Buying a new condo…am I protected?

In A Quick Guide To Increasing The Rent On An Investment Property, we answered your questions about when, how often, and by how much a landlord can increase the rent on an investment property.  Today, we’re going to switch gears and focus our attention on the Tarion New Home Warranty that all new home buyers are entitled to.

Buying a New Condo…Am I Protected?

What is the Tarion New Home Warranty?

All new homes and condos in the Province of Ontario come with a warranty that protects home buyers from defects in materials and workmanship.  Tarion, which was created by the Ontario government, is the organization that administers and enforces the warranty.

Who pays for the warranty and how much does it cost?

Home buyers are responsible for the cost of enrollment in the warranty program; the fee is calculated on a sliding scale based on the purchase price of the property.  For example, the cost to enroll a $300,000 condo would be $802.30, whereas that cost to enroll a $600,000 condo would be $1243.00.  This fee is paid as an adjustment on final closing, along with the land transfer taxes, legal fees, and development charges.

What about old buildings converted into condos?

Conversions do not qualify for the Tarion New Home Warranty.

What does the warranty cover?

The warranty has three parts, each of which covers different items for different periods of time:

One-Year Warranty 

-Requires a home is constructed in a workman-like manner and free from defects in material;

-Protects against unauthorized substitutions;

-Requires the home to be fit for habitation;

-Protects against Ontario Building Code violations; and

-Applies for one year, beginning on the home’s date of possession even if the home is sold.

Two-Year Warranty

-Protects against water penetration through the basement or foundation walls;

-Protects against defects in materials that affect windows, doors and caulking and defects in work that results in water penetration into the building envelope;

-Covers defects in work or materials in the electrical, plumbing and heating delivery and distribution systems;

-Covers defects in work or materials that result in the detachment, displacement or deterioration of exterior cladding (such as brickwork, aluminum or vinyl siding);

-Protects against violations of the Ontario Building Code that affect health and safety; and

-Applies for two years, beginning on the home’s date of possession.

Seven-Year Warranty

The home’s seven year warranty covers major structural defects (MSD) and begins on the date you take possession of the home and ends on the day before the seventh anniversary of that date.  For example, if your home’s date of possession is October 23, 2005, the seven year MSD warranty begins on October 23, 2005 and remains in effect until and including October 22, 2012.

Is there anything else that Tarion does for consumers?

Tarion protects new home buyer deposits – up to $20,000 for condos and up to $100,000 for all other property types.

In addition, Tarion protects consumers against delayed occupancy.  The warranty in every new condominium contract outlines the process and rules by which a developer can delay occupancy, when a buyer is entitled to compensation for delayed occupancy, and when a buyer has the right to walk away from the transaction with his/her deposits in hand.

I hope you found this instalment of the Condo Millionaire series entertaining and informative.  In the event that you have any questions about the article, are looking for assistance buying or selling real estate, or have friends or family members looking for a referral to a professional Realtor, please don’t hesitate to get in touch.  I’d be happy to help in any way that I can.

Click here to read the next instalment: What If You Have Second Thoughts After Buying a New Condominium?