Two major pre-construction projects entered receivership in 2025, leaving buyers scrambling. Here's exactly what Tarion covers, what it doesn't, and the steps to protect your deposit before you sign.
Understanding Tarion Deposit Protection
When buying a pre-construction home in Ontario, one of the first things you'll encounter is the requirement to make deposits. These deposits can be significant, often totaling 20% or more of the purchase price. The good news is that these deposits are protected by Tarion Warranty Corporation through its deposit protection program.
Tarion is a non-profit corporation established by the Ontario government to protect new home buyers and regulate builders. One of its key roles is to safeguard deposits made by buyers for pre-construction homes.
What Does Tarion Deposit Protection Cover?
Tarion's deposit protection program covers deposits made by buyers for pre-construction homes in Ontario. This includes:
- Deposits up to $40,000 per person
If a builder becomes insolvent or goes into receivership, Tarion will step in and protect these deposits.
What Does Tarion Deposit Protection Not Cover?
While Tarion's deposit protection program is comprehensive, it does have some limitations. It does not cover:
- Deposits made for commercial properties
- Deposits exceeding $40,000 per person
- Deposits made for homes outside of Ontario
What Happens If Your Builder Fails?
If your builder becomes insolvent or goes into receivership, Tarion will step in to protect your deposit. Here's what you can expect:
- The receiver will notify Tarion of the builder's insolvency
- Tarion will verify that the deposits are eligible for protection
- Tarion will reimburse the protected deposit amounts to buyers
- Research the builder thoroughly. Look for reviews, past projects, and any history of insolvency or receivership.
- Consider purchasing title insurance. This can provide additional protection in case of fraud or errors in the title search process.
- Ensure your deposit is held in trust by a lawyer or real estate brokerage. This provides an extra layer of security.
- The receiver will take control of the project and manage its completion.
- Tarion will step in to protect deposits, as outlined above.
- Buyers may have the option to cancel their purchase agreement without penalty.
- Tarion provides valuable deposit protection for pre-construction homes in Ontario.
- Understand what Tarion covers and what it doesn't.
- Take additional steps to protect your deposit, such as researching the builder and purchasing title insurance.
Tarion Warranty Coverage
In addition to deposit protection, Tarion also provides warranty coverage for new homes. This coverage protects against defects in workmanship and materials for up to seven years after the home is completed.
| Coverage Period | What's Covered |
|---|---|
| One Year | Labor and materials |
| Two Years | Water penetration, electrical, plumbing, heating |
| Five Years | Building envelope (exterior walls, windows, doors) |
| Seven Years | Structural defects |
Steps to Protect Your Deposit
While Tarion provides valuable protection, there are additional steps you can take to safeguard your deposit:
Tip: Always read the fine print in your purchase agreement. Make sure you understand the terms and conditions, including how deposits are handled and what happens if the builder fails.
Pre-Construction Receivership: What You Need to Know
If a pre-construction project enters receivership, it can be a stressful time for buyers. Here's what you need to know:
Key Takeaways
Buying a pre-construction home can be an exciting time, but it's important to understand the risks and protections available. Here are some key takeaways:
By being informed and proactive, you can help ensure that your dream home becomes a reality, not a financial nightmare. Always consult with a licensed mortgage broker or legal professional for advice tailored to your specific situation.
AI-generated content. This article was produced with AI assistance and reviewed for general accuracy. It is for informational purposes only and does not constitute financial, mortgage, or legal advice. Always consult a licensed mortgage professional before making any financial decisions.
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