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Ontario New Home Flippers Warned Of Warranty Fee


Blog by | April 30th, 2008



If you buy a new house or condominium in Ontario and sell it after you have taken possession but without living in it, you could be subject to warranty fees and may be forced to post a bond, according to the regulations from the Tarion Warranty Corp. All new homes in Ontario must have Tarion new home warranty coverage. Tarion spokesperson Robert Mitchell confirmed that Tarion requires the house to be registered twice if it is sold without being occupied. From an email sent to Toronto Star Mitchell said that when the first buyer resells the home without moving in, "the home is still a new home - it has never been occupied. The moment (the first buyer) sells a previously unoccupied home they fall within the definition of 'vendor' under the Act and they must be registered". Since it is (the original buyer) who will now be the one selling the home, taking deposits ... and setting up a closing date, it makes sense that they should have responsibility for those warranty obligations. In other words, Tarion requires the second owners to be protected by a second warranty enrollment. The cost to register the house with Tarion is $600. In addition, owners might have to post a $10,000 performance bond. In recent years, thousands of Toronto-area homes and condominiums have been "flipped" by buyers without being occupied. Tarion, it appears, is on a campaign to extract a double set of registration fees and performance bonds (or fines) from investors who buy and sell without moving in, suggests Bob Aaron, a Toronto real estate lawyer (aaron.ca).