What happens if your builder goes bankrupt?
(NC) While choosing to buy a new home is an incredibly exciting time, it can also be a little stressful. If you are considering buying a new-build home, a good understanding of how your deposit protection works will go a long way to giving you greater peace of mind. Here are answers to some of the most common questions new home buyers have:
What does deposit protection cover?
Deposit protection covers you in cases where your builder goes bankrupt or fundamentally breaches your agreement. It also applies in situations where you exercise a statutory right to end the purchase agreement, such as when completion of your home is extended beyond the latest allowable date indicated in the addendum of your agreement.
How much of my deposit is covered?
The level of deposit protection depends on the type of home you buy. If the price of your new freehold home is $600,000 or less, your deposit is covered for up to $60,000. For example, if the price of the home you’re buying is $550,000 and you put down $60,000, your entire deposit is protected. If it’s over $600,000, you’re protected for 10 per cent of the purchase price, up to a maximum of $100,000.
If you’re looking to buy a condo unit, you receive two levels of deposit protection. First, your deposit is protected by the trust provisions of the Condominium Act. Under the act, your builder must hold your deposit money in a trust account. As a second level of protection, if for some reason your deposit was not placed in trust, the new home warranty provides protection for up to $20,000.
What about other payments I make upfront?
Deposit protection now covers other payments related to your new home within the above limits, such as those you make for upgrades and extras like hardwood flooring or granite counters.
However, keep in mind that the new home warranty does not protect any payments made to reserve or hold a home before the purchase agreement is signed.
How do I get my deposit back?
If you’re eligible for a deposit refund, your builder must return it to you. If you’re unable to get a refund from your builder when you’re eligible, you can make a claim to the consumer protection organization Tarion.
You can learn more about buying a new home at tarion.com.
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