What happens when builders don’t follow the rules?

Before anyone can legally build or sell a new home or condominium in our province, they must be registered with Tarion. The registration requirements help ensure that Ontario’s new home builders have the skills and finances needed to build homes.

Before a builder begins building a home for someone under a contract or a home that they will be selling, each and every home and condominium unit must be enrolled in the warranty program. This allows Tarion to track each new home being built to protect consumers and help them understand their rights under the warranty.

Recently, a builder in Ontario was fined over $20,000 and is now at risk of having his builder registration revoked for failing to enrol homes with Tarion before starting construction.

The rules are clear cut, and so are the penalties

Ontario has strict rules when it comes to building and selling new homes. These rules have been put in place for a good reason – they help protect new home buyers and give them confidence that their builders are competent and their new homes will be repaired if they have any defects.

So when an unregistered (or even registered) builder does not enrol homes with Tarion before construction, it is a clear violation of the law. Registered builders should be well aware of the regulations in place. All builders of new homes, whether they are registered with Tarion or not, have a legal obligation to enrol any homes they build that fit within the warranty scheme. And very importantly, all builders of new homes that fall within the warranty must be registered. Those who fail to follow these rules run the risk of prosecution, heavy fines and possible imprisonment.

When Illegal building happens, it’s the buyers who suffer the most

Unfortunately, new homes are built by unregistered builders regularly and across the province. It also happens in different ways. Illegal builders are people who either cannot pass the technical and financial requirements to become a registered builder in Ontario, or are ‘builders’ who don’t even try to register with Tarion. Registered builders can also run afoul of the law by failing to enrol one or more homes into the warranty program. Illegal building puts buyers at risk because it means that they are likely unaware of their warranty rights and responsibilities, including filing deadlines that ensure their entitlement to specific warranty protections. Illegal builders may also not understand the Ontario Building Code, take work safety seriously or even have the necessary insurance coverage in place. In 2016, Tarion paid out over $2 million in warranted claims on illegally built homes, because unlike some other provinces in Canada, Ontario’s new home warranty provides consumers with protection on almost all new homes, even when they are built by illegal builders.

Illegal building puts buyers at risk because it means that they are likely unaware of their warranty rights and responsibilities, including filing deadlines that ensure their entitlement to specific warranty protections.

Tarion’s role in preventing illegal building

Part of Tarion’s mandate is to investigate and prosecute illegal builders. In 2016, the efforts of Tarion’s Enforcement Team led to 170 convictions, $488,000 in fines and one jail sentence.

In 2015, we began piloting a project in partnership with the Ontario Home Builders’ Association and the Ontario Building Officials Association that aims to prevent illegal building before it even begins.

When people wishing to build a new home seek a building permit from a municipal office participating in the pilot program, they are provided with information explaining the importance of working with a registered builder; the liability responsibilities that can come with filing a building permit under their own name; and how the mandatory warranty program in Ontario works. When someone takes out a building permit and does not also fill out a Tarion builder registration number, the participating municipality notifies us. We then review whether this person should in fact be registered as a builder or vendor in Ontario.

In certain cases, such as bona fide owner-builders (people who build a home to live in themselves), no registration is necessary. Ontarians are permitted to build their own home without being registered. In these cases, the home they construct is not covered by Ontario’s new home warranty program. However, if you hire a builder to build a home for you, this person must, by law, be registered with Tarion.

The illegal building prevention pilot is designed to educate and protect consumers before they might suffer any consequences associated with buying or owning a home that has not been built by a registered builder. While the pilot is currently only happening in 15 communities across Ontario, we hope to eventually effect legislative change that will serve consumers across the province.

How can you protect yourself from an illegal builder?

First and foremost, new home buyers should check our Ontario Builder Directory to ensure their builder is registered to build homes.

Secondly, understand the mandatory warranty coverage that is provided for each and every new home and condominium in Ontario. It starts with deposit protection and delay compensation, and includes three separate warranties that last up to seven years after you take possession of your new home.

Finally, if your builder does not provide you with a Homeowner Information Package at or before you Pre-Delivery Inspection, ask for one, and confirm that your new home is enrolled with Tarion. If your builder says the home does not have to be enrolled, or they have their own separate warranty instead, call Tarion. There is only one mandatory new home warranty in Ontario, and it’s not an option – it’s the law.

Lessons Learned:

  • Before buying a new home, make sure you know your rights. Check out the Before You Buy section on Tarion’s website to find out more.
  • Tarion publishes a list of people who have been charged for illegal building in the last three years, click here to make sure your builder isn’t one of them. Don’t forget to also check Tarion’s Ontario Builder Directory to make sure your builder is registered.
  • If you think your builder or someone in your community is engaging in illegal building, contact Tarion’s anonymous tip line at 1-800-786-6497.

The goal of this blog is to provide you with general information about the warranty process by sharing real experiences from new homeowners. The blog should not be relied upon as legal advice. For privacy reasons, we will not address or resolve current cases in a public forum, so any comments or questions that are posted on this site that describe individual cases cannot be discussed. If you have a question about your warranty or Tarion generally, we would be pleased to discuss your issue, in the context of your particular circumstances and in confidence. We exercise reasonable care to avoid offensive, illegal or defamatory content from being posted, as well as comments that are intended solely for self-promotion or considered to be spam.