Tarion Delayed Closing Compensation:

The Rules, The Limits, and The "Unavoidable" Exceptions

By David Young

When purchasing either a condominium unit or a freehold new pre-construction property, most are covered under the Tarion Warranty. This is a mandatory consumer protection warranty in Ontario that safeguards new home buyers against construction defects, delayed closing and certain deposits.

Imagine that you have received notice of closing, booked movers and given notice to your landlord - only to receive a letter from the builder delaying your closing by a few months.

Under the Tarion Warranty, in limited circumstances, you are entitled to compensation for these delays, but it is not automatic, and it is not unlimited.

Here is a breakdown of exactly when you get paid, when you don’t, and why condo buyers need to watch for a different date than freehold buyers.

1. The Compensation Structure: $150 Per Day

If your builder fails to deliver your home by the Firm Interim Occupancy Date (for condos) and Firm Closing Date (for freeholds), you are entitled to delayed closing compensation. The calculation is relatively straightforward, but there is a hard ceiling.

• The Daily Rate: You are entitled to $150 per day for living expenses (meals and accommodation). You do not need to provide receipts for this $150 daily amount. It is an automatic entitlement;
• Direct Costs: You can also claim additional expenses incurred due to the delay (e.g., moving truck cancellation fees, storage costs, or changing mailing addresses). Unlike the daily rate, you must provide receipts for these;
• The Hard Cap: The total compensation for all items combined—daily living expenses plus direct costs—is capped at $7,500.

At $150/day, you hit the monetary cap in 50 days. If your delay lasts 4 months, you are still only eligible for $7,500.

2. The Trigger: The "Firm" vs. "Tentative" Date

Many buyers are surprised to learn that the first date on their Agreement of Purchase and Sale is rarely a Firm date.

• Tentative Dates: Builders can extend "Tentative Dates" multiple times without penalty, provided they give you proper notice (usually 90 days);
• Firm Dates: Once the builder has reached a certain construction schedule, or is confident of completion, they will set the Firm Closing Date. Compensation only applies if it is a Firm Date that is missed. If the builder properly extends a Tentative date into a new/subsequent Tentative date with 90 days' notice, no compensation is payable.

3. The Condo vs. Freehold Distinction

While the compensation is the same ($150/day), the "Trigger Date" that starts the clock depends entirely on what type of home you purchased:

• For Freehold Homes: The trigger is the Firm Closing Date. This is the day you obtain a mortgage, pay the balance of the purchase price with closing costs, obtain ownership and get the keys;
• For Condos: The trigger is the Firm Interim Occupancy Date.
  
  In a condo, you often move in and have an occupancy period lasting 6-12 months (or years) before the Condominium Corporation is legally registered and the title is transferred to you. If your Firm Interim Occupancy Date is delayed, you may be eligible for the compensation. If your Final Closing Date is delayed but you are already living in the unit under the Interim Occupancy period, no compensation applies.

4. The Major Loophole: "Unavoidable Delay":

This is the most contentious part of the Tarion Warranty Delayed Closing Compensation. If a delay is caused by an event outside the builder’s control, the builder can extend your Firm Date without paying you a cent of compensation.

The addendum defines these "Unavoidable Delays" broadly. Common examples where compensation does not apply include:

• Trade Union Strikes: If the electricians, plumbers, or drywallers go on strike (as we saw in recent years), the builder is entitled to stop the clock;
• Pandemics (COVID-19): Public health lockdowns or supply chain severances caused by a pandemic are valid grounds for an unavoidable delay;
• Adverse Weather & Acts of God: For example a "100-year flood”, ice storm, or fire that destroys the site are valid exemptions.

The "Remobilization" period:

The builder isn't just entitled to extend the date for the duration of the strike or storm; they are also allowed to add a "Remobilization Period"—extra time to get trades back on site, supplies delivered and the schedule moving again.

5. The Last Minute Delay Penalty

There is a strict penalty for builders who drop a delay notice at the eleventh hour. If the builder delays your Firm Date with less than 10 days' notice, you are entitled to an immediate compensation claim of $1,500 (calculated as 10 days x $150).

This $1,500 is payable in addition to the standard daily compensation you are owed for the duration of the delay. However, the $7,500 cap still applies. This penalty is not separate from the aggregate limit. It counts toward your total. Therefore, even with the $1,500 "no notice" penalty included, your total compensation for all living expenses and costs combined cannot exceed $7,500 (or 50 days).

How to Make Your Claim

You cannot file a claim until after you have taken possession of the home - Interim Occupancy Closing for Condos and Final Closing for freeholds. You must follow this strict process:

1. The 180-Day Builder Deadline:

• You must submit your "Delayed Closing/Occupancy Claim Form" to your builder within 180 days (approx. 6 months) of the true date you took possession;
• You should generate this form through your MyHome account on Tarion.com, but you can also submit it directly to the builder in writing;
• If you miss this 180-day window, the builder can legally refuse your claim.
  
  

2. The One-Year Tarion Deadline:

• If the builder rejects your claim, fails to respond or does not pay out, you must escalate it to Tarion;
• You have one year (365 days) from the date of possession to request Tarion’s intervention.
• If you settled the claim directly with the builder, you do not need to involve Tarion.
  
  

3. Payment:

• For Condos: If the delay is acknowledged before Final Closing, the compensation is typically applied as a credit on the builder’s Final Statement of Adjustments This reduces the amount of money you need to close on the purchase;
• For Freehold Homes: Builders will typically issue a cheque or wire payment post-closing.
• If Tarion pays - If the builder refuses to pay and Tarion rules in your favour, Tarion will issue a cheque directly to you.

If you have any questions in regards to your Tarion Delayed Closing Compensation claim, please reach out to David Young at 365 509 2029 x 106 or dyoung@sorbaralaw.com.