Tarion New Home Warranty Protection: The Nuts And Bolts

Introduction

In Ontario, every new home is required to meet or surpass the structural requirements and health and safety standards of the Ontario Building Code, and every new home is protected by a mandatory warranty provided by its builder and backed by Tarion Warranty Corporation (“Tarion”). Tarion is a not-for-profit, private corporation established to protect new home buyers in accordance with the terms of the Ontario New Home Warranties Plan Act (the “Act“). The Act requires new home builders to meet or exceed certain standards in order to register with Tarion and to enroll every new home under the Tarion new home warranty protection program (the “Tarion Program”) prior to the start of construction. Finally, and perhaps most importantly, the Tarion Program requires new home builders to provide complete post-construction new home warranty coverage.

This article outlines the basic components comprising the coverage offered under the Tarion Program, which are:

a. Deposit Coverage;

b. Delays in Closing or Occupancy Coverage;

c. Pre-Delivery Inspection; and

d. Statutory Warranty Coverage.

Deposit Coverage

The deposit paid towards the purchase of a new home is protected by Tarion up to a maximum of $40,000 for freehold homes and up to a maximum of $20,000 for condominium units. The deposit monies are protected and guaranteed by Tarion in the event that the builder is unable to complete the sale of the new home because of:

1. bankruptcy;
2. the builder’s fundamental breach of the purchase agreement; or
3. in the event that a purchaser is otherwise legally entitled to treat the purchase agreement as terminated.

Financial Loss for Contract Homes

If you have entered into a contract with a builder to construct a freehold home on land that you own, the money that you pay to the builder under the construction contract will be protected up to $40,000. In the event that the builder fails to substantially perform the contract, Tarion will pay the difference between the value of the work and materials supplied by the builder and the amount you paid to the builder, up to a maximum of $40,000.

Please consult one of our lawyers for a more detailed explanation of these components.

Delays in Closing or Occupancy Coverage

Under the delayed closing warranty, your builder guarantees that your home will be ready for you to move in either by a Closing Date specified in the purchase agreement or by a date that has been properly extended if circumstances occur that delay the home’s completion. In many cases, the builder will be required to compensate you if a delay occurs.

There are two sets of delayed closing and delayed occupancy warranties. In the case of Freehold home buyers, the applicable warranty is based on the date on which the agreement of purchase and sale was signed. In the case of Condominium buyers, the warranty that applies is based on the date that the purchase agreement for the first unit sold in the condominium project or phase was signed. The builder is to provide this information to a purchaser, upon request.

Pre-Delivery Inspection

Before taking possession of a new home or condominium, the builder is required to conduct a pre-delivery inspection with the purchaser (the “PDI”). During the PDI, it is very important to identify any items that are damaged, missing, incomplete or not operating properly and have these conditions noted on the PDI Form. The builder’s representative attending the PDI is furthermore required to attend with a copy of the Homeowner Information Package, which contains important information regarding the Tarion warranty coverage. As a purchaser, it is a good idea to bring along a second individual well versed in matters of construction or even simply a trustworthy individual with an eye for detail which will serve in noting all matters requiring rectification. Once the PDI has been completed, both the purchaser and builder representative will executed the Certificate of Complete and Possession form under the Tarion Warranty program.

Statutory Warranty Coverage

Your statutory warranty coverage comprises three periods:

a. The One Year Warranty;

b. The Two Year Warranty; and

c. The Seven Year Warranty.

d. The One Year Warranty

Your home’s statutory one year warranty coverage begins on the date you take possession of the home and ends on the day before the first anniversary of this date. The one year warranty is provided by your builder and it requires that the home be:

• Constructed in a workmanlike manner and free from defects in material;
• Fit for habitation;
• Constructed in accordance with the Ontario Building Code; and
• Free of major structural defects.

The Two Year Warranty

Your home’s statutory two year warranty coverage begins on the date you take possession of the home and ends on the day before the second anniversary of this date. The two year warranty is provided by your builder and covers:

• Water penetration through the basement or foundation walls;
• Defects in materials, including windows, doors and caulking, or defects in work that result in water penetration into the building envelope;
• Defects in work and materials in the electrical, plumbing and heating delivery and distribution systems;
• Defects in work or materials which result in the detachment, displacement or deterioration of exterior cladding (such as brickwork, aluminum or vinyl siding);
• Violations of the Ontario Building Code affecting health and safety; and
• Major structural defects.

The Seven Year Warranty

Your home’s seven year warranty covers major structural defects (“MSD”) and begins on the date you take possession of the home and ends on the day before the seventh anniversary of that date. A major structural defect is defined in the Act as:

• Any defect in work or materials that results in the failure of a load-bearing part of the home’s structure or materially and adversely affects its load-bearing function; or
• Any defect in work or materials that materially and adversely affect the use of the building as a home.

The seven year MSD warranty includes significant damage due to soil movement, major cracks in basement walls, collapse or serious distortion of joints or roof structure and chemical failure of materials.