Guide · Getting paid
Holdback and prompt payment,
in plain language.
Ontario's Construction Act decides when you get paid, how much can be held back, and what you can do when a payer stalls. It was amended again on January 1, 2026. This is the short version for a small contractor or subtrade, current as of September 2026.
Published 2026-09-21 · Formory Group
The short answer.
Every payer on a contract or subcontract under which a lien may arise must hold back 10 per cent of the value of the work as it is supplied, under section 22 of the Construction Act. That applies to owners, general contractors and subcontractors paying the next level down, and it includes homeowners paying for a renovation.
Separately, the prompt payment rules in Part I.1 set deadlines. An owner has 28 days to pay a proper invoice. A contractor who is paid has 7 days to pay its subcontractors. Anyone who disputes an invoice has to say so in writing, on a deadline, with reasons.
What holdback is for.
Holdback exists because anyone who supplies work or materials to an improvement has a lien on the owner's interest in the property, under section 14. The 10 per cent held back is the pool that protects the owner if a subcontractor or supplier further down the chain goes unpaid and registers a lien.
Holdback is not a penalty and it is not the owner's money to keep. It has to be paid out once lien rights have expired or been dealt with, and since 2026 it also has to be released every year on longer jobs.
The annual holdback release.
Section 26, as re-enacted with effect from January 1, 2026, requires the owner, after each anniversary of the contract date, to publish a notice of annual release of holdback within 14 days, and then to pay the accrued holdback for that year no earlier than 60 and no later than 74 days after the notice, unless a lien has been preserved or perfected and not dealt with.
The contractor then has 14 days after receiving that holdback to pay its subcontractors their share, with the same exception for preserved liens. Section 87.4 contains transition rules for contracts signed before the new section took effect: for those, the first anniversary that counts is the second one after the change.
Most small residential jobs finish well within a year, so this matters mostly on commercial work and multi-phase projects. If you are a subtrade on a long job, it means you no longer wait until the very end for all of your holdback.
Prompt payment and the proper invoice.
The payment clock starts with a proper invoice. Section 6.1 lists what it must contain: your name and address; the invoice date and the period or milestone it covers; the contract or purchase order it relates to; a description of the work and materials, with quantities where appropriate; the amount payable and payment terms; and who to send payment to. Invoices go monthly unless the contract says otherwise.
Since January 1, 2026, an invoice that is missing something is treated as a proper invoice anyway unless the owner tells you in writing within 7 days what is wrong and how to fix it. That closes the old trick of sitting on an invoice and rejecting it weeks later on a technicality.
Under section 6.4, the owner must pay within 28 days of receiving a proper invoice. An owner who disputes it must give a notice of non-payment in the prescribed form within 14 days, stating the amount not being paid and all the reasons. The undisputed part still has to be paid on time.
If you are the subtrade.
Section 6.5 governs the next step down. A contractor who is paid in full must pay each subcontractor whose work was in that invoice within 7 days. If the owner pays only part, the contractor pays subcontractors from what was received, within the same 7 days.
If the owner does not pay at all, the contractor must still pay its subcontractors within 35 days of giving the invoice to the owner, unless it gives them a notice of non-payment on time, with a copy of the owner's notice, and undertakes to refer the matter to adjudication within 21 days. The same structure repeats between subcontractors and their own subtrades.
When payment stops: adjudication and liens.
Adjudication is a way to get a decision on a payment dispute from an adjudicator without starting a court action. Under section 13.5, a party to a contract or subcontract can refer a prescribed dispute to adjudication, but not more than 90 days after the contract is completed, abandoned or terminated, unless both sides agree otherwise. The Ontario Dispute Adjudication for Construction Contracts is the authority that runs it.
Liens have their own clock. Under section 31, a contractor's lien expires 60 days after the earlier of publication of the certificate of substantial performance or the date the contract is completed, abandoned or terminated. Miss that window and the lien is gone. If you are owed money on a job that is winding down, check the dates this week, not next month.
What this means for your paperwork and website.
Build your invoice template around the section 6.1 list and you rarely argue about whether an invoice was proper. Put your payment terms in every quote, and date every invoice. For homeowner work, the contract rules in home renovation contracts in Ontario apply on top of this.
On your website, a short line on how you invoice ("monthly progress invoices, payment due in 28 days, 10 per cent holdback released as the Construction Act requires") tells commercial clients you know the rules. GCs looking for subtrades also want your WSIB status; see WSIB clearance certificates. For the site itself, websites for renovation contractors shows what we build.
General information, not legal advice. For a specific dispute, speak to a construction lawyer or contact ODACC.
Questions
Straight answers.
How much holdback is required in Ontario?
10 per cent of the value of the services or materials as they are supplied, retained by each payer under section 22 of the Construction Act.
How long does an owner have to pay a contractor in Ontario?
28 days after receiving a proper invoice, unless the owner gives a notice of non-payment within 14 days for the disputed amount.
How fast must a contractor pay subcontractors?
Within 7 days of being paid by the owner for the invoice that included their work, or within 35 days of invoicing the owner if the owner does not pay, unless a proper notice of non-payment is given.
Does holdback apply to homeowners?
The holdback duty applies to each payer on a contract under which a lien may arise, which includes an owner paying for work on their home.
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