Ask Realtor® Steven Silva
Part of Your Team of Advisors
Do I need a Tarion Warranty If I Build a New House?
Posted by on September 8, 2011
The Ontario New Home Warranty (Tarion Warranty) Program is run by the Tarion Corporation and is mandatory for all new homes built for sale here in Ontario. If you are building a new home for yourself you do not need a Tarion Warranty. As a matter of fact, if you built a new home for sale and had enrolled in the Tarion Warranty Program and then decided to live in it yourself, the warranty would not apply. Tarion protects new home buyers by ensuring that the builder meets certain performance guidelines. It would not make sense for Tarion to protect a builder from himself/herself.
When you apply for a building permit, you will be asked if the home will be for personal use (i.e. personal residence, second home or for rent) or for sale. If it is for sale, you must enroll into the Tarion Warranty Program. The municipality will not give you a permit to build unless you do so. Anyone can build a home for themselves. In fact, it is a great way to create wealth and save money (IF you have the time, access to the right people and financial means). I’ve purchased a home from a builder and built myself. Builders have access to economies of scale so they can usually build less expensively and the emotional detachment allows them to move faster. Building for yourself usually takes longer but the final product is customized to you and you can decide on being the project manager yourself or contracting that out.
If you are building for yourself and intend to sell you should work with a Realtor who is experienced in Tarion, new homes and the special issues around selling new. You may be surprised as to the extent of the warranty you must provide.
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Another Related topic you can read: Do I Need a Realtor When Buying a New Home
Just for clarification when you advised “If you are building a new home for yourself you do not need a Tarion Warranty. As a matter of fact, if you built a new home for sale and had enrolled in the Tarion Warranty Program and then decided to live in it yourself, the warranty would not apply.”
First of all if you are building a new home with the intention of ocupying the home yourself you do not need to register as a builder nor enrol the home. However if you are building the home to sell you are required to register as a Vendor Builder and you must enrol the home upon receipt of the building permit. If you decide to occupy the home prior to selling it, it must be a bonifide occupancy. Just moving in is not sufficient There are many court decisions regarding occupancy so make sure you know what you are getting into. I always suggest you inquire at Tarion in writing with all the details of your inquiry and ask for a written response. It is not as cut and dry as you think.
Ken
I agree with what you have written, I really appreciate your adding to the discussion. I was just talking about the third case. Nothing is ever cut and dry, but please correct me if I am wrong. If your intentions before you start to build is to sell, you MUST enrol in Tarion. If your intentions before you start to build is to occupy the home or rent it out, you do not enrol in Tarion. If your intentions change after you have started to build… further investigations will be needed.
Of course, if you will want to sell the home, contacting a Realtor who has some experience in the matter as well as Tarion is a good thing.