When you buy something, be it a household appliance, electronic equipment or a car, you know that you’re protected against manufacturing defects by the manufacturer warranty. But what about when you buy a newly constructed home?
There are new home warranties, covering various types of new residences, to protect your purchase against possible construction defects. Is it mandatory or optional? Who is responsible for it, and who sets its terms? Who administers and manages it? What kind of coverage does a new home warranty provide? The following is an overview of the new home warranties presently in effect in Canada.
Let’s start with Quebec
In Quebec, the official name of the guarantee on new homes is the Guarantee Plan for New Residential Buildings. It falls under the Régie du bâtiment du Québec, which sets its terms. The guarantee is mandatory, which means that all the contractors that have a permit from the Régie du bâtiment du Québec to build and sell new homes must adhere to it.
The Régie du bâtiment du Québec has recently reworked this guarantee, and the new provisions came into effect on January 1, 2015. Before this date, the administration of the guarantee on new homes was entrusted to three independent organizations: Garantie habitation du Québec, Inc. provided the Qualité Habitation guarantee; the Association des professionnels de la construction et de l’habitation du Québec (APCHQ) provided the Garantie Maison Neuve [New House Guarantee]; and Garantie Abritat, Inc. offered the Abritat guarantee.
Since January 1, 2015, these three organizations have lost this authorization, and the administration of the Guarantee Plan for New Residential buildings is now entrusted to a new non-profit organization, the Garantie de Construction Résidentielle (GCR). However, if you own a new home guaranteed under the former plan, you have nothing to fear, as the guarantee remains valid.
The Coverage Offered
The new residential buildings covered by the guarantee are single-family detached, semi-detached or row-type houses, as well as prefabricated houses. Duplexes, triplexes, four-plexes and five-plexes are also covered, as well as co-owned properties with no more than four private portions (condos) stacked one above the other.
Before receipt of the home, the down payment made is protected up to a limit of $39,000, as long as the sale is not yet notarized. At the time of receipt of the home, completion and correction of the work are covered provided they are reported in writing upon receipt, or three days following such receipt if the purchaser has not moved in. After receipt of the home, faulty work and defects are protected as follows: faulty work and defects that are not visible upon receipt are covered for one year; hidden defects are covered for three years after receipt; and defects in the design, construction, and workmanship, as well as soil defects, are protected for a period of five years after the end of the work.
The Amounts Provided For
Maximum coverage for all faulty work and defects for a single-family home, regardless of its type, is $290,000. For multiple-family buildings (“plexes”), the amount is $130,000 per unit, or $1,900,000 for the building as a whole. For a condo, provision is made for $130,000 per unit. However, the amount for the building as a whole totals $2,600,000, as it includes the common portions. In the event of late delivery, compensation not exceeding $5,500 serves to pay for furniture storage as well as for the cost of accommodation and meals.
For Ontario Buyers
In Ontario, the new home warranty is mandatory. It is administered by Tarion Warranty Corporation, a private corporation financed entirely through the fees paid by its members (residential building contractors). In 2013, it had $449 million in funds to cover liabilities. Tarion has also been mandated by the Ontario government to enforce the Ontario New Home Warranties Plan Act, the law that defines the terms of the guarantee.
Down payments are covered up to $20,000 for a condo and $40,000 for a single-family house. Visible construction defects as well as unapproved substitutions are covered for a period of one year. Water infiltration and defects in the electrical, plumbing and heating systems, as well as in the roof and siding, are covered for two years. Major defects in the structure, including the load-bearing elements, are covered for seven years. The maximum coverage for a single-family house or a condo is $300,000. In the case of condominium buildings, the common portions are covered for $50,000 multiplied by the number of dwelling units, for a total amount of $2.5 million.
In British Columbia
The Homeowner Protection Office, a branch of the Crown agency BC Housing, is the organization responsible for new home guarantee in British Columbia. This guarantee is mandatory. The terms of the guarantee are determined by a law called the Homeowner Protection Act. However, the management and enforcement of the guarantee are entrusted under license to private insurance companies.
