Ask a subcontractor what nearly killed their business and the answer is rarely a bad project. It is almost always a good project that paid ninety days late while payroll ran every two weeks. Construction's payment structure, money flowing down a pyramid from owner to general contractor to subcontractor to supplier, with each layer holding the layer below it as a de facto line of credit, has been the industry's defining financial pathology for as long as the industry has existed. Since October 2019, Canadian legislatures have been methodically dismantling it, one province at a time.
Key Takeaway
Prompt payment legislation sets statutory deadlines for payment down the construction pyramid, typically 28 days from a "proper invoice" for owner-to-contractor, then 7 days for each tier below, and pairs them with adjudication: a fast, interim-binding dispute process that resolves payment fights in weeks rather than years. Ontario has had this since October 2019 and expanded it significantly on January 1, 2026, becoming the first province to mandate annual release of the 10% statutory holdback regardless of contract length. Alberta and Saskatchewan have full regimes in force, British Columbia's is coming, and the federal regime covers federal property in provinces without an equivalent. If your business operates in more than one province, you are operating under more than one set of rules.
The Problem This Solves
Before prompt payment legislation, the contractual position of a subcontractor waiting on payment was, in practical terms, close to hopeless. The remedies that existed, builders' lien registration and litigation, were slow, expensive, and structurally mismatched to the problem. A lien secures your claim against title; it does not put cash in your account this month. Litigation takes years and costs more than most disputed progress draws are worth. The rational economic response for a subcontractor owed $80,000 was frequently to absorb the delay, finance it personally or through a line of credit, and hope the relationship stayed good enough to win the next job.
That dynamic transferred an enormous, invisible financing cost down the pyramid to the parties least able to bear it. It also created a perverse incentive structure at the top: for an owner or a general contractor with cash management pressure of their own, slow-paying downstream was free. There was no statutory penalty, no interest that anyone reliably enforced, and no fast forum to be dragged into. Prompt payment legislation exists to put a price and a deadline on that behaviour[1].
How Prompt Payment Actually Works
The architecture is broadly consistent across every Canadian jurisdiction that has adopted it, which is genuinely useful for contractors working across provincial lines. The chain runs like this[2]:
Proper Invoice Delivered
The contractor gives the owner a "proper invoice," typically monthly unless the contract says otherwise. This document starts every clock that follows.
Owner Must Pay
The owner pays the contractor within 28 days of receiving the proper invoice, unless a notice of non-payment was properly delivered.
Contractor Pays Subs
Within 7 days of being paid, the contractor must pay each subcontractor whose work was covered by that invoice.
Subs Pay Their Subs
The same 7-day rule cascades to each subsequent tier, down through sub-subcontractors and suppliers.
Two features of this structure deserve attention because they are frequently misunderstood. First, the obligation to pay downstream is triggered by receiving payment, not by the passage of time alone, but a contractor who does not get paid must still either pay the subcontractor or deliver a proper notice of non-payment and, in most regimes, undertake to pursue the owner. Silence is not an option. Second, these are statutory minimums that the contract cannot simply override. Parties retain considerable freedom to structure their commercial relationship, but they cannot contract out of the payment timelines themselves.
The "Proper Invoice" Is The Whole Game
If there is one operational detail that separates contractors who benefit from this legislation from those who do not, it is this one. Every statutory clock in every prompt payment regime in Canada starts when a proper invoice is delivered. An invoice that does not meet the statutory definition does not start the clock, which means the 28-day deadline never begins running, which means there is nothing to enforce and no interest accruing[3].
The specific required content varies modestly by jurisdiction, but the common elements generally include the contractor's name and address, the date of the invoice and the period during which the work was performed, information identifying the authority under which the work was done (the contract), a description of the services or materials supplied, the amount payable and the payment terms, the name and title of the person to whom payment is to be sent, and any other information the contract itself requires[3].
