New Build, New Beginnings: Information for Buying from a Builder in Ontario

Introduction

Tarion, the consumer protection organization responsible for administering and enforcing the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 (the “ONHWPA”), is continuously developing novel ways to protect new home purchasers in Ontario. In 2021, the Home Construction Regulatory Authority (the “HCRA”) was created to hold licensed builders accountable to specific professional standards and increase the protection of public interest and confidence in the homebuilding industry in Ontario.[1]

Compensation Limit Increase

For home buyers of new freehold homes (i.e., detached, semi-detached, and some townhouses) who entered into a purchase agreement on or after July 1, 2023, the compensation limit has increased from $300,000.00 to $400,000.00. The compensation limit for condominium units remains $300,000.00 as these units are already benefitting from additional coverage under the builder’s common elements warranty.[2]

Tarion also increased their temporary relocation warranty to $150.00 per day, up to a maximum of $15,000.00, to help homeowners cover costs associated with having to temporarily relocate to a different accommodation.[3] This warranty applies for both freeholds and condominium units that are deemed uninhabitable due to a warranted repair, requiring homeowners to move until repairs are completed.[4] Tarion defines the term “uninhabitable” as:

(…) generally the home or a material portion of the home is (or will be in connection with a proposed repair, despite industry standard mitigation measures) objectively unfit or unsafe for the inhabitants as a result of a condition of or in the home which exists because of a breach of statutory warranty by the builder (e.g., supply of work or materials by the builder that is missing or defective).[5]

New Customer Service Standard

In 2024, Tarion updated their warranty program with a new Customer Service Standard (the “CSS”), which focuses on improving transparency, fairness, and accountability.[6] For homeowners of new homes with a possession date on or after May 1, 2024, the following changes apply: [7]

• The initial 30-day submission period to submit an initial warranty claim has been extended by a period of 10 days. As such, homeowners now have 40 days to submit their initial form, and this form will be automatically submitted on day 41 (the “Initial Form”).
• The interim 10-day grace period for warranty coverage at the end of the first year is now permanent. As such, a homeowner can now add additional items or file a new claim within 10 days of the end of the first year, if they can prove that they advised the builder of the issue in writing during the first year.
• Homeowners can now submit an additional warranty claim after 6 months, which will be automatically submitted at day 183 (the “Mid-year Form”).
• During the first-year warranty period, homeowners can now keep a running list of any potential defects. In other words, defects can be added to a list any time during the first year (the “Year-end Form”). The Year-end Form will be submitted automatically on day 366.
• Instead of the previous 30-day conciliation request timeline, homeowners can now request conciliation with Tarion as of the submission date of a form up to the date of the next form submission period. As such, for the Year-end Form, a homeowner can submit a conciliation request up to 150 days after the end of the first year.[8]

No changes have been made to the two-year warranty or the seven-year major structural defect warranty offered by Tarion. Purchasers continue to have coverage for water penetration, heating, and electrical for two years as of the date of possession, as well as coverage for a period of seven years as of the possession date for significant damage, such as failure of a structural load-bearing element of the building.[9]

Notice to Tarion

To protect new home purchasers from builders engaging in illegal construction and selling of new homes, Tarion is introducing a change which will apply to all agreements of purchase and sale signed on or after July 1, 2025.

Starting July 1, 2025, purchasers entering into an agreement of purchase and sale with a vendor/builder to purchase a newly-built freehold home will need to provide notice of their purchase to Tarion within 45 days of entering into the agreement (the “Notice”).[10] The Notice is submitted by using an online tool and will include information about the purchaser(s), the builder, the property, and the deposit paid. The Notice will allow Tarion to better identify illegal vendors/builders, as they can determine whether they are licensed and legally allowed to sell homes. Tarion will work alongside the HCRA to prevent the sale of illegal new homes.[11]

Starting January 1, 2026, purchasers buying a new freehold home who provide the Notice to Tarion will qualify for the maximum deposit coverage currently available under the warranty program.[12] On the other hand, those who do not provide the Notice will be eligible for coverage under a separate deposit claims process. Those purchasing a condominium will not be affected by this change as the builder is required to place all deposits in trust under the Condominium Act, 1998, S.O. 1998, c. 19.

Notwithstanding the foregoing, all new home purchasers will continue to benefit from Tarion’s deposit coverage and will continue to receive the full construction warranty coverage.[13] In fact, Ontario’s deposit protection program provides coverage of up to $100,000.00 for freehold homes in the event you are eligible to receive your deposit back and your vendor fails to refund you. This protection applies whether the builder is operating legally.[14]

Conclusion

Although these new regulations continue to make the construction of new homes in Ontario very challenging for builders, it is important not only for builders, but also for purchasers to stay up to date on the ever-evolving developments in warranty protection to understand each party’s rights and obligations. Lastly, purchasers need to do their research and engage with reputable and trusted builders to ensure high standards of quality throughout the entire process and to secure a successful outcome.

[1] Home Construction Regulatory Authority, “Our Role”, accessible online: <www.hcraontario.ca/about/our-role/>.

[2] Tarion, “Q&A: Information About New Regulatory Changes” at 1, accessible online: <www.tarion.com/sites/default/files/2023-03/Regulatory%20Changes%20-%20Public%20QA%20-%20Final.pdf>.

[3] Ibid.

[4] Ibid.

[5] Tarion, “Registrar Bulletin – No. 07”, accessible online: <www.tarion.com/sites/default/files/2023-06/RB07-Temporary-Relocation-Warranty.pdf>.

[6] Tarion, “New Customer Service Standard to be simpler, more flexible, and involve more support from Tarion”, accessible online: <www.tarion.com/media/new-customer-service-standard-be-simpler-more-flexible-and-involve-more-support-tarion>.

[7] Ibid.

[8] Tarion, “Updates to Customer Service Standard (CSS)”, accessible online: <www.tarion.com/CSS-Updates#builder-resources>.

[9] Tarion, “Warranty coverage after you close”, accessible online: <www.tarion.com/builders-guide-coverage-homes>.

[10] Tarion, “Tarion Taking Action To Fight Illegal Activity and Protect New Home Purchasers”, access online: <www.tarion.com/media/tarion-taking-action-fight-illegal-activity-and-protect-new-home-purchasers#:~:text=In%20a%20phased%20approach%2C%20starting,or%20after%20July%201%2C%202025.>.

[11] Ibid.

[12] Ibid.

[13] Ibid.

[14] Tarion, “Public Q&A Tarion Changes To Deposit Protection To Fight Illegal Activity and Protect New Home Purchasers” accessible online: <www.tarion.com/node/66087>.