Tarion Marketing & Warranty Bonds
The security Ontario’s new home warranty programme requires before a builder can take a deposit or turn a shovel — and the reason most developers post a Tarion bond rather than a letter of credit. If you build only in Atlantic Canada you do not need one, and we explain plainly why further down.
What Is a Tarion Bond?
Tarion administers Ontario’s new home warranty plan under the Ontario New Home Warranties Plan Act. Before a builder or vendor can enrol homes, take deposits or begin selling, Tarion requires financial security. A Tarion bond is a surety bond, in a form acceptable to Tarion, posted as that security in place of cash or an irrevocable letter of credit.
Note the division of responsibility, because it trips people up. Since February 2021 builder and vendor licensing has sat with the Home Construction Regulatory Authority. Tarion administers the warranty and holds the security. Two regulators, two functions — and the Tarion bond belongs to Tarion.
- Purchaser deposits — protection if the builder fails to return a deposit when it is owed
- Delayed closing and cancellation compensation owed to purchasers
- The one-year warranty — workmanship and materials, Building Code compliance and fitness for habitation
- The two-year warranty — water penetration through the basement and building envelope, exterior cladding, and the electrical, plumbing and heating systems
- The seven-year major structural defect warranty — load-bearing failures, roof structure and material or environmental hazards
- Tarion’s own recovery where it has paid a homeowner and looks to the builder to make it whole
“Marketing bond” is a broker’s term rather than a statutory one — Tarion’s own bulletins say only bond or letter of credit. The label stuck because on a condominium the security has to be in place before the developer can market: it must be posted at least five business days before the first agreement of purchase and sale is signed, the first deposit is taken, or construction starts, whichever comes first.
In practice one instrument carries through three phases — marketing while deposits are collected, construction, and the warranty period after the condominium corporation registers — which is why it is commonly sold as a Tarion marketing and warranty bond.
The mechanics of a Tarion bond are those of any surety bond: three parties, with the builder as principal, Tarion as obligee and a licensed surety behind the obligation. If that structure is new to you, our surety bond overview explains it, and the performance bond page covers the contract-side product this is often confused with.
The Builder’s Case
Why Post a Tarion Bond Instead of a Letter of Credit
The Bank Line Stays Free
A letter of credit is cash-secured or drawn against the operating facility, and it sits there for the whole security period. A Tarion bond is written on indemnity instead, so the borrowing capacity stays available for land, construction and the next project.
Newer Builders Pay for Longer
Release is weighted by tenure. On a low-rise condominium the second release comes twelve months after warranty start for a builder with seven or more years behind it — and thirty months for a new or inactive one. A newer builder carries the security roughly two and a half times as long, which is precisely when tying up cash hurts most.
One Instrument, Three Phases
The same security carries from marketing through construction and into the warranty period, reducing in stages as milestones are met rather than being replaced at each step.
Tarion Treats Them as Alternatives
The current bulletins list a Tarion bond and a letter of credit side by side as acceptable forms, with cash capped at $100,000 per registrant. Choosing the Tarion bond is a financing decision, not a compliance one.
Timing and Amount
When a Tarion Bond Is Required, and How Much
The requirement is not a single rule. It differs between freehold and condominium, it is weighted by how long the builder has been registered, and on a condominium it is a hard precondition to going to market rather than a formality to be sorted out later.
Condominium — Before You Sell
The Tarion bond must be in place at least five business days before whichever comes first: taking deposits or signing agreements of purchase and sale, or the start of construction. Initial security is generally $20,000 per unit, with a range of $20,000 to $40,000 and more in rare cases. On a 200-unit project that is $4 million of security posted before a single sale closes. Missing the deadline can bring expedited service fees, restricted use of a deposit trust agreement, or higher fees.
Freehold — With the Enrolment
Freehold builders generally provide a Tarion bond or other security with every new home enrolment, and builders with less than seven years’ tenure — or inactive builders proposing several homes — may be asked to post it up front at registration. The amount runs from $0 to $30,000 per home, set by a matrix that combines tenure with a risk rating built from four inputs: size, credit, equity and claims history.
After Registration
On a condominium the requirement changes when the corporation registers. Construction and warranty security is then set between $0 and $30,000 per unit, again by tenure and risk rating. Tarion can retain security, release it partially, or increase it based on claims history and compliance — so the number set at the outset is not fixed for the life of the project.
