The Open Door Blog
Whether you own a new home or condo, are considering buying one, or just love to dream about it, the Open Door blog is here to share stories that can help you protect what is likely the biggest investment of your life.
The Open Door blog is published by Tarion, a non-profit corporation that administers Ontario’s New Home Warranty Plan and registers all new home builders in Ontario. Click here to learn more about us.
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- March 7, 2019
Tarion Talks: Episode 11, Delays
When you’ve signed the purchase agreement for your pre-construction house or condo unit, all you can think about is how excited you are to move in.
While most new homes are completed and ready for move-in by their scheduled closing dates, there is always a risk that there could be delays. You can’t predict delays, but you can prepare for them by understanding what may cause them and how you’re protected if they happen.
What causes delays in the construction of new homes?
- Weather. Homes are built outside and, as a result, they’re subject to the elements. Things like extreme cold, excessive rainfall, or a heat wave may have an impact on the construction schedule.
- Labour shortages. Construction of houses, and especially high-rise buildings, involve a lot of individuals and different types of expertise. There may be times when a framer, drywaller, or electrician is not available. And because some work is dependent on another, it can push things out in terms of timing.
- Materials. If you chose a specific type of countertop or hardwood flooring, and the company that manufactures it is behind in their production, or it needs to be shipped from another region, this can delay the construction process.
With condominium projects, sometimes construction doesn’t begin until a certain number of units have been sold. In hot markets, this may happen in short order while at other times, it could take longer. And even when a project is completely sold out, it may still take years for construction to start. The delayed occupancy warranty was designed with that in mind.
Types of Closing and Occupancy Dates
When referring to the delayed closing warranty, the term “closing date” is associated with freehold homes. But when speaking about condominiums, the accurate term to use would be “occupancy date”, because purchasers of condominiums generally go through an occupancy period before the official closing.
A closing date or occupancy date, which is the date you’ll be able to move into your new house or condominium unit, needs to be set within the purchase agreement. The builder has a choice to set a “firm” date, or a “tentative” one. If they’re confident the home will be completed by a specific date, they can set a firm date.
If the builder is unable to determine the precise date the home can be completed, they have the option to set a tentative date. A tentative closing date can be extended by the builder if certain rules are followed, a firm date cannot.
What if my builder can’t finish my home by the closing or occupancy date?
If it was a firm date, your builder must set a delayed closing date. If the home is not complete by the specified date, your builder may be required to provide compensation for the delay under the new home warranty.
However, if you have a tentative closing or occupancy date, your builder can change the date – as long as they are following a specific set of rules:
- Once your builder realizes that they can’t make the tentative date, they’ll need to provide at least 90 days’ notice in writing before that date.
- There is a limit to the number of times a builder can extend a tentative date – in the case of a freehold home, they can extend the closing date twice, up to 120 days each time.
- The occupancy date can be extended multiple times for condominiums, provided that the builder notifies their purchasers at least 90 days in advance for each extension.
What can I use to help me through the process?
Dealing with delays can be a challenge, but don’t worry -- there’s a document that can help you keep track of the process. It’s called the Addendum.
You should find an Addendum attached to your Agreement of Purchase and Sale. The first page of the Addendum is the Statement of Critical Dates, which is extremely important. It shows your firm or first tentative closing or occupancy date. If your builder set a tentative date, it shows the dates by which your builder must notify you that there will be a change, including the latest new date that your builder can set.
The Addendum also indicates when you’re entitled to legally back out of your agreement because of delay. There’s a date listed in the Statement of Critical Dates called the “Outside Closing/Occupancy Date.” This date triggers a 30-day Purchaser’s Termination Period, during which you can terminate your agreement.
The Addendum also lists any early termination conditions, which will allow your builder to terminate the agreement if the conditions are not met.
What if my builder wants to amend my agreement?
Your builder might ask you to sign a revised agreement with a new closing or occupancy date. Before you sign, make sure you have carefully reviewed the Statement of Critical Dates and the Addendum.
In addition, you should also be certain that you understand your warranty rights before signing any amendment to your original purchase agreement. If you need to, contact your lawyer for advice.
If you decide to sign an amendment or mutual agreement regarding your closing or occupancy date, you might waive your right to delay compensation under the warranty.
Delayed Closing/Occupancy Compensation
Construction delays can be frustrating and stressful. Sometimes, they can turn people’s lives upside down. Some purchasers may have already sold their previous home and need to find a place to stay until their new home is ready. This means they are likely incurring additional expenses, such as storage or accommodation costs.
This is an area where the delayed closing warranty can certainly help. If your builder went past your firm closing date, or didn’t follow the requirements to properly extend your tentative closing date, you’re entitled to compensation for the delay. The compensation is $150 for each day of the delay, to a maximum of $7,500.
While you may not need to provide receipts for basic living expenses, such as meals or accommodations, it is a good idea to hold onto them. If you incur additional costs, such as moving and storage-related expenses, those are receipts that you should hold onto – as you’ll need to produce them if you want to claim those costs.
While the warranty covers a maximum of $7,500 in expenses as a result of a delay (the maximum payable by Tarion), this doesn’t prevent you from seeking additional compensation from your builder.
And if you terminate your agreement in accordance with the Addendum, you’re still entitled to the $7,500 compensation for the delay, in addition to your deposit. But if your builder doesn’t provide this to you, contact Tarion for help.
Who do I make my claim to?
Start with your builder – they are the ones that provide the warranty and are responsible for compensating you for the delay. You can also make your claim to Tarion, but keep in mind that you need to take possession of your new home first. You can submit your delay compensation claim within one year after closing or within one year after occupancy for condominium units.
If Tarion pays compensation on behalf of the builder, the builder will be required to pay Tarion back, along with paying an added administration fee. Additionally, they’ll receive a chargeable conciliation, which shows that they breached their warranty obligations, and this information will appear on their profile in the Ontario Builder Directory.
What happens after I submit my claim to Tarion?
Your builder gets 30 days to resolve the claim with you. But, if they don’t resolve it, that’s when you can ask Tarion to assess the claim for you and determine if you’re entitled to delay compensation.
Tips for new home buyers
- Review the Addendum and Statement of Critical Dates in your purchase agreement. Understand what type of closing or occupancy date you have, and when you need to be notified if there is going to be a delay.
- Know what compensation you’re entitled to. If you’re going to incur extra moving expenses and storage expenses on top of what you would have originally incurred to move, hold onto those receipts.
- Find out when you can make your claim for compensation. Approach your builder first – if you need to make your claim to Tarion, use the online Delayed Closing or Occupancy Form that is available through MyHome.
There are many reasons why your new home might get delayed, but there are things you can do to help you understand the process and prepare for the issues that you may encounter. And remember, you can always contact Tarion with any warranty-related questions.