After a number of public consultations, Tarion has introduced a change to the deposit protection process, which will encourage new buyers to provide notice of their purchase agreement within 45 days of signing it.
This will allow the new home warranty provider to check early and assess if the builder has complied with its obligations and take swift action against illegal actors.
Illegal building and selling is a serious problem, which hurts consumers. While there are a number of approaches to combat illegal selling, one of the biggest challenges to consumer protection is making sure that the regulators know about an illegal sale when they happen – not potentially years later when there is an issue with the home and any ability to take proactive action has passed.
“The problem of illegal building and selling is not new but while policing, prosecutions, and deterrence have a role to play in reducing illegal activity, it was clear that alternative approaches needed to be explored”, said Peter Balasubramanian, president and CEO of Tarion. “We believe that engaging new home buyers early in the process will help shed light on the transactions that might be problematic.
“If we know that agreement has been entered into, we can check to make sure the builder was approved to sell – that burden no longer has to be only on the purchaser to find out on their own. We can also act swiftly on this information, in collaboration with the Home Construction Regulatory Authority, to shut down the illegal activity.”
Starting July 1, freehold homebuyers can access an online portal to let Tarion know that they have bought a new home. To encourage homeowners to register this information early, the deposit coverage rules have been modified: purchasers who register within 45 days of signing their agreement will qualify for the maximum available deposit coverage. Those who register later (or do not register) will qualify for a different, potentially lower, level of deposit coverage.
“This commonsense step of sharing information with Tarion empowers buyers and will reduce the risk of illegal activity,” says Balasubramanian. “If a rogue builder knows their purchaser is likely going to notify Tarion right away, they’ll think twice before selling illegally.”
Purchasers who don’t provide notice will still be eligible for coverage under a separate deposit claims process, but the coverage limit may potentially be lower.
All new home buyers will continue to have full construction warranty coverage and protection against defects in their new home, whether or not the builder was legal. Ontario’s deposit protection program, and the coverage available to victims of illegal building and selling, is said to be the most comprehensive protection available anywhere in Canada.
Registering will also allow the organization to provide new purchasers with key information about the protection program. “Awareness is a critical consumer protection tool, particularly in today’s economic climate,” says Balasubramanian. “We want to reach homebuyers at key moments in their journey.”
In addition to registering the purchase agreement, homebuyers are encouraged to research their builders and carefully review purchase agreements with a real estate or condo lawyer.
