The Ontario New Home Warranties Plan

Is your new home or condo covered?

The decision to purchase a newly constructed home or condominium is a big one for most purchasers. Potential purchasers should take steps to reduce the risks associated with the transaction by ensuring that their dwelling is subject to the statutory warranty coverage provided by the Ontario New Home Warranties Plan Act (the “Act”).

General Information

The extent of the warranty protection provided by the Act differs depending on the type of dwelling purchased. For example, a newly constructed fully or semi-detached home or townhouse generally receives one, two and seven year warranty protection in relation to certain defects. That said, some homes are not covered and newly constructed condominiums are subject to different rules pursuant to the Act.

Purchasers should determine the extent of the statutory coverage as it applies to their new home or condominium prior to paying any initial deposit so that they can take steps to assert a claim for coverage if defects are encountered or unexpected delays in construction arise.

Deposit Protection

In general, the Act protects new home purchasers against a loss of deposit up to $40,000 if the sale of their home is not completed.  New condominium purchasers are generally protected for a loss of deposit up to $20,000.

Coverage for deficient work and materials and structural defects

Purchasers are entitled to one and two-year warranty protection against defects and working materials and a seven-year warranty protection against major structural defects.  Coverage is effective on the date of possession and remains in effect even if the purchaser sells their dwelling before the warranty expires. It is extremely important for purchasers to note the specific expiry dates in relation to the statutory warranty that applies to their dwelling and purchasers should seek professional advice immediately if they have any questions in this respect.

Exclusions with respect to certain deficiencies

Coverage under the Act is subject to the following exclusions (not an exhaustive list):

i.  damage resulting from a home owner’s failure to maintain proper ventilation levels or improper operation of a humidifier, hot tub or any other moisture producing device;

ii.  alterations, deletions or additions made by the home owner;

iii. defects in materials, design and work supplied or installed by the home owner/purchaser;

iv. secondary damage caused by defects under warranty (i.e. the statutory warranty covers the defects themselves but damage to property as a result is not covered);

v.  normal wear and tear or shrinkage;

This list represents a few of the exclusions as outlined in the Act and illustrates the importance of obtaining advice before conducting any work or supplying any services in relation to a new dwelling. A purchaser’s decision to attempt to fix problems their own without involving the builder could result in a denial of coverage.

Excluded Dwellings

The following dwellings are not covered by the Act:

i.   temporary or seasonal homes (i.e.  cottages);

ii.  homes built on existing footing or foundations;

iii. homes built in converted buildings;

iv. homes that have been lived in or rented by the builder before they are sold;

v.  homes that are built by their owners.

Builder/Vendor Registration

It is extremely important to ensure that your builder/vendor is registered under the Act and that all of the work and materials supplied to construct your new dwelling flows through that builder/vendor.

Purchasers are often surprised to learn that warranty coverage may be denied in instances where an owner contracts directly for the supply and/or installation of materials for their new dwelling.  The contractual relationship between the purchaser and the builder must remain consistent throughout construction so as to ensure that warranty coverage is not adversely affected.

Tarion Warranty Corporation (“Tarion”)

Tarion is responsible for administering the Act and for the licensing of all new home and condominium builders in the province of Ontario. Tarion is also responsible for ensuring that builders abide by the Act and will intervene to protect purchasers when builders fail to fulfill their warranty obligations.

Conclusion

The Act contains very specific rules with respect to asserting a claim to Tarion in the event that a builder breaches its statutory obligations. The process is complicated and requires a purchaser to meet very specific deadlines. If you encounter any defects or delays in the construction of your new home or condominium, you should consult a professional to determine the coverage afforded to you pursuant to the Act.

This article was originally published in the May 27, 2008 edition of the Ottawa Business Journal.