Ontario's 2026 Construction Act Changes: Mandatory Annual Holdback Release, Explained
The Vinclo Team · Construction operations & product ·
Not legal advice. This article is general information about a change to Ontario's Construction Act, not legal advice. For how it applies to a specific contract or project, consult a construction lawyer.
For most of the Construction Act’s history, releasing holdback before the end of a project was the exception, not the rule. Annual or phased release only applied if a contract specifically provided for it, and only on projects with a contract price of at least $10,000,000 — out of reach for the overwhelming majority of Ontario trade contractors, who held every dollar of statutory holdback until substantial performance, no matter how long the job ran.
That changed on January 1, 2026. Amendments made through Bill 216 and Bill 60 repealed the old optional annual and phased release provisions and replaced them with a mandatory annual release scheme that applies far more broadly — not just to the small slice of megaprojects that could opt in before.
What changed
The old regime (former sections 26.1 and 26.2) let an owner and contractor agree, in the contract itself, to release accrued holdback annually or in phases — but only above the $10M threshold, and only if the parties chose to include it. Everyone else held holdback until the project reached substantial performance, sometimes for years on a multi-phase build.
The amended Act replaces that with a mandatory scheme under section 26: owners must publish a Notice of Annual Release of Holdback on each anniversary of the contract, and — absent a preserved lien — must actually release the accrued holdback shortly after. It’s no longer opt-in, and it’s no longer limited to large contracts.
How the new annual release timeline works
- Notice. Within 14 days after each anniversary of the contract, the owner publishes a Notice of Annual Release of Holdback, stating the amount accrued and the intended payment date.
- Payment. If no lien has been preserved against the holdback, the owner must pay it no earlier than 60 days and no later than 74 days after publishing the notice.
- Down the pyramid. Once the contractor receives the released holdback, they have 14 days to pay it down to the subcontractors it’s owed to — the same cascading obligation prompt payment already imposes on progress draws.
Section 27.1, which allowed a notice of non-payment to justify withholding holdback, has been repealed. Once the release is due, it has to go out — without deduction, set-off, or withholding outside what the Act itself permits.
Which contracts are affected, and when
The transition rule turns on when the contract was signed, not when the amendments took effect:
- Contracts entered into on or after January 1, 2026 hit their first mandatory annual release on their first anniversary.
- Contracts entered into before January 1, 2026 get one anniversary’s grace — the first mandatory release is due on the contract’s second anniversary following January 1, 2026.
Either way, this is no longer a $10M-and-up problem. A holdback clock now starts on the contract anniversary of essentially every active Ontario construction contract, and it resets every year the project runs.
A related change: release no longer waits on lien expiry
Before Bill 60, annual release was tied to the expiry of the lien period — a project with a live lien risk couldn’t cleanly separate “holdback is releasable” from “the lien window has closed.” Bill 60 broke that link. Annual release is now anchored to the publication of the Notice of Annual Release of Holdback, a date the owner controls and must hit on schedule, independent of lien expiry.
What this means for your draws
For a contractor running several active projects, this is a real change in cash-flow shape, not just paperwork. Instead of one holdback release at the end of a project, you now have a release obligation — and a release entitlement — on every contract anniversary, for every contract signed. That means:
- Tracking a second date per project. Substantial performance still drives the existing statutory and maintenance holdback release. Contract anniversary now drives a separate, recurring release. Missing either one has consequences — for an owner, a missed notice or payment window; for a contractor further down the pyramid, a missed 14-day disbursement.
- Smaller, more frequent releases instead of one lump sum. Holdback stops being a long-term security deposit sitting on the books until project close. It becomes a recurring draw of its own, which changes how a multi-year project’s cash flow projects out.
- Consistency across every project, not just the big ones. Because the $10,000,000 threshold is gone, this now applies uniformly — a two-year residential build and a ten-year infrastructure project follow the same annual clock.
This article explains the general shape of the change. It doesn’t cover every transition provision or exception in the amended Act, and it isn’t a substitute for reviewing your specific contracts with a construction lawyer — particularly for anything mid-transition around January 1, 2026.