Purchasing a pre-construction or "new-build" home is an exciting yet stressful process. To help ease some of the risk and anxiety, Tarion Warranty coverage ("Warranty") plays a crucial role. Established under the Ontario New Homes Warranties Plan Act, the Tarion Warranty Corporation ("Tarion") ensures that new home buyers are protected against defects, financial losses, and construction delays.
What is Tarion Warranty Coverage?
The Warranty is available for new homes built by registered builders in Ontario. From the day of possession (or the occupancy date for condos), every eligible new home is covered for 7 years. The primary purpose of this coverage is to protect homeowners from construction-related problems, breaches of contract, or financial losses due to delays and other unforeseen issues.
Tarion is a non-profit organization that both regulates registered home builders and provides warranty protection. It not only enforces minimum construction standards but also offers homeowners a safety net should problems arise. Understanding what this Warranty provides is essential for all new homebuyers. We've created a quick guide to offer some insight.
One of Tarion's most significant assurances is its warranty on construction quality:
First Year Warranty
- Ensures that the home is built properly and is free from defects
- covers violations of the Ontario Building Code, unauthorized material substitutions, and fitness for habitation
Two-Year Warranty
- Protection against water penetration in the basement or foundation walls
- Coverage for the electrical, plumbing, and heating systems
- Additional protection against exterior cladding issues and major building code violations
Seven-Year Warranty
- Focuses on major structural defects that could compromise the home's integrity or affect the use of significant portions of the home
For a new-build home, the maximum financial limit for certain
defects in work and materials is $400,000.00. For new condominium units, the
maximum financial limit is $300,000.00.
Deposit Protection
Deposits made to secure a new home are safeguarded by Tarion in the event of specific issues. This protection can apply if:
- The builder goes bankrupt
- The builder fundamentally breaches the Agreement of Purchase and Sale ("APS")
- The buyer exercises their right to terminate the APS
Deposit Coverage Limits
- "Freehold" (not a condominium) homes priced at $600,000.00 or less are covered up to $60,000.00
- Freehold homes priced over $600,000.00 will be covered up to 10% of the purchase price, with a maximum of $100,000.00
There are two different forms of deposit protection for new condominium units. As per the Condominium Act, builders are required to place all deposits in trust, which ensures the deposit is protected. However, if for some reason the deposit was not placed in trust, you are covered for up to $20,000.00 through Tarion.
This protection extends to money paid for upgrades and extras, ensuring that your total investment is secured.
Delayed Closing Coverage
New home construction schedules are subject to change, and delays can often be stressful. Your APS must specify a "final" closing date. If your home is not ready by that date and the builder has not provided notice of an "unavoidable delay" (i.e., strikes, acts of God, pandemics), you may be able to claim compensation. The maximum amount of compensation for a delayed closing is $7,500.00. The same applies to new condominium units.
Common Elements Warranty
For most new condominiums, the Warranty also includes the common elements, also known as common areas. The coverage is distinct, as it is managed by your condominium corporation and applies to the boundaries of your unit.
Some things to remember and consider throughout the process:
Pre-Delivery Inspection ("PDI")
Before taking possession of a new home, builders must conduct a PDI with the buyer. Buyers will inspect the home prior to closing to identify any damage, missing components, or incomplete work. It also helps homeowners familiarize themselves with the operation and maintenance of vital systems like ventilation, plumbing, and heating. The PDI is an opportunity to document and address issues early, preventing problems after possession.
Enrolling an Existing Home
If you purchase a home that is less than 7 years old and already enrolled with Tarion, you inherit the remaining warranty coverage. To initiate this transfer, Tarion requires proof of ownership, so you should contact Tarion immediately.
Notice Requirements for New Freehold Homes
Effective January 1, 2026, purchasers of new freehold homes will be encouraged to notify Tarion of their purchase and provide transaction particulars within 45 days of signing their APS. An additional deposit coverage regime will be available for those who comply with the notice requirement.
What is Not Covered?
It is equally important for buyers to understand the limitations of the Warranty. Exclusions include:
- Defects in materials or work supplied by the homeowner
- Secondary damage (e.g., personal injury or property damage) caused by defects
- Normal wear and tear or shrinkage
- Damage from dampness due to inadequate maintenance
- Alterations or damage caused by the homeowner or visitors
The Tarion Warranty Coverage is a comprehensive program designed to protect new homebuyers in Ontario from financial loss and construction defects, providing significant peace of mind. For any homeowner investing in a new home, understanding these protections is essential.
A careful review of your pre-construction Agreement of Purchase and Sale ("APS") with a lawyer can help safeguard your investment and ensure that you fully benefit from the protections available under Tarion.
This blog was co-authored by summer law student Aranya Sivakumar.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
