Bill 106- Tarion Warranty Coverage for Conversion Projects

With the recent introduction of proposed amendments to the Condominium Act (Bill 106) at Queen’s Park, the industry is abuzz about many exciting changes. One important proposed amendment is the Tarion warranty coverage for conversion projects.

A conversion project is a condominium that has been converted from a prior use building. Currently, the warranties available to new homes under the Ontario New Home Warranties Plan Act (ONHWPA) do not cover any aspect of a conversion project. The only warranties available to purchasers would be those set out in their agreements of purchase and sale. In most instances, the agreements limit warranty coverage to the absolute minimum resulting in significant risk to purchasers.

The proposed amendments attempt to address this issue in the following manner:

• Protection – All Tarion warranty coverage would apply to “new” elements of the conversion project while pre-existing components would have limited warranty protection. Pre-existing elements would not have any warranty protection as to components being constructed in a workmanlike manner or that those components be free from defects in materials. However, all other ONHWPA 1^st year, 2^nd year and 7^th warranties would apply, including being fit for habitation and free from Ontario Building Code violations, protection against water penetration through foundation walls and protection against major structural defects.

• Funding – The builder will be required to establish and maintain a fund for the pre-existing elements of the conversion project and cannot seek reimbursement from purchasers for the fund. The funding will be based on a pre-existing elements fund study which will be prepared by a prescribed person and contain prescribed information.

• Full & Accurate Disclosure
  • The declaration will be required to confirm that the project, units and common elements have been enrolled in the ONHWPA.
  • The disclosure statement will make it clear that the project is a conversion project.
  • The disclosure statement and accompanying documentation will provide consumers with a list of all pre-existing elements together with the aforementioned fund study.

If these proposed amendments become law, prospective purchasers of conversion projects will be more informed consumers with significantly more warranty protection.