Home Warranty in Canada

As a homebuyer in Ontario, it's important to be aware of the Ontario New Home Warranties Plan Act (ONHWP Act), which requires new home warranties for all new homes sold in Ontario.

Tarion Warranty Corporation is responsible for enforcing the ONHWP Act. Prior to 2021, Tarion was also responsible for licensing new home builders and vendors in Ontario. The newly created Home Construction Regulatory Authority (HCRA) took over this responsibility in February 2021. Both Tarion and HCRA are private, not-for-profit corporations.

While Tarion enforces the ONHWP Act, they also act as a backstop to guarantee claims. This means that even though home warranties are provided by the builder in Ontario and not by Tarion, there is still a series of guarantees to homebuyers by Tarion that they will provide compensation should builders fail to back their warranties.

The coverage for new home warranties in Ontario that Tarion backstops includes the following:

• Deposit protection
• Delayed closing coverage
• Financial loss protection
• Work and materials coverage

Tarion’s warranty coverage for work and materials come in one-year, two-year, and seven-year warranty coverage periods. Each warranty period covers different aspects of the home’s labour and materials.

One-Year Warranty Period

Tarion's warranty coverage begins on the day that you take physical possession of the home. During the first one-year period, the builder guarantees that the home is:

• Fit for habitation
• Constructed in accordance with the Ontario Building Code
• Constructed in a workmanlike manner and is free from defects in material

This is required as part of the ONHWP Act (R.S.O. 1990, c. O.31, s. 13 (1)). What this means is that you have one year, starting from when you took possession of the home, to file a claim that the home is either not fit for habitation, violates the Ontario Building Code, or was not constructed in a “workmanlike” manner. Tarion’s Construction Performance Guidelines contain material and workmanship standards that are used when determining if a defect is eligible under the new home warranty.

Two-Year Warranty Period

Defects to work and materials are covered for two years. This includes windows, doors, and caulking defects that cause water penetration. It also covers the home's electrical, plumbing, and heating systems, as well as the exterior cladding of the home, such as brickwork or siding. After this two-year period, homeowners may still have protection under manufacturer’s warranties. This is commonly the case for heating and cooling systems.

Also in this two-year warranty period is protection for water penetration through the basement or foundation walls. Violations of the Ontario Building Code that affect health and safety are also covered for two years. This means that other Ontario Building Code violations are no longer covered after the initial one-year warranty period.

Seven-Year Warranty Period

Major structural defects are covered for seven years. This includes structural load-bearing elements,such as beams, columns, and walls. It also includes defects that affect the use of significant portions of the home.

Tarion’s Major Structural Defect Warranty Interpretation Guideline is used when determining if there is a major structural defect. According to Tarion, elements that are considered to be “load-bearing elements” include:

• Footings
• Beams
• Foundation walls
• Joists
• Pads
• Load-bearing floor slab
• Piles
• Structural walls
• Braces
• Rafters
• Plates
• Roof trusses
• Teleposts
• Columns

A major structural defect occurs if the element has failed, if it has been compromised and can no longer function as a load-bearing element, or if it affects the use of the home.

Tarion interprets a significant portion of the home to have been affected if either 25% or more of the total liveable area of the home is affected, or if it affects the use of an area that is required in a home.

For example, if the second floor of a home cannot be accessed due to a defect in the stairs, then this would be considered a major structural defect. If the only bedroom or bathroom in the home has a defect, then this would be a major structural defect.

Tarion Coverage Limits

The maximum coverage is $300,000 for freehold homes and condominium units. This is the maximum amount that Tarion will pay a homeowner to compensate for repairs should a builder not honour their warranty. Tarion will also pay out a maximum of $50,000 for damage caused by environmentally harmful substances or hazards.

Tarion's deposit protection has a maximum coverage of $60,000 if the purchase price is $600,000 or less, or 10% of the purchase price up to a maximum of $100,00, for homes with a purchase price over $600,000.

Delayed closing coverage allows you to claim up to $7,500 should your home's closing date, or your pre-construction condo's occupancy date, be delayed beyond your purchase agreement's firm closing or occupancy date. This may be different from your freehold home's tentative closing date or your condo's tentative occupancy date. Check your purchase agreement's Statement of Critical Dates to find your firm and tentative dates.

The amount that you can claim from your builder is $150 per day, up to a maximum claim of $7,500. This helps to cover living expenses to compensate for your home's delayed occupancy. You have up to one year after the eventual occupancy of your new home to make a claim to Tarion, or within 180 days of the missed occupancy date to make a claim to your builder.

If you purchased a contract home, which is when you hire a builder to construct a home on land that you already own, then you may be protected on the amount that you have paid the builder if they fail to complete the contract. The maximum amount that the owner can claim is the difference between the amount paid and the value received, up to $40,000. For example, if an owner paid $200,000 but only $180,000 of work and materials was provided, then the owner may be eligible for $20,000 in compensation.

