Ontario’s new housing consumer protection organization says it expects to pay home buyers more than $90 million this year, the “largest claims event” in its history, in the wake of more receiverships and developers failing They have completed residential projects.
In recent months, real estate experts have reported seeing a influx of residential development projects going into receivership and builders are walking away from projects amid high interest rates and rising construction costs. Tarion, which was established to ensure builders meet their warranty obligations to consumers, said last year’s “extraordinary claims event” was the result of “builder failures, receiverships and illegal construction and sale.” .
Although developers must honor new construction warranties, if a builder fails to deliver a home to the buyer and is unable to provide a refund, the buyer can file a deposit claim with Tarion.
According to Tarion, who signed a purchase agreement after January 1, 2018, deposits are protected up to $60,000 for homes with a sales price of $600,000 or less. For homes with a sales price of more than $600,000, deposits are protected up to $100,000.
“While projects and receiverships are not fully resolved at the time of writing this plan, gross claims for homeowner deposits may exceed $90 million,” the organization said. noted in its 2024 business plan.
“The risk of builder insolvency combined with illegal receipt of deposits is an emerging risk that may increase due to uncertainty in the broader property market.”
Tario did not reveal how many developers failed to complete projects last year.
“The statement in the business plan was forward-looking and estimates the anticipated gross impact for Deposit Protection claims in relation to a number of supplier companies, including StateView Homes companies involved in receivership proceedings,” said Andrew Donnachie, spokesperson for the organization. in an email to CP24.com.
“These were situations in which the builder could not finish his projects and deliver the homes to the buyers.”
Tarion said this year it will “continue to mitigate the risks of similar losses” in the future by “increasing owner education” and improving its “underwriting approach.”
“Other process improvements are being investigated, including qualification for the enrollment process and/or tracking and recording deposits and purchase and sale agreements,” the organization wrote.
Tarion said he will work with the Housing Construction Regulatory Authority (HRCA) to apply “appropriate sanctions against the builders involved”. No details of the sanctions were provided.
Despite the huge increase in payments, Tarion said it is not expected to affect its ability to respond to future claims.
“While the deposit claims represent a historic and material amount, at this time we do not believe that the overall losses will impact the provincial fund’s ability to respond to future guarantee claims due to our capital management and reinsurance programs,” says the business plan. read.
“The long-term impact of deposit losses will also be mitigated by the capital replacement program.”