Construction holdbacks in Ontario, explained

Ten percent, held by whoever is paying

Ontario's Construction Act requires anyone paying for construction work — the owner paying you, or you paying your subcontractors — to hold back 10% of the value of work certified on each payment. It is not optional and it is not something a contract can negotiate away. The statutory holdback exists to protect the subcontractors and suppliers further down the chain, who can register a lien against the property if they go unpaid.

Construction Act, R.S.O. 1990, c. C.30, s. 22

After the certificate is published and the lien period runs out

The basic holdback becomes payable after substantial performance of the contract is certified and published, and the lien preservation period that follows expires with no liens preserved. In sequence: the certificate is published, a 60 day window runs, and the holdback is released. On long contracts, annual or phased release can apply where the contract provides for it.

Construction Act ss. 26, 31, 32 — certification and publication of substantial performance; expiry of liens; payment of holdback

The clock starts at a proper invoice

Under the prompt-payment rules the schedule is defined by the proper invoice: an owner has 28 days to pay after receiving one, and a contractor who is paid must pay its subcontractors within 7 days. A dispute has to be raised by notice of non-payment and may go to adjudication — silence is no longer a payment strategy. Your invoicing discipline, meaning dates, contents and delivery, is now the difference between predictable cashflow and an unenforceable pile of receivables.

Construction Act Part I.1 (prompt payment, ss. 6.1–6.9); Part II.1 (construction dispute interim adjudication)

What this means for how you run projects

• Track holdback as its own number, per project — not buried inside accounts receivable. You need to know what is retained, by whom, and which date starts its release clock.
• Model cashflow with the ten percent out , so a profitable project does not go cash-negative in month four.
• Certify substantial performance promptly. Every week the certificate is not published is a week added to the statutory timer on your money.
• Mirror the obligation downward. You hold back from your subcontractors the way the owner holds back from you, and release on the same statutory schedule.