Significant changes coming January 1, 2026

Significant changes to the Construction Act (the “Act”) come into force on January 1, 2026. These include the introduction of mandatory annual holdback release, and numerous changes to the adjudication regime including the introduction of private adjudication.

Annual Holdback Release

The most significant change to the Act is the introduction of the mandatory annual release of holdback and the elimination of the right of an owner to give a notice of non-payment in respect of holdback. All holdback accrued on a contract will need to be released following each anniversary of the contract (the agreement between the owner and the contractor).¹

A fundamental aspect of the Act has been the interrelationship between holdback and liens: holdback is maintained for the benefit of lien claimants and therefore could only be released following the expiration of liens. Now, for the first time, holdback will be released while lien rights of contractors and subcontractors continue without expiration.

Owners are now required to publish a notice of release of holdback within 14 days of the anniversary of the date the contract was entered into, specifying the amount of holdback that is to be paid.

Owners can no longer give a notice of non-payment of holdback. This section has been repealed.²

At least 60 days but not later than 74 days after the date on which the notice of annual release of holdback is published, the owner must release all accrued holdback, unless there is a subsisting lien that has not been vacated.

The contractor and each subcontractor must pay the holdback down the contractual chain within 14 days of receiving payment, and no set-off can take place at any level.

A question arises as to how the amount of holdback is to be calculated. The Act does not provide this answer. However, based on Duncan Glaholt’s 2024 report recommending these changes, there is an argument that the legislative intent is that the accrued holdback will be calculated based on the proper invoices given by the contractor to the owner in the relevant year, subject to any adjudication determinations.³

As a consequence, the importance of statutory adjudication will increase, because if a contractor gives a proper invoice that the owner believes is excessive, the owner must adjudicate or the holdback in respect of the disputed portion of the invoice will arguably be required to be released following the anniversary date.

As noted above, holdback is to be released even though liens have not expired. This will mean that at the end of a multi-year project, there will be less holdback in the hands of an owner to answer the lien claims of any subcontractors. This has both benefits and drawbacks. On the one hand, subcontractors should benefit from significantly improved cash flow over the course of the project. On the other hand, if a contractor defaults on payment to subcontractors, the owner has less cash remaining to pay subcontractor liens. Subcontractors must be vigilant about ensuring they received their share of the annual holdback release, or pursue adjudications before it is too late, as their lien security is effectively diminished by the owner’s holdback release.

The annual holdback release provisions do not change the existing procedures for holdback release following certification of substantial performance, contract completion, or certification of completion of a subcontract. However, subcontractors may be less likely to request certification of completion of their subcontracts given that holdback will be released annually.

One thing that the amendments do not do is provide for a detailed scheme to explain what happens if the owner pays none or only some of the required holdback. Section 26(5) of the Act provides that the contractor must pay “all of the accrued holdback” to subcontractors after receiving “payment of the holdback as required” from the owner. The prompt payment provisions of the Act have a detailed scheme setting out a contractor’s rights and obligations if an owner does not pay a proper invoice in full. That scheme has not been carried over to the annual holdback payment provisions.

Commencement of the Annual Holdback Release

When will annual holdback release begin?

For all improvements that are subject to the old Construction Lien Act,⁴ and for P3 projects where the project agreement was entered into before January 1, 2026,⁵ annual holdback release will never apply. For all other improvements, the following transition provisions apply.

If the contract is entered into on or after January 1, 2026, holdback must be released annually following the first anniversary date of that contract.⁶ For example, for a contract entered into on May 1, 2026, annual holdback release would begin following May 1, 2027.

If the contract was entered into before January 1, 2026, annual holdback release begins as of the second anniversary date of the contract which follows January 1, 2026.⁷ For example, for a contract that was entered into on June 1, 2023, annual holdback release would begin following June 1, 2027. In that first annual holdback release, all holdback accrued under the contract in the foregoing years must be released.

Holdback Deemed to be Trust Funds

The statutory trust provisions are amended to provide that holdback which is required to be retained by an owner, or which is owed to or received by a contractor or subcontractor, are trust funds for the benefit of persons who have supplied services and materials to the trustee.⁸

The amendments to the owner’s trust provisions are particularly notable. For the first time, “any amount that is required to be retained by the owner as a holdback” will be impressed with a statutory trust, whether or not that amount has been received as financing by the owner, and whether or not it is certified as payable. As a result, the delivery of a proper invoice will give rise to trust obligations in respect of the holdback amount of that invoice.

Invoices Deemed Proper Unless Objected To

One of the issues that has arisen in the course of implementing prompt payment and adjudication has been the question of whether a contractor’s invoice is in fact a proper invoice. Prompt payment obligations are triggered by the giving of a proper invoice, so if the invoice does not meet the requirements for a proper invoice, the prompt payment obligations of an owner (including to give a notice of non-payment) are not triggered.

