Regulator of Ontario’s new home building industry, Tarion Warranty Corporation has introduced a number of program changes which will benefit consumers, including lower enrolment fees and better disclosure of extra charges in builder sales agreements.
By law, every agreement of purchase and sale for a new home or condominium must contain a lengthy disclosure statement called an addendum. Tarion has now introduced a new schedule to be added to every addendum, called Schedule B.
Schedule B became optional for builders on July 1st, and on October 1st it will become mandatory for all homes and condominium projects where the first purchase agreement is signed on or after that date.
There will be two parts to the schedule. Part I will contain an itemized list of all charges, fees or other adjustments to the final purchase price or balance payable on closing, where the dollar value is set out in the builder’s agreement of purchase and sale.
Charges listed in this section may be items such as the Tarion enrolment fee (which has now been reduced by $150), a charge for holding the purchaser’s deposits in trust, a fee to discharge the builder’s construction financing and a fixed charge to subsidize the builder’s legal fees.
Part II of the new schedule will set out all additional charges, fees or other anticipated adjustments to the final purchase price, which are to be calculated after the purchase agreement is signed, according to the written terms of the agreement.
For condominium purchases, charges in this section may include items such as:
- The unit’s proportionate share of the cost of installation of gas, hydro, sewers and water service and meters in the project,
- Any new / increase in taxes, levies or development charges imposed on the unit by any level of government after the agreement was signed (such as parks and other municipal charges, education or transit development charges)
- A portion of the costs associated with a development agreement entered into with the city,
- HST on the value of the appliances included with the unit,
- Interest on the balance of the purchase price until final closing,
- A portion of the building’s first common elements study.
Each charge will be referenced to the relevant text in the purchase agreement so buyers can determine whether it is unlimited or capped at a particular amount.
Your real estate agent should be limiting the charges on your behalf, however, assembling all the open-ended charges in one place will also alert purchasers to the additional financial risks involved in signing the pre-construction agreement.
Another significant change to the Tarion warranty came into effect on July 1st. It affects all new houses sold after that date and all condominium units where the first purchase agreement in the project was signed after that date.
A new definition of “major structural defect” has been implemented by regulation. The warranty program now protects purchasers against a defect in work or materials if it results in a failure of a structural load-bearing element, or adversely affects the use of the building for the usual and ordinary purposes of a residential dwelling.
Breakdown of mechanical equipment like a furnace, where the builder has no control over its manufacture or ongoing functionality, will now rest solely with the manufacturer, either through the original warranty or ongoing service contracts.
More information can be obtained here: http://www.tarion.com/Pages/New-Policies-in-Effect-July-1st-2012.aspx
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Ashley Lo | Real Estate Advice, Real Estate Solutions