Your New Home Warranty

Is a new home warranty mandatory?

In British Columbia, Alberta, Ontario and Quebec, builders must provide home buyers with a third-party warranty. In the rest of Canada, the decision is left up to the individual builder, but members of the Canadian Home Builders’ Association are required to offer a warranty as a condition of membership.

For home buyers, the choice is easy – you want to buy your home from a professional builder with a solid reputation, excellent after-sales service and a third-party warranty.

What's covered?

At a minimum, a new home warranty generally includes deposit insurance and protection against defects in work and materials as well as major structural defects. Additional coverage may include defects in your home's mechanical systems or building envelope. Some warranties include living expenses to offset the cost of temporary accommodations, moving and storage if you cannot occupy your home due to builder failure or warranty repairs. You may also be able to upgrade a "basic package" and get extended coverage.

Before you sign a contract with your builder ask them to explain the warranty provided and its coverage – what's covered and for how long, and what's not covered. Also verify that the builder is registered with a warranty provider; you can contact the provider by telephone or check their web site.

Before you move in

As your home nears completion, your builder will schedule a walk-through inspection/orientation of your home, also known as a pre-delivery inspection. Together, you and your builder will go through the home to verify that it is built according to plan, with the features and inclusions specified in your agreement. At the same time, you should take note of any imperfections and defects that require attention, down to the smallest detail such as a sticking drawer, a missing towel rack, a scratch on the wall and so on. Discuss with your builder how and when these things will be dealt with.

During the walk-through, your builder will explain how to operate and service the mechanical systems, and how to take care of the many components in your home to ensure long-lasting performance. Ask questions as you go – it's important that you feel confident and knowledgeable about your new home from the outset.

What if I run into a problem with my new home?

Keep in mind that "settling" is common during the first year and may result, for instance, in minor cracks or nail pops. If you have questions about your home, encounter any problems or need service, follow the process set out by your builder. In the event that your builder is not responsive to your needs, the warranty provider will ensure appropriate action, including mediation between you and your builder.

Warranty providers also offer detailed consumer information, including home maintenance, so visit their websites. Many warranty providers also have excellent advice on home buying, such as what to look for in a builder and the steps involved in home ownership.

From Offer to Contract

The process from first offer to final agreement can be quick, or it may involve several steps over a longer period of time. It can be an intense time, but bear in mind that you and the builder are aiming for the same goal.

Your signed offer is presented to the builder who, by the irrevocable date, will either:

• accept it as written. His/her signature on the offer results in a contract that is binding on both parties. Or,

• counter your offer (by changing the price, terms, closing date or other points). Changes are made directly in the Agreement of Purchase and Sale document. A new irrevocable date is set, by which you must respond to the builder's offer, failing which the offer is no longer valid.

If your builder makes you a counter offer, you may decide to accept it or you may wish to re-counter.
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This process continues until an agreement has been reached between you and your builder, or you determine that an agreement cannot be reached.
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If your accepted offer was conditional on financing, you now need to apply and receive approval for a mortgage within the time specified in the contract. If you are unsuccessful in obtaining the necessary funds, the contract is no longer valid or binding, and your deposit will be returned to you in full. The same process holds true for all other conditions written into the contract.
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Bring a copy of the Agreement to your lawyer. When it includes a condition for a legal review, the lawyer may suggest changes to the wording and the clauses of the contract to further promote your interests. The builder should be notified immediately of these recommendations, allowing enough time for a review by the builder and/or the builder's lawyer before acceptance or possible counter.
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Once your offer has been accepted and all conditions have been waived, you have a firm contract.

The Role of Your Lawyer

You need to arrange for a lawyer to look after the legal aspects of buying a home, or a public notary if you buy in Quebec. It is a good idea to contact a lawyer early, even before you actually begin to look at properties. Your local and provincial bar association can refer you to a lawyer who specializes in real estate. Ask for an estimate of costs in advance so you know what to expect.

Your lawyer will represent your interests throughout the process of buying your new home:

• reviewing the Agreement of Purchase and Sale
• advising you during the counter and re-counter process of the offer
• making sure that you get clear title to the property and verifying, preparing and executing transfer documents, deeds and your mortgage
• registering the change of property ownership and obtaining legal possession for you.

Review the Contract Before You Sign

Review the Agreement of Purchase and Sale carefully before signing it. Professional new home builders will go through the contract with you, point by point. This helps to eliminate errors or misunderstandings, and it is a great opportunity for you to ask questions. Here are some pointers for your contract review.

• Check for correct spelling of names.
• Verify the description of the home—e.g. lot, model, elevation (orientation on the lot).
• All attachments or schedules that form part of the contract must be referenced in the main contract document. This includes site plans, drawings, specification list, design and approvals process for customized homes, and so on.
• Make sure you understand what's included and not included in the base price of the home—particularly important if you have based your decisions on a model home with a mix of standard and upgraded features.
• Check that any extras and upgrades you have chosen are documented accurately (e.g. model, brand name, size, colour, price).
•  If the price includes allowances—for instance, for lighting and kitchen cabinets—the amount should be noted in the contract with a description of what happens if you go over or under budget.
• How will you pay for the home? This must be noted in the contract. It may be as simple as "cash", or a description of your mortgage (amount, interest rate, term). If the contract is conditional on financing, this must be noted clearly, along with the number of days allotted for obtaining the mortgage approval and the process for notifying the builder. It should also be stated clearly what happens if the mortgage application is turned down (e.g. the contract is null and void, and the deposit will be returned in full).
• Any and all other conditions, such as the sale of your current home or a favorable review of the contract by your lawyer, must be similarly detailed. That way, nothing is left to chance or misinterpretation.
• Payment milestones should be clearly outlined—e.g. initial deposit upon signing of the contract, additional deposit when conditions (if any) have been met, possible construction advances and amount due on closing (when you take possession of your new home).
• The builder (or sales representative) should issue a receipt for the deposit and a copy should be attached to the contract. The builder's refund policy and third-party deposit warranty should also be described in the contract—your protection in the unlikely event that the builder for some reason is unable to honour the contract.
• If the new housing tax rebate is applicable and assigned to the builder, this should be noted.
• Similarly, provision of condominium documents, including budget, if applicable, should be noted. This does not pertain to freehold dwellings where ownership includes exterior space.
• The closing date is the day you take possession of the home. Ask your builder to explain how possible delays will be handled.
• The irrevocable date is the date by which the builder must respond to your offer, failing which it is no longer valid.

As noted in Writing Up the Contract, consider having a lawyer review the contract before you sign it.

What are Change Orders?

Signing a contract to purchase your new home is a major milestone. However, this may not be the end of your decision-making.  It is not uncommon for homeowners to continue to decide on additional items for weeks afterwards.
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For instance, a visit to the lighting supplier may trigger a desire for a fixture not included in the contract for your new home. Or you may decide to include an optional fireplace after all, or make other minor changes not reflected in your contract.

Professional new home builders will attempt to accommodate any such changes or additions you want to make before construction of your home begins, or even when it is in progress. But before you make any decisions, talk with your builder.
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Sometimes even small changes can have a significant impact on cost or scheduling, particularly if construction is already under way. It may mean changing some aspect of the construction—for instance, a change in floor coverings may call for a different sub-flooring. Changes can also result in delays. A professional new home builder works with a tight construction schedule and subtrades who move from one task to another according to a timetable.

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