Ontario making strides to fix Tarion’s ‘broken system’

The Ontario government recently announced that they are in the process of fixing Tarion Warranty Corporation’s “broken system” in an effort to better protect new home buyers. 

"There are many families across the province who have faced difficulties over the years when seeking a solution from Tarion," says Bill Walker, Minister of Government and Consumer Services. "For our government one thing is clear, Tarion is broken. That is why I am pleased to announce that we are taking decisive action to put the people of Ontario first by transforming Tarion and strengthening consumer protection."

In 2017, there were 68,945 new homes enrolled in the Tarion warranty program, and 46% were new condos. In the same year, there were 5,549 builders and vendors registered with Tarion. Clearly, the Corporation has a significant role in the new home building industry.  

There have been a few major condo project cancellations recently that left buyers with nothing but their returned deposits with a tiny bit of interest on top. When a family buys into a new preconstruction condo project, they fully expect the development to move forward, but that’s not always the case. If the project is cancelled three years later, buyers get their deposits back and are left to fend for themselves in a completely different housing market. As is the trend in many Ontario markets, prices go up, which means disappointed buyers can’t afford as much home as they could a few years ago. 

The province says they are planning to introduce new initiatives that will “better inform and protect purchasers of cancelled condominium projects.” The release doesn’t go into details, so we’ll have to wait and see to understand how Tarion can work better for new condo buyers. 

One thing that immediately jumps out to us is that the maximum deposit coverage for condo units is just $20,000. So if the developer goes bankrupt, there’s a breach in the purchase agreement, or the purchase agreement is terminated, Tarion only covers you for $20,000. In recent cancellations, it’s our understanding that many developers returned full deposits, but we have heard of times when the developer folds up and declares bankruptcy, then everyone loses their deposits. Imagine putting $100,000 down on a new condo unit and then only qualifying to get back $20,000 three or four years later after you find out the developer went bankrupt. Sadly, some people don’t have to imagine it.

Ontario is also considering creating a separate regulator for builders and vendors in an effort to eliminate any conflicts of interest. Currently, Tarion represents builders and vendors, as well as new home owners. When it comes to making warranty claims, that’s like having a lawyer represent the plaintiff and defendant. 

The province is also looking into establishing policy to make it mandatory for Tarion executives’ and board members’ compensation to be made publicly available. There was a story in the Toronto Star in 2016 that found that in 2013, the CEO of Tarion was making hundreds of thousands of dollars a year, plus another 60% of his salary in bonuses. This didn’t sit well with people who felt the regulator wasn’t working in their best interest regarding warranty claims.

In the meantime, Tarion will continue to service new home owners, builders and vendors, but with more government oversight. 

Feature image: Bill Walker, Minister of Government and Consumer Services, provided by Province of Ontario