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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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Deposit protection takes stress out of buying new homes 
August 25, 2022
Piggy bank next to a wooden toy house


Buying a new-build home or condominium is a big decision and your investment is quickly made very real when you plop down a hefty deposit to secure your purchase. And just like homes, deposits have risen significantly in price.

Fortunately, under Ontario’s new home warranty and protection plan that is administered by Tarion, your deposit is protected. Even better, this coverage has recently been increased and expanded, offering you more protections and greater peace of mind as you shop for your new dream home.

Here’s what you need to know about deposit coverage in Ontario:      

What is deposit protection?  

Deposit protection covers you if you’ve paid a deposit toward the purchase price of a new home but your purchase isn’t completed because your builder goes bankrupt or fundamentally breaches your purchase agreement. While these cases are rare, it’s good to know you have some protection if it happens. 

You can also claim deposit protection if you exercise a statutory right to terminate the purchase agreement. If for some reason your builder cannot or will not return your deposit, you can submit a claim to Tarion 

Deposits on freehold homes 

If you signed your purchase agreement for your freehold home before January 1, 2018, your deposit is protected by Tarion up to a maximum of $40,000.

If you signed your purchase agreement on or after January 1, 2018, your deposit coverage depends on the purchase price of your new home. For example, if the price of your new freehold home is $600,000 or less, your deposit is covered up to $60,000. If the purchase price is more than $600,000, you’re protected for 10 per cent of the purchase price, up to a maximum of $100,000.  

Deposits on condominiums 

There are two levels of deposit protection for purchasing a condominium unit. First, builders of condominiums are required by law (the Condominium Act) to place all deposits in trust – which means your deposit is fully protected. If your purchase agreement is terminated by the builder, your deposit must be returned to you in full within 10 days. 

Second, if for some reason your deposit was not placed in trust, or it is not returned by your builder, Tarion provides deposit protection of up to $20,000.     
     
Upgrades and extras  
Purchasing upgrades and extras for your new home can add to its value. Common examples of upgrades include hardwood floors, quartz or granite countertops, bathroom tiling or higher-quality cabinets. Extras could include central air-conditioning or a fireplace.

If you’ve spent money on upgrades or extras, you can rest easy knowing that deposit protection has now been expanded to cover any payments made to your builder for these enhancements to your home.

What deposits are not covered?

If you pay to reserve or hold a new-build home or a condominium unit before you sign a purchase agreement, this payment is not protected by Tarion. If you do make such a payment, you should ask the builder to hold the money in trust and ensure you get a receipt.

Buying a new-build home or condominium is a huge investment – likely the largest you will make in your lifetime. It’s good to know that there is protection for the deposit you make on that investment and it’s one less thing to worry about as you search for the home of your dreams. 


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.

 

  

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