Annual and Phased Holdback Release for Long-Term Ontario Construction Projects

On a project that takes years to finish, waiting until final completion to release any holdback can tie up a meaningful amount of a contractor's or subcontractor's money for a long time. Ontario's Construction Act addresses this with phased holdback release for long-term Ontario construction projects, allowing owners to release accumulated holdback in stages rather than only at the very end.

This matters most for multi-year projects — large infrastructure builds, phased developments, or long commercial construction contracts — where cash flow for contractors and subcontractors further down the chain can otherwise be strained for the life of the project.

Here's the general shape of how phased release works, and what it means if you're an owner, contractor, or subcontractor on a long-running project.

Why Phased Release Exists

The basic statutory holdback rule requires a percentage of what's owed to be retained until the applicable lien period passes. On a short project, that's a manageable wait. On a project spanning several years, requiring every dollar of holdback to sit untouched until the entire project wraps up can put real financial pressure on the businesses that did the work early on and are still waiting to be paid in full years later.

To address this, Ontario's Construction Act includes a mechanism for releasing holdback annually, or on another agreed basis, as a long project progresses, rather than only once at the very end.

How Annual Release Generally Works

In broad terms, the annual release process is tied to the anniversary of the contract. Around each anniversary, the owner is expected to take steps toward releasing the holdback that has accrued for that period, following a process set out in the Construction Act. The specific notice steps, timing windows, and forms involved are detailed and technical enough that they're best worked through with a lawyer or your project's construction counsel rather than relied on from a general summary — the consequences of getting a step wrong on a large project can be significant.

What matters most for planning purposes is the concept: holdback on a long project doesn't have to be a single lump sum released at the finish line. It can, and in the right circumstances must, be addressed in stages along the way.

What This Means for Owners

• You may have an ongoing, recurring obligation to address holdback release at intervals throughout a multi-year project, not just once at completion.
• Missing a required step in the annual process can create risk, so this generally isn't something to manage informally on a large or long-running job.
• Your construction contracts and payment processes should be set up from the start to track holdback separately for each phase or year.

What This Means for Contractors and Subcontractors

• You may be entitled to receive a portion of your holdback earlier than the project's final completion, improving cash flow on long jobs.
• Keeping your own records of what's been supplied each year makes it easier to confirm the correct amount is released on schedule.
• If an owner isn't following the annual process correctly, that's worth raising early — and getting legal advice on — rather than waiting until the end of the project.

Getting the Timing Right

Because annual and phased release involves specific procedural steps under the Construction Act, and because getting a step wrong can affect lien rights and holdback obligations for everyone on the project, this is an area where it pays to get it right the first time rather than improvising. If your project is expected to run more than a year, build a conversation with a construction lawyer into your planning early, not after a dispute has already started.

Frequently asked questions