New Home Builder Contracts and Tarion Warranty in Ontario

Buying a brand-new home from a builder in Ontario works differently from buying an existing resale property, starting with the contract itself. Where a resale deal generally uses the standard agreement of purchase and sale form many buyers and agents are familiar with, a new-build purchase is governed by the builder’s own agreement — a document the builder drafts, often lengthy, and generally used for every buyer in that project rather than individually negotiated.

The practical differences flow from the fact that the home may not exist yet, or may be mid-construction. Instead of a fixed closing date, new-build agreements commonly set an occupancy or closing date range, with mechanisms allowing the builder to adjust it as construction progresses. Buyers are often also choosing finishes and upgrades as part of the purchase process, which get documented separately and folded into the final price. And unlike most resale purchases, a new-build home generally comes with statutory warranty protection through Tarion that doesn’t apply to an existing home changing hands.

A builder’s agreement of purchase and sale is generally longer and more detailed than a resale APS, reflecting the number of variables involved in building a home. It typically sets out the purchase price and what it includes, a schedule of standard features and any selected upgrades, the deposit structure (often staged over several payments rather than a single deposit), and detailed provisions addressing delays, extensions, and closing adjustments.

It also commonly includes the builder’s right to make certain changes during construction — substituting materials of similar quality, for instance, or adjusting minor specifications — within limits set by the agreement and by Tarion’s rules. Because builders generally use one form across an entire project, there’s often limited room to negotiate the core structure of the agreement, even though specific items like upgrade pricing or included features can sometimes be discussed before signing.

The agreement also generally addresses what happens if the buyer wants out before closing, or wants to sell their interest in the purchase to someone else before the home is complete. Builder agreements commonly restrict or require consent for an assignment of the agreement, often charging a fee or imposing conditions on the buyer who wants to assign their rights. Reviewing these provisions before signing matters particularly for buyers purchasing a pre-construction unit with a long gap between the agreement date and closing, since circumstances can change considerably over that time.

Construction timelines shift, and new-build agreements are generally built around that reality rather than treating the closing date as fixed the way a resale deal does. Many builder agreements set out an initial occupancy date along with a defined number of permitted extensions the builder can exercise, often with required notice to the buyer for each one.

Beyond what the contract itself allows, Tarion’s warranty program generally layers its own delayed closing and delayed occupancy compensation rules on top, which can entitle a buyer to compensation once delays exceed what’s permitted under the statutory framework. The two systems — the contract’s own extension provisions and Tarion’s compensation rules — generally work together rather than one replacing the other, which is part of why reviewing both the agreement and Tarion’s published bulletins on delayed closings can be worthwhile before relying on an expected move-in date.

Deposits on a new-build purchase generally work differently from a resale deposit, which is typically held in trust by a brokerage. On a new-build deal, deposits are generally protected through Tarion, up to a statutory maximum set by regulation, rather than simply sitting in a real estate trust account. This protection is specifically designed to address situations where a builder becomes insolvent, abandons a project, or otherwise fails to complete the home as agreed.

Because deposits on larger pre-construction or custom projects can sometimes exceed the statutory protected amount, it’s generally worth understanding what portion of a deposit is actually covered before structuring payments, particularly on higher-priced builds where staged deposits can add up quickly over the course of construction.

Tarion administers Ontario’s new home warranty program under the Ontario New Home Warranties Plan Act. Every builder constructing new homes for sale in Ontario is generally required to be registered with Tarion, and every new home sold is generally enrolled in the warranty program as part of that process. The program exists to give buyers a baseline level of protection against construction defects that exists independently of what any individual builder’s contract promises.

Rather than a single blanket guarantee, the warranty is structured around different time periods, each covering different categories of potential problems. This structure reflects the reality that some defects — like a workmanship issue with a cabinet — tend to show up quickly, while others — like a structural problem — may not become apparent for years.

Builders generally pay an enrolment fee to Tarion for each new home sold, which funds the warranty program and the claims process. In exchange, buyers generally receive a level of protection that exists regardless of what a particular builder’s own contract promises — meaning a builder generally cannot contract out of the statutory minimum warranty coverage, even if the purchase agreement includes language that tries to limit liability more broadly.

The one-year warranty is generally the broadest in day-to-day terms, covering the home against defects in work and materials, unauthorized substitutions, and ensuring the home is fit for habitation and built in accordance with the Ontario Building Code. Many of the issues buyers first notice after moving in — minor cracks, finishing problems, or appliances and fixtures not working as expected — generally fall within this window.

The two-year warranty generally continues to cover items like water penetration through the basement or foundation, defects in the electrical, plumbing, and heating delivery and distribution systems, and violations of the Ontario Building Code affecting health and safety. The seven-year warranty is narrower in scope but longer in duration, generally covering major structural defects — issues serious enough to affect the structural integrity of the home. Each window generally has its own reporting deadlines, and coverage for a given category of issue typically ends once its specific window has closed.

A Tarion claim generally starts with notifying the builder directly, since many issues are resolved without a formal filing. If that doesn’t resolve the problem, the next step is generally submitting the applicable warranty form to Tarion within the reporting period tied to that item — commonly structured around certain intervals after possession, with a separate process for major structural claims that can arise later within the seven-year window.

Because each warranty period generally has its own reporting deadline, keeping track of when the home was occupied and documenting issues as they’re noticed is generally important — an otherwise valid defect can lose its warranty eligibility if it isn’t reported within the applicable window. For problems that fall outside what Tarion covers, or that raise broader contract or construction issues, it may also be worth understanding how Ontario’s general limitation periods could apply alongside the warranty process. See also our overview of real estate disclosure obligations and visit our tools or contact pages for further resources.