September 16th 2024
Purchasing a newly built home is an exciting opportunity that comes with unique responsibilities for home buyers. This is particularly true when it comes to understanding the warranties and protections for your home. In this two-part article, we will review how the Ontario New Home Warranties Plan Act (the “Warranties Act”) provides warranty coverage for you and your new home.
This first article considers the role of Tarion and the obligations of home builders. In our next article, we will review the types of damage and repair that your warranty may cover.
Builder Licensing and Warranty Registration
With the enactment of the Homeowner Protection Act in 2024, every builder must now obtain a license from the Home Construction Regulatory Authority (HCRA) prior to engaging in new build construction. Builders who construct or sell new homes without a license can face significant fines and even imprisonment, as detailed in the New Home Construction Licensing Act. You can search for your builder’s enrolment and confirm your home warranty by visiting the Ontario Builder Directory, currently found at obd.hcraontario.ca
Knowing that your builder is licensed ahead of construction means that you will be able to make your claims through Tarion. Tarion is the non-profit corporation designated by the provincial government to administer the Warranties Act and manage any warranty claims. Warranty coverage is designed to protect homeowners from loss of their deposit if a project is cancelled or contract is breached, as well as provide protection from defects in workmanship, materials, and major structural components.
While the HCRA focuses on licensing and regulatory compliance for builders, Tarion manages warranty coverage and dispute resolution from buyers. Both organizations share information and collaborate to ensure that builders comply with licensing and warranty requirements.
Types of Coverage
There are three main ways that the Warranties Act protects home buyers. The first way is by protecting your deposit, the second is in dealing with delays and occupancy issues, and last, in the protection of your home through correcting defects on and after closing. Let’s deal with each of these items in turn.
Deposits
The Warranties Act includes provisions to protect deposits made by homebuyers when purchasing a new home. The deposit protection is intended to safeguard your financial investment if the builder fails to fulfill the contract and the deal fails. For a newly built home, the maximum deposit protection is 10% of the purchase price up to $100,000, but this coverage is only $20,000 plus interest for new build Condominiums. If a buyer provides a deposit beyond the insured amount, they may need to pursue the difference through other legal avenues, such as relying on the mandatory Arbitration provisions of the Warranties Act, subsection 17(4). Since arbitration is detailed in Tarion’s standard form documents dealing with delays, occupancy issues, and termination of the contract, lets turn to these issues now.
Delays, Occupancy Issues, Termination
Tarion and the Home Construction Regulatory Authority have developed an Addendum form for different types of new home purchases. These forms are available at tarion.com/builders-forms.
These forms are mandatory documents that form part of any contract for a new build home and they provide advice to the purchaser about their rights and obligations. The forms provide a Statement of Critical dates for when the home is expected to be ready for occupancy. If there is a delay, it clarifies the allowable limits for builders to extend closing dates and provides compensation to purchasers where a delay exceeds the allowable period. It also mandates types of disclosure required from the builder so a purchaser can better assess the risk that a delay may occur. It sets an Outside Occupancy Date where a purchaser has a right to terminate the transaction, and also has a section called “Disputes Regarding Termination” which clarifies that the builders will pay the costs of Arbitration.
In our next article, we will consider the types of protection for individuals who discover issues with their home before and after closing their real estate transaction.
If you have enjoyed this article and are looking for a real estate lawyer to assist you with your home purchase, reach out to Liddiard Law today!
Michael Liddiard, BA MA JD
Liddiard Law Professional Corporation
michael@liddiardlaw.ca