Tarion Warranty and Deposit Protection Explained (Ontario New Homes, 2026)
Every Ontario new home carries Tarion’s 1-2-7 warranty, and deposits are protected up to $100,000 for freehold homes. Coverage, deposit caps, and how to claim.
Every new home sold by a licensed builder in Ontario comes with a statutory warranty administered by Tarion: one year on workmanship and materials, two years on water penetration, electrical, plumbing, heating and exterior cladding, seven years on major structural defects. Deposit protection is separate and capped: up to $100,000 on a freehold home (10% of the price up to $60,000 for some older agreements), and $20,000 on a condo. Condo deposits sit in the builder's lawyer's trust account, though, and are typically covered above $20,000 by excess-deposit insurance, so in practice condo deposits are protected in full. Other provinces have their own programs; this guide is Ontario.
The CostToClose guided buying flow includes the Tarion enrolment fee in new-build closing costs.
Deposit protection
| Home type | Tarion deposit coverage | What covers the rest |
|---|---|---|
| Freehold (house, townhouse) | Up to $100,000 (agreements from 2018) | Nothing — do not pay more than the cap in deposits without trust protection |
| Condominium | Up to $20,000 | Deposits held in trust by the builder's lawyer under the Condominium Act; excess-deposit insurance for amounts released to the builder |
Source: Tarion; Ontario New Home Warranties Plan Act; Condominium Act s. 81. Checked 14 September 2026.
Deposit protection pays out if the builder goes bankrupt, fundamentally breaches the agreement, or the buyer has a legal right to treat the agreement as terminated. It does not cover a buyer who simply changes their mind.
The three warranty periods
| Period | Covers |
|---|---|
| Year 1 | Defects in work and materials; the home is fit for habitation; Ontario Building Code violations |
| Years 1–2 | Water penetration through the basement or foundation; defects in electrical, plumbing and heating delivery systems; exterior cladding; Building Code health and safety violations |
| Years 1–7 | Major structural defects: load-bearing failures, defects that materially compromise the home's use |
Coverage limits: $300,000 per freehold home (agreements from 2018), $150,000 per condo unit, plus common-element coverage for the condo corporation. The warranty attaches to the home and transfers to subsequent owners within the periods.
What the buyer must do
- Pre-delivery inspection (PDI). Before closing, walk through with the builder and list every defect and incomplete item on the PDI form. Anything not listed that was visible can be argued as pre-existing damage later.
- File warranty forms on time. The 30-day form (within the first 30 days after possession) and the year-end form (last 30 days of year one) are the windows for most claims; missing them can forfeit coverage for those items.
- Enrolment fee. The builder pays Tarion's enrolment fee, scaled to price (roughly $1,000 to $2,000), and nearly always passes it through in the purchase agreement's adjustments.
Worked example from the calculator
$720,000 new freehold townhouse, Ontario, deposits of $72,000 paid over 18 months:
| Item | Amount |
|---|---|
| Deposit protected by Tarion | $72,000 (under the $100,000 cap) |
| Tarion enrolment fee, passed through at closing (estimate) | $1,500 |
| HST built into price, rebates assigned to builder | Included |
| Warranty coverage limit | $300,000 |
Had the deposits been $120,000, $20,000 would have been unprotected unless held in trust, a point to negotiate in the agreement. Reproduce this.
Other provinces
BC: mandatory 2-5-10 warranty through licensed providers; deposits held in trust. Alberta: mandatory 1-2-5-10 warranty since 2014. Quebec: GCR plan for new homes, with deposit protection. Atlantic Canada: voluntary programs (Atlantic Home Warranty). Manitoba: mandatory since 2017 under the New Home Warranty Act. Coverage terms and deposit rules differ; confirm before signing.
Frequently asked questions
Is my deposit on a new home protected in Ontario?
Up to $100,000 on a freehold home and $20,000 on a condo through Tarion. Condo deposits are additionally held in trust or insured, so they are generally protected in full.
How long is the Tarion warranty?
One year on workmanship, two years on water penetration and major systems, seven years on major structural defects, from the date of possession.
Does the Tarion warranty transfer if I sell?
Yes. It stays with the home for the remaining periods.
Who pays the Tarion enrolment fee?
The builder pays it to Tarion and almost always recovers it from the buyer as an adjustment at closing.
What happens if I miss the 30-day form?
Items that should have been reported in that window may lose coverage. Year-two and seven-year items can still be claimed in their own windows.
Sources
- Tarion Warranty Corporation, deposit protection and warranty coverage — checked 14 Sept 2026
- Ontario New Home Warranties Plan Act and regulations — checked 14 Sept 2026
- Condominium Act, 1998 (Ontario), s. 81 — deposits held in trust — checked 14 Sept 2026
- Home Construction Regulatory Authority, builder licensing — checked 14 Sept 2026
This is general information for Canadian home buyers and sellers, checked against the sources listed above on the date shown, and it is not legal, tax, or mortgage advice. Rules and rates change, so confirm current figures with your lawyer or notary, your lender, or the government office that administers the tax before relying on them.