Tarion: What is New Home Warranty?

Toronto Real Estate News
Photo by hobvias sudoneighm
Photo by hobvias sudoneighm

Tarion is a witty anagram of the word Ontario. But it’s much more than that. Tarion is a home warranty program run by the Ontario provincial government that aims to ensure that all builders and developers in Ontario adhere to the applicable provincial laws at all times and that all new-home owners can feel safe and cozy.

Let’s list the most important rules governing the warranty protection so that you can get the basic idea of its mechanics.

How Does New Home Warranty Protection Work?

The Tarion protection sounds very good if you are a home owner, but make sure you understand its limitations and specialties. Tarion does not actually provide universal and automatic protection on every new home. Tarion is notified of every new home by the builder and then steps in, ready to back up the builder and his or her future clients. New home owners, however, must also approach Tarion in a timely fashion and make sure that they qualify for the warranty coverage.

Once the builder and the owner have taken all the necessary steps, Tarion acts as a kind of warranty insurer and a dispute-resolving authority between buyers and builders. Tarion does not automatically pay out compensations to adversely affected home owners. Owners must do their best to communicate and attempt to resolve their issues directly with the builder. Only when this approach fails does Tarion provide the warranty back up.

Coverage Details

Under Construction by Richard
Under Construction by Richard

The current total maximum coverage provided by Tarion is $300,000 on any new home or condo unit sold. Owners are eligible for compensation in case of delayed closings (applies to houses), delayed occupancy (applies to condos), or alternative arrangements performed without their consent. Alternative arrangements protect owners in case the builder decides to implement different materials, technologies, or items than were agreed upon in the purchase agreement. An owner can claim this only if the new arrangements are actually detrimental or inferior to those originally agreed upon.

Even the deposit you may have made on your property is protected by Tarion. Deposits on freehold houses are covered up to $40,000 and deposits on condominiums are covered up to $20,000 (with any excess amount subject to Ontario Condominium Act).

In order to ensure that your long-term protection can be established, you must attend a pre-delivery inspection (PDI) and carefully examine your soon-to-be home. All future assumptions will be based on the results of the PDI. If you later find a flaw that should have been apparent during the inspection, you may have a much harder time subjecting it to the warranty.

Read the next post on The Three Tarion Warranties for New Home Owners to learn more about the coverage.

Quick Facts about Tarion

The idea of New Home Warranty was enacted in 1976 by the Ontario New Home Warranties Plan Act, and Tarion was created as an administrator of this law. Tarion is effectively the regulator of Ontario’s new home building industry.

Tarion receives no government funding and is financed entirely by builder registration fees and other fees payable on new homes in the province. These fees are pooled in Tarion’s guarantee fund. A small portion of the fees is used to run the organization, of course.

Since its inception, Tarion has guaranteed warranty protection for about 1.5 million new homes. The total amount paid out in claims has added up to nearly $200 million.

As of July 2006, the total warranty coverage for a purchaser on a new home is $300,000. This means that Tarion guarantees the repair of construction errors, malfunctioning technology, and decaying materials up to this amount. It is, however, possible to claim a higher amount from the builder, who may have sold a terrible piece of property to you.

When a homeowner is dissatisfied with his or her new home, Tarion investigates whether the builder engaged in illegal building practices and in turn resolves warranty disputes between builders and homeowners. Tarion has the authority to order builders to perform the necessary repairs.

Tarion takes steps to educate homeowners about their rights and the mechanics of the warranty. It collaborates with builders to spread the necessary information and knowledge to all new home buyers.

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