This has given rise to a practice in which owners receive an invoice with some technical defect, fail to deliver a notice of non-payment, and then object to a contractor’s right to adjudicate on the basis that no proper invoice was given and so no prompt payment obligations arose.

In response to this practice, the Act now includes a provision that deems an invoice to be a proper invoice unless, within 7 days of receipt of the invoice, the owner provides notice in writing of the deficiency in the proper invoice and of what is required to address it.⁹

The Act’s definition of a proper invoice has also been amended to include “Any other information that is necessary for the proper functioning of the owner’s accounts payable system that the owner reasonably requests.”¹⁰

These changes should improve the proper functioning of prompt payment and associated adjudications. However, the changes did not address the fact that contractors are under no obligation to carry subcontractor amounts in the contractor’s proper invoice to the owner. Subcontractors must still close this gap through contract negotiations.

Significant Changes to Adjudication

The most significant change to the Act’s adjudication provisions is the introduction of private adjudications, to be held outside of the ODACC process and before private adjudicators who are not registered with ODACC. These private adjudicators must still be licensed by ODACC, but ODACC will not set their fees.¹¹

Adjudicators may either be ODACC registry adjudicators or private adjudicators, not both. Private adjudicators must be agreed to by both parties and may not be appointed by ODACC.¹²

The regulations provide for a minimum fee of $1000/hour for a private adjudicator.¹³

Additional key adjudication changes:

a) More Time to Commence Adjudications ¹⁴
i. Contractors may commence within 90 days after contract completion, abandonment or termination
ii. Subcontractors may commence within 90 days of the earlier of contract adjudication deadline, subcontract completion certification, or last supply

b) Expanded Scope ¹⁵
Disputes regarding scope of work, price changes, and time extensions may now be adjudicated

c) Consolidation by Subcontractors^{16 17}
Any party may require consolidation of adjudications, subject to procedural rules

d) Notices of Adjudication ¹⁸
Must include details of any prior adjudications and include copies of prior determinations

e) Determinations Published ¹⁹
Adjudicator’s determinations will be published, subject to anonymization on request

f) Jurisdictional Objections ²⁰
Parties may raise jurisdictional objections promptly

g) Corrections ²¹
Adjudicators may correct determinations within 5 days

h) More Time for Leave to Judicial Review ²²
Leave may be sought within 35 days

i) Delayed Enforcement ²³
Payment deadline extended to 15 days

Joinder of Lien and Trust Claims Permitted

The Act now allows breach of contract and breach of trust claims to be joined in a single court action, reducing duplicative proceedings. ²⁴

Notice of Termination

A notice of termination must now be published within 7 days of termination. ²⁵
If multiple notices are published, the first notice triggers lien expiry. ²⁶

Deemed Lien Rights for Architects and Engineers

If an owner retains holdback for design services on a project that is not commenced, architects and engineers are now deemed to have lien rights unless the owner proves there has been no increase in value to the lands. ²⁷

1. Section 26 of the Act ↩︎
2. Section 27.1 of the Act ↩︎
3. Duncan W. Glaholt, 2024 Independent Review: Updating the Construction Act, page 18, Item 18 ↩︎
4. Section 87.4(1)(a) of the Act ↩︎
5. Section 87.4(5) of the Act ↩︎
6. Section 87.4(2) of the Act ↩︎
7. Section 87.4(4)1 of the Act ↩︎
8. Sections 7 and 8 of the Act ↩︎
9. Section 6.5(2) of the Act ↩︎
10. Section 6.1.6.1 of the Act ↩︎
11. Section 13.10(2.1) of the Act ↩︎
12. Section 13.9(2.1) of the Act ↩︎
13. Section 21 of O. Reg. 264/25 ↩︎
14. Section 13.5(3) of the Act ↩︎
15. Section 19(1) of O. Reg. 264/25 ↩︎
16. Section 13.8(2) of the Act ↩︎
17. Sections 26–27 of O. Reg. 264/25 ↩︎
18. Section 13.7(1)(e) of the Act ↩︎
19. Section 16 of O. Reg. 264/25 ↩︎
20. Section 13.12.1 of the Act ↩︎
21. Section 13.17.1 of the Act ↩︎
22. Section 13.18(2) of the Act ↩︎
23. Section 13.19(2) of the Act ↩︎
24. Section 50(4) of the Act ↩︎
25. Section 31(8) of the Act ↩︎
26. Section 31(9) of the Act ↩︎
27. Section 14(4) of the Act ↩︎