That last item is the trap. A contract can legitimately specify additional documentation requirements, statutory declarations, WSIB or WCB clearance certificates, updated schedules of values, lien declarations from lower tiers, and if the contract requires them, an invoice lacking them may not be a proper invoice. Contractors routinely submit invoices monthly for years, get paid slowly, and never realize that their own invoices have never once started a statutory clock because a required attachment was missing every time.
A second common failure: many regimes require the proper invoice to be delivered monthly, unless the contract provides otherwise, and specifically prohibit making the giving of a proper invoice conditional on prior certification of payment by a payment certifier or owner. A contract clause saying "invoice only after the consultant certifies the draw" is, in several jurisdictions, unenforceable to the extent it delays the proper invoice, but a contractor who follows that clause anyway has effectively waived the timeline benefit through practice rather than law.
Notice Of Non-Payment: The Owner's Escape Valve
Prompt payment does not mean automatic payment. An owner who disputes an invoice can refuse to pay, but must do so formally and fast. In the common model, the owner has 14 days from receiving the proper invoice to deliver a notice of non-payment specifying the amount not being paid and the reasons for non-payment[4]. Miss that window and the obligation to pay the full invoiced amount crystallizes at day 28 regardless of the merits of the underlying dispute.
This is the single most important behavioural change the legislation produced on the owner and general contractor side. Disputing a progress draw is no longer something that can happen leisurely, in the ordinary course of a monthly meeting, six weeks after the invoice arrived. It has to happen within two weeks, in writing, with reasons. Contractors who understand this timeline have a meaningful negotiating advantage: an owner who missed the notice window is in a materially weaker position than one who papered the dispute properly.
The mirror obligation runs downstream too. A general contractor who receives only partial payment from the owner must, within a short prescribed period, deliver its own notice of non-payment to affected subcontractors, disclosing the owner's non-payment and, in most regimes, undertaking to refer the matter to adjudication. That undertaking requirement is deliberate: it prevents a contractor from using the owner's non-payment as an indefinite excuse while doing nothing to actually collect.
Adjudication: Interim But Binding
Payment deadlines without an enforcement mechanism would be aspirational. Adjudication is the enforcement mechanism, and it is genuinely novel in Canadian construction practice. It is a rapid, statutory dispute resolution process, conducted by a trained and certified adjudicator, that produces a determination in a matter of weeks rather than the years litigation requires[1].
The critical legal concept is interim binding. An adjudicator's determination must be complied with, money must actually move, but it is not final in the way a court judgment is final. Either party can subsequently pursue the same dispute through litigation or arbitration and potentially reverse the outcome. Nothing in the legislation restricts the authority of a court or an arbitrator to consider the merits of a matter an adjudicator already decided[4]. In practice, the overwhelming majority of adjudicated disputes end at adjudication, because once the money has moved and the project has continued, the commercial appetite for a multi-year rematch over the same facts tends to evaporate.
This "pay now, argue later" design is the entire point. It inverts the traditional leverage structure. Previously, the party holding the money had every incentive to delay, because delay was free and the other side's only remedy was slow and expensive. Under adjudication, delay carries a real, near-term risk of an enforceable order to pay. Alberta courts have gone further than most in reinforcing this, with judicial consideration of the province's adjudication provisions examining just how final and binding those determinations are in practice[1].
What Changed In Ontario On January 1, 2026
Ontario has had prompt payment and adjudication since October 1, 2019, longer than anywhere else in Canada, and has now had six years of operating data to identify what was not working. On January 1, 2026, amendments under Bill 216 (the Building Ontario For You Act) and Bill 60 (the Fighting Delays, Building Faster Act, 2025) came into force[5]. Three changes matter most to a contractor's cash position.
Mandatory annual holdback release. Ontario became the first province in Canada to require that the 10% accrued statutory holdback be released annually, regardless of contract price or contract length[6]. This is a structurally significant change for anyone on a multi-year project. Under the previous framework, holdback on a four-year project could sit untouched until substantial performance, meaning a subcontractor with $4 million of work over that period was effectively extending a $400,000 interest-free loan for the duration. Annual release converts a large, deferred, illiquid receivable into a recurring, forecastable cash event.
