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Let's Talk Tarion
May 28th 2015
I met a buyer the other day who had concerns about purchasing a newer property that was not registered with Tarion.
The Tarion New Home Warranty is a Government safeguard set up to protect consumers who otherwise might find themselves in a situation with unexpected deficiencies after taking possession. Just about all new houses and condominiums in Ontario come with a mandatory warranty that begins when you sign a purchase agreement, and lasts seven years from the date of first possession. This means that if you are a new homeowner, you have warranty protection, guaranteed by Tarion Warranty Corporation.
Tarion provides a 3 stage insurance program for the first 7 years of a new build that steps in when homeowners cannot satisfy warranty rights at the builder level.
NOT ALL NEW BUILDS ARE PROTECTED
A primary example are OWNER-BUILT homes. These homes can not be registered with a Tarion Warranty.
We are seeing more and more of these in today's market as people will build a single home to sell after residing in it.
A home is owner built if:
• The owner builds the home him/herself on land that he/she owns; or
• The owner hires someone else to build the home on the owner's land but the owner exercises significant control over the construction of all or part of the home; and, in both cases, the owner (or his/her tenant) then resides in the home. Exercising control over construction includes, for example:
• Selecting, contracting directly with or terminating contracts with subcontractors, trades or suppliers; and/or • Reviewing, revising, approving, supervising or directing work or materials. Whether the control exercised by the owner is significant depends on the nature, value and quantity of the work or materials controlled or contributed by the owner. For example, installing interior finishes will not disqualify the home from warranty coverage but would exclude from coverage those finishes and any defects relating to those finishes. On the other hand, controlling the construction of the foundation - an essential element of the home - may be significant enough to make the home an owner built home.
Owner built homes are not covered under the statutory warranties.
But if the owner sells the home without first legitimately residing in the home, it is not an owner built home and the home is entitled to statutory warranty coverage. The owner must register with Tarion before selling the home and will be responsible for the warranty coverage on the home. There are a number of other types of properties that are ineligible for Tarion Warranty. If no Tarion warranty is in place and the home is less than 7 years old there are several safety measures a buyer should consider.
The 3 stage government mandated insurance program to protect consumers during the first 7 years of a new build when homeowners cannot satisfy warranty rights at the builder level.
SEVEN YEAR WARRANTY
Your home’s seven year warranty covers major structural defects (MSD) and begins on the date you take possession of the home and ends on the day before the seventh anniversary of that date.
For example, if your home’s date of possession is October 23, 2005, the seven year MSD warranty begins on October 23, 2005 and remains in effect until and including October 22, 2012.
A major structural defect is defined in the The Ontario New Home Warranties Plan Act as:
In respect of a post June 30, 2012 home, any defect in work or materials in respect of a building, including a crack, distortion or displacement of a structural load-bearing element of the building, if it,
(i) results in failure of a structural load-bearing element of the building,
(ii) materially and adversely affects the ability of a structural load-bearing element of the building to carry, bear and resist applicable structural loads for the usual and ordinary service life of the element, or
(iii) materially and adversely affects the use of a significant portion of the building for usual and ordinary purposes of a residential dwelling and having regard to any specific use provisions set out in the purchase agreement for the home
The seven year MSD warranty includes significant damage due to soil movement*, major cracks in basement walls, collapse or serious distortion of joints or roof structure and chemical failure of materials.
In addition to the general exclusions, the seven year MSD warranty specifically excludes: dampness not arising from failure of a load-bearing portion of the building; damage to drains or services; and damage to finishes.
For most condominium projects, warranty coverage also includes the shared areas of the building, referred to as Common Elements.
Having a knowledgeable Realtor is invaluable.
An Educated buyer is a wiser buyer.