Home buyers do not pay for the cost of Tarion's home warranty coverage. Instead, the builder will need to pay a fee to Tarion when they enroll the home with Tarion before construction starts. The cost of Tarion may be passed onto the home buyer through a higher home sales price. The cost of Tarion's enrollment fee depends on the sales price of the home, excluding HST. HCRA, Ontario’s regulator of home builders, also charges a regulatory oversight fee. This fee is a flat $145 that does not depend on the home’s sale price. Both Tarion's enrolment fee and HCRA's fee are subject to Ontario's 13% HST.

Tarion Warranty Enrolment Fees

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Alberta’s New Home Buyer Protection Act requires all new homes built in Alberta to be covered by a home warranty insurance contract. New home warranty is also required if more than 75% of a home is being rebuilt. Alberta new home warranties are commonly called 1-2-5-10 Coverage, as it covers certain defects from 1 to 10 years. Alberta home builders must purchase home warranty coverage in order to get a building permit. This means that homebuyers do not directly pay for the cost of Alberta home warranties. However, the cost may be passed onto the buyer through a higher home price.

Similar to other provinces, it is the homeowner’s responsibility to find defects and make warranty claims. Alberta’s Construction Performance Guide is used to help Albertan homeowners with determining whether an issue will be covered by their new home warranty.

In Alberta, home warranty coverage is through third-party home warranty providers. If you have a claim, then you would file a warranty claim with your home warranty provider, who will then work with your builder. This is unlike Ontario where builders are the ones that provide home warranty coverage and Tarion acts to resolve claim disputes.

There are six home warranty providers in Alberta that your builder can choose to purchase coverage from. Having for-profit warranty providers means that there may be an incentive to deny or limit claims. The Alberta New Home Warranty Program (ANHWP) is the only not-for-profit warranty provider in Alberta.

List of Alberta Home Warranty Providers

The following home warranty coverage is the minimum required coverage in Alberta:

One Year

Defects in labour and materials are covered for one year. Examples would be flooring and cabinets.

Two Years

Defects in labour and materials of delivery and distribution systems are covered for two years. This includes heating, air conditioning, plumbing, and electrical systems.

Five Years

Defects in the building envelope, such as the roof or exterior walls, are covered for five years.

Ten Years

Major structural defects are covered for ten years in Alberta. That’s longer than the seven years that major structural defects are covered for in Ontario. This includes the frame or foundation of the home.

There is a maximum amount that your home warranty provider will pay out in claims, which will be either your original purchase price or a coverage limit. This upper limit is established through Alberta’s Home Warranty Insurance Regulation. For single-family homes, the maximum coverage limit is $265,000. Multi-family homes that are not part of a condominium, such as duplex homes and row townhomes, also have a coverage limit of $265,000. Condos have a maximum coverage limit of $130,000.

Additional home warranty coverage can be purchased by your homebuilder. In fact, Alberta’s New Home Buyer Protection Act requires warranty providers to provide home builders with the option to purchase extended building envelope coverage of an additional two years. If your builder chooses to purchase extended coverage for your building envelope, this will extend the warranty for your building envelope from the minimum 5 years to an extended coverage of 7 years.

British Columbia's Homeowner Protection Act requires all new homes to be covered by third-party home warranty insurance. Similar to other provinces, BC’s Residential Construction Performance Guide is used as a reference for the minimum performance required in a new home. Home warranty insurance is commonly called 2-5-10 home warranty insurance in British Columbia.

There are only five home warranty providers that are authorized by the BC Financial Services Authority (BCFSA) to provide home warranties in British Columbia.

List of BC Home Warranty Providers

The following home warranty coverage is the minimum required coverage in BC:

Two Years

Building Code violations, as well as defects in labour and materials, are covered for 1 year. For the common property of strata corporations, this coverage is extended to 15 months.

Defects that are covered for 2 years include labour and materials for heating, air conditioning, plumbing, and electrical systems. It also includes Building Code violations that may cause damage to the home, as well as defects to caulking, windows, doors, and cladding that may also lead to damage.

Five Years

The building's envelope is covered for 5 years. This includes exterior walls and the roof.

Ten Years

Structural defects are covered for 10 years, with it being either a failure of a load-bearing element, or a defect that significantly affects the use of the home.

Home warranties are commonly called “Guarantee Plans” in Quebec. In 1999, new home warranties in Quebec became mandatory for all new homes through the “Regulation respecting the guarantee plan for new residential buildings” of Quebec’s Building Act. In Quebec, there can be two types of home warranty coverage. The Guarantee Plan is required in Quebec, while private guarantee plans by third-party providers may be used to offer some warranty coverage.

The administrator of Quebec's mandatory Guarantee Plan is Garantie Construction Résidentielle (GCR). GCR is a non-profit organization.

Optional, private guarantee plans are also available.

Quebec Private Home Warranty Providers

The following home warranty coverage is provided by the mandatory Garantie Construction Résidentielle (GCR) Guarantee Plan.

One Year

Apparent defects in material and labour, identified after acceptance of the building.

Three Years

Hidden/latent defects in material and labour. Under the Quebec Guarantee Plan, a latent defect is defined as a serious defect that was already present in the home during construction but was unknown to you. An example would be a leaking roof.

Five Years

Structural defects in design, construction, or due to execution.

Quebec Home Warranty Coverage Limits