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Professional Standards Manual

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Trading Services

7. New Construction

(j) Homeowner Protection Act Matters View Entire Section

(iv) New Home Warranty
(1) Home Warranty Insurance Exclusions

The Homeowner Protection Act regulations specify what the home warranty insurance companies can exclude from their policies.

General exclusions can include: landscaping; non-residential detached structures (however, parking structures, recreational and amenity facilities in multi-unit buildings are covered); commercial-use areas; roads, curbs and lanes (however, driveways are covered); site grading and surface drainage; the operation of municipal services; septic tanks and fields; and water quality and quantity.

Defect related exclusions can include: normal wear and tear; normal shrinkage of materials from construction; use of new home for non-residential purposes; materials, labour and design supplied by the owner; damage caused by anyone other than the residential builder; damage caused by insects or rodents; failure of an owner to prevent or minimize damage and acts of nature.

(2) Limits on Coverage

Coverage on claims is as follows:

  • Fee simple (primarily detached dwelling units):
    • The lesser of the first owner’s purchase price or $200,000.
  • Strata homes:
    • Strata unit: lesser of the first owner’s purchase price or $100,000.
    • Common property: the lesser of $100,000 X the number of dwelling units in the building or $2.5 million per building.

The following are suggested clauses for use with respect to new-construction warranties where the seller is not an owner-builder:

Licensed Builder and Warranty Insurance Clauses

Subject to the Buyer confirming on or before (date) that the Seller is duly licensed pursuant to the Homeowner Protection Act and that the mandatory warranty insurance pursuant to that Act is in place.

This condition is for the sole benefit of the Buyer.


The Seller represents and warrants that the Seller is duly licensed pursuant to the Homeowner Protection Act and that the mandatory warranty insurance pursuant to that Act is in place.

The Seller will provide to the Buyer on or before (date) all details of the warranty insurance coverage pursuant to the Homeowner Protection Act.

(3) Home Warranty Insurance on Homes under Construction

A buyer may be purchasing a new home being built by a residential builder (not an owner-builder) that has not been completed when the Contract of Purchase and Sale is negotiated. The home warranty insurance provided by a warranty provider generally begins on the earlier of when the home is occupied or upon transfer of title to the buyer. While it does not frequently occur, it is possible that the company providing the warranty insurance could revoke their commitment to do so prior to that time.

(4) Permission To Sell New Homes under Construction

Under the Homeowner Protection Act, new homes that are under construction but not complete may not be sold (or offered for sale) unless the home is covered by home warranty insurance or exempt. This affects new homes that originally had home warranty insurance coverage but are de-enrolled for a variety of reasons, including: cancellation of a builder’s contract, owner bankruptcy or cancellation of builder’s acceptance by a warranty provider. Such homes may no longer be offered for sale or sold ‘‘as is.’’ Owners must write to the HPO for the registrar’s express permission, and may be subject to conditions, such as that the home is sold to a licensed residential builder to enrol with home warranty insurance. This ensures that a partially complete new home is not inadvertently sold without the protection of the legislation in place for a new homebuyer. The prohibition applies to new homes at all stages of construction.

The Homeowner Protection Act states that a new home built by a residential builder may not be built, offered for sale, or sold without warranty insurance. The following clause could, however, make a buyer’s position more certain should the warranty insurance commitment be revoked for any reason.

Mandatory Warranty Insurance Coverage Clause

It is a fundamental term of this contract that the mandatory warranty insurance coverage required pursuant to the Homeowner Protection Act be provided.