What is a holdback under the Construction Act and when can it be released in Ontario?

The Construction Act requires anyone paying for services or materials on an improvement - typically the owner paying the general contractor, and each payer down the chain - to hold back 10% of the price of what's been supplied, rather than paying the full amount right away. This statutory holdback exists specifically to protect unpaid subcontractors and suppliers further down the contract chain, giving them a fund to claim against if they aren't paid, since it isn't released until the deadline for preserving liens related to that work has passed.

Once the applicable lien preservation period expires without a lien being registered against the holdback, it can generally be released to the party who earned it. If a lien is registered in time, the holdback tied to that portion of the work is generally retained to help satisfy it rather than released. The Construction Act also now includes a mandatory annual holdback release regime for longer projects, requiring holdback tied to each contract year to be released on a periodic basis rather than only at the very end of a multi-year project, though the detailed mechanics of that annual process are technical enough that they're worth confirming with a lawyer for any specific multi-year project.