Attention real estate lawyers! Here are the new home warranty ABC’s you need to share with your clients.

Your client comes to you excited and possibly a little unfocused too. Not surprising of course. She’s buying a dream. A brand new home! She definitely needs your expertise and guidance to help ensure the contract has all the i’s dotted and t’s crossed.

You comb through every inch of the contract to make sure it’s done right and what she wants. Now you go through the nuts and bolts with her. You highlight certain sections. Are there easements that need to be reviewed? What about financing conditions? If it’s a condo she’s buying, does she know there’s a 10-day cooling off period?

But don’t stop there! Remember to review the new home warranty. You probably took a course about Tarion back in law school. We won’t go through the syllabus here, but here are some of the key things that every real estate lawyer should discuss with their clients:

ABC building blocks on wooden background

Learn the new home warranty ABC’s you need to share with your clients – like understanding that when she signs the deal, her deposit is protected.

This new home comes with a warranty.

If your client is buying a brand new home that has never been lived in, it should have been built by a licensed builder and will come with Ontario’s statutory new home warranty. Remember: While the warranty is actually provided by the vendor the vendor’s warranty is backed by Tarion. There are a few exceptions to this rule, but very few.

Tarion licenses builders and vendors in Ontario and administers the new home warranty program through the Ontario New Home Warranties Plan Act. It is important to point out that new home builders and vendors in Ontario must be registered with Tarion. You can check out every builder’s record on our website in the Ontario Builder Directory. If the builder not listed here, beware! They may be building illegally.

Your client should understand that when she signs the deal, her deposit is protected – up to $20,000 for condos (in addition to the trust provisions of the Condo Act), and $40,000 for freehold homes. All new freehold home buyers should be made aware that any deposit amount over $40,000 will not be protected. Note too that depending on how the sale is structured, upgrades may or may not be protected.

There is also delay compensation and three separate warranties that cover such things as defects in materials and construction and Ontario Building Code violations, water penetration and major structural damage. It is very important to note and understand that these warranties have exceptions, exclusions, liability caps and strict time limits to make claims that homeowners should be made aware of. Here’s a link to a brochure that you can provide your clients with more information.

Delays may be compensated.

You know that new home and condo construction can often get delayed. Perhaps your client is thinking “that won’t happen to me.” Regardless, take the time to point out the Outside Closing Date on the first page of the Addendum. It’s likely set so far into the future that your excited client isn’t focusing in on the date, or even considering it properly. As far as the warranty is concerned though, this is a significant date that can trigger the delay compensation – up to $7,500 if a builder misses the Outside Closing Date or does not properly extend other dates in the contract.

The Pre-Delivery Inspection.

As part of their warranty obligations, builders must perform a Pre-Delivery Inspection (PDI) with the homeowner on every home before or on the date of occupancy. Advise your client to make a record during this inspection and take pictures of anything incomplete, damaged, missing or not working properly. It is difficult to prove that a scratch on the floor was not done by the homeowner if there is no record of it before she moves in.

Timing can be everything!

As the builder has obligations under the warranty, the homeowner has responsibilities. The first chance your client has to submit a warranty form is 30 days after she moves into her new home. The next opportunity comes at the 1-year mark, and then any time within the second year. A major structural defect claim can be made any time before the home’s seventh birthday.

Missing one of these deadlines could jeopardize your client’s warranty rights. The best advice to give her is to sign up for MyHome (Tarion’s online warranty service) as soon as she takes possession of her new home. Through this service she can manage her warranty online and Tarion will send her automatic reminders when warranty deadlines are approaching.

In the event of a claim, here’s what happens.

About 50 per cent of new homeowners make a claim in their first year of possession. Fortunately, the vast majority of these warranty claims are addressed by the vendor/ builder. This means that your client may submit a warranty form, but the vendor / builder will most likely take care of any defects that are covered under the warranty within the repair period. If your client’s vendor / builder does not properly resolve the claim, she can request Tarion’s involvement.

If your client books a Conciliation Inspection with Tarion, we may come to her home and assess whether the defect in question is warranted. If it is, the vendor / builder may have another chance to make the repair and if he/she doesn’t, Tarion will resolve the claim directly with your client.

If your client disagrees with Tarion’s decision, she can appeal it to the Licence Appeal Tribunal (LAT) – an independent and provincially funded, administrative tribunal.

Warranty questions? Ask Tarion.

Tarion is here to help new home buyers throughout the entire process. If your client has questions about the warranty, encourage her to contact Tarion.

Lessons Learned:

  1. As a real estate lawyer, your clients are looking to you to make sure they are set up right from the start. Make sure the new home warranty is included early in your discussions.
  2. Tarion’s website includes information about the warranty and the new home buying process. Check out this page for resources that real estate lawyers can share with their clients.