Contract Homes
If you own land and you hire a builder or contractor to build a home on your land, this is considered a ‘contract home’. There are special considerations for contract homes that can impact warranty coverage. See below for more information:
Owner-built homes
For most contract homes, the builder (contractor) undertakes the performance of all the work and the supply of all materials necessary to build the completed home. If a consumer, rather than a builder (contractor), exercises significant control over the construction of the new home, or is responsible for contributing one or more essential element(s) to it, the home may become an ’owner-built home’. The statutory warranty does not apply to owner-built homes. This is because the warranty is from the builder to the owner, and it does not apply when the builder and the owner are the same.
Consumers who contract with a builder to build a home on land they own should be aware of the impact that their level of control can have on whether the project will be covered by the statutory warranties.
If you have questions about your situation, you can contact Tarion at ismyhomecovered@tarion.com.
Deposit Protection
A construction contract for a contract home typically includes a payment schedule tied to various stages of construction. For this reason, contract homes are not eligible for deposit protection under the new home warranty but may qualify for financial loss protection. See information below.
Warranty Coverage & Financial Loss
Once the contract home is completed, the home is covered by a seven-year warranty for construction defects, up to $400,000, that begins on the date you take possession. To learn about these warranties, visit Coverage for Freehold, Contract, Condo Units and Condo Conversions.
If the project is not completed due to the builder’s fault, you may be entitled to financial loss protection. Financial loss protection is the difference between what was paid to the builder and the value of the work and materials that was delivered by the builder, up to $40,000. If the project is very close to completion when the relationship ends, it is possible the home will qualify instead for the full construction-related warranties noted above. The threshold that must generally be met is that the home must have been at least 97% complete at the time the builder stopped the construction. The 97% threshold is a statutory threshold drawn from provincial construction legislation. Homes that are less than 97% complete will not qualify for the construction warranties because those warranties only apply to completed homes where all of the work and materials were supplied by a single builder.
For more information on Financial Loss and how to make a claim, visit Coverage & claims before you move in, and refer to the section entitled “Financial Loss Compensation for Contract Homes”.