WARRANTY COVERAGE ON A NEW HOME

When it comes to a brand new home, we often assume everything is in perfect working order because after all, it is brand new. But in reality, this isn’t always the case.

Fortunately in Ontario, there is a legislation called the Ontario New Home Warranties Plan Act that protects buyers of newly constructed homes. The Tarion Warranty Corporation administers this legislation on behalf of the provincial government to ensure builders meet minimum standards for construction and repairs. This protection is more widely known as the Tarion Warranty. On the date of possession of a new home, three warranties with specific coverage at one year, two year and seven year periods are taking effect. In this blog, we will cover an overview of the three warranties but for more information please visit www.tarion.com.

One Year Warranty

As per Tarion, the one year warranty covers the following:

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

• Protects against unauthorized substitutions (like carpet used instead of the required hardwood flooring);

• Requires the home to be fit for habitation;

• Protects against Ontario Building Code violations; and

This coverage is valid for one year, beginning on the home’s date of possession even if the home is sold.

As noted above, the one year warranty covers a broad range of defects. Since it is hard to know what is considered "workman-like manner", Tarion has put together an illustrated version of the Tarion Warranty found in https://cpg.tarion.com that describes some of the most common issues observed by homeowners.

By selecting either an exterior or interior view of the house, you can drill down to an area or room.

For example, if kitchen is selected, you can drill down to parts of the kitchen such as flooring.

Next, you would see a list of issues related to flooring with explanations describing the condition, performance, warranty, action and remarks as shown below.

In the above example, if the issue you are inquiring about is concerning a finished floor being uneven, you can see that this is covered under the one year warranty. However, in order to qualify for repair, the unevenness of the floor must differ by more than 6mm. If this is the case, the builder is required to correct this issue. Otherwise, no action is needed since a difference less than 6mm is not considered a tripping hazard. Further details on how to measure the floor variance is found in the Related Articles section on the Tarion website. For this particular issue, Tarion has also provided a video showing a real life scenario of what constitutes as an uneven floor.

As you navigate around Tarion's interactive website, you will notice a myriad of issues covered under the one year warranty. But it is up to homeowners to inspect their home to find these defects and report them to Tarion before the warranty deadlines. These important dates can be found here. Even if some of these issues may seem easy to fix yourself, it might be worth it to have the builder repair it professionally. From our experience with one of our properties, the process to submit a claim to Tarion and have an issue repaired by the builder was pretty quick and straightforward.

A tip from our side: Take note of the main coverages and deadlines! Mark the deadline in your calendar and make it a point to purposely walk your home to look for any potential issues!

Two Year Warranty

As per Tarion, the two year warranty covers the following:

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

• Protects against defects in materials and work in windows, doors and caulking that result in water penetration into the building envelope;

• Defects in work or materials in the electrical, plumbing and heating delivery and distribution systems;

• 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

This coverage is valid for two years, beginning on the home’s date of possession.

The two year warranty covers mainly water related issues. One of a homeowner's worst nightmare is basement flooding. Every home is at risk of basement flooding, even if it has not happened before. Water in your basement is most likely to occur during a heavy rainfall, or when snow and ice is melting. So it is important to regularly check your basement for water seepage because the longer water damage goes undetected, the greater the chance of mold and other costlier repairs. Again, it is important to submit a claim before the two year warranty ends.

Seven Year Warranty

As per Tarion, the seven year warranty covers major structural defects.

This covers any defect in work or materials in respect of a building, including a crack, distortion or displacement of a structural load-bearing element of the building, if it,

1. results in failure of a structural load-bearing element of the building,

2. materially and adversely affects the ability of a structural load-bearing element of the building to carry, bear and resist applicable structural loads for the usual and ordinary service life of the element, or

3. materially and adversely affects the use of a significant portion of the building for usual and ordinary purposes of a residential dwelling and having regard to any specific use provisions set out in the purchase agreement for the home.

The seven year warranty includes significant damage due to soil movement, major cracks in basement walls, collapse or serious distortion of joints or roof structure and chemical failure of materials.

One important thing to remember is that the Tarion Warranty comes with the house and transfers to subsequent owners. When we moved into our current house, which was only six years old at the time, we soon discovered cracks in the foundation walls. This was a major headache for us as we just renovated the finished basement. Seeing the new basement being demolished was quite excruciating. Since we were the third owners of the house, we did not know the house was still covered under Tarion Warranty. We assumed it was only for the first owners of the house. At the time of purchase, we had asked our realtor if it was covered under Tarion and because we were told no, we did not think to inquire further. Had we known, we wouldn't have made such a costly mistake by having paid out-of-pocket. Tarion has a total coverage limit up to $300,000 for each home, which is more than enough to repair cracks in the foundation walls.

Exclusions

It is also important to know that not all new homes are covered under the Tarion warranty. Some exclusions include:

• Temporary or seasonal homes (such as cottages not built on permanent foundations and not insulated sufficiently to enable year-round living)

• Homes built on existing footings/foundations (for example, a builder having demolished an existing residential structure but leaving the foundation intact and rebuilding the house from the foundation up)

• Homes that have been lived in or rented out by the builder before sale to the first owner

• Homes in which the contractor only erects the shell and the owner completes the interior

• An owner of a vacant lot contracting the construction of a home through subcontractors.

Since the Passive House we are building is considered a substantial renovation as we are leaving two existing walls intact, it would not be covered under Tarion Warranty. But there are other advantages in doing so as mentioned in one of our previous blog post. Knowing what the Tarion Warranty entails allowed us to negotiate warranty terms with our builder that are reasonable and suitable for us.

There you have it...

When buying a house less than seven years old, there is a good chance it's covered under the Tarion Warranty as coverage transfers between owners. Understanding the three warranties at the one, two and seven year mark can give you some peace of mind in case something goes wrong in the workmanship of your home.

Another tip: Check if your builder or the builder of your current home is registered with Tarion and if there have been any claims filed!

Realistically, we don't want to think about anything going wrong with our house, especially if it is a newly built one. It is normal to be wrapped up in excitement and moving into our new home that we turn a blind eye to the risks and potential negatives. However, good warranty coverage is like an insurance policy or rainy day savings account: It will cover you if things don't work out as planned!

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