Do you own land and want to build? As exciting as it is to start looking for the builder who can make your dream custom home a reality, it’s important to take a moment to understand the rules surrounding new home construction that are meant to protect you against fraud.
At Tarion, we refer to new homes that are built on land already owned by the purchaser as “contract homes.” That’s because the agreement between purchaser and builder is based on a construction contract as opposed to a standard agreement of purchase and sale that includes both home and property.
While there may be more freedom when it comes to building a contract home, it could end up working against you if your builder doesn’t follow the rules. Before you start searching for your builder, take a moment to familiarize yourself with the following things they’re required to do:
1. Get licensed as a new home builder and vendor.
Builders and sellers of new homes in Ontario must be licensed by the Home Construction Regulatory Authority. It’s against the law for your builder to enter into a contract with you if they don’t have a licence. You can confirm that a builder you are interested in is licensed by using the online Ontario Builder Directory.
2. Enrol the home with Tarion.
Tarion administers the province’s new home warranty program and steps in to help you if your builder fails to honour their warranty obligations. Almost all new homes in Ontario must be enrolled in the warranty program before construction begins. You can also use the Ontario Builder Directory mentioned above to confirm that your home has been enrolled.
3. Prepare a proper contract and review the warranty.
Your contract with your builder should clearly state everything included in the home, the work your builder will be doing, and the cost. Your contract must also include a Warranty Information Sheet that provides a brief overview of the coverage that comes with your new home. It is strongly recommended that you have your contract thoroughly reviewed by a real estate lawyer before you sign.
4. Conduct a pre-delivery inspection on or before your possession date.
The purpose of the pre-delivery inspection (also known as a PDI) is to make a record of any items in your new home that are missing, incomplete, damaged, or not working properly. It’s also a chance for you to ask questions about how to use and properly care for items in your home. Your builder must also provide you with a copy of your warranty certificate at this time. To learn more about the PDI, visit our PDI page and check out the resources in our Learning Hub, including our PDI Checklist.
5. Honour the new home warranty.
Your builder’s warranty on work and materials lasts for a total of seven years from the date you take possession. Among many other things, it provides coverage against building code violations and major structural defects. When you bring an item covered under warranty to your builder’s attention, they are responsible for investigating and resolving it in a timely manner. Visit our website for more information about warranty coverage and the process for making warranty claims.
Financial Loss Compensation for Contract Homes
In closing, you should also keep in mind that the new home warranty includes financial loss protection for purchasers of contract homes. This protection covers you in the event that your builder fails to perform the work outlined in your contract. For more information, visit the pre-possession coverage section on our website.