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Delayed Closing Coverage for Freehold Homes

As a licensed new home builder, you are required under the Ontario New Home Warranties Plan Act to provide a delayed closing warranty to purchasers. The delayed closing warranty is intended to provide purchasers with some protection against the financial impact of closing delays.

Below is a general overview of the delayed closing warranty, which is outlined in full detail in Registrar Bulletin 6F.

Closing Date Options

You have the option to set a firm or a tentative closing date in the purchase agreement.

If you set a firm closing date, you cannot extend the Firm Closing Date without paying compensation to the purchaser, except in cases of unavoidable delay or where you and the purchaser mutually agree to amend the purchase agreement.

If you set a tentative closing date, you may extend the closing date twice by up to 120 days each time without having to pay compensation to the purchaser, provided you give sufficient advance written notice for each extension. 

The Addendum

The Addendum sets out standard contract provisions related to closing dates and delays. You must include an Addendum with every purchase agreement. 

There are two Addendum forms that can be used for freehold homes depending on the type of closing date you set:

The first page in the Addendum is the Statement of Critical Dates, which sets out important dates related to the home’s closing date. You must complete the Statement of Critical Dates in full, or else your purchase agreement cannot be enforceable. Tarion’s online Critical Dates Calculator is a fast and easy way to complete the Statement of Critical Dates.

The Addendum also includes parts that set out disclosure obligations, conditions of sale, and termination conditions. 

Compensation for Delays

If you delay closing beyond the firm closing date and no exceptions apply – such as a mutual agreement to extend the closing date or an unavoidable delay – you must provide compensation to the purchaser. 

The maximum amount of compensation under the warranty is $7,500. This includes:

  • $150 per day for direct living expenses (such as accommodation and meals) for each day of delay until the date of occupancy or termination of the purchase agreement (if applicable); and,
  • Any other expenses incurred by the purchaser as a result of the delay, such as moving or storage costs.

The purchaser is not required to provide receipts for direct living expenses but must provide receipts if they are seeking compensation for other costs such as moving and storage.

Unavoidable Delays

An unavoidable delay is an extraordinary circumstance where a closing date may need to be delayed through no fault of the builder or purchaser. This may be a strike, fire, explosion, ‘act of God’, civil insurrection, act of war or terrorism, or a pandemic. 

If such a delay occurs, you are permitted to extend all deadlines by up to the length of the unavoidable delay period without paying delayed closing compensation. You must inform the purchaser at the outset of the delay, provide an estimate of how long it will last and give written notice as soon as the delay has ended.

  

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