What is a Contract Home?
In general terms, a “contract home” is a home that is built on land (a vacant lot, for example) that is already owned by the prospective homeowner.
The home is constructed in accordance with a construction contract between the homeowner and a builder, and the builder (contractor) undertakes the performance of all of the work and the supply of all materials necessary to construct the completed home.
If a homeowner, rather than a builder (contractor), exercises significant control over the construction of a new home, or is responsible for contributing one or more essential element(s) to it, the home may no longer be characterized as a contract home, but rather it becomes an “owner-built home”. This is important because a contract home is entitled to statutory warranty coverage (except for Delayed Closing Coverage) but an owner-built home is not.
As an owner, the important thing to remember is that the statutory warranty is intended for homes where a builder does the work. It is not meant to protect a landowner who is building a home, or for situations where separate contractors are building different stages of a home.
If you are building a contract home, it is recommended that you consult a lawyer to assist you with the construction contract and explain your rights and obligations.
Warranty Coverage for Contract Homes
If you enter into a contract with a builder for the construction of a new home on property that you own, some or all of the money you give your builder under that contract may be protected.
If your builder fails to substantially perform the contract, you may be entitled to compensation from Tarion for the difference between the amount you paid the builder and the value of the work and materials that were supplied, up to a maximum of $40,000.
Making a Claim
Please note that all documents you submit to Tarion may be provided to your builder and your builder will be given an opportunity to respond.
Depending on the information, documents, and responses provided by you and your builder, it may take up to six months for Tarion to assess and resolve your claim. If your claim is disputed or complex, it may take longer to assess.