Getting It Back
A freehold Tarion bond is assessed for release twelve months after warranty start for builders with four or more years’ tenure, or twenty-four months for newer and inactive builders, with Tarion conducting the assessment within forty-five days. Low-rise condominiums see a first release once 51% of units have transferred title, then a second release at thirty, twenty-four, eighteen or twelve months by tenure. High-rise releases are staged by experience category.
One point worth getting right, because a lot of published material has it wrong. The security rules now sit in three bulletins — freehold, low-rise condominium and high-rise condominium — all effective 3 December 2020. The older single Builder Bulletin 28 from 2009 is still hosted on Tarion’s site and is still widely quoted, but it uses a different risk methodology and different per-unit numbers.
If you read that freehold security is “held one year after possession and released within 45 days,” you are reading the 2009 wording; under the current bulletin the forty-five days is Tarion’s window to conduct the assessment, not a promise to return the money. Read the current low-rise condominium bulletin at source, and the rest through Tarion’s builders’ resources hub.
Behind the Security
The Statutory Warranties a Tarion Bond Backstops
One Year From Possession
The home must be built in a workmanlike manner and free from defects in material, fit for habitation, and compliant with the Ontario Building Code. Unauthorised substitutions are caught here too.
Two Years From Possession
Water penetration through basement or foundation walls and through the building envelope, defects in exterior cladding, and defects in the electrical, plumbing and heating delivery and distribution systems — plus Building Code violations affecting health and safety.
Seven Years — Major Structural
Load-bearing failures: soil movement and major basement wall cracking, roof structure collapse or joint distortion, and chemical or environmental material failures. Finishes, drains and general dampness sit outside it.
How Much Coverage Sits Behind It
For agreements of purchase and sale signed on or after 1 July 2023, statutory coverage runs to $400,000 for a freehold home and $300,000 for a condominium unit, with common elements at $100,000 per unit to a $3.5 million ceiling and $50 million combined for a project. A great deal of material online still quotes $300,000 for freehold; that figure is out of date.
Deposits and Liquidity
The $20,000 Line, and Why It Matters
This is the part of the picture most summaries get muddled, and it is where the real money is. Tarion’s security and condominium deposit protection are not the same thing as the insurance that lets a developer actually use purchaser deposits — but they meet at a single number.
Deposits Sit in Trust
Section 81 of the Condominium Act requires a prescribed trustee to hold purchaser deposits in trust. They are not the developer’s money and cannot be spent on the project. Until registration, that capital is inert — which on a large project means many millions of dollars sitting still while construction is financed at bank rates.
Only Two Securities Release Them
The regulation prescribes exactly two classes of security that permit deposits to come out of trust: an insurance policy meeting the prescribed requirements, or a deposit receipt executed by the warranty corporation. There is no third option, and a Tarion bond is not itself one of them — it stands behind the deposit receipt.
Where $20,000 Comes From
Under the deposit-receipt rules, where a purchaser has paid $20,000 or less the receipt covers the whole amount; where more has been paid it covers $20,000, or such greater amount as the receipt provides. That is the same $20,000 Tarion publishes as condominium deposit protection — and unlike the freehold figures, it has not been increased.
Excess Deposit Insurance
Everything above that layer needs a prescribed insurance policy if the developer wants the funds released. Purchasers are the beneficiaries. The insurer must pay within sixty days of the beneficiary’s entitlement being established, and its obligations are not affected by the declarant failing to pay premiums, failing to notify it of deposits received, or breaching a term of the policy.
That last point is the whole design: the protection has to be bulletproof from the purchaser’s side before the law will let the money move. For the developer the effect is that deposits stop being dead capital and become construction financing, typically released against agreed ratios as bank funding is drawn. It is a different product from the Tarion bond, placed alongside it, and it is usually the larger commercial conversation of the two.
Freehold is a separate regime with no trust mechanic. There, Tarion protects deposits directly: up to $60,000 where the purchase price is $600,000 or less, or 10% of the price to a maximum of $100,000 above that, for agreements signed on or after 1 January 2018.
Placement
Underwriting a Tarion Bond, and What Drives the Cost
A Tarion bond is credit, not insurance. Nothing is transferred to the surety — if it pays Tarion, it recovers from the builder under the indemnity. The file is therefore underwritten like a lending decision, and the strength behind the indemnity matters more than the size of the project.
