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To: Regulatory Registry, Government of Ontario
Re: Your proposed new Tarion regulations re deposit protection penalties
Below are my comments on the government’s proposed Tarion regulations re deposit coverage for freehold new home buyers. My comments are from the consumer perspective, as an advocate for new home buyers for the last sixteen years.
1) No freehold new home buyer should be penalized for not advising Tarion of their new home purchase. The regulatory role for making sure builders are licensed with HCRA and enrolled with Tarion should be with the two regulatory agencies, HCRA and Tarion, and not with the consumer.
2) To impose this registration obligation for freehold home buyers only, (not condo or timeshare buyers), with a penalty of losing full deposit protection, seems unfairly singling out freehold buyers with an extra reporting burden and potential penalties.
3) Your formula to calculate the penalty for freehold home buyers who don’t register their contracts is too complex for most people to readily understand. For a “consumer protection” agency, Tarion’s concept of a “sub-limit” calculation formula is complex and confusing for the average consumer.
4) Part of your proposed penalty calculation is beyond the buyer’s control; for example it becomes applicable only if the total amount of aggregate claims for illegal building and illegal deposit-taking in one calendar year exceed $10 million. How can any purchaser influence how many builders might in one calendar year not follow the existing laws? – No home buyer should reasonably be made responsible for illegal activities of builders and the failure of regulatory agencies to enforce the existing licensing and enrollment laws.
5) You propose that lawyers, lenders, and real estate agents be also responsible for advising freehold purchasers to register with Tarion. This is too vague, and bound to fail.
– Imagine a situation where a lawyer has told the purchaser to register his purchaser contract with Tarion, but the buyer has no recollection of this, or inadvertently forgets to do so. Or if the lawyer forgets to advise the purchaser, but says he did so. This will become another finger-pointing exercise, where only the purchaser will face a penalty, not the lawyer, lender, or real estate agent. – There should be a legal obligation for lawyers closing new freehold deals to check if a builder is licensed and enrolled, by means of for example a law statement. This idea was already proposed to you by homebuyer G. Dudeck, a former long-time registry office official. Each lawyer who drafts purchase contracts for developers could make a statement that the builder is licensed, and has advised Tarion of their intention to build freehold homes. Tarion has not responded to this idea.
– If you make several stakeholders responsible, then no one is. In this new regulation, the only one bearing the negative consequences, meaning reduced deposit protection, is the freehold purchaser. This is often a purchaser’s life savings at stake.
– Another idea would be:
– Lawyers writing new home freehold contracts could file, with the mandatory HCRA/Tarion ADDENDUM, the HCRA license number and Tarion enrollment number, or if construction has not begun, then a temporary enrollment number.
This is an idea I proposed to Tarion at their Annual Meeting in July 2024, and has not been meaningfully considered.
6) Buying a new home is one of the busiest times for consumers; they are often overwhelmed dealing with the financial aspects, busy jobs and families. To place an extra burden on consumers at this time seems out of balance.
– This tegulation has no provision to protect purchasers if they inadvertently fail to register with Tarion. ————————
In summary, this seems an odd regulation: it only applies to a certain type of new home purchase, freehold. It seems unprecedented, and not used in any other jurisdiction.
– It will not likely stop illegal building or illegal deposit-taking. That’s the job of the regulators, Tarion and HCRA.
This regulation seems designed to protect Tarion’s guarantee fund. Tarion’s problem appears to be, as their Discussion Guide dated Dec. 2024: “deposit coverage exposure for freehold homes is impossible for Tarion to assess and fundamentally threatens the viability of the warranty programme, impacting Tarion’s ability to provide deposit coverage and leaving consumers at risk.”
Deposit coverage should be an insurance product, issued by several regulated insurance providers under the Insurance Act, as recommended by the justice Cunningham’s Tarion Review in 2017. If it is “impossible” for Tarion to assess the risk of illegal builders, perhaps partly because it’s not an insurance company, then proper risk assessment and regulating should be handled by real insurance/warranty providers who have the expertise and funds to assess risk and protect consumers from high risk activities, such as the illegal building of new freehold homes.
In the meantime, HCRA and Tarion should do a more effective job of regulating builders and enforcing existing laws re licensing and enrollment, instead of putting an increased reporting burden and penalties on freehold purchasers.
Submitted by:
B. Captijn, Consumer Advocate
Dec. 30, 2024
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CONSUMERS' REFORM TARION 
As a formal new home buyer, I did not see that HCRA did the correct job for investigating Mattamy builder’s conduct. Yes, Mattamy did not obey the agreed up floorplan and valid building permit to build the house. but HCRA allowed Mattamy to rob our deposit of $154, 010. There is no regulation and no law for Ontario new home buyers’ protection.