custom home, contract home, home construction, home warranty

Tarion Talks Podcast: Episode 6, Contract Homes

Are you thinking of building a custom home? Or maybe a brand-new cottage you can escape to for some much-needed rest and relaxation? Hiring a builder to create your oasis can be exciting, but it could also become stressful if things don’t go a planned.

Luckily, we have some advice to help you avoid some of the pitfalls of building your own home.

What is a contract home?

When you already own a piece of land and you decide to build a home on it, that’s known as a “contract home”. The home is built according to a construction contract between you and your builder and the builder provides all the work and all the materials for the build. Custom homes and brand-new cottages often fall into this category. The good news is, contract homes are generally covered by the statutory new home warranty.

How to find a builder

When building a home, it’s important to work with someone you can trust.

  • Use the Ontario Builder Directory on to find a registered builder – it is illegal to build a new home in Ontario without being registered with Tarion.
  • Look up past Homeowners’ Choice Awards and Ernest Assaly finalists and recipients on These are generally considered trustworthy and reputable builders.
  • Ask around – friends, family and previous buyers from that builder can be a great resource!
  • Visit the builder’s sales office and model homes and don’t forget to ask about Tarion.

Get it in writing!

contract home, customer home, home, home buildingIt’s also important to have everything you and your builder agree to documented – the key to a contract home is starting with a solid contract.

  • Your contract should include, for example, the design, features and finishes of the home that your builder is to provide; a payment schedule of when you will provide funds to your builder, how much you are paying and what you are paying for; and the date by which your home is to be completed.
  • Have a lawyer look at your contract. They can help walk you through your rights and obligations to help you protect your investment and warranty.

Thinking of jumping in during construction?

You want to build a home that’s perfect for you. We get that. You may even want the satisfaction of having a hand in building it – maybe by doing a few things yourself or by hiring or directing some of the trades doing work on your home. But before you do that, you should know that getting involved may affect your new home warranty.

If you get too involved in the construction of your new home, it may be considered an “owner-built” home. “Owner-built” homes are not eligible for warranty coverage.

A home may be considered “owner-built” if:

  1. The owner builds the home him/herself on land that he/she owns; or,
  2. 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.

Whether the owner’s level of control is “significant” depends on various factors – such as the nature, value and quantity of the work or materials controlled or contributed by the owner. If the owner was responsible for certain elements of the home, it may also depend upon whether those elements are considered essential.

So what are “essential elements,” you may ask? Here are some examples:

  • footings
  • foundation
  • framing
  • exterior cladding
  • building envelope
  • heating
  • electrical
  • plumbing distribution systems

As we’ve already said, the best way to protect your new home warranty is to limit your involvement. But, if you simply must get involved, these are some examples of non-essential items:

  • flooring
  • interior trim
  • paint
  • carpeting
  • kitchen cabinets
  • bathroom vanity
  • counter tops

Keep in mind, if you supply or install these yourself, you won’t exclude your home from warranty coverage, but any owner-installed finishes will not be covered under your warranty. If, for example, you buy paint and paint your new home yourself, you couldn’t make a warranty claim against the builder regarding the paint.

What to do if things go wrong

Not every new home build goes as planned. In the worst-case scenario your builder may stop work altogether before the home is complete. If your builder fails to substantially fulfill your contract:

  • Don’t carry on with any construction.
  • Don’t hire a new builder.
  • Don’t do any work yourself.
  • Don’t fix any defects that may have been left behind.

Why? Because homeowners are eligible to receive protection against financial loss for payments made to the builder for up to $40,000. However, Tarion needs to assess the site the way it was left by your builder first. Here’s what you should do:

  • Do call Tarion as soon as possible.
  • Do fill out a Financial Loss Claim Form as soon as possible.
  • Do call the Tarion customer support team to help you through it.

While building a new home can be rewarding, it can also be a little daunting. If you have questions before you sign your contract or during the build itself, feel free to contact Tarion for help.