Construction Act, Holdbacks, Prompt Payment, and Lien Discharge
December 2024 · 14 min read
Ontario construction liens are governed by the Construction Act (formerly the Construction Lien Act, substantially amended in 2018 and in force for new contracts from 2019). The Act creates a statutory lien right for contractors, subcontractors, and suppliers who improve real property — a lien against the owner's interest in the land that must be preserved and perfected within strict timelines. This guide covers lien timelines (45-day preservation, 90-day perfection), mandatory holdback obligations, trust provisions, the prompt payment and adjudication regime, and lien vacating procedures.
Construction lien timelines are strictly enforced — missing the 45-day preservation deadline extinguishes the lien right entirely. There is no power to extend or excuse a missed lien preservation deadline.
| Event | Deadline | Party | Consequence of Missing |
|---|---|---|---|
| Substantial performance declared | Triggered by prime contractor | Prime contractor / owner | Starts 45-day lien period for most parties; holdback release period begins |
| Preserve lien (registration or filing) | Within 45 days of last supply OR 45 days of substantial performance publication | All lien claimants (contractors, subcontractors, suppliers) | Failure to preserve extinguishes lien right; no extension available |
| Perfect lien (commence action) | Within 90 days of preservation | Lien claimant | Failure to perfect extinguishes lien; action on contract may survive |
| Set action down for trial | Within 2 years of preservation | Lien claimant | Failure to set down may result in dismissal for delay; lien action is set down in Superior Court |
| Holdback released to prime contractor | 45 days after publication of substantial performance (if no liens) | Owner | If liens exist, holdback held until liens resolved; owner personally liable to lien claimants if holdback released prematurely |
| Prompt payment — owner to prime | 28 days from proper invoice | Owner | Notice of Non-Payment required if not paying; failure triggers right to adjudication |
| Prompt payment — prime to subcontractor | 7 days from receipt of owner payment | Prime contractor | Notice of Non-Payment required; failure triggers adjudication right |
The 10% mandatory holdback applies at every level of the construction pyramid — owner to prime contractor; prime contractor to subcontractor; subcontractor to sub-subcontractor. Failure to maintain holdback creates personal liability for the payer.
Every payer must retain 10% of the price of each payment for services or materials under a contract or subcontract
The holdback is held as a fund available to satisfy valid liens; payer cannot apply holdback to other debts or set-offs
The basic holdback may be released 46 days after publication of a certificate of substantial performance if no liens are registered
Separate holdback for finishing work (work done after substantial performance); released 45 days after completion of the entire contract
Owner who releases holdback prematurely or fails to maintain holdback is personally liable to lien claimants up to holdback amount
The Construction Act creates statutory trust obligations at each level of the construction pyramid. These trusts operate in addition to lien rights and provide an additional remedy for unpaid suppliers and subcontractors.
Under the Construction Act s.31, a lien must be preserved (registered on title or filed with court) within 45 days of the date of last supply of services or materials to the improvement (for subcontractors and suppliers) or within 45 days of publication of a certificate of substantial performance (for prime contractors). Missing the 45-day preservation deadline extinguishes the lien right.
Under Construction Act s.22, every payer (owner, prime contractor, subcontractor) must hold back 10% of the price of services and materials supplied under a contract or subcontract. The holdback is retained for the applicable lien period after publication of a certificate of substantial performance. The holdback fund is available to satisfy valid liens. Failure to maintain holdback makes the payer personally liable to lien claimants up to the holdback amount.
Under the Construction Act prompt payment provisions (in force since October 2019 for new contracts): the owner must pay the prime contractor within 28 days of receiving a proper invoice; the prime contractor must pay subcontractors within 7 days of receiving owner payment; subcontractors must pay sub-subcontractors within 7 days of receiving payment. If payment is not made, the payer must give a Notice of Non-Payment with reasons within the payment period. Disputes may be referred to adjudication.
A construction lien may be vacated by: (1) court order under Construction Act s.44 (lien not properly preserved, untimely, or no arguable case); (2) payment into court — owner or contractor pays the lien amount into court, court orders lien vacated; (3) posting of security (letter of credit or bond) in lieu of lien amount — court orders lien vacated; or (4) settlement agreement between the parties with discharge registered on title. The most common commercial approach is payment into court or posting of security to remove the lien from title while the underlying claim proceeds.
Atticus tracks 45-day preservation deadlines, 90-day perfection deadlines, holdback release dates, prompt payment timelines, and adjudication dates for Ontario construction law files. AI document analysis extracts key dates from contracts, invoices, and certificates automatically.
Try Atticus Free for 14 Days