Private adjudication. Parties to an adjudication may now choose a private adjudicator rather than being confined to the roster administered through the Ontario Dispute Adjudication for Construction Contracts (ODACC)[5]. For specialized disputes, mechanical, electrical, complex delay claims, the ability to select an adjudicator with genuine subject matter expertise is a meaningful quality improvement.
Expanded availability of adjudication. Adjudication is now available in both broader time windows and broader subject matter scope than before[5]. Notably, adjudication in some Canadian regimes is now available after project completion and even where arbitration or court proceedings have already been commenced[1], which removes a previously common tactical defence, that the dispute came too late or was already in another forum.
Transitional measures are built into section 87.4 of the Act, which matters enormously for anyone with contracts spanning the changeover[5]. Whether a given project falls under the old or new rules is a fact-specific question turning on contract dates and procurement timing, and getting it wrong in either direction, assuming rights you do not have, or failing to exercise rights you do, is expensive. This is worth confirming with construction counsel on a per-project basis rather than assuming a uniform cutover.
The Province-By-Province Map
This is where multi-provincial contractors get into difficulty, because the regimes are similar enough to feel interchangeable and different enough to matter. As of this writing[2][7]:
- Ontario: in force since October 1, 2019; significantly amended effective January 1, 2026. The most developed regime with the most case law and the only mandatory annual holdback release.
- Alberta: the Prompt Payment and Construction Lien Act (PPCLA) replaced the Builders' Lien Act, with further amendments proclaimed April 1, 2025 that modified the adjudication process and extended portions of the scheme to provincial public works. Adjudication is available after project completion and where court or arbitration proceedings have already started. Recent changes also clarify that a regulated professional engineer or architect waiving lien rights also waives the owner's obligation to maintain statutory holdback for those services.
- Saskatchewan: a full prompt payment and adjudication regime in force, and one of the three provinces federally designated as having a "reasonably similar" regime.
- British Columbia: the Construction Prompt Payment Act (Bill 20-2025) introduces statutory prompt payment and adjudication, designed to complement rather than replace the existing Builders Lien Act. BC's regime brings requirements comparable to Alberta's and Ontario's on proper invoices, payment timelines across all tiers, and adjudication. A consultation period on the Act has been open, meaning implementation details were still being finalized at the time of writing.
- Nova Scotia: legislation enacted; steps taken toward implementation and toward federal exemption.
- Manitoba: the Builders' Lien Amendment Act (Prompt Payment) received Royal Assent in 2023 but is not yet in force. Its payment deadlines mirror the common model: monthly proper invoices, 28 days owner to contractor, 14 days for notice of non-payment.
- New Brunswick: the Construction Prompt Payment and Adjudication Act received Royal Assent in 2023 but is not yet in force, with provisions closely tracking Ontario, Saskatchewan and Alberta.
- Northwest Territories: the Builder's Lien Act received Royal Assent October 6, 2023 and came into force September 1, 2025, replacing the Mechanics Lien Act and containing prompt payment provisions.
- Quebec: follows a distinct path. No federal exemption is contemplated for Quebec, meaning the federal regime applies to federal projects there.
The practical implication for a contractor working in, say, both Alberta and Manitoba is that your invoicing discipline, your notice obligations, and your dispute options are materially different on either side of that border, even for two projects running simultaneously with the same crew and the same accounting system. Treating them as one process is a live risk.
The Federal Regime
The Federal Prompt Payment for Construction Work Act applies to construction contracts relating to federal real property or federal immovables, between contractors and Canadian or Canadian-owned organizations, where neither party is a lessor or lessee[4]. Its timelines closely track the provincial model.
