How does the Construction Act protect Toronto homeowners?

Ontario's Construction Act gives Toronto homeowners powerful legal tools to protect their money when hiring contractors — most importantly, the ability to hold back payment until work is properly completed and verified.

The Construction Act (formerly the Construction Lien Act, updated significantly in 2018 and 2019) governs virtually every construction project in Ontario, including residential renovations and new builds in Toronto and across the GTA. Understanding how it works can save you from some of the most common — and costly — disputes homeowners face.

The Holdback Requirement

The single most important protection the Act provides is the mandatory 10% holdback. On any project over a certain value, you are legally entitled — and in fact required — to withhold 10% of every payment to your general contractor until the lien period expires. This holdback exists as a financial safety net for subcontractors and suppliers who worked on your home. If your GC doesn't pay their electrician or drywall supplier, those trades can register a construction lien against your property title. The holdback protects you from having to pay twice for the same work.

The lien period for most residential projects is 60 days from the date of last work (extended from 45 days under the 2018 reforms). During this window, you should not release the full holdback. Once that period passes without a lien being registered, you can safely release it. For larger or more complex projects, always have a real estate lawyer do a title search before releasing holdback funds.

Prompt Payment Rules

The 2019 amendments introduced mandatory prompt payment timelines that work in your favour as a homeowner. Once you receive a proper invoice, you have 28 days to pay or issue a written Notice of Non-Payment explaining exactly why you're disputing it. This two-way obligation creates accountability — it protects contractors from slow-paying owners, but it also forces contractors to justify any billing disputes in writing rather than just stalling.

If a payment dispute escalates, the Act now includes a formal adjudication process — a faster, less expensive alternative to court that can resolve disputes in as little as 30 days. This is a significant improvement over the old system where disputes dragged through the courts for years.

What This Means Practically for Toronto Homeowners

Before starting any renovation, make sure your written contract clearly defines the scope of work, payment milestones, and substantial completion criteria. Toronto's older housing stock — think century homes in The Annex or Leslieville — often produces scope changes mid-project, and documented change orders are your best friend under the Act. Always get lien waivers from your contractor (and ideally from major subcontractors) before releasing final payment.

When to get legal help: For projects over $50,000, it's worth a one-hour consultation with a construction lawyer before you sign anything. For smaller projects, understanding the holdback rule and keeping good payment records goes a long way.

Your next step is to ensure any contractor you hire provides a written contract that references payment milestones and substantial completion. You can find experienced, reputable contractors through the Toronto Construction Network directory — browse local professionals at Toronto Construction Network and ask them directly how they handle holdbacks and lien waivers. A professional contractor will have straightforward answers.