for that cycle’s work has expired; owner retains holdback only to cover preserved liens | Owner → GC → Subcontractor; Sureties affected by earlier release of funds |
Existing contracts that pre-date January 1, 2026, should be reviewed for compliance. A typical redline to a payment clause might read:
“The Owner shall pay the Contractor within 30 calendar days 28 days of receipt of a proper invoice as defined in section 6.1 of the Construction Act, R.S.O. 1990, c. C.30. Where the Owner disputes any portion of the invoice, the Owner shall deliver a notice of non-payment within 14 days of receipt of the proper invoice, specifying the disputed and undisputed amounts. The undisputed amount shall be paid within the 28-day period regardless of the dispute.“
This redline ensures the contract mirrors the statutory requirements. Any contractual payment term that purports to extend the 28-day window or waive the prompt payment regime is likely unenforceable given the Act’s mandatory framework.
Contracts should now expressly reference the adjudication provisions of the Act. A recommended clause:
“Any dispute arising under this contract that is eligible for adjudication under Part II.1 of the Construction Act shall be referred to adjudication in accordance with the Act and applicable regulations. The parties consent to the jurisdiction of the Authorized Nominating Authority and agree to comply with any interim determination within 10 days of its issuance.”
While adjudication is a statutory right that does not require contractual consent, including an express clause reduces procedural friction and manages expectations for all parties from the outset.
Project teams should implement the following internal controls to comply with the construction contract changes Ontario projects now require:
The annual holdback release and broadened adjudication access create new risk vectors for sureties and construction lenders. Surety bonds Ontario projects rely upon are typically structured around the assumption that holdback remains intact until project completion, providing a financial cushion against deficiency claims. The mandatory annual release reduces that cushion incrementally, increasing the surety’s potential exposure to performance and payment bond claims earlier in the project lifecycle.
Sureties should take the following steps to mitigate risk:
Lenders with security interests in construction receivables should similarly update their monitoring protocols, as the annual release changes the timing and quantum of funds flowing through the project waterfall.
Use this role-based checklist to confirm your organisation has addressed the most critical Ontario Construction Act changes:
The following anonymised scenarios illustrate how the reforms play out in practice and what steps project teams should take:
The Ontario Construction Act changes effective January 1, 2026, are not optional compliance items, they are mandatory obligations backed by enforceable deadlines, adjudication rights and court enforcement mechanisms. Every project participant, from owners and general contractors to subcontractors, sureties and lenders, must update their contracts, invoice templates, AP workflows and dispute-response protocols to align with the new framework. Organisations that treat these reforms as a back-office administrative update risk missed deadlines, deemed-payment obligations and costly adjudications. Those that invest in compliance infrastructure now will benefit from faster cash cycles, clearer dispute pathways and stronger contractual relationships. To discuss how these amendments apply to your specific project or portfolio, find a Canadian construction lawyer through the Global Law Experts directory.
Last reviewed: May 14, 2026
This article was produced by Global Law Experts. For specialist advice on this topic, contact Brendan D. Bowles at Glaholt Bowles LLP, a member of the Global Law Experts network.
posted 17 minutes ago
posted 1 hour ago
posted 1 hour ago
posted 2 hours ago
posted 3 hours ago
posted 3 hours ago
posted 3 hours ago
posted 4 hours ago
posted 5 hours ago
Find the right Advisory Expert for your business
Sign up for the latest advisor briefings and news within Global Advisory Experts’ community, as well as a whole host of features, editorial and conference updates direct to your email inbox.
Naturally you can unsubscribe at any time.
Global Law Experts is dedicated to providing exceptional legal services to clients around the world. With a vast network of highly skilled and experienced lawyers, we are committed to delivering innovative and tailored solutions to meet the diverse needs of our clients in various jurisdictions.
Global Advisory Experts is dedicated to providing exceptional advisory services to clients around the world. With a vast network of highly skilled and experienced advisors, we are committed to delivering innovative and tailored solutions to meet the diverse needs of our clients in various jurisdictions.
Send welcome message
