Tarion administers and enforces the Ontario New Home Warranties Plan Act and Regulations. Coverage includes deposit protection, defects in work and materials, unauthorized substitutions, and delayed closings or delayed occupancies. The maximum amount of coverage is a total of $300,000 for homes with a date of possession on or after July 1, 2006. This amount is the same for new homes and condominium units. However, the maximum coverage for condominium common elements is $50,000, times the number of units, to a maximum of $2.5 million. It is important to note that the warranty coverage only applies to new homes or condominiums. For the purpose of this article, the focus will be on new homes. For more information, please consult Tarion’s website at www.tarion.com.
What is Covered?
a) Deposit Protection - If a purchaser is legally entitled to terminate the purchase agreement before closing, the builder fundamentally breaches the purchase agreement, or the builder goes bankrupt, the purchaser’s deposit will be protected under Tarion. If the purchase agreement was signed on or after February 1, 2003, the deposit will be protected up to a maximum of $40,000. It is important to consider this maximum when ? the amount of deposit to pay to a builder.
b) Unauthorized Substitutions - If the purchase agreement or construction contract provided the purchaser with the right to select certain construction items or finishing (i.e. materials and colours), no substitutions are usually permitted without the purchaser’s consent. Furthermore, if the purchase agreement provides that particular items will be included such as a specific model of appliance, those items can only be substituted by the builder with items of equal or greater quality. This assumes that the purchaser does not have the right to make a selection. This right may be modified in an Agreement of Purchase and Sale.
c) Delayed Closings or Delayed Occupancies - The builder guarantees that the home will be ready for the purchaser to move in by a date specified in the purchase agreement or by a date that has been properly extended due to unforeseen circumstances. The builder is required to compensate the purchaser if a delay occurs. The purchase agreement may provide a firm or tentative closing date. This will determine whether and when compensation is payable by the builder.
d) Defects in Work and Materials
i) One Year Warranty - The one year warranty begins on the date of possession and ends on the day before the first anniversary of the date of possession. The one year warranty requires that the home be: i) constructed in a workmanlike manner and be free from defects in material; ii) fit for habitation; iii) constructed in accordance with the Ontario Building Code; and iv) free of major structural defects. This is the broadest scope of coverage.
ii) Two Year Warranty - The two year warranty begins on the date of possession and ends on the day before the second anniversary of the date of possession. The two year warranty covers: i) water penetration through the basement or foundation walls; ii) defects in materials, including windows, doors and caulking, or defects in work that result in water penetration into the building envelope; iii) defects in work or materials in the electrical, plumbing and heating delivery and distribution systems; iv) defects in work or materials which result in the detachment, displacement or deterioration of exterior cladding (such as brickwork, aluminum or vinyl siding); v) violations of the Ontario Building Code affecting health and safety (including, but not limited to, violations relating to fire safety and the structural adequacy of the home); and vi) major structural defects.
iii) Seven Year Warranty - The seven year warranty begins on the date of possession and ends on the day before the seventh anniversary of the date of possession. The seven year warranty covers: i) 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 ii) any defect in work or materials that materially and adversely affects the use of the building as a home. The seven year 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. This is the narrowest scope of coverage.
How to Protect Your Rights
It is important for new home purchasers to pay close attention to the terms contained in the purchase agreement. It is also important for new home purchasers to do the required inspections and fill out the appropriate forms on time. For example, for Tarion to become involved in a dispute between a homeowner and builder, the homeowner must submit a Statutory Warranty Form. The forms include a 30-day form, Year-end form, or Major Structural Defect Form, which notify Tarion of any outstanding warranty items that have not been resolved by the builder. The process for submitting these forms is very specific and the timelines must be considered.