Introduction

In Ontario’s residential construction sector, disputes between owners and contractors or between contractors and subcontractors are common. Issues such as payment delays, unexpected cost increases, changes in the scope of work, or dissatisfaction with quality can quickly escalate into legal conflicts.

With Bill 216 (Building Ontario for You Act) amending Ontario’s Construction Act, the rules for residential construction disputes have changed for 2025. These updates impact how payments are made, when holdbacks are released, and how disputes are resolved.

Whether you are a homeowner hiring a contractor or a contractor managing subcontractors, knowing these changes will help protect your rights and avoid costly litigation.

Key Legal Framework for Residential Construction

Bill 216 and the Construction Act

Bill 216, which received Royal Assent on November 6, 2024, brings important reforms to Ontario’s Construction Act. Although some changes are still awaiting a formal effective date, it’s crucial for both owners and contractors to understand the upcoming rules.

Annual Release of Holdbacks

For residential construction projects, the new rules require owners to issue a Notice of Annual Release of Holdback within 14 days after each anniversary of the contract start date.

If no lien is preserved or perfected within 60 days after that notice, the owner must release all accumulated holdbacks to the contractor within 14 days. Contractors must then pay subcontractors their share within 14 days unless a lien has been preserved.

This change affects cash flow between owners and contractors and ensures that disputes between owners, contractors and subcontractors over delayed holdback payments are minimized.

Expanded Adjudication Rights

The new regulations expand adjudication to include disputes over:

• Scope of work changes

• Adjustments in contract price

• Extensions of time in residential construction projects

Either owners or contractors can start adjudication within 90 days after project completion, termination, or the last day materials or services were provided. This expansion offers faster resolutions for disagreements between contractors and subcontractors.

Proper Invoice Requirements

The updated definition of a proper invoice, the delivery of which triggers deadlines for payment, now requires:

• Clear contract identification details (contract number, purchase order, etc.)

• Detailed descriptions of work completed, milestones reached, or time periods covered

• Additional information requested by the owner to process payments

This helps to clarify whether an invoice is valid.

Transition Rules

Not all projects will be immediately subject to these rules:

• Contracts entered into before July 1, 2018, remain under the older rules.

Prompt payment and adjudication apply only to contracts signed or procured after October 1, 2019.

Practical Tips for Owners and Contractors in Residential Construction

For Homeowners (Owners)

• Draft Clear Contracts: Define what constitutes completion, scope changes, and payment milestones.

• Track Notices: Ensure holdback notices are issued and deadlines are met to avoid disputes.

• Prepare for Adjudication: Understand when you can initiate adjudication for payment or quality issues.

For Contractors

• Manage Cash Flow: Plan for prompt payment obligations to subcontractors after receiving holdbacks.

• Maintain Detailed Records: Keep organized invoices, variation orders, and communications with owners and subcontractors.

• Be Aware of Expanded Adjudication: Use adjudication to resolve scope or delay disputes quickly.

Conclusion

For Ontario residential construction in 2025, owners, contractors and subcontractors, relationships are governed by evolving legal standards under Bill 216. Staying informed about these updates—especially regarding annual holdback releases, proper invoices, and adjudication timelines—helps homeowners and contractors manage projects smoothly and avoid legal disputes.

Whether you are building a new home, renovating, or managing subcontracted work, understanding your rights and obligations under the new Construction Act framework is essential for protecting your investment and ensuring timely project completion.