What is Tarion?
Tarion is an independent, non-profit organization which aims to protect purchasers and owners of newly constructed homes by ensuring that builders meet their obligations under the Ontario New Home Warranties Plan Act and regulations (the “Act”).
Through administration of the Act, Tarion is responsible for:
- Enrolling new homes in the warranty program;
- Maintaining an online portal for homeowners to review warranty information and report defects in construction;
- Corresponding with homeowners to investigate and resolve claims; and
- Managing a guarantee fund from which warranty claims are paid. (About us | Tarion.com)
During 2021, Tarion’s former authority to regulate and license builders was given to The Home Construction Regulatory Authority ( “HCRA”), the newly established regulator under the New Home Construction Licensing Act, 2017. HCRA is now responsible for managing the Ontario Builder Directory, enforcing professional standards and responding to consumer complaints regarding builder misconduct (www.hcraontario.ca). Tarion and HCRA collaborate to combat issues within the building industry, including the illegal building and selling of new homes in Ontario, which has been prominent in recent years (Tarion Taking Action To Fight Illegal Activity and Protect New Home Purchasers | Tarion.com).
New Notice Requirements for Purchasers
In an effort to reduce illegal building and selling activities in Ontario, Tarion has introduced a new notice requirement for purchasers of newly constructed freehold homes.
Beginning July 1, 2025, purchasers of new freehold homes, including homes on parcels of tied land, are required to notify Tarion of their purchase and particulars of the transaction within 45 days of signing an agreement of purchase and sale (O. Reg 17/25 under the Ontario New Home Warranties Plan Act, section 2.1(2)).
Purchaser’s can deliver notice through Tarion’s online portal or in writing to Tarion. Particulars of the transaction include:
- Name and contact information of the purchaser;
- Name of the vendor;
- The municipal address or other description or identifier of the property; and
- The amount of total deposits paid or to be paid under the terms of the purchase agreement. (Ibid)
Tarion has not yet confirmed whether lawyers or other professionals may provide notice on a purchaser’s behalf.
Purchaser’s Deposit Protection
When purchasing a newly constructed home, the deposits payable under the purchase agreement tend to be much larger than in the context of a resale home. So, what happens to your deposit if the builder fails to close under your agreement?
In Ontario, new homes purchasers receive deposit protection through Tarion to ensure their financial investments are protected if the purchaser exercises a legal right to rescind the agreement prior to completion of the transaction, or a builder cannot close due to circumstances such as bankruptcy or failure to meet their obligations under the agreement.
Failure to Provide Notice Can Negatively Impact Deposit Coverage
Starting January 1, 2026, to encourage purchasers to comply with the aforesaid notice requirements, Tarion will implement a separate deposit coverage regime for purchasers who have given proper notice and particulars of the transaction to Tarion within 45 days of entering into a purchase agreement.
Purchasers who provide proper notice to Tarion will continue to be eligible for deposit protection up to the existing limit of $100,000. Tarion must establish a “special fund” of $10 million for purchasers who fail to provide notice. Purchasers who fail to provide notice will only qualify for up to $100,000 in coverage if the total claims submitted during the previous calendar year do not exceed the $10 million sub-limit. If the total claims exceed $10 million, the deposit coverage will be based on a proportional share calculated based on the difference between the total of all claims and $10 million (Ibid, s. 4.9).
For clarification, deposit coverage will still be available for all purchasers, but on a potentially reduced basis for purchasers who do not provide notice.
Warranty coverage for protection against defects is not impacted by the new notice requirement, and purchasers of condominium units are similarly unaffected by this legislative change.
Takeaway
Purchasers of pre-construction homes should be aware of the new notice requirement commencing July 1, 2025, and how failure to provide notice can negatively impact their deposit protection entitlements.
Builders and vendors of newly constructed homes should consider revisiting their standard agreements to ensure the purchaser’s notice requirement is clearly identified. Consultation with Tarion may be advisable to confirm whether third parties, such as the purchaser’s legal representative, may provide notice on a purchaser’s behalf.
Whether you are a purchaser or vendor of a pre-construction home, the Real Estate and Development Group at Soloway Wright LLP can help you navigate recent legislative amendments, including the new Tarion notice requirement.
To determine how we may assist you, please contact one of our real estate lawyers today: Real Estate & Development – Soloway Wright LLP
