Once you have determined what you are looking for in a new home, it is important to understand the types of homes that are available to you. Statutory warranty coverage may vary depending on the type of home you buy.
The most common forms of housing can be grouped into three types, and each are discussed below:
■ Custom/Contract Homes
However, certain dwellings may not be covered under the statutory warranty for a variety of reasons. To learn more, please see Other Dwellings: Not Covered or Special Considerations. Note: If you buy a resale home that is less than seven years old, and was originally covered under the statuory warranty, you are entitled to the remaining statutory warranty coverage.
The statutory warranty applies to new homes built by a builder. If you as a homeowner exercise significant control over construction (e.g., entering into contracts directly with subtrades) or contribute one or more essential elements (e.g., footing/foundation, framing, exterior cladding, building envelope, or an electrical, plumbing or heating system), then the home may not qualify for the statutory warranty.
A freehold home is a fully detached, semi-detached or townhouse dwelling that is entirely owned by the purchaser. All maintenance (indoors and out) is the sole responsibility of the owner and no monthly maintenance fees are required.
If a home is a condominium unit, the owner is required to pay a monthly fee for the upkeep of the common elements. Common elements are the areas shared by residents, such as lobbies, parking garages, and recreational facilities such as pools and gyms. These spaces are looked after by the condominium corporation. Condominium projects can include high-rise buildings, low-rise buildings, townhouses, semi-detached homes and detached homes.
Generally, when you buy a new condominium, your statutory warranty covers both your unit (the home you purchase) and the common elements. Statutory warranty coverage for a unit will begin on the date you take possession of your home. Statutory warranty coverage for common elements takes effect when the condominium is registered as a corporation. The condominium corporation addresses any statutory warranty matters for the common elements.
There are, however, new types of condominiums available, and statutory warranty coverage is not the same for all types. For example, for “common elements condominiums” and “vacant land condominiums”, there is no coverage for the common elements. See Other Dwellings: Not Covered or Special Considerations. You should check with your condominium lawyer if you are not sure about what the statutory warranty will cover.
If your condominium is not brand new, the statutory warranty coverage you receive may be limited. For example, if you purchase a unit in a building that has been registered for more than one year, parts of the common elements coverage may have expired. There are other reasons why your condominium may have limited warranty coverage or no coverage – please see Other Dwellings: Not Covered or Special Considerations.
However, if you purchase a unit from a previous owner, and the unit was originally covered under warranty, you are entitled to the remaining warranty coverage on that unit and on the common elements.
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 a contractor undertakes the performance of all of the work and the supply of all materials necessary to construct the completed home.
A custom or contract home is not always covered under the statutory warranty. If a homeowner, rather than a contractor, exercises significant control over the construction of a new home, or is responsible for contributing essential elements to it, the home may no longer be characterized as a contract home. Rather, it becomes an “owner-built” home. This is an important distinction because contract homes are entitled to statutory warranty coverage (except for Delayed Closing Coverage), but owner-built homes are not.
As an owner, the important thing to remember is that the warranty is meant for homes where a builder does the work, not to protect a landowner who is building a home or for situations where separate contractors are building different stages of a home. If the home is built from the foundation to the finished stage by a builder, the home is likely eligible for statutory warranty coverage. However, there are a variety of reasons why a custom or contract home may not be covered under the statutory warranty – please see Other Dwellings: Not Covered or Special Considerations.
As with any new home transaction, you should consult a lawyer to assist you with the construction contract – and be sure you understand your rights and obligations under that contract.
Other Dwellings: Not Covered or Special Considerations
When shopping for a condominium, you may find projects referred to as “condo conversions”. A conversion is an existing building, usually a commercial office building, which has been transformed into condominium units. Because conversion projects are not completely “new” dwellings, they are not covered by the statutory warranty.
Common Element Condominium
Typically, this is a set of common elements (organized as a condominium) that benefits surrounding freehold homes (sometimes called “parcels of tied land” or “POTLs”). The adjacent or benefitted home will typically have statutory warranty coverage but the common elements do not.
Vacant Land Condominium
This is a condominium ownership structure of vacant land. As such, statutory warranties intended for a home would generally not apply. However, it is possible that the statutory warranty will apply if the vendor/builder sells to the purchaser not only the unit of vacant land, but also a finished home to be built on the land.
