What a holdback is
A holdback is 10 per cent of the price of construction work, withheld from what you pay your contractor and held until the lien rights attached to that work run out. Ontario's Construction Act puts the duty on every payer under a contract where a lien can arise, and a landlord paying for a unit renovation or a roof is a payer. There is no dollar floor, and an agreement to opt out of the Act is void.
The money exists to protect you. If your contractor never pays a subcontractor, that firm can lien your building, and the holdback is the fund the claim attaches to. Your exposure is capped at the amount the Act required you to hold, whether or not you held it, so an early release can mean paying the same dollar twice.
The Act reaches an improvement, which includes any alteration, addition or capital repair. A capital repair extends the economic life of the building or raises its value, and the Act carves out maintenance done to keep a building in a normal, functional state. Replacing a thirty-year-old boiler is an improvement. Servicing it in the fall is not.
Step 1: Pay every invoice at 90 per cent
The holdback accrues as work is supplied, not at the end. Section 22 sets it at 10 per cent of the price of the services or materials as they are supplied, and it applies whether your contract calls for monthly draws or a single payment on completion. You may hold it as cash, a prescribed letter of credit, or a holdback repayment bond.
Prompt payment runs on its own clock beside it. The 90 per cent is due no later than 28 days after you receive a proper invoice, and to dispute part of it you have 14 days from receipt to give a notice of non-payment on the prescribed form, with every reason set out. Let the 14 days pass and the 28-day deadline stands for the full amount.
One change took effect on January 1, 2026. An invoice missing required information now counts as a proper invoice anyway, unless you tell the contractor in writing within 7 days what is deficient and what would fix it. Checking invoices for completeness in that first week is now a dated task.
Step 2: Work out which release clock your contract is on
There are two clocks, and the length of the job decides which one you use. A job that finishes inside a year releases on lien expiry: once every lien that could be claimed against the holdback has expired or been satisfied or discharged, you have 14 days to pay the contractor, who then has 14 days to pass the matching holdback down to each subcontractor.
A contract still live at an anniversary of its signing date moves onto the annual release rules, which are a publishing obligation rather than a quiet bank transfer.
Step 3: Run the annual release on three dates
Annual holdback release became mandatory and sequenced on January 1, 2026. Each anniversary of the contract date produces three diary entries.
- Anniversary plus 14 days. Publish a notice of annual release of holdback on the prescribed form, naming the amount you intend to pay and the intended payment date.
- Publication plus 60 to 74 days. Pay the contractor all holdback accrued on work supplied during the year just ended. Not before day 60, not after day 74.
- Payment plus 14 days. Your contractor owes subcontractors their matching holdback for the year.
Publication is not a government filing. The regulation sends the notice to a construction trade news website, and names three: the Daily Commercial News, Link2Build and Ontario Construction News.
You withhold the annual payment in one narrow case: a lien has been preserved or perfected on the contract and not yet discharged, satisfied or cleared by a court order. Once that lifts, the money is due within 14 days.
Step 4: Check the signing date before the first anniversary
Contracts signed before January 1, 2026 get a staged start: the first anniversary that triggers a release is the second one falling after that date, and the payment then covers all holdback accrued before it rather than one year of it. A contract signed in March 2025 is the worked example. Its March 2026 anniversary did nothing, March 2027 is the first that counts, and the release covers everything banked since.
Step 5: Know what makes liens expire
Lien expiry runs 60 days from an event, not from your last cheque. For your contractor, those days run from the earlier of two things: publication of a certificate or declaration of substantial performance, and the date the contract is completed, abandoned or terminated. For subcontractors and suppliers the list also includes the date that firm last supplied anything to the job, so different trades can be on different clocks for the same building.
Substantial performance is a formula, not a judgment call. The improvement has to be ready for use or in use for its intended purpose, and the cost to finish or correct a known defect has to come in at or under 3 per cent of the first million dollars of contract price, 2 per cent of the next million and 1 per cent of the balance.
A certificate of substantial performance has no effect until a copy is published, so an unpublished certificate starts no clock. Once it is certified, a second 10 per cent holdback opens on the finishing work still to come.
The checklist
- Decide whether the work is a capital repair or maintenance. Maintenance carries no holdback.
- Review each invoice for missing information within 7 days of receipt.
- Pay every invoice at 90 per cent within 28 days, or serve a notice of non-payment within 14.
- Diary the contract signing date as a recurring annual anniversary.
- At each anniversary the job is still live: publish within 14 days, then pay between day 60 and day 74.
- Search title for preserved liens before releasing anything.
- Publish the certificate of substantial performance, then open a fresh 10 per cent on the finishing work.
- If the contract ends early, publish a notice of termination within 7 days. That is what starts the 60 days.
One caveat: the structure travels and the numbers do not. British Columbia, Alberta and the rest each run their own builders lien legislation, with their own percentage, trigger and expiry period. Vetting the contractor is a separate job, and the five checks to run before anyone picks up a tool cover it.