Selling a Home Without a Tarion Warranty? Read This First!

Tarion warranties protect buyers, but what you don’t know as a seller could cost you. If you’re selling a home without a Tarion warranty, doing your homework before you list could save you time, money, hassle, and even legal trouble.

What is Tarion?

A Tarion warranty, originally called the Ontario New Home Warranty Program, is a government-mandated registry for all new homes. Builders must enrol new construction and have the properties inspected to ensure that the home “is constructed in a workmanlike manner and is free from defects in material, is fit for habitation, and is constructed in accordance with the Ontario Building Code.” To read the law in its entirety, visit Ontario.ca/laws.

Does Tarion Apply Only to New Construction?

Yes. Builders are required by law to enrol newly built homes in the Tarion warranty system. However, that doesn’t mean they always do, and for those trying to sell a home that wasn’t originally registered, it could be trouble.

Are There Exceptions?

Yes. Permits are required to build a home in Ontario unless the builder plans to live in it himself.

How Long Are the Warranties?

Seven years, generally speaking, beginning on the date you take possession of the home.

Is My Home Registered?

If you don’t know, the answer is “probably not.” While the law was applied in 1976, plenty of builders erected new construction without registering for Tarion by claiming that they intended to live in the home themselves. While the Province is cracking down on this–according to The (Toronto) Star, “In 2015, Tarion was involved in 241 illegal building investigations, which resulted in 105 convictions, more than $330,000 in fines and two jail sentences.”–it still happens.

Builders simply claim they changed their mind and decided to sell it instead of living in it. Another reason your home may not be registered is that renovations don’t qualify as new construction, and builders attempt (often successfully) to claim that new construction was actually a renovation. Without an inspection, years can pass and multiple owners can come and go before it’s discovered that the law was violated and the home wasn’t enroled.

Can You Get Warranties After the Fact?

Yes. Tarion warranties cover the home, not the builder. So if the home wasn’t enroled in Tarion but should have been, it’s not too late—and if you have documentation from your purchase, you’ll likely be able to avoid being blamed. Full seven-year warranties are available to homeowners whose homes, due to no fault of their own, were not properly warrantied at the time of construction. If you’re looking to sell, have your realtor pull the records on your home.

Plan for the Worst

When selling a home, the philosophy “Hope for the best, plan for the worst” is sage advice. Since you may not know what lies beneath the floorboards or within the walls, unexpected repairs can take a significant chunk out of your equity. Be prepared. Start saving to ensure that you have money to for repairs that may be needed.

What to Expect if You’re Also Shopping

If you’re looking at new construction for your next home, check the reputation of the builder and ask your realtor about Tarion before you get under contract.

Also be careful about HST: Canada’s Harmonized Sales Tax (HST), which is 13% in Ontario (5% federal, 8% provincial), does boost the cost of a home, but not by as much as people tend to think. Ontario offers exemptions on the 8% provincial portion for some items. While new homes aren’t specified as one of those items, Ontario does offer a rebate of 75% of the 8% provincial portion on the first $400,000 of the cost of a new home. These rebates can offset the price of a home by as much as $30,000. Ask your realtor about available rebates. For resales, the tax applies only to the services associated with the real estate deal, such as inspections, realtor commissions, legal fees, etc. This is still an unfortunate increase over the 5% paid prior to the July 2010 implementation of HST, but it’s not as bad as it’s often believed to be.

At Shop Mortgages, our team of experts can walk you through virtually any real estate transaction, so if you have questions contact us today!

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