Public Q&A
Tarion Changes To Deposit Protection To Fight Illegal Activity and Protect New Home Purchasers
Following public consultation in 2024, Tarion is taking action to address illegal activity and protect current and future new home purchasers.
The illegal building and selling of new homes is a serious problem which hurts consumers, and is why Ontario has laws and a regulatory system in place to protect consumers. These changes will help identify illegal activity, and enable action to be taken earlier to protect consumers.
In a phased approach starting July 1, 2025, new freehold home purchasers will need to provide notice of their new home purchase to Tarion within 45 days of entering into an agreement of purchase and sale with a vendor/builder.
Starting January 1, 2026, freehold purchasers who provide this notice will qualify for the maximum amount of deposit coverage currently available under the warranty program, while those who don’t provide notice will be eligible for potentially reduced coverage, depending on the circumstances. It is important to note that all new home buyers will continue to benefit from Tarion’s deposit coverage.
In all cases, consumers will continue to receive the full construction warranty coverage and protection against defects in their new home.
You can see the full regulatory changes here
By making this change Tarion will be better able to identify illegal vendor/builder activity and act to stop it in partnership with the Home Construction Regulatory Authority (HCRA), preventing cases of large scale illegal new home sales like we have seen in the last two years.
This Q&A has been developed to assist in providing more information on the changes.
What change is Tarion making?
Ontario's deposit protection program provides coverage, up to $100,000 (for freehold homes), in the event that you become eligible to receive your deposit back from your vendor and your vendor fails to refund you. Purchasers are covered whether or not the builder is operating legally. Ontario is the only province in Canada that provides universal coverage. In all other Canadian jurisdictions, deposit protection must be specifically purchased, and victims of illegal building are not protected at all. This change ensures that Tarion can continue to sustainably provide universal deposit protection for consumers.
In a phased approach, starting July 1, 2025, new home purchasers will need to provide notice of their new home purchase to Tarion within 45 days of entering into an agreement of purchase and sale with a vendor/builder.
Starting January 1, 2026, freehold purchasers who provide this notice will qualify for the maximum amount of deposit coverage currently available under the warranty program, while those who don’t provide notice will be eligible for potentially reduced coverage, depending on the circumstances. It is important to note that all new home buyers will continue to benefit from Tarion’s deposit coverage.
Providing notice of agreements will be free and easy to do - using an online tool already available to new home purchasers. The notice to Tarion would include information about the purchaser, the vendor/builder, the property, and the deposit paid.
In all cases, consumers will continue to receive the full construction warranty coverage and protection against defects in their new home.
When would these changes come into effect?
The changes requiring freehold home purchasers to provide notice to Tarion will come into force for Agreements of Purchase and Sale signed on or after July 1, 2025.
However, to help consumers and allow for further public education and a longer implementation period, Tarion is deferring any changes to deposit coverage until January 1, 2026.
Tarion is committed to keeping the public informed on these important changes and is planning additional public education initiatives encouraging purchasers to provide notice as part of the new process.
Additionally, we will build on education with professionals in the real estate, legal and mortgage sectors so they can assist their clients with the required notice.
How will these changes enhance consumer protection?
The illegal building and selling of new homes is a serious problem which hurts consumers. That is why Ontario has a regulatory system in place to protect consumers. These changes will help identify illegal activity, and enable action to be taken earlier to protect consumers.
These changes will better enable Tarion to provide protection for new homeowners currently in the warranty program as well as future new home purchasers. The changes would give Tarion the ability to verify in real-time that the vendor/builder is licensed and legally selling homes and, if they aren't, Tarion can immediately alert the Home Construction Regulatory Authority (HCRA) so they can assess what action should be taken. This will also protect future potential purchasers from the illegal actor.
Tarion and the HCRA will be able to intervene earlier and prevent large scale cases of illegal new home sales like we have seen in the last two years.
It is important to note that Ontario is the only province in Canada that provides universal deposit coverage. In all other Canadian jurisdictions, deposit protection must be specifically purchased, and victims of illegal building are not protected at all. The requirement to give Tarion notice of purchase agreements ensures that Tarion can sustainably provide universal deposit protection for consumers.
Did Tarion make any changes based on feedback from the public consultation?
Yes, Tarion made several changes to the regulations, as well as adjustments to the implementation of the new requirements.
Based on the public consultations Tarion has amended the regulatory changes to:
- Allow for a longer implementation timeline where the requirement will be effective July 1, 2025; however, changes to deposit coverage will not be in force until January 1, 2026;
- Allow for a purchaser’s lawyer, agent, or representative to provide notice on the purchaser’s behalf;
- Double the size of the fund available for those who do not provide notice within 45 days from the initial proposed $5 million to $10 million, thereby ensuring that purchasers who do not provide notice are more likely to full deposit protection in the absence of extraordinary claims conditions;
- Defer for future consideration and consultation changes to when Tarion collects its enrolment fee due to concerns about the impact on housing affordability.
