Substantial Performance in Ontario: Why That Date Decides So Much
Updated: Sep 25
There is one date on an Ontario construction project that quietly decides more money questions than any other, and most owners have never been asked to think about it carefully. It is the date of substantial performance.
Substantial performance is not a feeling about how finished the building looks. It is a statutory test under the Construction Act with a precise definition, a publication requirement, and a chain of deadlines that starts running the moment it is certified.
What substantial performance actually means
Under Ontario's Construction Act, a contract is substantially performed when the improvement to be made under it is ready for use, or is being used, for the purpose intended, and the cost to complete, correct or otherwise finish the remaining work is no more than a prescribed sliding amount: three per cent of the first $1,000,000 of the contract price, two per cent of the next $1,000,000, and one per cent of the balance.
Two things follow from that wording. First, use matters. A building that is occupied and operating is hard to argue is not ready for its intended purpose. Second, the test is arithmetic, not opinion. Someone has to price the outstanding work, and that price is either under the threshold or it is not.
Certification and publication
The payment certifier, usually the consultant, certifies substantial performance. The contractor then publishes a certificate in a construction trade newspaper as prescribed. Publication is not a formality. It is what starts the lien and holdback clocks for everyone on the project.
Why the date decides so much
Holdback release. The statutory 10 per cent holdback on the substantially performed work becomes due after the lien period expires following publication. Before that date, releasing it early exposes you. After it, continuing to hold it without a proper notice exposes you to a different problem.
Lien periods. Lien rights for the contract expire a set number of days after publication. Miss the publication, and lien periods for some parties may not start at all, leaving your title exposed far longer than you expect.
Warranty start. Most contract warranty periods run from substantial performance, not from final completion or from the day the last deficiency is fixed. That means a delayed certification quietly extends your warranty exposure, and an early one quietly shortens it.
Insurance transition. Builder's risk coverage typically ends at or shortly after substantial performance or occupancy. Your permanent property policy has to be in force on that date or you have a gap.
Contract administration winds down. Consultant services, site supervision and the contractor's general conditions costs are usually priced to this date. Extending past it is a cost conversation.
Where it goes wrong
Treating it as a negotiation
Contractors want certification early because it releases holdback and stops general conditions burn. Owners sometimes resist it because deficiencies remain. Neither position changes the test. If the building is in use and the cost to complete is under the threshold, it is substantially performed, whatever anyone would prefer.
No deficiency list at certification
Certify without a complete, priced deficiency list and you have given up your best leverage. The list should exist, be agreed, and be valued before the certificate is issued, because that value is what proves the threshold has been met.
Confusing it with completion
Substantial performance is not the same as completion of the contract, and not the same as final payment. Completion has its own definition and its own, smaller, holdback consequences. Owners who treat certification as "we are done" are surprised by the remaining obligations on both sides.
What to do as the date approaches
Agree the deficiency list and its value in writing before certification, not after.
Confirm your permanent insurance is bound to start on the date.
Diarise the publication date, the lien expiry date, and the holdback release date the day the certificate is published.
Collect warranties, as-builts, operating manuals and training before you lose leverage, not after.
Check whether your contract requires anything else to coincide with the date, such as commissioning sign-off or occupancy permits.
The honest summary
Substantial performance is a statutory test, a published certificate and the trigger for holdback, liens, warranties and insurance. It is arithmetic, not atmosphere. Get the deficiency list agreed and priced before certification, diarise every date that follows from publication, and make sure your insurance and your warranties line up with it.
Common questions about substantial performance
What does substantial performance mean under the Construction Act?
It is a statutory test, not a judgement about how finished the building looks. The improvement is ready for use or being used for its intended purpose, and the cost to complete or correct the remaining work falls within a prescribed sliding amount: three per cent of the first million of the contract price, two per cent of the next million, and one per cent of the balance.
Who certifies substantial performance?
The payment certifier, usually the consultant. The contractor then publishes a certificate in a construction trade newspaper as prescribed. That publication is not a formality, it is what starts the lien and holdback clocks for everyone on the project.
What does the date actually trigger?
Holdback release once the lien period expires, the expiry of lien rights, the start of most contract warranty periods, the end of builder’s risk coverage, and the wind-down of contract administration.
Is substantial performance the same as completion?
No, and it is not the same as final payment either. Completion comes later and carries its own holdback and its own lien period. Treating the two as the same is a common and expensive mistake.
One more thing worth knowing: if the landlord holds the contract, as on a turnkey fit-out, the holdback sits with them and not with you.
If you are approaching this milestone and want the sequence checked before it becomes an argument, that is a short conversation worth having. You can see how I work with owners and project partners on project solutions.
This article is general information about commercial construction practice in Ontario, not legal advice. The Construction Act has precise requirements — have your own counsel review your situation.
Connect with Carolee on LinkedIn: linkedin.com/in/carolee-w-turner-2002417
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