Previously Occupied Homes
The statutory warranties apply to new homes and accordingly, do not apply to dwellings that have been occupied by the vendor/builder or rented out by the vendor/builder and occupied by other persons before being sold to a purchaser.
Owner Built Homes
An owner built home is a home where the landowner owns the lot, and the landowner rather than a contractor: (1) exercises significant control over the construction of a new dwelling, and/or (2) is responsible for contributing one or more essential elements to it. Exercising control over the construction includes entering into contracts directly with subcontractors. Essential elements include footings/foundation, framing, exterior cladding, building envelope, heating, electrical and plumbing distribution systems. Owner built homes are not covered under the statutory warranty.
Homes Built on Existing Foundations
A foundation is defined as an arrangement of various “foundation units” through which the loads from a building are transferred to supporting soil or rock. A “foundation unit” refers to any one of the structural parts of a permanent foundation, such as footings, foundation walls, block, piers and pier type foundations constructed of cement products such as concrete, concrete block, wood or any other approved material.
A foundation does not include non-load bearing partition walls, weeping tiles, damp proofing, waterproofing, and parging or encompass load bearing structures that form part of the above ground construction such as columns, beams, posts and above ground load bearing walls.
If part of the foundation of a home is pre-existing and that foundation does not exceed 40% of the footings as determined by linear measurement (footprint), the home will have statutory warranty coverage; otherwise, it will not.
Homes Sold by Resellers
A homeowner who does not occupy a new home and sells it to another homeowner is deemed to be a vendor under the Ontario New Home Warranties Plan Act and must register with Tarion as a Vendor. Further information on warranty coverage when purchasing a resold home can be found in Reselling New Homes.
An as-built home is a home constructed by a builder and sold to a purchaser in an “as-is” condition. A builder cannot sell the entire home “as is” to avoid statutory warranty coverage. However, purchasers can accept existing surface defects in an as is condition and there will be no statutory warranty coverage for those items. The agreement must list the specific items to clearly demonstrate that the purchaser is aware of them and accepts them as is.
A modular home is a complete home composed of finished sections built off-site. Statutory warranty coverage applies to the home if the assembled sections are placed on a permanent foundation that meets Part 9 of the Ontario Building Code and was installed by the same builder that sold the home to the purchaser.
A model home is a home constructed by a builder either for showcasing the details of homes available for purchase by a builder or for business purposes (i.e. used as a sales office). Statutory warranty coverage applies to model homes except for existing surface defects which have been accepted by the purchaser in the purchase agreement. However, purchasers can accept existing surface defects in an as is condition and there will be no statutory warranty coverage for those items. The agreement must list the specific items to clearly demonstrate that the purchaser is aware of them and accepts them as is.
A mobile home is a transportable, single or multi-section self-contained home built off-site. Statutory warranty coverage applies if the mobile home is placed on a permanent foundation that meets Part 9 of the Ontario Building Code and was installed by the same builder that sold the home to the purchaser.
A seasonal home is a home that does not meet the requirements of Part 9 of the Ontario Building Code and is therefore not built for year-round occupancy. Other considerations, such as seasonal use of the home or lack of year-round access, do not determine whether a home is seasonal for the purposes of the Ontario New Home Warranties Plan Act. Seasonal homes are excluded from statutory warranty coverage.
Log homes are built with logs, which form an integral part of the structure and the building envelope. A log home is covered under the statutory warranty as long as it has been constructed in accordance with Part 9 of the Ontario Building Code.
Panelized (Kit) Homes
A panel or “kit” home is a self contained home assembled on-site using factory built finished components. Statutory warranty coverage applies if the panel home is placed on a permanent foundation that meets Part 9 of the Ontario Building Code and was installed by the same builder that sold the home to the purchaser.
A shell home is a home in which the builder completes the “shell” but does not finish the interior elements. For freehold and low-rise condominiums, the “shell” includes the essential elements (footings/foundation, framing, exterior cladding, building envelope, heating, electrical and plumbing distribution systems) and installation of the drywall. For high-rise condominiums, the “shell” includes the essential elements and installation of the drywall on the exterior walls only; the builder is not required to install drywall on the interior walls. Statutory warranty coverage applies to the work completed by the builder.