Before You Close
Warranty coverage includes protection both before, and after closing. See below for an overview of the warranty coverage.
Warranty coverage includes financial protection before closing (pre-possession). There are four main types of warranty coverage during this period including deposit protection, delayed closing/occupancy coverage, condominium cancellations and financial loss coverage for contract homes. Learn more about each of these below.
Financial Loss Coverage for Contract Homes
When you enter into a construction contract with an owner of land to build a new home on the owner’s property, the owner may be entitled to statutory protection for some or all of the money paid to you under the construction contract.
If you fail to substantially perform the contract, the owner may be entitled to compensation for the difference between the amount they gave you and the value of the work and materials that you supplied, up to a maximum of $40,000.
Owners who wish to make a claim for financial loss protection are advised to contact Tarion. All documents that the buyer submits to Tarion in support of the claim may be provided to you and you will be given an opportunity to respond.
Compensation Delays for Condominiums
If you delay occupancy beyond the firm occupancy date and no exceptions apply – such as a mutual agreement to extend the occupancy date or an unavoidable delay – you must provide compensation to the purchaser.
The maximum amount of compensation under the warranty is $7,500. This includes:
$150 per day for direct living expenses (such as accommodation and meals) for each day of delay until the date of occupancy or termination of the purchase agreement (if applicable); and,
Any other expenses incurred by the purchaser as a result of the delay, such as moving or storage costs.
The purchaser is not required to provide receipts for direct living expenses but must provide receipts if they are seeking compensation for other costs such as moving and storage.
Compensation Delays for Freehold Homes
If you delay closing beyond the firm closing date and no exceptions apply – such as a mutual agreement to extend the closing date or an unavoidable delay – you must provide compensation to the purchaser.
The maximum amount of compensation under the warranty is $7,500. This includes:
$150 per day for direct living expenses (such as accommodation and meals) for each day of delay until the date of closing or termination of the purchase agreement (if applicable); and,
Any other expenses incurred by the purchaser as a result of the delay, such as moving or storage costs.
The purchaser is not required to provide receipts for direct living expenses but must provide receipts if they are seeking compensation for other costs such as moving and storage.
Condominiums & Freehold Homes
An unavoidable delay is an extraordinary circumstance where a closing date may need to be delayed through no fault of the builder or purchaser. This may be a strike, fire, explosion, ‘act of God’, civil insurrection, act of war or terrorism, or a pandemic.
If such a delay occurs, you are permitted to extend all deadlines by up to the length of the unavoidable delay period without paying delayed closing compensation. You must inform the purchaser at the outset of the delay, provide an estimate of how long it will last and give written notice as soon as the delay has ended.
Under the new home warranty, purchasers of new homes (not including contract homes) are entitled to statutory deposit protection if:
- the builder goes bankrupt resulting in the transaction not closing;
- the builder fundamentally breaches the purchase agreement resulting in the transaction not closing; or,
- the purchaser exercises a statutory right to rescind the purchase agreement before closing. As of January 2018, deposit protection includes other payments made by the purchaser, such as those made for upgrades and extras.
Deposit protection does not apply to any payments made to reserve or hold a home or a condominium unit before the purchase agreement is signed.
Deposit Protection for Freehold Homes
For purchase agreements signed on or after January 1, 2018, deposit coverage depends on the purchase price of the home:
- If the price of the home is $600,000 or less, the purchaser’s deposit is protected for up to $60,000.
- If the price of the home exceeds $600,000, deposit protection equals 10% of the purchase price up to a maximum of $100,000.
Deposit protection for Condominium Units
Condominium unit deposits must be placed in trust under the provisions of the Condominium Act. If you terminate a purchase agreement, you must return the purchaser’s deposit in full within 10 days. Tarion provides deposit protection of up to $20,000 plus a limited amount of interest that has accrued.
Deposit Refund Claims
If you fail to refund a deposit to a purchaser, the purchaser may make a deposit refund claim to Tarion. Tarion will provide you with copy of the documentation submitted by the purchaser and give you an opportunity to respond.