Deposit Protection
If you sign a purchase agreement for a new home or condominium unit and give your builder a deposit, Tarion protects those funds up to a certain limit in the event that the sale is not completed for the following reasons:
- Your builder goes bankrupt
- Your builder fundamentally breaches the purchase agreement
- You have a statutory right to treat the purchase agreement as terminated.
Please Note - Effective July 1, 2025, if you purchase a freehold home, you should register your purchase with Tarion within 45 days of signing.
As of January 1, 2026, purchasers who provide notice within 45 days of signing will qualify for the maximum amount of deposit coverage currently available under the warranty program.
For more information, click on ‘deposit protection for freehold homes’ below.
Deposit protection for freehold homes
If you signed your purchase agreement before January 1, 2018, your deposit is protected by Tarion up to a maximum of $40,000. If you signed on or after January 1, 2018, your deposit coverage depends on the purchase price of your new home. Please refer to the table below:
| Sale Price | Deposit Coverage |
|---|---|
| $600,000 or less | Up to $60,000 |
| Over $600,000 | 10% of purchase price (to a maximum of $100,000) |
Starting July 1, 2025, new homebuyers should register their purchase agreement with Tarion within 45 days of signing to let Tarion know that they have signed an agreement and want their deposit covered.
As of January 1, 2026, purchasers who provide notice within 45 days will qualify for the maximum amount of deposit coverage currently available under the warranty program (see table above), while those who register later (or do not register) will qualify for coverage under a separate fund.
For freehold homes purchasers that 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 a $10 Million special fund) in any given year. For more information on how these claims will be reviewed please refer to our Q&A.
It is important to note that all new home buyers will continue to benefit from Tarion’s deposit coverage and consumers will continue to receive the full construction warranty coverage and protection against defects in their new home.
Deposit protection for condominium units
Condominium unit deposits must be placed in trust under the provisions of the Condominium Act. If your purchase agreement is terminated by your builder, your deposit must be returned to you in full within 10 days. If your builder does not return your deposit, Tarion provides deposit protection of up to $20,000.
To ensure your deposit claim will be covered by Tarion, you should consult a lawyer before treating your purchase agreement as terminated.
How to make a claim
- Contact Tarion at 1-877-982-7466 to request a Deposit Refund Claim Form.
- Send the completed form to this address: Tarion Warranty Services Department 5160 Yonge Street, 7th Floor Toronto, ON M2N 6L9
- You will be asked to provide a copy of your purchase agreement, cancelled deposit cheque(s), and possibly other relevant documentation.
- All information and documentation you submit to Tarion will be provided to your builder and your builder will be given an opportunity to respond.
- Depending on the information, documents, and responses provided by you and your builder, it may take up to six months for Tarion to assess and resolve your claim. If your claim is disputed or complex, it may take longer to assess.
Condominium cancellations
When purchasing a pre-construction condominium, there is always a risk that the project could be delayed or cancelled. There may be many different reasons for a project cancellation. For example, the expected sales for the project may not materialize or the development approvals necessary for the project are not forthcoming.
For purchasers who are facing the cancellation of their project, review our page on occupancy dates, delays and cancellations for condominiums.
Unauthorized Substitutions
If the Agreement of Purchase and Sale or construction contract ("purchase agreement") included the right to select certain items of construction or finishing, such as colours and styles, these usually cannot be substituted without the purchaser's written consent.
The process for substitutions
There may be circumstances in which a builder may need to substitute an item that they had agreed to supply for the home, usually because the item has since become unavailable.
The new home warranty covers improper substitutions. There are two separate warranties for substitutions depending on how the item is presented in the purchase agreement. The distinction is important because the test for whether there is a remedy is different for “selected” items as opposed to “specified” items.
Selected items – This is where the purchase agreement entitles the purchaser to select the item of construction or finishing that will be provided by the builder (e.g., selecting flooring from the options at the builder’s décor centre). If an item is selected, the builder is not permitted to make a substitution without the written consent of the purchaser. If an unauthorized substitution occurs (in other words, written consent has not been provided), the homeowner is entitled to the item of construction or finishing that they had selected (subject to the legal concept of ‘reasonableness’ in assessing damages which, in very general terms, means the remedy must be reasonable and proportionate to the breach).
