When buying a new home or condominium unit in Ontario, it’s vital to understand the types of warranty protection available before you move in. Tarion provides two major categories of pre-possession coverage: Deposit Protection and Delayed Closing/Occupancy Warranty. Knowing your rights can help you protect your investment and avoid unexpected financial risks.
Deposit Protection Explained
When you sign a purchase agreement for a new property and pay a deposit, Tarion ensures your deposit is protected up to a specific limit if the transaction falls through due to:
- Bankruptcy of the builder
- Fundamental breach of the purchase agreement by the builder
- Statutory rights allowing you to cancel the agreement
Deposit Protection for Freehold Homes
- Agreements signed before January 1, 2018: Deposits protected up to $40,000.
- Agreements signed on or after January 1, 2018:
- Homes priced at $600,000 or less: Protection up to $60,000.
- Homes priced over $600,000: Protection equals 10% of the purchase price, up to a maximum of $100,000.
Deposit Protection for Condominium Units
Under the Condominium Act, deposits for condos must be placed in a trust account.
- If a builder terminates the agreement, they must return the deposit within 10 days.
- If they fail to do so, Tarion provides deposit protection up to $20,000.
Understanding the Delayed Closing/Occupancy Warranty
Every builder in Ontario must provide buyers with a delayed occupancy or closing warranty at the time of signing the purchase agreement. This warranty ensures that your home or condo will be ready by a Firm Occupancy Date (for condos) or Firm Closing Date (for freehold homes), or within a properly extended timeline.
All the relevant information regarding these timelines is found in the Tarion Addendum attached to your purchase agreement.
Important Dates in Your Purchase Agreement
Firm Occupancy Date (Condos) / Firm Closing Date (Freeholds)
- A definite date is set for occupancy or closing.
- If not met, the builder must set a Delayed Occupancy/Closing Date, and you become eligible for compensation.
- The Statement of Critical Dates (first page of the Addendum) outlines these key dates.
Outside Occupancy Date / Outside Closing Date
- The absolute latest date the builder must provide you occupancy or close the sale.
- Set at the time of signing and typically 365 days after the Firm Date.
Tentative Occupancy Date (Condos) / Tentative Closing Date (Freeholds)
- An estimated date for occupancy or closing.
- Subject to change based on construction progress and other factors.
Additional Timeline Details:
- First Tentative Date: The initial target for move-in.
- Final Tentative Occupancy Date (Condos): Must be set within 30 days of completing the roof if delays occur.
- Second Tentative Closing Date (Freeholds): Adds 120 days to the First Tentative Closing Date.
- Firm Date Set with 90 Days’ Notice: If tentative dates cannot be met, builders must confirm a firm date with 90 days’ written notice.
Compensation for Delayed Occupancy or Closing
Buyers are eligible for compensation up to $7,500 in the event of delays under the following conditions:
- If occupancy or closing happens after the Firm or Tentative dates.
- If you terminate the purchase agreement during the Purchaser’s Termination Period because of delays.
Compensation Details:
- $150 per day for living expenses (no receipts required).
- Reimbursement for additional moving and storage costs (receipts required).
- If the builder fails to provide at least 10 days’ notice of a delay, an automatic $1,500 compensation applies.
What Happens During Unavoidable Delays?
Sometimes, delays are outside the builder’s control, such as:
- Strikes
- Fires or explosions
- Acts of God (natural disasters)
- Civil insurrection, terrorism, or pandemics
In these cases:
- Builders can extend the timelines without penalty.
- They must notify buyers immediately, provide an estimated duration, and update buyers once the delay ends.
- No compensation for delayed occupancy/closing is required during unavoidable delay periods.
Final Thoughts
Understanding Tarion Warranty Coverage Before Possession is key to protecting your investment when purchasing a new property in Ontario. Always carefully review the Tarion Addendum attached to your purchase agreement and consult a real estate lawyer if you have concerns. Proper knowledge ensures you can enforce your rights if your builder does not meet agreed-upon deadlines.