What the Surety Reviews
- Financial statements for the building entity and any parent
- Personal net worth statements for the principals
- Project budget separating hard and soft costs, with the pro forma
- Bank financing agreements and the lender’s commitment
- Consultant reports and the project schedule
- Tarion enrolment documents and correspondence
- Registration history, tenure and prior claims experience
What Moves Your Rate
- Tenure — how long the entity has been registered and building
- Financial strength and liquidity standing behind the indemnity
- Total security outstanding measured against net worth
- Claims and customer service history with Tarion
- How long the security will be held before release
- Project type, unit count and absorption assumptions
- Whether the deposit layer is being insured at the same time
What Is Actually Negotiated
- Fees for the Tarion bond and for any deposit release facility
- Deposit release ratios and the order of bank versus deposit draw
- The scope of indemnity — corporate, principals, spouses, cross-project
- Collateral and any warranty holdback retained at delivery
- How reductions are triggered and evidenced
- How the surety facility sits alongside the construction lender
Two things are worth settling before you sign rather than after. The first is indemnity: it is a negotiated term, not a standard form, and the difference between a corporate indemnity and one that reaches principals and spouses is significant. The second is the relationship between the surety facility and the bank — if those two are not aligned, the liquidity you set out to free up can end up restricted by the lender instead.
Premium on a Tarion bond is charged annually on the amount outstanding, so the length of the hold matters as much as the size. A newer builder waiting thirty months for a second release pays for two and a half times as long as an established one on the same project. Sureties in this class also normally want a commitment fee before they begin.
The Honest Answer
Does a Tarion Bond Apply in Atlantic Canada?
No. Tarion is a creature of Ontario statute and has no jurisdiction anywhere else — the sureties that write the product label it as available in Ontario, and a project in Nova Scotia, New Brunswick, Prince Edward Island or Newfoundland and Labrador cannot be asked for one. If you build only in this region, a Tarion bond is not a product you need, and we would rather say so than sell you something you do not.
New Home Warranty Here Is Voluntary
Atlantic Home Warranty, based in Halifax, covers Nova Scotia, New Brunswick, PEI and Newfoundland. Enrolment is not mandatory in any of them. Coverage runs to $70,000 per home including engineering fees, with a one-year builder warranty, a second year on electrical and plumbing distribution systems, and ten-year major structural defect protection. The pressure to enrol comes from lenders and CMHC rather than from legislation.
And It Takes Guarantees, Not Bonds
Atlantic Home Warranty’s builder registration checklist asks for personal guarantees from all principals, a personal net worth statement, spousal disclosure where applicable, credit and technical references, workers’ compensation standing and proof of $2 million liability insurance. It does not require a surety bond or a letter of credit. That is the structural difference from Ontario, and it is why no Atlantic equivalent of the Tarion bond exists.
What Atlantic Builders Do Post
Security still shows up, just from different obligees. Municipalities take servicing security on subdivisions — Halifax has accepted a development bond alongside letters of credit since November 2024. Owners and general contractors take performance and payment bonds on construction contracts. Those, not Tarion, are the instruments an Atlantic residential builder is actually asked for.
So who does buy a Tarion bond through a Halifax brokerage? Realistically three people: an Atlantic-based builder or developer expanding into Ontario; a national developer with an Atlantic head office or an established broker relationship here; and an Atlantic company in a joint venture with an Ontario partner where it is asked to sign the indemnity. The geography of the project changes; the underwriting relationship and the financial disclosure package do not.
If you are building here rather than there, the pages worth your time are site agreement and subdivision bonds, performance bonds and labour and material payment bonds. Elsewhere in the country the rules differ again — British Columbia, Alberta and Quebec all mandate third-party new home warranty, while Manitoba and Saskatchewan leave it voluntary.
Before You Sign
What a Tarion Bond Does Not Do For You
None of this is an argument against the Tarion bond. It is an argument for understanding what you are signing, because the indemnity behind a Tarion bond is a real liability and it is easy to read the instrument as protection for the builder when it is nothing of the sort.
It Protects Tarion, Not You
A Tarion bond guarantees the builder’s performance to the obligee. If Tarion calls the security and the surety pays, the builder owes that money straight back under the indemnity. Economically you end up where you would have been had you posted cash — you simply deferred the funding. That deferral is genuinely valuable, but it is not risk transfer.
Indemnity Reaches Past the Company
Every Tarion bond is written with an indemnity agreement, and sureties look for as much of it as they can get: corporate indemnity as a minimum, commonly the principals, and sometimes spouses. It can also reach across projects. The scope is negotiable at placement and is not negotiable at claim, which tells you when to spend time on it.
The Amount Is Not a Ceiling
The Tarion bond caps what the surety pays Tarion. It does not cap your warranty obligations to homeowners, which run to the statutory coverage limits, and it does not cap your indemnity debt to the surety. Tarion can also increase the security requirement based on claims history and compliance, so a clean start does not guarantee a fixed number.
