Purchasing a new construction home is an exciting opportunity. However, it is not uncommon to hear nightmare stories about the quality of new construction homes. A defect in the construction of your new home can be costly and frustrating and not all homebuilders are the same when it comes to ensuring quality of workmanship and materials.
To protect homebuyers in Ontario, most new homes and condos are subject to the Tarion Warranty program. Tarion is a non-profit corporation established by the provincial government to protect the rights of new home buyers and regulate the home building industry.In this post, we will delve into the world of Tarion Warranty, providing a thorough understanding of its purpose, coverage, and processes to help home buyers make informed decisions.
What is Tarion Warranty?
Tarion Warranty Corporation, also known as Tarion, is a non-profit organization that regulates new home builders and provides warranty protection to new homebuyers in Ontario, Canada. The Tarion warranty program was established under the Ontario New Home Warranties Plan Act, which mandates that all new homes built by registered builders in Ontario must be enrolled with Tarion and have warranty coverage.The Tarion warranty program aims to protect the rights of new homebuyers and provides coverage for various defects in a new home's construction and materials. It sets out minimum standards for new home construction and provides financial compensation to homeowners for damages caused by construction deficiencies or delays.
Will Tarion Warranty protect my deposit?
Deposit protection covers you if you’ve paid a deposit toward the purchase price of a new home but your purchase isn’t completed because your builder goes bankrupt or fundamentally breaches your purchase agreement. You can also claim deposit protection if you exercise a statutory right to terminate the purchase agreement and for some reason your builder cannot or will not return your deposit.The amount of deposit covered by Tarion varies based on the type of property you are purchasing. For a freehold home, if you signed your purchase agreement on or after January 1, 2018, your deposit coverage depends on the purchase price of your new home. For example, if the price of your new freehold home is $600,000 or less, your deposit is covered up to $60,000. If the purchase price is more than $600,000, you’re protected for 10 per cent of the purchase price, up to a maximum of $100,000.On the other hand, if you're purchasing a condominium, things can be a little different. The Condominium Act requires builders to place all deposits in trust, which means your deposit is fully protected. However, if for some reason your deposit was not placed in trust, or it is not returned by your builder, Tarion provides deposit protection of up to $20,000.
What is covered under the Tarion Warranty?
The Tarion warranty program provides coverage for three main types of warranties:
New Home Warranty: This warranty covers defects in the work and materials of a new home for up to seven years from the date of possession. It includes coverage for defects in the electrical, plumbing, and heating systems, as well as defects in the building envelope, such as water penetration and structural defects.
Deposit Protection: Tarion also provides deposit protection to new homebuyers in case the builder fails to complete the home or breaches the purchase agreement. For a freehold home purchase, if you signed your purchase agreement on or after January 1, 2018, your deposit coverage depends on the purchase price of your new home. For example, if the price of your new freehold home is $600,000 or less, your deposit is covered up to $60,000. If the purchase price is more than $600,000, you’re protected for 10 per cent of the purchase price, up to a maximum of $100,000. If you are purchasing a condo and your builder fails to put your deposit in a trust account, you could be covered for deposit protection of up to $20,000.
Major Structural Defects Warranty: This warranty covers major structural defects in a new home for up to ten years from the date of possession. Major structural defects are defined as defects that result in the failure of a load-bearing part of the home, making it unsafe or unfit for habitation. The warranty provides coverage for the cost of repairing or replacing the defective part, up to a maximum of $300,000.It's important to note that the Tarion warranty is not an all-inclusive warranty and does not cover all types of defects or damages. It has specific limitations and exclusions, and homeowners are encouraged to review the Tarion warranty booklet and consult with a qualified professional for a complete understanding of their coverage.
Delays in closing: Tarion provides coverage for delayed closing under its warranty program, which is designed to protect homebuyers in Ontario, Canada, in case their new home is not completed by the builder within the agreed-upon timeframe. A delayed closing can cause significant inconvenience and financial strain for homebuyers, as they may have to find temporary accommodations or incur additional costs due to the delay.
Registering for Tarion Warranty
All new homes built by registered builders in Ontario must be enrolled with Tarion and have warranty coverage. Builders are required to register each new home with Tarion and provide the homebuyer with a certificate of warranty coverage at the time of purchase.Homebuyers should ensure that their builder is registered with Tarion before making a purchase as there have been cases of builders and home flippers who are not registered with Tarion, which means that as a consumer, you are essentially unprotected. Tarion-registered builders are required to meet certain licensing and financial requirements, and they must comply with the Ontario Building Code and the Tarion Construction Performance Guidelines. To check if your builder is registered and review their track record of claims, homebuyers can check the Tarion website or contact Tarion directly to verify a builder's registration status.
