Contractor and Subcontractor Payment Disputes in Ontario: Options for Getting Paid

You finished the work. You submitted the invoice. And now the general contractor (GC) is stalling, disputing the amount, or simply not responding. A contractor subcontractor payment dispute in Ontario is more common than most people in the trades realize — and, crucially, the law gives subcontractors real teeth to recover what they are owed.

Ontario's Construction Act (formerly the Construction Lien Act) was substantially overhauled in 2019 and again in 2020. The reforms introduced a prompt payment regime and a mandatory adjudication process that did not exist before. If you are a subcontractor or sub-subcontractor who has not been paid, you now have faster options than a full court lawsuit — though the timelines are strict and missing a deadline can cost you the right entirely.

This article walks through the main remedies available, the traps to watch for, and the concrete steps to take in the days after payment stops.

Why Payment Gets Withheld — and Why It Matters Who Is Doing It

Money flows down the construction pyramid: owner pays GC, GC pays subcontractors, subcontractors pay sub-subcontractors and suppliers. When anything blocks that flow — an owner dispute, a GC cash-flow problem, or a bad-faith holdback — every party below bears the pain.

Understanding why the GC is withholding matters because it affects your strategy. A GC who genuinely disputes the quality of your work is a different problem from a GC who has simply not been paid by the owner yet and is using you as a short-term line of credit. Ontario law distinguishes between these situations and gives you tools for both.

Your Main Remedies as an Unpaid Subcontractor

1. The Construction Lien

A construction lien is a legal claim registered against the title of the property where you performed work or supplied materials. It is the foundational remedy under the Construction Act and it applies whether you are a subcontractor, sub-subcontractor, or material supplier.

Key points to understand:

• Who can lien. Anyone who supplies services or materials to an improvement to a property in Ontario can register a lien — you do not need a direct contract with the owner.
• The holdback. Owners are required by statute to hold back a percentage of each payment (the exact percentage is set in the Act — verify the current figure with a lawyer) as security for lien claimants. That holdback is there for you.
• Strict time limits. The deadline to register a lien is calculated from the date your last work on the contract was performed or materials were supplied — as of writing, that window is 60 days, but verify this immediately with a lawyer because missing it extinguishes the right entirely.
• Preservation and perfection. Registering the lien (preservation) is only the first step. You must then perfect it — commence an action and make a motion to consolidate — within a further time limit, or the lien expires. These are two separate deadlines.

A lien does not automatically get you paid. It clouds the title and creates leverage, usually forcing a conversation. Many lien disputes settle before trial.

2. Prompt Payment and Adjudication

The 2019 reforms added a prompt payment regime. In plain language: once a subcontractor delivers a "proper invoice," the GC has a fixed number of days to either pay or deliver a written "Notice of Non-Payment" explaining why payment is being disputed (verify the current number of days with a lawyer — the deadlines are specific and may have changed).

If the GC fails to pay or give proper notice in time, you can pursue adjudication — a fast, binding dispute-resolution process conducted by a licensed adjudicator, not a judge. Key features:

• An adjudicator's decision is made within a short fixed window (verify the current timeline with a lawyer) from the date of referral.
• The decision is binding and payable immediately, even if the losing party plans to challenge it later in court.
• Adjudication covers disputes about the amount owed under a contract, whether a notice of non-payment was proper, and related matters.

Adjudication is designed to keep cash flowing on active projects. It is faster and less expensive than litigation, but the rules around what can be adjudicated are specific — not every dispute qualifies.

3. Breach of Contract Claim

If lien rights have expired, or the amount is too small or the dispute too complex for adjudication alone, a traditional breach of contract claim in the Ontario courts remains available. This is the slowest and most expensive path, but it has the broadest scope: you can claim the unpaid contract price, extras and change orders, interest, and in some cases legal costs.

"Pay When Paid" Clauses — Are They Enforceable in Ontario?

Many GC contracts contain a "pay when paid" clause: language saying the GC only has to pay the subcontractor once the owner has paid the GC. Subcontractors often sign these without realizing what they mean.

The short answer in Ontario is that these clauses are generally enforceable as a timing mechanism, not as a complete defense. Courts have read them as delaying when payment falls due, not as eliminating the obligation to pay entirely. If the owner never pays the GC — say, due to the owner's insolvency — the question of whether the subcontractor bears that risk permanently is a more nuanced one and depends heavily on the specific contract wording.

The Construction Act's prompt payment regime has also added complexity: where prompt payment obligations apply, a contractual clause that purports to override them may not be enforceable. This is an evolving area — get specific legal advice before signing any contract with pay-when-paid language, and again if payment has stopped.

Trust Obligations Under the Construction Act

The Construction Act imposes a statutory trust on certain funds. In brief: money received by a GC from an owner for the purpose of paying subcontractors is held in trust for those subcontractors — the GC cannot use it for other purposes. If a GC diverts trust funds to pay its own overhead or other creditors, this may give rise to claims beyond the ordinary breach of contract, including claims against individual principals of a corporate GC.

Trust claims are powerful but legally complex. They are worth exploring if the GC has received payment from the owner but failed to pass it down.

Do This Now: A Practical Checklist for an Unpaid Subcontractor

If payment has stopped or is significantly overdue, act on this list immediately — several deadlines are time-limited and cannot be recovered once missed.

1. Pull your contract. Locate your subcontract, any change orders, and all correspondence about scope and price.
2. Document your last day of work. The lien clock runs from this date. Write it down and gather supporting records (daily logs, site photos, timesheets).
3. Check the 60-day window. As of writing, you have 60 days from the last day you supplied services or materials to register a lien — verify the current limit with a lawyer immediately.
4. Issue a proper invoice if you have not already. The prompt payment regime is triggered by a "proper invoice" as defined in the Act. If your invoice does not meet those requirements, the clock has not started.
5. Look for a Notice of Non-Payment. Has the GC delivered a written notice disputing your invoice within the time allowed? If not, you may already be in a position to refer to adjudication.
6. Do not do additional work for free. If payment has stopped, think carefully before continuing. Additional work supplied without security for payment can complicate your lien claim.
7. Contact a construction lawyer before the lien deadline. Lien registration is a technical process with mandatory content requirements. Errors in registration can void the lien.

Frequently asked questions