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    The Open Door Blog


Whether you own a new home or condo, are considering buying one, or just love to dream about it, the Open Door blog is here to share stories that can help you protect what is likely the biggest investment of your life.

The Open Door blog is published by Tarion, a non-profit corporation that administers Ontario’s New Home Warranty Plan and registers all new home builders in Ontario. Click here to learn more about us.


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Insolvent builder? We’re here.
September 21, 2016
Insolvent builder? We’re here.

When buying any product or service, many people do their homework. What is the company’s track record? What is their customer service like? How long have they been in business? Typically, the higher priced the item the more inclined we are to spend time researching the company. When it comes to buying a new home, usually the most expensive thing you will ever buy, we strongly encourage buyers to research their builder. Of course, no amount of research can guarantee that a company will always be there to back up its product or service. Sometimes, unexpected events force companies into insolvency. Again, the same reality exists in the new home building industry. Thankfully it is very rare, but occasionally new home builders do become insolvent. The big question then, is what does it mean for you as a new home buyer?

Backstopping the Builder’s Warranty

In Ontario, almost every new home builder is required to provide a warranty on the home or homes they build. We TarionBlog-InsolventBuilder-imsis800-215step in when the builder cannot or will not meet their warranty obligation. Insolvency is one of those ‘cannot’ situations. For the most part, buying a new home is an exciting and rewarding experience for thousands of people across the province. But if you experience the rare circumstance of moving into your new home just as your builder becomes insolvent it’s likely that you still have the benefit of the new home warranty.

So, while there are many reasons why builders can become insolvent, some builders can and do bounce back. They might find alternate funding, renegotiate loans or sell assets. Whatever happens, consumers’ warranty rights remain unchanged.


How does a builder become insolvent?  

Any company can face insolvency when it isn’t able to meet its financial obligations. For example, insolvency may occur with too rapid growth or expansion, unexpected cost overruns on key projects, or financing that doesn’t get approved. Insolvency can even relate to market fluctuations over which the company has no control. So, while there are many reasons why builders can become insolvent, some builders can and do bounce back. They might find alternate funding, renegotiate loans or sell assets. Whatever happens, consumers’ warranty rights remain unchanged.

You remain protected.

Whatever the future holds for your builder, as a new home owner you can count on Tarion and your new home warranty. In fact, it’s a key part of our job to make sure anyone buying a new home in Ontario receives the full warranty protection they are entitled to.

There have been a few cases recently where a builder has gone insolvent. This has had tremendous impact on some new home buyers who were in various stages of the new home buying experience, and Tarion has supported them in many ways. We understand how stressful and emotionally taxing these situations can be. We encourage people to reach out to us anytime they have specific questions.

In some cases, where larger groups of people may be impacted we hold town hall meetings and/or post information on our website.
Last year, we worked with homeowners, municipal officials and contractors to help complete sodding, grading and driveways for an entire subdivision after being abandoned by their builder.  In another instance, we held town hall meetings for homeowners impacted by a builder’s insolvency and delivered valuable information on how they could protect their warranty rights. We also reassured homeowners that we would take over all of the insolvent builder’s warranty obligations, and work to resolve any warranted defects in their homes.

For the past 40 years, Tarion has been here to help new home buyers all across the province when their builders cannot or will not. All new home buyers in Ontario are protected as soon as they sign an Agreement of Purchase and Sale. The warranty begins with deposit protection and delay compensation and lasts up to seven years for construction deficiencies. So if your builder isn’t there for you, we are. If you purchase a new home and your builder becomes insolvent, contact Tarion if you have any questions. We can provide you with next steps to receive the full new home warranty protection you are entitled to.

Lessons Learned

  1. You are protected when a builder goes insolvent. Contact Tarion for more information on how the warranty, and Tarion, is here for you.
  2. Get to know Ontario’s New Home Warranty Plan to make sure you are informed about the coverage you are entitled to when purchasing a home.

The goal of this blog is to provide you with general information about the warranty process by sharing real experiences from new homeowners. The blog should not be relied upon as legal advice. For privacy reasons, we will not address or resolve current cases in a public forum, so any comments or questions that are posted on this site that describe individual cases cannot be discussed. If you have a question about your warranty or Tarion generally, we would be pleased to discuss your issue, in the context of your particular circumstances and in confidence. We exercise reasonable care to avoid offensive, illegal or defamatory content from being posted, as well as comments that are intended solely for self-promotion or considered to be spam.