Prompt Payment Under Ontario's Construction Act: Rules, Timelines, and What Happens When Payment Is Disputed

Getting paid on a construction project in Ontario used to mean waiting — sometimes for months — while owners held money back and disputes dragged through court. Ontario's prompt payment regime, introduced through amendments to the Construction Act, changed that. The rules create strict timelines that move money from owners down to contractors and subcontractors, and they give the industry a fast dispute-resolution tool — adjudication — when someone along that chain refuses to pay.

If you work on Ontario construction projects as an owner, general contractor, or subcontractor, understanding prompt payment construction Ontario rules is essential. Missing a deadline or failing to issue the right notice can cost you the right to withhold payment — or the right to get paid at all.

This article explains how the payment chain works, what triggers each deadline, and what options you have when a dispute arises.

How the Payment Chain Works

Think of prompt payment as a waterfall. Money flows from the top — the owner — down through the general contractor, then down to each subcontractor tier. The Construction Act sets a mandatory schedule for how quickly that water has to move at every level.

Step 1: The Contractor Issues a Proper Invoice

Everything starts with a proper invoice — a document that meets the formal requirements set out in the Construction Act or the contract. A proper invoice must generally include: the contractor's name and address, the date, information identifying the contract, a description of the services or materials supplied, the amount claimed, and any other information the contract requires.

The "proper invoice" concept matters because the payment clock does not start until a valid invoice has been delivered. An incomplete invoice can restart the timeline — which is sometimes used strategically. As of writing, contracts cannot waive or modify the proper invoice requirements, so any attempt to do so in a contract is unenforceable. Verify the current requirements with a lawyer before relying on any contractual language.

Step 2: The Owner Has a Set Window to Pay

Once the contractor delivers a proper invoice, the owner must pay within a fixed period — as of writing, 28 days after receiving the invoice. This is the owner's payment deadline. Verify this timeline immediately with a lawyer, as the Act may have been amended.

During that 28-day window, the owner can dispute all or part of the invoice. But to do so lawfully, the owner cannot simply ignore the invoice — the owner must deliver a notice of non-payment (explained below) before the deadline expires.

Step 3: The Contractor Passes Payment Down the Chain

Once the contractor receives payment from the owner, the contractor has a shorter window — as of writing, 7 days — to pay each subcontractor the amount that relates to that subcontractor's work. Again, confirm this with a lawyer before acting on it.

If the contractor received only partial payment from the owner, the contractor must still pass down the proportional share owed to each subcontractor within that 7-day window. The contractor cannot use partial payment from the owner as an excuse to withhold everything from subcontractors.

This cascading obligation continues at each subcontractor tier. A first-tier subcontractor who receives payment from the general contractor has the same 7-day obligation to pay its own sub-subtrades. The timeline compresses as you move down the chain.

When Payment Is Disputed: The Notice of Non-Payment

The Construction Act does not allow a party to simply refuse payment without explanation. If an owner or contractor intends to withhold all or part of a payment, they must deliver a notice of non-payment — a written document that sets out the reasons for withholding and the amount being disputed.

The notice must be delivered within a specific window before the payment deadline expires. As of writing, an owner must deliver a notice of non-payment no later than 14 days after receiving the proper invoice, and a contractor must deliver it within a set period after receiving payment from the owner. These timelines are strict — verify them with a lawyer.

A notice of non-payment is not a get-out-of-jail-free card. The party withholding payment must still pay any undisputed portion on time. Only the genuinely disputed amount may be withheld. Withholding the undisputed portion is itself a breach that triggers its own consequences.

What Happens If No Notice Is Delivered?

If the payment deadline passes and no notice of non-payment was delivered, the party owing the money is in default under the Act. The unpaid party then has the right to refer the matter to adjudication — the rapid dispute resolution process described below.

Adjudication: The Fast-Track Dispute Path

Adjudication is the enforcement mechanism that gives prompt payment its teeth. Before the Construction Act amendments, the only way to fight a payment dispute was to go to court or arbitration — both slow and expensive for a contractor waiting on a progress payment.

Adjudication is different. A trained adjudicator — not a judge — reviews the dispute and issues a binding decision, typically within 30 days of the adjudicator receiving all documents (as of writing; verify). Either party may refer a payment dispute to adjudication while the project is still underway.

The types of disputes that can go to adjudication include:

• The amount of a proper invoice
• The non-payment of a proper invoice
• Amounts owed under the contract related to services or materials supplied
• Disputes about the valuation of proposed or completed change orders
• Claims for extension of time under the contract

Importantly, adjudication decisions are pay now, argue later. A party ordered to pay by an adjudicator must pay, even if they intend to challenge the decision in court or arbitration afterward. The losing party can bring a court action to set aside the decision on limited grounds, but they cannot use that future challenge as a reason to delay payment now. This feature is what makes adjudication a true cash-flow tool rather than just another dispute process.

Adjudicators are appointed from a roster established under the Act. Either party can trigger the process by delivering a notice of adjudication. Once that notice is delivered, the other party has a short window to object to the adjudicator or raise jurisdictional issues.

Key Practical Points for Each Party

Owners should review their internal approval workflows before any construction contract begins. The 28-day payment window starts on invoice receipt, not on internal approval. If your accounting team needs three weeks to process a payment requisition, the timeline will be nearly impossible to meet.

General contractors should build the 7-day downstream payment obligation into their cash-flow planning. Receiving payment from the owner and then sitting on it — even briefly — puts you in breach of the Act toward your subcontractors.

Subcontractors should track every proper invoice they deliver and note the date on which the 28-day or 7-day clock starts running. If a notice of non-payment does not arrive before the applicable deadline, the right to adjudicate may arise — but it must be exercised within its own limitation period.

Frequently asked questions