Substantial Performance Payment Closeout

Substantial Performance Payment Closeout

Fast-Fact Summary

• Governing Agency: Ontario Ministry of the Attorney General / Construction Act framework
• Form, Bylaw, or Regulation: Construction Act, R.S.O. 1990, c. C.30
• Effective/Current Anchor: Ontario Construction Act amendments in force January 1, 2026 through Bill 216 and Bill 60
• Direct Portal or Source: https://www.ontario.ca/laws/statute/90c30

Mandatory Scope

This compliance framework applies to all owners, general contractors, subcontractors, and payment certifiers operating within the Ontario construction sector. It governs all trades, project values, and licence categories subject to the Construction Act. Parties must systematically track substantial performance publication, deficiency closeout, invoice intake, and holdback release events within a single, unified administrative window to mitigate project closeout risks.

Deadlines & Administrative Windows

• 7-Day Invoicing Rule: Invoices are legally deemed proper unless the owner delivers a formal written notice of deficiency to the contractor within 7 days after receiving the invoice. Missing this 7-day notice window forfeits the right to dispute invoice form or structure and immediately triggers the 28-day prompt-payment timeline.
• Mandatory Annual Holdback: For contracts extending beyond one year, owners must publish a Notice of Annual Release of Holdback (Form 6) on an electronic construction trade news website within 14 days after each contract anniversary.
• Holdback Payment Window: Payment of the accrued basic holdback must occur no earlier than day 60 and no later than day 74 after the publication of Form 6, provided no liens have been preserved.
• Repeal of Section 27.1: The former section 27.1 notice-of-non-payment mechanism for refusing holdback distribution due to deficient or incomplete work is repealed. Holdback usage is strictly restricted to formal contract abandonment or termination scenarios and preserved lien risk.
• Adjudication Window: Parties have a strict 90-day window after contract completion, abandonment, or termination to initiate interim binding adjudication through ODACC or a qualified private adjudicator.

Financial & Legal Liability

• Non-Compliance Penalty: Uncontrolled closeout exposes parties to Construction Act payment administration liabilities, including lien claims, mandatory interest on late payments, holdback disputes, and warranty litigation. Specific statutory fine amounts are not defined in the source legislation for administrative closeout delays; liability is established through civil enforcement and binding adjudication.
• Average WSIB Premium Rate: $1.23 per $100 of insurable payroll, down from $1.25 per $100 of insurable payroll.
• G6 Non-Residential Construction Rate: $1.61 per $100 of insurable payroll.
• 2026 Maximum Insurable Earnings Ceiling: $121,700.

Step-by-Step Filing Instructions

• Step 1: Proper Invoice Intake: Receive the proper invoice from the contractor. Review the invoice layout immediately upon receipt.
• Step 2: Issue Deficiency Notice (If Applicable): If the invoice layout or structure is deficient, draft and deliver a formal written notice of deficiency within 7 days of receipt. If no notice is sent, proceed to process payment within the 28-day prompt-payment window.
• Step 3: Publish Form 6 for Multi-Year Projects: For contracts extending beyond one year, track the contract anniversary date. Publish the Notice of Annual Release of Holdback (Form 6) on an electronic construction trade news website within 14 days after the anniversary.
• Step 4: Release Accrued Holdback: Monitor the registry for preserved liens. If no liens are preserved, release the accrued basic holdback between day 60 and day 74 following the publication of Form 6. Do not withhold holdback for deficient work unless formal abandonment or termination has occurred.
• Step 5: Initiate Adjudication for Disputes: If a payment or holdback dispute arises, file for interim binding adjudication through ODACC or a qualified private adjudicator within 90 days of contract completion, abandonment, or termination.

2026 Inspection Notes

For 2026 construction compliance context, pay close attention to working-at-heights training records, trenching and excavation controls, and training/competency documentation. Ensure all on-site personnel hold valid certifications in accordance with O. Reg. 213/91 under the Occupational Health and Safety Act (OHSA) during closeout inspections and deficiency rectifications.

Official Sources

• https://www.ontario.ca/laws/statute/90c30
• https://www.ontario.ca/laws/regulation/180304