New home buyers in Ontario will soon have greater deposit protection once a proposed policy and draft regulation from Tarion comes into effect.
Currently, deposits for new non-condominium freehold homes are protected under the Ontario New Home Warranties Plan Act (ONHWPA) up to a maximum of $40,000. Following extensive public feedback last spring, Tarion is proposing to increase deposit protection for non-condominium freehold homes to 10 per cent of the purchase price with a maximum coverage of $100,000 and a minimum coverage of $60,000.
This minimum threshold of $60,000 ensures that all non-condominium freehold homes will have increased coverage under this proposal; meaning that non-condominium freehold homes with a purchase price of under $600,000 will have coverage up to $60,000.
The proposed policy and draft regulation were posted on October 24 on Tarion’s website and on Ontario’s Regulatory Registry for public comment, where it will remain available for 45 days. The new deposit protection coverage is expected to be in place in January 2018.
In addition, if Bill 166, the Strengthening Protection for Ontario Consumers Act, 2017 is passed, then upon Royal Assent the current deposit protection under ONHWPA would be extended to include other payments including those made for upgrades and extras.
Deposits on condominium apartment units are not part of the proposed changes because these units already enjoy significant protection: any deposit amounts are protected by the trust provisions of the Condominium Act, 1998 as well as by coverage under ONHWPA for up to $20,000.
Under ONHWPA, deposit protection levels for non-condominium freehold homes and condominium units were last changed in 2003. However, the Ontario housing market has changed drastically since then due to the increasing price of new homes across the province.
In 2016, Tarion publicly committed to a review of deposit protection for Ontario’s new home buyers. The Ministry of Government and Consumer Services also publicly noted it wished for Tarion to move forward with a review in this current marketplace.