How does holdback release work on a large project completed in phases in Ontario?

The Construction Act no longer allows an optional phased or milestone-based holdback release — the provisions that once permitted it (former ss. 26.1, 27.1) were repealed by the 2024 amendments (2024, c. 20, Sched. 4); instead, accrued holdback must now be released annually as the project proceeds (s. 26). This lets contractors and subcontractors working on an earlier phase get paid their holdback sooner, rather than waiting for a multi-year project to fully wrap up, while still preserving the protection holdback is meant to provide for that phase's subcontractors and suppliers.

The current regime is the mandatory annual release: accrued holdback must be released on an annual basis as the project proceeds (s. 26) — this replaced the old optional annual and phased provisions. Because the timing rules, required notices, and interaction between phased releases and the annual release regime are technical and depend heavily on how a specific contract and project are structured, this is an area where getting the mechanics confirmed against the actual contract and project schedule with a lawyer is particularly important before relying on any release having properly occurred.