Tarion’s Temporary Relocation Warranty – An Overview for Developers and Builders

On July 1, 2023, Tarion’s new Temporary Relocation Warranty coverage came into effect as a result of recent amendments to Regulation 892 passed under the Ontario New Home Warranties Plan Act. The Temporary Relocation Warranty provides enhanced coverage to owners of newly constructed freehold homes and condominium units that are sold under purchase agreements, or constructed under construction contracts, which are entered into after July 1, 2023 (a “Covered Home”).  

The purpose of the Temporary Relocation Warranty is to defray some of the relocation costs that homeowners face in the event that, following initial occupation, the Covered Home (or a material portion of it) becomes “uninhabitable” (i.e., objectively unfit or unsafe for occupancy) due to a matter covered by the one-, two- or seven-year Tarion Warranty.

Under the new Temporary Relocation Warranty, vendors, including builder/vendors, are liable to pay displaced homeowners the sum of $150 per day for each day the Covered Home remains uninhabitable, up to a maximum amount of $15,000 per Covered Home. In place of compensation, vendors may instead provide displaced homeowners with reasonable alternative living arrangements for the time period during which the Covered Home remains uninhabitable, at the vendor’s sole expense.

As the Temporary Relocation Warranty could lead to significant expenses for vendors/builders of new freehold homes and condominium units, developers and builders should be aware of the following with respect to the Temporary Relocation Warranty:

• Coverage under the Temporary Relocation Warranty only applies to homes purchased (or constructed) under agreements that are dated on or after July 1, 2023, regardless of when the actual construction is completed. For projects that have already commenced and for which agreements of purchase and sale have already been signed, only the agreements of purchase and sale entered into on or after July 1, 2023, will be subject to this new warranty;
• For condominium developers, the Temporary Relocation Warranty also applies in circumstances where a Covered Home becomes uninhabitable due to the condition of the common elements that are under warranty;
• An entire home does not need to be rendered uninhabitable for the Temporary Relocation Warranty to apply. The Temporary Relocation Warranty will also apply if the usable portion of the home does not include at least one reasonable access and egress, living/sitting area, kitchen for cooking and eating, one or more bathroom(s), which collectively have at least one accessible sink, toilet and shower or bath, and a bedroom for the inhabitants;
• The Temporary Relocation Warranty only applies for claims that are submitted within one year following the date on which the Covered Home, or a material portion of it, is rendered uninhabitable;
• A homeowner may be entitled to compensation (or replacement accommodations) from the vendor on more than one occasion in connection with the same Covered Home, up to the $15,000 maximum, if there are different breaches of a Tarion Warranty that occur at different times; and
• A vendor or builder/vendor who disputes the application of the Temporary Relocation Warranty may request an arbitration according to the rules and criteria of the Builder Arbitration Forum. It should be noted, however, that Tarion maintains full discretion to determine whether such claim is suitable for the Builder Arbitration Forum and, as such, there is no guaranteed appeal process for a decision stating that the Temporary Relocation Warranty applies.

If you have any questions regarding the Temporary Relocation Warranty and/or related matters, the authors and other lawyers in our Commercial Real Estate Group would be pleased to assist.