Critically, the Act allows the Governor in Council to exempt provinces that have already implemented a reasonably similar prompt payment and adjudication regime. On December 8, 2023, Ontario, Saskatchewan and Alberta were designated as exempt provinces[4]. The regulatory impact analysis accompanying that order noted that Nova Scotia and Manitoba had taken steps toward similar legislation with a view to exemption, and that no exemption was contemplated for Quebec[4].
What this means operationally: if you are working on federal property in a province without an equivalent designated regime, the federal Act governs your payment timelines, not your provincial rules. A transitional provision states the Act does not apply to contracts entered into before it came into force[4]. For contractors who bid federal work across provincial lines, this creates a genuinely confusing matrix, provincial regime in some places, federal regime in others, depending on both the property's status and the province's designation, and it is worth mapping deliberately rather than assuming.
How This Interacts With Your Lien Rights
A persistent misunderstanding among contractors is that prompt payment legislation replaced the builders' lien system. It did not. In every Canadian jurisdiction that has adopted prompt payment, the lien regime continues to operate alongside it, and in British Columbia the Construction Prompt Payment Act was explicitly designed to complement rather than replace the existing Builders Lien Act[7].
These are two different tools solving two different problems. A lien is a security interest: it attaches to the owner's title and preserves your priority position if the project or the payer collapses. It does not accelerate payment; it protects your place in line. Adjudication is a liquidity tool: it moves money quickly but creates no security. A contractor who wins an adjudication against a general contractor that becomes insolvent three weeks later has an enforceable determination and no assets to enforce it against. The lien, registered on time, would have been the instrument that mattered in that scenario.
This has a direct operational consequence: prompt payment deadlines and lien preservation deadlines run on entirely separate clocks, and the existence of an active adjudication does not extend your lien deadlines. Lien timelines remain strict and unforgiving. Courts continue to enforce perfection deadlines rigorously, though there is some judicial willingness to apply curative provisions to fix technical defects such as an incorrectly stated "last supply" date where the underlying timing was sound[7]. The safe practice is to treat lien preservation as an absolute calendar obligation entirely independent of whatever payment or adjudication process is running in parallel. Contractors who allowed a lien deadline to lapse because "we're in adjudication anyway" have surrendered their only real protection against downstream insolvency.
What Actually Gets Adjudicated
Adjudication is available for a defined range of matters, and understanding the scope helps contractors choose the right forum rather than filing a claim that gets rejected on jurisdictional grounds. In the common model, adjudicable disputes include the valuation of services or materials provided, payment under the contract including change orders (whether approved or not), disputes over notices of non-payment, the payment or non-payment of holdback, and non-payment generally[1].
The inclusion of unapproved change orders deserves emphasis, because disputed extras are among the most common sources of contractor cash flow damage. Under the traditional model, a subcontractor who performed directed extra work without a signed change order faced a genuine dilemma: sue and destroy the relationship over a $40,000 claim, or absorb it. Adjudication provides a middle path that is fast enough and cheap enough to be commercially proportionate to the disputed amount, which is precisely the category of claim that previously went uncollected as a matter of routine.
Ontario's expansion of adjudication availability in January 2026 to broader time windows and subject matter, combined with Alberta's allowance of adjudication after project completion and even where litigation or arbitration is already underway[1], materially widens this. Claims that would previously have been time-barred from adjudication, or blocked because another proceeding had started, may now be adjudicable. For contractors carrying aged receivables on completed projects, this is worth a specific review rather than an assumption that the window has closed.
What This Means For Your Books
Prompt payment legislation is usually discussed as a legal development. Its most immediate effects, though, land in the finance function, and there are four worth building around.
Your DSO assumption is now legislated, not negotiated. If you have been forecasting cash on the historical assumption of 60 to 90 day collection, and you operate in a jurisdiction with a live regime, and your invoices actually qualify as proper invoices, your baseline should be materially tighter. Contractors who never updated their cash flow model after their province's regime came into force are frequently carrying more working capital and more line-of-credit cost than they need. Equally, a contractor who assumes 28-day payment while systematically submitting invoices that fail the proper invoice test has built a forecast on a right they are not actually exercising.