The coverage offered is broken down into three parts:
- First, construction defects related to general work, electricity, plumbing, heating and ventilation are covered for two years.
- The building envelope, foundation, roof, windows, and doors are covered for five years.
- Defects in the structure and in the load-bearing elements are covered for ten years. The amount of the coverage for a single-family house is $200,000, or the purchase price if the latter is lower. For a condo, coverage is $100,000, or the purchase price if it is lower. The common portions of condominium buildings are covered for $100,000 per unit, for an eligible total of $2.5 million.
Atlantic Canada and the Maritimes
In Newfoundland, Labrador, Nova Scotia, New Brunswick and Prince Edward Island, the new home warranty is offered by Atlantic Home Warranty, a not-for-profit organization established by a group of building contractors. However, in these regions, new home warranties are optional. Only the builders who are members of Atlantic Home Warranty have the right to offer the Atlantic Home Warranty Program.
This warranty is administered and managed by Lux Residential Warranty, an insurance company that specializes or specializing in protecting new homes. The seven-year coverage is limited and mainly covers major structural defects. Certain options are available, including coverage of the down payment made. The maximum amount covered is $50,000 for a single-family house or condo.
The Prairie Provinces
Since February 1, 2014, the new home warranty is mandatory in Alberta, thanks to the New Home Buyer Protection Act. The management and administration of this warranty have been entrusted to a not-for-profit organization called the Alberta New Home Warranty Program, made up of residential building contractors.
The coverage offered is the following:
- Defects in materials and construction are insured for one year;
- Electricity, plumbing, heating and ventilation for two years;
- The envelope for five years, with an option to extend it by two years, and;
- The structure is insured for 10 years.
If the residence is not delivered on time or if it is uninhabitable due to repairs, compensation of $150 per day (maximum $15,000) is provided for. Protection of the down payment made, that is, 20% of the purchase price up to a total of $100,000, is optional. The maximum protection for a single-family house is the lower of the purchase price of the home or $265,000. In the case of a condo, it is the lower of the purchase price or $130,000. The common spaces in condominium buildings are insured for $130,000 per condo unit, to a maximum of $3,300,000.
In Saskatchewan, new home warranties are optional. However, the Saskatchewan New Home Warranty Program, a not-for-profit association of residential building contractors, offers a warranty on new homes. Only its members can offer this warranty to homebuyers. Private insurers take care of its management and administration.
The warranty offered by the New Home Warranty Program includes coverage of $25,000 for down payments made.
- Defects in materials and construction are covered for one year;
- Water infiltration is covered for two years;
- Major structural defects are covered for a period of five years, and;
- An option to extend protection of the structure to 10 years is available. The maximum amount of the coverage is $100,000 for a single-family house or a condo. The protection of the common portions of a condominium building is $100,000 per unit up to a total of $1 million.
In Manitoba, new home warranties are optional. The New Home Warranty Program of Manitoba, a not-for-profit association of building contractors, offers a guarantee on new homes. Only its members can offer the warranty to homebuyers. The management and administration of the warranty are entrusted to private insurers.
The coverage offered by the New Home Warranty Program of Manitoba includes coverage of $25,000 for the down payment made.
- Defects in materials and construction are covered for one year, and;
- Major structural defects are covered for five years.
- Compensation of $3,000 is provided for relocation during the repair of the structure. The maximum coverage is $50,000 for a single-family house or a condo. Note that only condos in buildings of three stories or less are eligible.
As you can see, in terms of both coverage and application, new home warranties vary from one province to the next. If you are a homebuyer living in a province where the guarantee is not mandatory, you should check if your contractor is a member of an organization that offers a warranty. If such is the case, you are protected, and the terms of the protection are the same for everyone. However, building contractors that are not members of such an organization may, if they wish, offer a guarantee on new homes, according to the terms that they have negotiated with their own insurer. It is then in your interest to check the terms and, most importantly, to check the soundness of the insurer. If you live in a province where a new home warranty is mandatory, the rules of the game are set, and you can rest easy.