Tarion Seeking Input On Regulatory Changes to Ensure Coverage for Current and Future Purchasers
Regulation Number(s):
R.R.O. 1990, Reg. 892
Instrument Type:
Regulation - Other
Bill or Act:
Ontario New Home Warranties Plan Act
Summary of Proposal:
Following the previous policy consultation earlier this fall, Tarion is now proposing regulatory changes to the deposit coverage policy, requiring purchasers to provide notice when they sign a purchase agreement, to help combat illegal vending of new homes and ensure protection for current and future new home purchasers.
Specifically, to address these issues Tarion is consulting on the following proposed regulatory changes:
1. Requiring purchasers of new freehold homes (including freehold homes on parcels-of-tied-land) to provide notice and information to Tarion about their new home purchase within a specific period of time after entering into an agreement of purchase and sale with a vendor/builder to qualify for the maximum entitlement to deposit coverage.
2. The notice to Tarion would potentially include specific information about the purchaser, address, builder, and deposit paid using a simple online, free, portal.
3. Introduce a variable compensation limit for freehold home deposit coverage depending upon whether the purchaser provides notice to Tarion that they have entered into a new home purchase agreement as would be required. Purchasers that do not provide notice to Tarion would continue to be eligible for deposit coverage at the variable limit up to the current maximum.
In all cases, consumers will continue to be eligible for some deposit protection compensation, even if they purchase from a builder operating illegally and do not provide notice to Tarion within the specific time. Maximum deposit coverage, however, will require timely notice to Tarion. This proposal does not impact a homeowners construction warranty which apply to the home after occupancy.
Based on the earlier public consultation Tarion has amended the proposed changes to:
- Allow for a longer implementation timeline where the requirement will be effective July 1, 2025; however, changes to coverage will not be in force until January 1, 2026,
- Doubling the size of the proposed fund available for those who do not provide notice in the applicable timeframe from the initial proposed $5 Million to now $10 Million, allowing increase coverage for purchasers who do not register.
- To help reduce onus on purchasers, allow for a purchaser's lawyer, agent, or representative to provide this notice on the purchaser's behalf.
- Deferred for future consideration and consultation changes to when Tarion collects its enrolment fee due to concerns about the impact on housing affordability and potential impacts to business processes.
These proposed changes are necessary to ensure that purchasers continue to benefit from deposit coverage for new freehold home purchasers. Without a change to the program, deposit coverage exposure for freehold homes is impossible for Tarion to assess and fundamentally threatens the viability of the warranty program, impacting Tarion's ability to provide deposit coverage and leaving consumers at risk.
Analysis of Regulatory Impact:
Purchasers and current homeowners would benefit from the continued existence of a robust guarantee fund for warranty claims, and will continue to receive the warranty coverage and protections of the construction warranty against defects in their new home.
Tracking purchase agreements will be an invaluable tool in combating illegal vending, as builders and vendors will be unable to "stay under the radar" because purchasers will be disclosing the existence of the new home transaction, and this would benefit licensed builders and vendors by reducing competition with illegal vendors and reputational harm of illegal building to the industry.
There would be a new requirement for purchasers, but one which would involve minimal effort for purchasers with only a few key pieces of information needing to be entered to register the purchase agreement/contract.
Upon registration purchasers would now be advised about what they are covered for (for example if they provided more than $100,000 they would know their exposure), which is new and important information for purchasers to know.
For freehold home purchasers who provide notice of their purchase agreement within the appropriate timeframe, their entitlement to deposit coverage remains at the current level, which depends on the purchase price and type of home they buy.
For freehold homes where the purchasers do not provide notice within the required time of 45 days of their purchase agreement, their deposit compensation limits will be subject to a further sub-limit (i.e., $10 Million) in any given year. Such claims will be aggregated at the end of each calendar year. If the total is less than sublimit, their deposit coverage limit will not be impacted, and their claim would be subject to the limits noted above. However, if the aggregate claims are more than the sublimit in a calendar year, their compensation limit will be based on a proportional share derived from the difference between the aggregate claims and sublimit.
By requiring the purchase agreements to be registered, Tarion would benefit by being in a position to track whether or not the builder was licensed or had the appropriate QFE and would be able to take appropriate actions to mitigate the risk to the guarantee fund in a more immediate timeframe. Tarion would also be able to track the size of deposit exposure at any given time.
Additionally, Tarion would be able to immediately act and intervene to address illegal activity once identified.
The registration of purchase agreements would also give the Home Construction Regulatory Authority (HCRA) a better sense of who is involved in illegal selling and building activity, to better target enforcement activities.
Further Information:
Proposal Number:
24-MPBSD025
Posting Date:
December 16, 2024
Comments Due Date:
January 15, 2025
Contact Address:
Tarion
5160 Yonge Street, 7th Floor
Toronto, ON M2N 6L9