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, such payments if paid to the vendor on account of the purchase price for the home may well be covered by the deposit protection.
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.