Additionally, the implementation of this regulatory change would be accompanied by:
- A robust public education initiative to increase consumer awareness;
- An extended implementation period to further promote the education initiatives to create awareness;
- A requirement that agreements of purchase and sale contain a clear direction to the purchaser to provide notice to Tarion of their agreement;
- Education for professionals involved in the new home purchase process, such as real estate lawyers, real estate agents, and mortgage providers;
- A simple notification process, supported by an easy-to-use digital registration portal;
Transparent reporting on how the program functions.
Why is Tarion making these changes?
The illegal building and selling of new homes is a serious problem which hurts consumers and reduces trust in the new home buying process. That is why Ontario has laws and a regulatory system in place to protect consumers. These changes will help identify illegal activity, and enable action to be taken earlier to protect consumers.
The changes would give Tarion the ability to verify in real-time that the vendor/builder is licensed and legally selling homes and, if they aren't, Tarion can immediately take action to protect the purchaser, mitigate impacts to the guarantee fund, and alert the Home Construction Regulatory Authority (HCRA) so they assess what action should be taken.
Tarion and the HCRA will be able to intervene earlier and prevent large scale cases of illegal new home sales like we have seen in the last two years, which have led to the largest claims event in Tarion’s history.
Through the Ontario New Home Warranties Plan Act (ONHWPA), Ontario is the only province in Canada that provides universal deposit coverage. In all other Canadian jurisdictions, deposit protection must be specifically purchased, and victims of illegal building are not protected at all. The requirement to provide notice of purchase agreements change ensures that Tarion can sustainably provide universal deposit protection for consumers.
Will purchasers of condominium or contract homes need to provide notice to Tarion?
No. Tarion is only making changes to freehold deposit protection due to the difference in deposit protection for condominiums and construction contracts.
Vendors/Builders of condominiums are required by law under the Condominium Act to place all deposits in trust.
In cases where a landowner and vendor/builder have entered into a construction contract for a contract/custom home, there could be a number of different financial arrangements and timelines for deposits or other payments which Tarion would not be able to adequately capture.
Is Tarion removing protection for new home purchasers?
No – all purchasers will still receive deposit protection coverage whether they provide notice or not, as well as full warranty coverage and protection of the construction warranty against defects in their new home.
Starting January 1, 2026, freehold purchasers who provide this notice will qualify for the maximum amount of deposit coverage currently available under the warranty program, while those who don’t provide notice will be eligible for potentially reduced coverage, depending on the circumstances. It is important to note that all new home buyers will continue to benefit from Tarion’s deposit coverage.
Do I receive deposit protection coverage if I don’t provide notice or miss the deadline?
Yes – all purchasers will still receive deposit protection coverage and the full warranty coverage and protection of the construction warranty against defects in their new home.
For freehold home purchasers who provide notice of their purchase agreement within the appropriate timeframe, their entitlement to deposit coverage remains at the current level.
For freehold homes where the purchasers do not provide notice within the required time of 45 days of entering into their purchase agreement, their deposit compensation limits will be subject to a sub-limit (i.e., under the $10 Million special fund) in any given year. A fund of $10 Million per year is significantly higher than the historical deposit claims paid by Tarion in past years - prior to 2023 the average total amount of deposit claims paid was around $1 Million per year. These changes will allow Tarion and the HCRA to intervene earlier and prevent cases of large scale illegal new home sales like we have seen in the last two years well before the $10 Million annual cap for the special fund is exceeded.
These claims will be aggregated based on the total claims made in a calendar year. If the total is less than the amount of the special fund, the deposit coverage limit will not be impacted, and the purchaser’s claim would reflect the current limits. If the aggregate claims are more than the amount of the special fund in a calendar year, then the compensation limit will be based on a proportional share of the special fund.
For example, if 110 purchasers submit claims for $100,000 in a year, then the total deposit claims under the sub-limit for that year are $11 Million. Therefore, these purchasers, who did not provide proper notice, would then receive up to $90,909 in coverage each.
Tarion has created a special $10 Million fund for purchasers who do not follow the new process – is that amount enough?
Based on historical data for deposit protection claims, the average annual amount Tarion has paid out in deposit claims prior to 2023 has been about $1 Million and the number of purchasers impacted approximately 30.
Additionally, for a purchaser to be required to make a claim through the special fund several different things would need to happen:
- The vendor/builder did not finish their home/complete the sale (i.e., their purchase agreement would need to be cancelled);
- The vendor/builder did not return their deposit, as required; and
- The purchaser did not provide the proper notice to Tarion within the 45-day window.
Based on the historic numbers and possible number of purchasers who would meet all three criteria, purchasers will likely not be negatively impacted by these changes.
However, Tarion is committed to conducting an annual review to determine if the special fund amount should be adjusted.