Real estate litigation involving deficient construction of new homes often revolves around Tarion warranty claims. But what if your Tarion warranty claim is denied? Can you still claim against the builder for the cost to repair the deficiencies? The answer – maybe.

The Tarion Warranties

Builders in Ontario are deemed to provide statutory warranty coverage as described in the Ontario New Home Warranties Plan Act, including coverage for:

  • One and two year warranties for certain defects in work and materials; and
  • A seven year warranty for major structural defects.

The statutory warranties are in addition to any warranties or rights the homeowner may have under contract or otherwise.

Tarion was created to administer the Ontario New Home Warranties Plan, the guarantee fund and to assist with conciliations.

Coverage Limits for the Tarion Warranty

The maximum statutory warranty coverage available for freehold homes and condominium units is $300,000.

The maximum coverage for condominium common elements is $50,000 times the number of units, up to a maximum of $2.5 million. The maximum combined coverage for a condominium project (units and common elements) is $50 million.

There is a maximum of $15,000 for warranted damage caused by environmentally harmful substances or hazards and a maximum of $25,000 for coverage of septic systems.

Tarion’s Role with Conciliation

Tarion ensures that new home buyers receive the statutory warranty coverage that they are entitled to under the Act. If the builder fails to honour their warranty obligations, then Tarion may intervene. However, statutory warranty coverage is different from the warranties for items provided by manufacturers, suppliers or subcontractors. Claims for these items should be made directly to the product provider.

Although the statutory warranty protection is broad, it is not all inclusive and there are limitations and exclusions. For more information, home owners should read the Homeowner Information Package created by Tarion or speak to a real estate litigation lawyer.

The Tarion Forms and Claims

There are specific forms to be filled out by specific dates in order to obtain Tarion warranty coverage. For example, there is the 30-Day Form to be completed within 30 days of possession, the 1-Year Form to be completed within 1 year of possession, etc. The deadline for submitting a Major Structural Defect Form is the 7th anniversary of a home’s date of possession. Upon receipt of the form, the builder has 120 days to repair the defect(s).

If the builder does not complete repairs or otherwise resolve items that are covered under the warranty by the end of their initial 120 day repair period, then the homeowner has 30 days to contact Tarion and request a conciliation. Conciliation is a process where Tarion assesses the items on the homeowner’s warranty form and decides whether they are covered under the Tarion warranty.

During the conciliation process, Tarion may send an investigator to the home to investigate the claims. Tarion will then make a decision regarding whether the item(s) is/are warranted. Tarion can also decide whether it agrees with the way a repair was done or offered to be done by the builder; whether it agrees that a settlement offer by the builder is reasonable; and/or what, if any, compensation or repair the owner is entitled to receive from the builder or Tarion. Tarion’s decision will be drafted in a Warranty Assessment Report.

If the warranty claim is denied by Tarion, the homeowner may appeal Tarion’s decision before the License Appeal Tribunal (“LAT”). The builder has no right to appeal a Tarion decision that a claim is warrantable to the LAT.

Civil Litigation Claim Against a Builder

The leading authority is Metropolitan Toronto Condominium Corporation No. 1352 v Newport Beach Development Inc., 2012 ONCA 850, which held that the statutory warranties in the Ontario New Home Warranties Plan Act are in addition to any other rights a homeowner may have. Accordingly, nothing in the Ontario New Home Warranties Plan Act prevents a homeowner from claiming against a builder for breach of contract or negligence in a civil litigation claim in the Superior Court. Further, nothing in the Act precludes a civil litigation claim against Tarion for payment out of the guarantee fund for breach of the statutory warranties.

However, whether a civil litigation claim against the builder will be successful will depend, in part, on the wording and clauses in the contract between the builder and the homeowner. For example, the Agreement of Purchase and Sale may limit the liability of the builder, or prevent a homeowner from pursuing a claim outside of the Tarion conciliation scheme.

If you are a new homeowner and think you might have a claim for deficient construction, reach out to a real estate litigation lawyer to learn about your options.

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