Researching your home builder
Regardless of the features of a Tarion warranty, dealing with builder defects can be cumbersome and frustrating. One way to avoid the process is to do your homework and research potential builders before signing on the dotted line and purchasing a home. In Ontario, the homebuilder's directory outlines all builders, along with their history of Tarion claims and warranty coverages.
Who pays for the Tarion Warranty?
The cost of the Tarion warranty is typically included in the purchase price of a new home and is typically paid by the builder, although in many circumstances, the homebuyer will be charged a Tarion enrolment fee as part of closing costs. This fee is usually passed on to the homebuyer as part of the purchase price of the home.The specific cost of the Tarion warranty may vary depending on the size and value of the home, as well as the type of warranty coverage provided. For example, the cost of deposit protection coverage may differ from the cost of the new home warranty or major structural defects warranty.
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How to make a Tarion Warranty Claim
If a homeowner discovers a defect covered under the Tarion warranty, they must report it to the builder and Tarion in writing within the applicable warranty period. The builder is responsible for repairing or replacing the defective item or compensating the homeowner for the cost of the repair.If the builder fails to address the warranty claim within a reasonable time, the homeowner can escalate the claim to Tarion for resolution. Tarion has a dispute resolution process that includes mediation, conciliation, and adjudication to help resolve disputes between homeowners and builders.
What is not covered by the Tarion Warranty?
While the Tarion warranty provides coverage for many construction defects and issues, there are certain limitations and exclusions to be aware of. Some of the common items that are typically not covered by the Tarion warranty include:
Normal wear and tear: The Tarion warranty does not cover damages or defects that are considered normal wear and tear or routine maintenance items. This includes things like minor cracks in drywall, scuffs or scratches on flooring, and fading of paint or finishes over time.
Homeowner negligence: The Tarion warranty does not cover damages or defects that are caused by the homeowner's negligence or improper maintenance. For example, if a homeowner neglects to properly maintain their home, such as failing to clean gutters, allowing water to infiltrate the home, and causing damage as a result, it may not be covered under the warranty.
Non-residential use: The Tarion warranty is designed to cover new homes that are used primarily for residential purposes. If a home is used for non-residential purposes, such as a home-based business or rental property, it may not be covered under the warranty.
Items covered by other warranties: The Tarion warranty does not duplicate coverage that may already be provided by other warranties or insurance policies. For example, appliances, fixtures, or materials that are covered by separate manufacturer's warranties or extended warranties may not be covered under the Tarion warranty.
Consequential damages: The Tarion warranty does not cover consequential damages, which are damages that are caused by a defect but are not directly related to the defect itself. For example, if a defect in the plumbing system causes water damage to other parts of the home, the Tarion warranty may cover the plumbing defect but not the resulting water damage.
Unauthorized alterations or repairs: The Tarion warranty may be voided if the homeowner or a third party makes unauthorized alterations or repairs to the home without the builder's approval. It's important to follow proper procedures and obtain necessary approvals before making any changes to the home to ensure that the warranty coverage remains intact.
Pre-existing conditions: The Tarion warranty typically does not cover defects or issues that existed prior to the date of possession. It's important for homebuyers to thoroughly inspect the home during the pre-delivery inspection process and report any defects or issues to the builder before taking possession to ensure that they are properly addressed and covered under the warranty.It's crucial for homebuyers to review the Tarion warranty booklet and understand the specific limitations and exclusions of the coverage provided. If there are any questions or concerns about the coverage, it's recommended to seek legal advice or contact Tarion directly for clarification.
The Bottom Line
In conclusion, the Tarion warranty is a vital protection program for new homebuyers in Ontario, Canada. It provides coverage for a wide range of construction defects and issues that may arise in a new home, including defects in workmanship and materials, water penetration and structural defects, HVAC systems, major structural defects, Ontario Building Code violations, delayed closing or occupancy, and deposit protection.The Tarion warranty aims to provide peace of mind to homebuyers by offering financial compensation, repair or replacement of covered items, and dispute resolution mechanisms in case of issues with their new homes. It is important for homebuyers to thoroughly review the Tarion warranty booklet, understand the coverage provided for their specific situation, and follow the proper procedures for reporting and resolving issues in a timely manner.Homebuyers should also be aware of their rights and responsibilities under the Tarion warranty program, including the requirement for builders to enroll their new homes in the program and provide deposit protection. In case of disputes or claims, homebuyers can seek assistance from Tarion's customer service, or may need to involve legal counsel or other professional advice to resolve the matter.
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