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New home considerations

Region: Ontario Answer # 401

Buying a new home or a resale home

There are a number of differences between buying a new home and buying a resale home. A new home is one that has just been built. You might buy a new home from a contractor who has already built the home, or you might hire a contractor to build it for you. A previously-owned home, often called a resale home, has already been lived in. There are advantages and disadvantages to both.

When buying a new home:

  • it may have the most current materials and features, and the purchaser may be able to choose certain features such as flooring, cabinets and electrical fixtures;
  • the purchaser may have to pay extra for certain features, such as a fireplace, or trees;
  • certain taxes may be added to the cost of the home, such as the GST, or HST in Ontario; and
  • a warranty may be provided by the builder of the home, and New Home Warranties are provided by provincial governments.

When buying a resale home:

  • purchasers can see what they are buying;
  • landscaping is usually done and other extras such as a pool or a finished basement may already exist;
  • buyers do not have to pay the GST/HST unless the house has been renovated substantially, and then the taxes are applied as if it were a new home; and
  • renovations may need to be done, as well as major repairs such as replacing the roof or windows.

New home Purchase Agreements

Another difference when purchasing a new home is that the offer to purchase is considerably longer and more complicated than a resale Agreement of Purchase and Sale. In addition, the text is often written in very small print and there is not much space to make changes. For this reason, it is important to take the offer to a lawyer before signing it. Your lawyer will explain the agreement to you to ensure that it is acceptable. With your lawyer’s advice and assistance, you may also be able to delete or change terms that are heavily weighted in favour of the builder.

If you are unable to consult a lawyer before signing the offer, you may choose to insert a written clause into the contract stating that your acceptance is conditional on your lawyer reviewing the agreement and finding it satisfactory. Some builders will not accept agreements with substantial changes to the standard clauses. In these circumstances, it is important to assess the reputation of the builder and how past purchasers have been dealt with.

Delays and extensions to the closing date

When buying a new home which is being built for you, you should be prepared for possible delays and complications. Although many new homes are completed and ready to move into by the scheduled closing date, it is not unusual for the closing date to be delayed or extended. This can happen as a result of strikes, shortages of labour or materials, or simply the builder’s inability to meet the original delivery date.

New home buyers generally have less certainty about closing dates and move in dates. To provide a set of rules for both buyers and builders, the Ontario Home Warranties Plan has established a Delayed Closing Warranty. According to the rules, a delay does not automatically void or cancel an agreement between a buyer and a builder. The rules regarding delayed closing protection depend on many factors, including on whether the home or condominium closing date is firm or tentative. There are also specific rules regarding occupancy dates.

The Warranties Plan also sets rules requiring the ‘notice of delay’ to be delivered by builders to buyers.

Vist Tarion.com for more information on the Delayed Closing Warranty.

Deposit protection and warranties

All newly constructed homes and condominiums in Ontario must be enrolled in the Ontario New Home Warranties Plan, which is administered by Tarion. Purchasers usually have to pay the enrolment fee, which ranges from about $400 to $1700, depending on the purchase price of the property. In addition to setting certain guidelines for how the builder must deal with purchasers, the most important part of the program is the insurance plan. This protects purchasers from having to live in an unfinished or defective home if the builder is unable or unwilling to complete the work that needs to be done. There is also deposit protection on new homes of up-to $60,000 for homes sold for $600,000 or less and 10% of purchase price (to a maximum of $100,000) for homes sold for over $600,000. Deposits paid for condominium units are protected by Tarion up-to a maximum of $20,000.

If a builder fails to honour its warranty for service and repair, the cost or repairs may be covered by the Warranties Plan. If there are certain problems with the home, the buyer is able to make a claim for compensation against the Plan, rather than having to sue the builder.

The warranty covers new homes for seven years. During the first year, the builder is generally responsible for repairing defects in material or quality of work. During the second year of a new home’s possession, homeowner’s may notify Tarion of any outstanding warranty items covered by the two-year warranty or the major structural defect warranty. During years three through seven, homeowners may make a claim regarding any major structural defect directly to Tarion. Claims may be made at any time during a home’s third year of possession, but no later than the end of the seventh year of possession.

If for any reason the builder is unable or unwilling to return to make the necessary repairs, the Warranties Plan will pay for someone else to handle the repairs. Buyers of new homes should be aware that the Warranties Plan does not cover every kind of defect in a new home.

Additional costs

Buyers should also be advised of a number of additional costs involved in new home purchases. In addition to the enrolment fee in the Warranties Plan, HST is payable on new homes. In many cases, this is already included in the purchase price. Since this is a very significant expense, the Agreement of Purchase and Sale should clearly state if the HST was already included in the purchase price, and how any rebates are to be handled. Other extra charges can include lot levies, sewer impost charges, hydro meter installation, curb charges, gas hook-up charges, water hook-up charges, tree charges, and super mailbox charges. If you are buying a new home, you should be sure that you know what is actually included and what additional costs you will be responsible for on closing.

For more information on buying a new home, refer to Canada Mortgage and Housing Corporation. For more information on what the New Home Warranties Plan covers, or to make a delayed closing compensation claim, visit Tarion.

If you are buying a home and want to know how much of a mortgage you qualify for, use the Scotiabank mortgage calculator .

Get help from a life insurance advisor

Understanding life insurance and what is best for you can be overwhelming. It is important to get professional advice for your unique situation, and it is more affordable than you think. Life insurance can protect your family, your home and your business.  For a free consultation and quote, contact an Empire Life Insurance advisor.


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