Be Sure you Understand Ontario’s New Home Warranty

Are you considering purchasing a new home or condo unit that’s still under construction?

In addition to working with buyers and sellers of resale homes in Ottawa for more than 30 years, I’ve assisted many clients with new-construction properties, when buyers make their decisions based only on drawings or perhaps a model home or condo unit they can visit.

If you thought Realtors work only with resale homes, it might surprise you that we work regularly with clients purchasing a brand new home or condo unit that isn’t yet constructed. Many choose this option because they like the idea of living in a house no one has occupied, and they enjoy customizing the space with their choice of fixtures and colours.

There is no fee to the buyer for a Realtor’s services. And just as when you’re buying a resale home, it means you’ll have someone with expertise representing your interests in the transaction. While builders don’t usually reduce the asking price with new constructions, we can often negotiate to get upgraded features included without extra charge.  Builders will sometimes do this with Realtors who have worked regularly with them.

We are also familiar with Ottawa’s builder community and can recommend builders who have excellent reputations and records for customer service.

Unlike a resale home, which you can see with your own eyes before you make an offer and can have inspected by a professional for any defects, a new construction can sometimes come with unwelcome surprises if you choose the wrong builder.

When you are allowed your first inspection of the finished property (known as a pre-delivery inspection or PDI), what do you do if certain features you were told were included were left out or some elements remain unfinished?

Before you begin searching, brush up on Ontario’s New Home Warranty Program, the steps to take if you aren’t satisfied once the construction is complete and what the rules and deadlines are for filing complaints.

In Ontario, new homes built by licensed builders are covered by a warranty provided by builders and administered by Ontario’s Tarion Warranty Corporation, an agency established by the province in 1976 to protect consumers and regulate builders.

Under the warranty, some features are covered for one year, some for two, and some, such as major structural defects, can be covered for up to seven years.

If you are considering a builder, start by searching for details on the Ontario Builder Directory (https://obd.hcraontario.ca)  to see if the builder is licensed to build new homes in Ontario. The warranty applies only to builders who are licensed with the province’s regulatory authority.

The Builder Directory gives information on things like whether they’ve had claims with the warranty program from unhappy buyers; any defects they’ve refused to repair; if they have money owing to Tarion; and if they have a record of cancelled construction projects.

A good next step is to visit the website of the Tarion Warranty Program (www.tarion.com) . On the homebuyers tab and the resources tab, you will find a lot of helpful information and a new learning hub about the buying process, how to prepare for the PDI and the warranty coverage.

If a buyer files a claim about an issue covered by the warranty, Tarion assesses the complaint and tries to resolve the dispute. Tarion says the vast majority of issues are resolved between buyers and builders.

If a builder does not address a complaint that Tarion determined was valid, Tarion works to resolve the issue with the homebuyer, through compensation from Tarion’s fund for that purpose or repairs completed by a third party. Tarion then approaches the builder for repayment to Tarion for those expenses.

Tarion, which is funded by fees paid by builders, says it has done much to improve the program following a stinging report by Ontario Auditor General Bonnie Lysyk in 2019.

Lysyk said Tarion had failed homebuyers by creating rules and regulations that favoured builders. She noted that between 2014 and 2018, in nearly two-thirds of complaints it received, Tarion failed to fix problems that should have been covered by the warranty.

She said the agency had failed to sanction and flag bad builders, sometimes renewing licenses of builders who had demonstrated questionable practices or had not reimbursed Tarion for costs it had incurred resolving defects.

In response, in late 2020, Tarion announced it had implemented 19 of Lysyk’s recommendations, and said the remaining six would be implemented by the end of 2021.

The changes Tarion has made include:

  • A new e-learning hub with plain-language modules to help understand the warranty coverage, buyers’ rights and responsibilities, and the importance of the pre-delivery inspection.
  • A new and less complex mediation option for homeowners who do not agree with a Tarion warranty assessment, using independent mediators. (Previously, the only way to appeal a Tarion decision was through the courts or through a tribunal that one consumers group said homeowners rarely won).
  • A new targeted inspection program aimed at “higher risk” builders to identify potential deficiencies regarding Ontario’s Building Code before a buyer occupies the property
  • Improvements to the Builder Directory, including additional information such as whether a builder was found by Tarion to have lacked honesty and integrity in their dealings with buyers
  • A new requirement for a Warranty Information Sheet to be included with all purchase agreements, to include clear information about the warranty.

As well, Tarion has increased the warranty compensation limits on such issues as claims involving condominium common elements and compensation for septic system issues for homes with septic systems.

To learn more about these issues and the process of buying new construction, visit the Tarion site.

On the main page, click on the tabs for “homeowners” and “resources” for helpful information, including top 10 tips for buying and a page on how to maintain your home through the seasons.

If you’re considering buying or selling property in the Ottawa area, whether resale or new, I’d be happy to chat and fill you in on the Ottawa market. You can read more about me on my site, www.nancybenson.com. Feel free to give me a call, at 613-747-4747.