Holdback becomes a scheduled receivable, at least in Ontario. Mandatory annual holdback release converts what was a lump, uncertain, end-of-project event into a recurring one. That belongs in the 13-week cash flow forecast as a named, dated line item, not as a vague long-term receivable. For a contractor carrying holdback across several multi-year jobs simultaneously, the aggregate annual release can be one of the largest single cash events in the year.
Interest on late payment is real and should be tracked. Prompt payment regimes provide for interest on amounts not paid within statutory deadlines. Most contractors never invoice for it, treating it as commercially awkward. That is a defensible relationship decision, but it should be a decision, not an oversight, and the accrued amount is worth calculating even if you choose not to pursue it, because it quantifies exactly what a slow-paying customer is costing you.
Adjudication costs are a budget line. Adjudication is fast and far cheaper than litigation, but it is not free. Adjudicator fees, and the internal time required to assemble a submission on a compressed schedule, are real costs. Contractors who treat adjudication as a genuine collection tool rather than a last resort should budget for it the way they budget for any other collection cost.
Practical Steps
Start by auditing a recent invoice against your own contract and your province's statutory definition, line by line, and confirm it actually qualifies as a proper invoice. This single exercise resolves the most common failure mode, and it costs an hour. Then build the required elements into your invoicing template permanently, so that qualification is automatic rather than dependent on whoever prepared that month's draw.
Calendar the statutory dates on every active project: proper invoice submission, the owner's 14-day notice window, the 28-day payment deadline, and your own 7-day downstream obligations. Missing your own downstream deadline is an exposure most contractors underweight, the legislation runs in both directions, and a general contractor who is paid on time but pays subs late is the one now facing adjudication.
Review your contract templates for clauses that conflict with the statutory scheme, particularly any provision purporting to make a proper invoice conditional on prior certification, or extending payment periods beyond statutory limits. Such clauses may be unenforceable, but their presence in your paperwork shapes behaviour on both sides regardless of enforceability. And if you work in more than one province, maintain a one-page matrix of the differences rather than relying on institutional memory that will inevitably default to whichever province you work in most.
Frequently Asked Questions
What actually makes an invoice a "proper invoice"?
Does prompt payment legislation apply in my province?
Is an adjudicator's decision final?
What is the annual holdback release change in Ontario?
Can my contract override the statutory payment deadlines?
What happens if I work on federal property?
References
- Miller Thomson. (2025, September 10). Prompt Payment, Liens and Adjudication: Reviewing the status of legislation in Canada. millerthomson.com/.../prompt-payment-liens-and-adjudication-status
- Miller Thomson. (2026, March 18). Prompt payment update. millerthomson.com/.../prompt-payment-update
- Alexander Holburn Beaudin + Lang LLP. (2026, March 4). Prompt Payment Legislation - Update. ahbl.ca/prompt-payment-legislation-update-2
- Miller Thomson. (2026, February 27). Canada's federal prompt payment legislation now in force. millerthomson.com/.../federal-prompt-payment-legislation-now-in-force
- Osler, Hoskin & Harcourt LLP. (2026, March 30). Canadian prompt payment and construction law reforms. osler.com/en/insights/updates/canadian-prompt-payment-and-construction-law-reforms
- Bennett Jones. (2026, February 20). Updates to Prompt Payment Legislation in Ontario, British Columbia and Alberta. bennettjones.com/Insights/Blogs/Updates-to-Prompt-Payment-Legislation
- Glaholt Bowles LLP. (2025, December 5). Construction Law Across the Provinces: Key Legislative Moves, Cases, and Practice. glaholt.com/.../construction-law-across-the-provinces
This article reflects publicly available legislative text and professional commentary current as of publication and is provided for general informational purposes. It is not legal advice for any specific contract, invoice, or dispute. Prompt payment and adjudication rights are jurisdiction-specific and fact-dependent; confirm your position with construction counsel before relying on any timeline in this article.