We are continuing our blog series about Ontario’s new construction rules with a goal to summarize, in simple language, the recent changes to the Construction Act.
Here’s what you need to know about the construction lien process, what a holdback is and how you handle on your project.
What Is the Right to Lien a Property?
The basics – a lien is a legal right that lets you register a claim for money for work or materials provided to a construction project on title to the property where the value was supplied. It’s a way to protect contractors, sub-trades, suppliers, and even professionals (i.e. engineers, architects) and ensure they are paid for their work.
How Long Do I Have to Register a Lien?
Anyone with a right to lien has 60 days to register the lien on title. However, the key will be when this sixty-day period starts. This varies from case to case but, in general, the 60-day period starts when the work was finished or the contract was completed. These deadlines are strict and unforgiving. When in doubt, always seek and obtain professional legal advice.
What Is a Holdback?
A holdback is money that the owner or contractor must keep back (10% of each payment) until certain conditions are met. A common misconception is that the holdback is kept for deficiencies. However, the holdback is meant to protect parties further down the construction pyramid (like subcontractors and suppliers) by making sure there’s money available if someone files a lien.
If you are an owner or a contractor who pays others (a “payor”), you must keep this holdback by law.
What’s New: Annual Release of Holdback
Previously, trades would lament having to wait for the entire project to finish in order to receive the last of their 10% holdback.
However, starting in 2026, there’s another big change: holdback money must be released every year on the anniversary of the contract, not just at the end of the project. Here’s how it works:
- Each year, the owner must publish a notice and then release the holdback for work done in the previous year, as long as no liens have been filed.
- This means subcontractors and suppliers who finished their work early in a long project can get their holdback money sooner, instead of waiting until the whole project is finished.
- For example, if you did your part at the start of a two-year project, you could get your holdback after the first year, not at the very end.
Release of the Holdback: Use Caution
Releasing a holdback isn’t always simple. Before releasing a holdback, you must check if any liens have been registered. If there are liens, you can’t release the holdback until those claims are dealt with.
There are specific timelines and steps you must follow to release a holdback properly. If you release it too soon or without checking for liens, you could be on the hook for unpaid claims from people you didn’t even contract with directly.
Bottom Line
- Liens protect parties in the construction pyramid by securing a type of ‘reserve fund’ for payment. The time limits for filing a lien is not changing in 2026.
- Holdbacks are still required, but now they can now be released every year, not just at the end of the project. Parties can get their holdback money sooner on long projects.
- Owners and contractors need to be careful and follow the rules before releasing a holdback, or they could face unexpected claims.
If you’re involved in a construction project, make sure you understand these new rules so you can protect your rights and avoid costly mistakes.
This post is part of a series exploring the recent changes to Ontario’s Construction Act in 2026. Click here for the next post in the series.
More information? We’re here to help – litigation@wardlegal.ca
This WARDS LAWYERS PC publication is for general information only. It is not legal advice, nor is it intended to be. Specific or more information may be necessary before advice could be provided for your particular circumstances.