Construction Law Update: Upcoming Changes to the Ontario Construction Act Regarding Holdback

In November 2024, the Ontario Provincial Government passed Bill 216, the Building Ontario for You Act. Among its many updates, the bill introduces a major change to the Ontario Construction Act, which requires a mandatory annual release of holdback on certain construction projects. Once the amendments to the Construction Act take effect, the release of holdback will apply differently depending on timing and will proceed as follows:

• Contracts governed under the former Act: Old rules continue—no mandatory annual release.

• Contracts signed before the In-Force Date: Annual release kicks in on the second anniversary after the In-Force Date. Example: If the contract was signed on August 1, 2025, and the law takes effect on December 1, 2025, the first release occurs on August 1, 2027.

• Contracts signed after the In-Force Date: Annual release applies immediately, with the first release due on the first anniversary of the contract date.

Why This Matters to the Construction Industry:

The mandatory release of holdback will significantly affect:

• Cash flow for contractors, subcontractors, and suppliers

• Lien rights and dispute resolution timelines

• Contract administration for owners and developers

However, until the Ontario Government announces the In-Force Date and releases draft regulations, construction professionals should carefully review which version of the Act applies to their projects. In this regard, the Construction Act has already gone through multiple revisions since replacing the older versions of the Construction Lien Act in 2018. Each version of the legislation comes with transition rules that determine which regime applies to a project as follows:.

• CLA (pre-July 1, 2018): Still governs contracts entered into or procurement processes started before July 1, 2018. No annual holdback release applies.

• Current Construction Act (post-July 1, 2018): Allows optional annual holdback release, but only if:

  
  

  1. The contract price is $10M or more,

  2. The project lasts longer than one year, and

  3. The contract expressly provides for annual release.

Key Takeaway:

Amendments to the current Construction Act are coming, and with them, a change surrounding the mandatory annual release of holdback, which you should be prepared for in the operation of your business as a construction professional.

For more information on your specific situation, contact us by booking a paid consultation online with us at www.bprlitigation.com or emailing us at justin@bprlitigation.com, and we would be happy to arrange an in-person or virtual consultation to assist you further.