Requirements under the HCRA and Tarion to Sell New Construction Homes in Ontario

How to Avoid the “Illegal Builder” Designation

By Slonee Malhotra and Ashley Hizo

Interested in selling a new construction home in Ontario? Here’s what you need to know…

There are two authorities that regulate new build homes in Ontario:

1. The HCRA and

2. Tarion.

Entities that build and construct homes in Ontario without obtaining the required licences/ approvals are considered “Illegal Builders” and are liable to pay fines or may be imprisoned.

What is the HCRA?

The Home Construction Regulatory Authority (HCRA) licenses and regulates people and companies who build and sell new homes in Ontario. As defined by the HCRA, a new construction home is a self-contained single-family dwelling that can be either a new freehold home, or a condominium unit.

What is Tarion?

Effective February 1, 2023, Tarion’s previous licensing responsibilities have been transitioned to the HCRA. Tarion’s role is now a consumer protection organization established by the Ontario government to administer the province’s new home warranty program. Tarion’s program ensures that buyers of new homes receive the coverage that they are entitled to under their builder’s warranty.

Considerations in Selling New Homes[1]

1. You need to be licenced with the HCRA if you intend to sell the new construction home!

   3 types of entities may sell a new construction home in Ontario: builder, vendor, or owner-builder.

   A builder performs the work including the supply of materials to construct a home and must be a licenced person or company under the HCRA.

   A vendor sells and transfers title of the new home to a purchaser and must be a licenced person or company under the HCRA.

   A person planning to build their own home may be an owner-builder.

   An owner-builder may not need to be licensed provided that they do not sell their new home once construction is completed. A licence is required if the entity desires to sell the new construction home.

2. Pre-Licencing Requirements: Have you fulfilled the Core Competency Requirements, Criminal Record Check & Interested Persons Check?

   Competency

   Under the New Home Construction Licensing Act (NHCLA), a builder or vendor applying as a first-time applicant must meet certain core competency requirements. To satisfy the competency requirements, applicants may complete HCRA- approved courses; skip to a challenge exam for a required course through Algonquin College or Training Ontario; or satisfy the equivalency process.

   It is possible to obtain an exemption of certain competencies by completing a pre-qualification survey and submitting the survey and qualifying documents to the HCRA. Upon receipt, HCRA staff will then advise if additional information is required to assess experience or course equivalencies.

   Criminal Record

   First- time applicants must undergo a Criminal Record and Judicial Matter check. If the applicant is a corporation or partnership, a check must be provided for each of the directors, officers and partners.

   Interested Persons

   An interested person is a person who may not be the applicant or an officer or director, but who nonetheless exercises influence or control over the operation of the applicant. As part of the application process, the HCRA will ask applicants to identify any applicable interested persons.

3. Applying for a Licence through the HCRA

   To begin a licence application, applicants are directed to create an account on the HCRA’s online Builder Portal, file the required information and pay an application fee. The application fee differs depending on whether the applicant is part of an umbrella group or not.

   If the applicant is part of an umbrella group (i.e., if the applicant shares at least one common, principal, director, officer, or partner with another licenced vendor or builder) the application fee is $750.00.

   If the applicant is not part of an umbrella group, the application fee is $3,000.00.

   First-time applicants may be required to participate in a virtual licensing interview pursuant to section 6 of O. Reg 631/20 if any past or present conduct gives rise to any consumer protection risks.

4. What is the next step after obtaining the HCRA Licence?

Once an application is approved, all licensees are obligated to conduct business in accordance with the NHCLA. Important requirements under the NHCLA that all licensees must make note of include:

• Licensees are required to prominently display their licence at their principal place of business, on their website and at any premise where business is conducted with the public; and
• Licensees are required to notify the Registrar of any future changes to address for service, changes in control, change in share ownership or any other material changes.

5. Qualification for Enrolment – The Tarion Requirement

Vendors and builders must pay an applicable fee to receive Qualification for Enrolment (QFE) Confirmation and Enrolment Confirmation for each home that will be built or sold. A QFE must be obtained for every new home intended to be sold, and an Enrolment Confirmation must be obtained for every new home intended to be built.

TARION has recently announced that there will be upcoming changes to the schedule of new enrolment fees effective as of January 1, 2024. We have previously written on this topic found here.

At the time of enrolment with TARION, there is also a HCRA oversight fee. Currently, this fee sits at $145.00 per enrolled unit +HST.

There are several HCRA and TARION requirements to be met both before, during, and after selling a new construction home in Ontario. For questions related to this article or assistance in submitting your application, please reach out to one of our experienced municipal and land development lawyers at SorbaraLAW.