New warranty coverage for Ontario condo conversions

New warranty coverage for Ontario condo conversions

March 29, 2018
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Originally seen in Feb 20, 2018

Condominiums that in their previous lives were used as warehouses, other types of industrial structures, churches, jails or orphanages have been given a new lease on life in recent years when they were converted into condominiums. In the construction industry, they are referred to as residential condominium conversion projects or RCCPs.

However, these projects sometimes had significant drawbacks, such as protracted sales periods to permit developers time to reach the required sales to obtain construction financing. Sometimes there were complete project failures.

The drawbacks resulted from the RCCP being classified as a renovation rather than a new building, causing anxiety among some buyers about what could go wrong with an older renovated building as opposed to a newly constructed one. Additionally, the Ontario New Home Warranty Plan Act previously did not apply to RCCPs.

The RCCP conversion process incorporates some of the older buildings’ interesting structural and architectural features, referred to as “pre-existing elements”, such as original wood and steel framing, exterior and interior brick walls, large windows and stained-glass windows.

The good news is that effective Jan. 1, 2018 the warranties previously offered only on newly constructed buildings now apply to RCCPs (one-year, two-year and seven-year warranties).  The first-year work and materials warranty does not apply to pre-existing elements – all the other warranties, such as Ontario Building Code and Major Structural Defects apply to pre-existing elements.  So, for example, pre-existing windows will not have the benefit of the one-year warranty regarding the building being constructed in a “workmanlike” manner and free from defects in the material.

Another change in the Tarion program will help buyers sleep well, knowing that their deposit will have the same deposit protection and delayed occupancy coverage as buyers of new condominium projects. Deposits and monies paid for extras and upgrades must be placed in trust and are fully refundable if the project does not proceed to fruition. Another positive change requires builders to register RCCPs with Tarion.

Rental apartment buildings that are converted into condominiums typically will not be eligible for coverage.

The warranty coverage for RCCPs applies to conversion projects where the first Agreement of Purchase and Sale is signed on or after Jan. 1, 2018.

This is a positive event for buyers who want to purchase a condominium unit in a project with some history to it and maybe even some old ghosts!

  • Note: This story was updated from a previous version that incorrectly said that no warranties would apply to pre-existing elements. Only first-year work and materials do not apply. It also said that some apartment conversions may be eligible for coverage. The test is prior use, so a converted apartment building would not qualify as an RCCP.

 

New warranty coverage for Ontario condo conversions
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