Introduction

Disputes concerning construction contracts—overpayment, delays, quality, and scope changes are all too common in Ontario. The legal landscape has recently shifted with new amendments and proposed regulations under the Construction Act, following pthe assage of Bill 216 (“Building Ontario for You Act (Budget Measures)”). These changes affect how parties to construction contracts can enforce their rights, what timelines apply, and how holdbacks and adjudication work. If you’re involved in construction (owners, contractors, subcontractors), being aware of these 2025 updates is essential.

Key Legal Framework & Recent Amendments

1. Construction Act and Bill 216

• Bill 216, which received Royal Assent on November 6, 2024, introduces important amendments to the Construction Act relating to prompt payment, adjudication, and holdback release.

• As of mid-2025, these amendments are not yet fully in force as they are awaiting proclamation of a date they will come into force by the Lieutenant Governor; several key regulations (drafted under the Act) are under review.

2. Annual Release of Holdback

• One of the most significant changes is the introduction of mandatory annual releases of holdbacks under certain contracts. Basically, under the new scheme, owners must publish a Notice of Annual Release of Holdback within 14 days after each anniversary date of when a contract was entered into.

• If no liens were preserved or perfected within 60 days following publication of the Notice of Annual Release of Holdback, the owner must release all accumulated holdbacks to the Contractor within 14 days after that 60-day lien period ends, unless a lien has been preserved or perfected and not discharged, vacated, or satisfied within that 60-day period.

• Within 14 days after receiving payment from the Owner, the Contractor is required to pay a subcontractor's accumulated holdbacks, unless a lien has

  been preserved or perfected and not discharged, vacated or satisfied.

• Subcontractors have payment obligations to sub-subcontractors similar to the obligations of contractors to subcontractors. The first annual release of holdbacks may be deferred until the second anniversary after the new holdback section comes into force.

3. Expanded Adjudication Rights & Timelines

The updated rules clarify that a party may initiate adjudication within 90 days after the earliest of these events:

i. contract completion, abandonment, or termination.

ii. the last date services/materials were supplied; or,

iii. The date the subcontract is certified complete.

iv. for subcontracts, items ii. and iii. apply

The scope of the disputes eligible for adjudication is being broadened. In addition to payment and holdback claims, the new draft regulations propose that issues such as scope of work, change in contract price, or extension of time may also be adjudicated if reasonably necessary to resolve a dispute.

4. “Proper Invoice” Revisions

The definition of a “proper invoice” is being refined: the amended definition will include requirements for more details about the periods of time, milestones or other factors affecting entitlement to payment as well as contract identification details to which the invoice relates, (contract number, purchase order, etc.) and additional detail requested by the Owner to assist the account payment procedure.

5. Transition Rules

Transition rules include that Bill 216 will not apply to contracts entered into or concerning which the procurement process commenced on or before July 1, 2018, which may still be governed by older versions of the law; for others, the new rules will apply with delays (e.g., delayed first annual holdback release).

Bill 216's amendments with respect to Prompt Payment and Adjudication do not apply unless the contract was entered into or the procurement procedure was commenced on or after October 1, 2019.

Things to Watch / Practical Tips

Watch for the dates when the amendments to the Construction Act come into force (the date to be announced by proclamation by the Lieutenant Governor).

Also, many key sections only become operative once the corresponding regulations are finalized.

Contract drafting: contracts written now should anticipate the changes. For example:

• include precise wording about what counts as a proper invoice;

• clarify what “completion” / “termination” / “abandonment” mean;

• address how changes/variation orders and extensions of time will be

  handled;

• plan for holdback release schedules and how subcontractors are paid.

Recordkeeping and notice obligations: ensure all notices (e.g., holdback release notices, lien preservation notices) are done properly and in a timely fashion. Missed notices or delays can cause loss of rights.

Cash flow implications: the earlier release of holdbacks, prompt payment enforcement, and broader adjudication may help contractors/subcontractors, but may increase pressure on owners, developers, contractors, and subcontractors to manage payments carefully.

Enforcement: Even after adjudication decisions, enforcement remains key. Recent Court decisions reaffirm that adjudication determinations are binding (as interim remedies) and can be enforced, e.g., by garnishment, etc.

Conclusion

With the 2025 amendments under Bill 216, Ontario’s legal regime for construction contracts is shifting toward greater certainty, timeliness, and fairness, but also more complexity, especially concerning payment, holdback release, and adjudication scope/timelines. For anyone involved in construction contracts, remaining informed of when the new rules take effect, ensuring contracts are drafted with the changes in mind, and being proactive about invoices, notices, and lien preservation will help avoid or enable better management of construction contract disputes.