Ontario holdback is released every year since 1 January 2026

Ten percent of everything you earn on an Ontario job is withheld by law, and until this year there was no date on which you were entitled to see it. On a three-year project that meant a subcontractor could finish year one and wait until the whole job was substantially performed to be paid for it.

That changed on 1 January 2026. Section 26 of the Construction Act now requires the owner to release the previous year's holdback after each contract anniversary, on a published timetable, whether anyone asks or not — a separate clock from the 28-day proper-invoice payment cycle running under the same Act: Ontario prompt payment: 28 days, 7 days, and a new invoice rule.

What holdback is, in the Act's own words

The definition in section 1(1) is a single number:

"holdback means the 10 per cent of the value of the services or materials supplied under a contract or subcontract required to be withheld from payment by Part IV"

And section 22(1) imposes it on every payer in the chain:

"Each payer upon a contract or subcontract under which a lien may arise shall retain a holdback equal to 10 per cent of the price of the services or materials as they are actually supplied under the contract or subcontract until all liens that may be claimed against the holdback in respect of the supplied services or materials have expired or been satisfied, discharged or otherwise provided for under this Act."

Three points that get argued about and should not be.

It is not negotiable by contract. Section 22(3): the obligation to retain "applies irrespective of whether the contract or subcontract provides for partial payments or payment on completion."

Every payer retains it, not just the owner. "Each payer upon a contract or subcontract." A general contractor holds back from its subs; a sub holds back from its subs.

It does not have to be cash. Section 22(4) permits some or all of a holdback to be retained instead as a letter of credit in the prescribed form, a demand-worded holdback repayment bond in the prescribed form, or another prescribed form. That is the mechanism by which the money can stay in your business rather than the owner's account. It sits inside the same money that Part II of the Act treats as a trust fund for the people who did the work: Ontario construction trust funds: directors are personally liable.

There is also a second holdback. Section 22(2) requires a separate 10 percent holdback on the price of services or materials still to be supplied after the contract has been certified or declared substantially performed — the finishing-work holdback, retained from the certified or declared date of substantial performance.

The annual release, step by step

Section 26 replaced the old discretionary regime entirely. Sections 26.1 and 26.2 — the former provisions for annual and phased release — were repealed by the same amendment.

Subsection (2) is headed "Mandatory annual payment":

"Following each anniversary of the date on which the contract was entered into, the owner shall, (a) give notice in accordance with subsection (3); and (b) make payment of accrued holdback under subsection 22 (1) in accordance with subsection (4)."

The timetable:

Note the anniversary is measured from the date the contract was entered into — not from mobilization, not from the first invoice, not from a fiscal year end. On a job signed on 12 March, the clock runs to 12 March.

The 60-to-74-day window between notice and payment is deliberate: the notice is what gives lien claimants a chance to preserve a lien against that year's holdback before it is paid out. That date is also a tax date — GST/HST on the holdback follows it rather than the invoice: GST/HST on holdback: no tax before the holdback is payable.

When the payment does not happen

Section 26(4) makes payment conditional on there being no live lien. The owner must pay "unless a lien has been preserved or perfected in respect of the contract" and, in summary:

• where the lien attaches to the premises: it has not been discharged under clause 41(1)(a), and no order declaring it expired, discharging it, or vacating the registration has been registered under section 49;
• where the lien does not attach to the premises: it has not been satisfied, has not been discharged under clause 41(1)(b), and no order declaring it expired or vacating it has been made.

Section 26(5) applies the same conditions to the contractor's payment down to a subcontractor.

And the release valve — section 26(7):

"A payer shall make payment of a holdback that was not payable under subsection (4), (5) or (6) not later than 14 days after the circumstances preventing payment cease to apply."

So a lien does not park the money indefinitely. It parks it until the lien is resolved, plus fourteen days.

What is left over at the end

Not everything falls into an annual release. Section 26(8) governs the remainder — holdback not paid or payable under subsections (4) to (7) — once all liens claimable against the section 22(1) holdback have expired or been satisfied, discharged or otherwise provided for:

1. the owner pays the contractor not later than 14 days after the liens have expired or been resolved;
2. the contractor pays a subcontractor not later than 14 days after receiving payment from the owner;
3. a subcontractor pays a further subcontractor not later than 14 days after receiving payment.

The finishing-work holdback under s. 22(2) is dealt with separately by section 27, which requires the payer to discharge all claims in respect of that holdback once the liens against it have expired or been resolved.

And section 26(9) confirms the obvious but necessary point: a payment made in accordance with section 26 "reduces the amount required to be retained by the payer under subsection 22 (1) to the extent of the amount paid."

Why the lien deadlines belong in the same conversation

The whole holdback structure exists to hold a fund for lien claimants. So the fund is released when the liens are gone — which means the dates you care about on the payment side are the dates on the lien side.

Under section 31, a contractor's lien for services or materials supplied on or before the certified or declared date of substantial performance expires at the conclusion of the 60-day period following the earlier of publication of the certificate or declaration of substantial performance, and the date the contract is completed, abandoned or terminated. For everyone else the same 60-day period runs from the earliest of publication, the date that person last supplied services or materials, the date the contract is completed, abandoned or terminated, and the date a subcontract is certified complete under section 33.

Which is why the notice of annual release under s. 26(3) exists and why 60 days must pass before payment: if you have not preserved a lien against that year's holdback by then, it is paid out.

What to do with this

1. Write down the contract execution date for every job. It is now a payment date, not just a header field.
2. Watch for the notice of annual release. It is published, and the amount it names is the amount the owner intends to pay. If your accrued holdback for the year is larger than what the notice says, that is the moment to raise it — not seventy-four days later.
3. Track accrued holdback by year, per job. The annual release pays "accrued holdback in respect of services or materials supplied … during the year immediately preceding the anniversary". If you cannot split your billings by contract year, you cannot check the payment.
4. Ask for a letter of credit or a holdback repayment bond where the contract allows it. Section 22(4) makes it lawful; whether you get it is negotiation.
5. Remember there are two holdbacks after substantial performance — the basic one under 22(1) and the finishing-work one under 22(2), released under different sections.

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Current as of August 29, 2026. This article describes Part IV of Ontario's Construction Act and is not legal advice. It applies to Ontario only. It does not cover the prescribed forms for the notice of annual release, publication requirements, the alternative financing and procurement modifications, the lien preservation and perfection procedure, or the trust provisions in Part II, which apply to holdback amounts as well. Several provisions quoted here — sections 26 and 27 as they now read — came into force on 1 January 2026 and replaced earlier provisions that have been repealed. The version consulted was the consolidation published on Ontario's e-Laws on the date shown.

What Zirko does: it carries interim and final documents on one job with recorded payment terms, and it records the full value of the work in positions, so a withheld portion is visible as a deferral rather than disappearing into a reduced price. Zirko does not calculate holdback, does not track anniversaries or release dates, does not monitor lien status and gives no legal advice. Issued documents are immutable; a correction is a separate document, so the billing history of a job stays readable years later.