Specified items – This is where the item to be provided by the builder is referred to in the purchase agreement (e.g. a specific brand of window). The builder may make a substitution without consent of the purchaser but only with an item that is of equal or better quality to the item referred to in the purchaser agreement. Several factors should be considered when determining whether one item is of equal or better quality to another including, for example, cost of the item, cost of maintenance, functionality/performance, and intended use. If an unauthorized substitution occurs (in other words, the substituted item is not of equal or better quality), the homeowner will typically be entitled to the difference in cost between what was referred to in the purchase agreement and what the homeowner received. However, the most reasonable remedy will depend on the particular circumstances.
How to make a warranty claim for an unauthorized substitution
Unauthorized substitutions of selected and specified items are covered under the First Year Warranty. Homeowners should report any items they believe are improper substitutions to their builder. If the concern is not resolved with the builder, then the homeowner should submit a warranty claim to the builder and Tarion within the first year following the date of possession.
If you have questions about the substitution warranty, contact Tarion at customerservice@tarion.com
The process for making selections
- The purchaser is responsible for making the selections required within 30 days of the purchase agreement, or within any other time as agreed between the purchaser and the builder.
- If the builder cannot supply a purchaser’s selection, the purchaser must be notified in writing.
- The purchaser is then responsible for making another selection within 7 days of receiving the notice from the builder, or within any other time as agreed between the purchaser and the builder.
- If the purchaser does not make the original selection in time, or does not make new selections within 7 days, the builder has the right to substitute options of equal or better quality.
Financial Loss Compensation for Contract Homes
If you enter into a contract with a builder for the construction of a new home on property that you own, some or all of the money you give your builder under that contract may be protected. The following information will help in understanding your rights and making informed decisions.
What is Financial Loss Compensation
In general terms, a “contract home” is a home that is built on land (a vacant lot, for example) that is already owned by the prospective homeowner.
The home is constructed in accordance with a construction contract between the homeowner and a builder, and the builder (contractor) undertakes the performance of all of the work and the supply of all materials necessary to construct the completed home.
If a homeowner, rather than a builder (contractor), exercises significant control over the construction of a new home, or is responsible for contributing one or more essential element(s) to it, the home may no longer be characterized as a contract home, but rather it becomes an “owner-built home”. This is important because a contract home is entitled to statutory warranty coverage (except for Delayed Closing Coverage) but an owner-built home is not.
As an owner, the important thing to remember is that the statutory warranty is intended for homes where a builder does the work. It is not meant to protect a landowner who is building a home, or for situations where separate contractors are building different stages of a home.
If you are building a contract home, it is recommended that you consult a lawyer to assist you with the construction contract and explain your rights and obligations.
What is covered
If you enter into a contract with a builder for the construction of a new home on property that you own, some or all of the money you give your builder under that contract may be protected.
If your builder fails to substantially perform the contract, you may be entitled to compensation from Tarion for the difference between the amount you paid the builder and the value of the work and materials that were supplied, up to a maximum of $40,000.
Making a claim
To make a claim for financial loss protection, contact Tarion.
Please note that all documents you submit to Tarion may be provided to your builder and your builder will be given an opportunity to respond.
Depending on the information, documents, and responses provided by you and your builder, it may take up to six months for Tarion to assess and resolve your claim. If your claim is disputed or complex, it may take longer to assess.
Delayed closing/occupancy coverage & cancellations
When purchasing a pre-construction homes and condominium units, there is always a risk that the project could be delayed or cancelled. There may be many different reasons for a project cancellation. For example, the expected sales for the project may not materialize or the development approvals necessary for the project are not forthcoming.
For purchasers who are facing delays or cancellation of their project, the following information will help in understanding your rights. Select the type of home you are purchasing from the options below to see more information.
Already have possession of your new home?
Visit our section on coverage after you have moved in, also known as post-possession.