Holdback Requirements Under Ontario's Construction Act

The 10% rule

Every payer on a construction contract or subcontract in Ontario — owner paying contractor, contractor paying subcontractor, and so on — must hold back 10% of the price of the services or materials supplied, until the lien period below them has expired. The requirement is statutory; a contract cannot waive it.

Why holdback exists

Holdback is the pool that protects people lower in the construction pyramid who have no contract with the owner. If a subcontractor goes unpaid and liens the project, the owner's exposure to that claim is generally tied to the holdback the owner was required to retain — which is exactly why paying out early, or not retaining at all, is the classic expensive mistake in Ontario construction.

When holdback is released

Basic holdback becomes payable once the lien expiry period after publication of the certificate of substantial performance has passed with no liens preserved (or all liens discharged). The Act also provides for annual and phased holdback release on longer projects, and separate finishing holdback for work after substantial performance.

Before releasing, prudent payers do a subsearch of title to confirm no liens were preserved — releasing holdback while a lien is on title defeats the entire protection.

Prompt payment and adjudication

Layered on top of holdback, Ontario's prompt payment regime sets strict clocks: a proper invoice starts a 28-day payment countdown for owners, with 7 days for contractors to pay subcontractors after receiving payment, and notices of non-payment required to stop the clock. Disputes can go to interim adjudication — a decision in weeks, binding on an interim basis, designed to keep money moving while the project continues.

If you are building payment processes for a project — or chasing money on one — we can set up compliant invoicing and holdback practices, or enforce them. The first 15 minutes are free.