From Holdbacks To Terminations: Navigating Bill 60's Construction Act Amendments

On November 12, 2024 and August 7, 2025, we published bulletins outlining the significant changes to the Construction Act (the "Act") brought about by the Building Ontario For You Act ("Bill 216"). On September 3, 2025, we published a further bulletin describing key aspects to the draft Regulations issued in furtherance of Bill 216. In another move indicating that the Province will soon proclaim Bill 216 into force (which has yet to occur), on October 23, 2025, the Ontario government released the Fighting Delays, Building Faster Act ("Bill 60"), which refines and repositions several key amendments introduced in Bill 216. The most notable changes introduced by Bill 60 are:

1. Decoupling annual holdback release from lien expiry by creating a clearer timeline for payment of holdback on an annual basis and restoring the existing (and separate) timelines for lien preservation, perfection and expiry.
2. Revising section 30's prohibitions to use of holdback (such as for set-off against default claims) so that the prohibitions only apply where a contract or subcontract has been abandoned or terminated instead of when there has been any contractor or subcontractor default.
3. Introducing a transitional provision with respect to Public-Private Partnership (special vehicle) contracts.

Under Schedule 2 to Bill 60, most amendments are set to come into force on the day Bill 60 receives Royal Assent. However, the amendments aimed at decoupling annual holdback release and lien expiry, and the transitional provision with respect to P3 contracts will come into force on the later of (i) the day on which section 26 of Schedule 4 to Bill 216 comes into force (being when the annual holdback release requirements come into force); and (ii) the day Bill 60 receives Royal Assent.

Bill 60 passed its first reading on October 23, 2025, and is currently in second reading. Below, we share our preliminary analysis of these proposed changes and their practical implications for industry stakeholders.

1. Decoupling of Annual Holdback Release and Lien Expiry

Bill 60's most significant change concerns amendments to the annual holdback release and lien expiry provisions introduced by Bill 216.

Through amendments to sections 26 and 31 of the Act, Bill 216 mandates the release of accumulated holdback annually and this annual holdback release was coupled with expiry of liens for all services and materials supplied during the same annual period. Specifically, Bill 216 mandated that owners publish a notice of holdback release annually within 14 days of the anniversary of the date the contract "was entered into." This notice would then start a 60-day clock for the expiry of liens arising from the supply of services or materials that are included in the notice. Owners would then be required to release the holdback within 14 days of the expiry of the 60-day clock. In effect, Bill 216 tied the lien expiry directly to the timing of annual holdback release.

If it receives Royal Assent in its current form, however, Bill 60 will amend the scheme introduced by Bill 216 by severing the link between annual holdback releases and expiry of liens. Under Bill 60's proposed amendments, annual holdback release will still be mandated. However, the timeline for preservation, perfection and expiry of the corresponding lien rights for the services and materials supplied during that year will not be tied to the timing of this annual holdback release. Under Bill 60, while owners are still required to provide notices of annual holdback releases, holdback release will now need to occur at least 60 days but not later than 74 days after the date on which the notice of annual release of holdback is published. As such, under Bill 60's proposed amendments, holdback release is temporally tied to the date of the originating notice of holdback release only, and not to the date of lien expiry.

To this end, Bill 60 also backtracks on the annual expiry of liens introduced by Bill 216. Bill 60 seeks to repeal section 27 of Schedule 4 to Bill 216, which contained the not-yet-in-force amendments to section 31 of the Act. This means that a notice of annual holdback release will no longer start the clock for the expiry of liens. The timing for the preservation, perfection and expiry of liens will remain as it is, i.e. tied to the timing for completion of work, achieving substantial performance, or abandonment or termination of a contract or subcontract. However, Bill 60 does introduce a requirement that the owner or contractor publish a notice of termination within 7 days of the termination of a contract. The date of this notice will be considered the date of termination and will trigger the start date for calculating the lien expiry period.

By decoupling annual holdback release from lien expiry, Bill 60 shifts the focus back to predictable security for lien claimants and prevents the need for contractors and subcontractors to lien each year to preserve their rights for services and materials supplied during each calendar year. This also means, however, that the overall pool of holdback funds available for lien claimants when the contract is substantially performed or completed will be much smaller (as compared to today when all holdback taken under the contract is held until after substantial performance).

2. Revisions to the Section 30 Limit on Use of Holdback

Bill 60 also revises the scope of section 30 of the Act. Currently, where a contractor or subcontractor defaults in the performance of a contract or subcontract, section 30 restricts the use of holdback to address the default (such as to obtain substitute services or materials or satisfy a claim caused by the default) until all potential liens against that holdback have expired or been satisfied, discharged or otherwise addressed. As revised by Bill 60, however, section 30 now applies where a contract or subcontract is abandoned or terminated, meaning that the section 30 restrictions will arguably no longer apply to contractor or subcontractor defaults generally and will only apply where there has been abandonment or termination. Nevertheless, Section 30 continues to reinforce the principle that holdback funds are strictly reserved for lien-related security, not as a contingency for performance issues. Section 30 also does not reduce or change an owner's liability to lien claimants which remains tied to the amount of holdback required to be held.

We note that Ontario's summary of Bill 60 may suggest that the amended Section 30 applies in situations of termination and abandonment, as well as contractor or subcontractor default. However, the revised section 30 does not refer to default, indicating that its limitations may only apply in situations of termination and abandonment.

3. Transitional Provision with Respect to Public-Private Partnership Contracts

Bill 60 stipulates that section 26 of the Act (relating to payment of basic holdback), as it existed prior to the enactment of Bill 216, will continue to govern contracts for special purpose entities entered into before the amendments take effect and that have been prescribed for such exemption by regulation. Consequently, annual holdback release will not apply to these prescribed contracts.

This approach reflects the practical realities of P3 arrangements, whereby the capital costs of P3 projects are funded in whole or in part by private financing arrangements that may not be easily modified to accommodate unexpected changes to the timing of holdback releases. That said, even if a P3 contract is negotiated before the amendments take effect, if execution occurs afterward, the parties may still need to comply with the annual holdback release requirement in the final agreement. Accordingly, parties to P3 contracts should account for the annual release requirement going forward, including in P3 projects which may be in active procurement or negotiations at the time the amendments under Bill 60 take effect.

Conclusion

Bill 60 represents a notable recalibration of Ontario's construction payment and lien framework. In particular, by decoupling annual holdback releases from lien expiry, the legislation aims to balance timely and regular release of holdback with security for lien claimants that will not be overly burdensome to implement by project parties and the courts. Stakeholders should act now to review existing agreements, update internal processes, and ensure that future contracts that have not yet been executed reflect these pending (and likely imminent) changes.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2025