Whether you are a builder, vendor, or owner of a new property in Ontario, you should know that most new homes in Ontario are covered by a new home warranty. This warranty protection is provided by Ontario’s builders and enforced by Tarion, a private not-for-profit organization funded entirely by registration, renewal, and enrollment fees paid by builders.
Tarion administers the Ontario New Home Warranties Plan Act, (the “Act”), which provides warranty coverage. Tarion’s activities include investigating home owner warranty claims, resolving warranty disputes between home owners and builders, providing deposit and delayed closing protection for new home buyers, and prosecuting illegal builders. The statutory warranties are in addition to any warranties or rights the purchaser may have under contract.
Coverage under the Act includes protection for deposits, protection against financial loss for contract homes, compensation for delays in closing or occupancy, protection against unauthorized substitutions, one and two-year warranties for defects in work and materials, a seven-year warranty for major structural defects and coverage for condominium common elements, which are the common or shared areas of condominium buildings. Under the Act, every vendor of a home warrants to the owner that the home is free from defects in material and major structural defects, is fit for habitation, and is constructed in accordance with the Ontario Building Code.
Warranty protection applies to home owners and condominium owners as well as owners of residential condominium conversion projects. These projects are existing non-residential buildings that are converted into condominiums where pre-existing elements of the building such as foundation and frame are incorporated into the design and construction of the new building.
Types of Warranties
The one-year warranty applies for one year beginning on the home’s date of possession and provides fairly comprehensive coverage. This warranty requires that a home be constructed in a workman-like manner, free from defects in material and protects against Ontario Building Code violations. The home owner has two opportunities to file a statutory warranty claim—either during the first 30 days of possession with a 30-Day Form or during the last 30 days of the first year of possession with a Year-End Form. When the home owner sends in either of these forms, a 120-day period is triggered during which the builder is required to repair or resolve warrantable items. The two-year warranty applies for two years beginning on the home’s date of possession and protects against water penetration through the basement or foundation walls and the building envelope as well as defects in work or materials in the electrical, plumbing and heating delivery and distribution systems. To file a two-year warranty claim, the home owner would submit a Second-Year Form any time within two years from possession for items covered and once sent, a similar 120-day period would be triggered. The seven-year warranty covers major structural defects such as major cracks in basement walls, collapse or serious distortion of joint or roof structure or chemical failure of materials. The seven-year warranty begins on the date the home owner takes possession and ends on the day before the seventh anniversary of that date.
Most condominium projects have warranty coverage for the shared areas of the building referred to as common elements warranty. The Act recognizes the condominium corporation as the owner of the common elements and requires the condominium to make such warranty claims to Tarion.
As of January 1, 2018, condominium conversion projects qualify for warranty coverage if the first Agreement of Purchase and Sale was signed on or after this date. Conversions benefit from the same 7-year warranty coverage as other new homes but pre-existing elements are not covered by the one-year warranty on workmanship and materials. All other one-year warranty protection would apply to both pre-existing elements and new components of the project. Warranty protection beyond the first year coverage would apply to both new and pre-existing elements.
When the Builder Does Not Resolve Warranty Problems
Should a builder, home owner, or Condominium Corporation, as applicable, not resolve the warranty claims in question, there are options. Where there is reason to believe that the relationship between home owner and builder is strained and/or when the issues are so complex that they make the warranty process difficult, an early intervention process can be employed. With this method, Tarion assists parties in working together to resolve matters to potentially avoid conciliation or dispute. Should the builder not complete repairs or resolve the issue in the 120-day period from the appropriate Form being sent to Tarion, the home owner has 30 days to contact Tarion and request conciliation. Conciliation is a process whereby a Tarion representative inspects the property with the builder’s representative and the home owner in attendance. The purpose of the inspection is to assess whether the home owner’s complaint is covered under the warranty set out under the Act. A home owner can appeal the warranty assessment report if they disagree with Tarion by submitting a complaint to Tarion. If after this process, the home owner disagrees with Tarion’s decision, an appeal can be made to the Licence Appeal Tribunal.
There are items and circumstances not covered by warranties under the Act including: normal wear and tear such as scuffs and scratches to floor or wall surfaces, damage caused by improper maintenance, damage caused by a 3rd party, (such as municipal services or insects and rodents), secondary damage by defects that are under warranty such as personal injury or property damage, deficiencies caused by home owner actions such as alterations or additions and defects in work or material that the home owner accepts in writing.
Builders and Vendors
Subject to the following, anyone in Ontario who plans to build and/or sell a new home, condominium, or residential condominium conversion project must be registered with Tarion and enroll the property as set out by the requirements of the Act. Properties that have statutory warranty coverage include single family dwellings, condominium dwellings and contract homes, to name a few. Types of homes that are NOT covered include renovated homes, homes previously occupied by the builder/vendor or rented out by them, seasonal homes or, owner-built homes.
Process for Builders in Establishing a New Home Warranty
Vendors and builders of homes covered by the Act must be registered with Tarion. Furthermore, new homes including freehold and condominiums units that are built for sale must be enrolled with Tarion. As confirmation that the home is enrolled with Tarion, the vendor/builder will receive a certificate of completion and possession which contains information such as the enrollment number and final sale price of the home. The vendor/builder will also receive a warranty certificate. Once the certificate of completion and possession and warranty certificate is received and the home is occupied by the home owners, the new home warranty protection comes into force.
Please note that amendments to Ontario’s new home warranties are planned, with the introduction of the Protection for Owners and Purchasers of New Homes Act and New Home Construction Licensing Act, which will take effect on a date yet to be announced.
Please note these materials have been prepared for general information purposes only and do not constitute legal advice. Readers are advised to seek legal advice by contacting Frank Feldman regarding any specific legal issues.