Release Is Slower Than You Expect
Security is returned in stages, weighted by tenure, and it is measured from warranty start or registration rather than from completion. Premium runs the whole time. A claim compounds it: claims history feeds directly into the risk rating that sets the amount, and a paid demand sits on your file with the surety as well as with Tarion.
One practical note on wording. Tarion prescribes the form of bond, and the surety obtains the current version from Tarion rather than downloading it — there is no public template. Because the Tarion bond substitutes directly for an irrevocable letter of credit, which pays on presentation, ask your surety to confirm the call mechanics of the wording you are actually signing rather than assuming a default has to be adjudicated first. If you want the broader picture of how a surety works through a demand, our surety bond overview covers it.
Tarion Bond FAQs
No. Tarion administers Ontario’s plan under the Ontario New Home Warranties Plan Act, and the sureties that write the product list it as available in Ontario only. A project in Nova Scotia, New Brunswick, Prince Edward Island or Newfoundland and Labrador cannot be asked for a Tarion bond. Other provinces run their own schemes — British Columbia, Alberta and Quebec each mandate third-party new home warranty through their own administrators.
Under the current bulletins, a Tarion bond or a letter of credit in a form acceptable to Tarion. Condominium builders may alternatively use a deposit trust agreement with an approved escrow agent. Cash is capped at $100,000 in total per registrant, so it is not a practical answer at project scale. The builder bears the cost of putting the security in place.
At least five business days before whichever happens first: taking deposits or signing agreements of purchase and sale, or the start of construction. Separately, no condominium unit may be sold until Tarion confirms qualification for enrolment. Missing the timing can bring expedited service fees, restricted use of a deposit trust agreement, or higher fees — which is why the instrument is often called a marketing bond.
Generally $20,000 per unit, with a normal range of $20,000 to $40,000 and higher figures in rare cases. After the condominium corporation registers, construction and warranty security is set between $0 and $30,000 per unit based on the builder’s tenure and risk rating. Tarion can also increase the requirement later based on claims history and compliance.
Not in Tarion’s documents, which say only bond or letter of credit. In the market, a Tarion marketing and warranty bond describes a single instrument carried across three phases — marketing while deposits are collected, construction, and the warranty period after registration — reducing in stages as milestones are met. Treat it as a trade name for one facility rather than as two separate products.
Tarion protects a condominium purchaser’s deposit up to $20,000, and the security the builder posts stands behind that. Excess deposit insurance is a separate policy covering deposits above the $20,000 layer, and it exists so those funds can be released from the statutory trust and used as construction financing. One is protection Tarion extends to the buyer; the other is a financing tool the developer buys.
Section 81 of the Condominium Act requires a prescribed trustee to hold them. The regulation prescribes exactly two classes of security that allow release: an insurance policy meeting the prescribed requirements, or a deposit receipt executed by the warranty corporation. Where a purchaser has paid more than $20,000, the deposit receipt covers $20,000 or such greater amount as the receipt provides — which is what leaves room for the excess layer.
Within sixty days after the beneficiary’s right to payment has been established. The insurer’s obligations to the purchaser are not affected by the developer failing to pay premiums, failing to notify the insurer that deposits were received, or breaching a term of the policy — the protection is deliberately insulated from the developer’s conduct.
Premium on a Tarion bond is charged annually on the amount outstanding and is set by underwriting rather than a published tariff. The main drivers are tenure, financial strength behind the indemnity, total security outstanding measured against net worth, claims and service history with Tarion, the expected length of the hold, and the project’s own economics. Because premium runs for the whole period, the release schedule affects total cost as much as the rate does. Expect a commitment fee before the surety begins work.
It depends on the product and your tenure. A freehold Tarion bond is assessed for release twelve months after warranty start for builders with four or more years’ tenure, or twenty-four months for newer and inactive builders, with the assessment conducted within forty-five days. Low-rise condominiums see a first release once 51% of units transfer title, then a second at thirty, twenty-four, eighteen or twelve months by tenure. High-rise releases are staged by experience category.
No. Every Tarion bond is written with an indemnity agreement, which may be corporate, may extend to principals, and sometimes to spouses. The surety pays the obligee and then recovers from the principal. The Tarion bond defers the funding requirement; it does not remove the liability. It can also affect your position going forward, since claims history feeds directly into the rating Tarion uses to set future security.
No. Atlantic Home Warranty enrolment is voluntary across Nova Scotia, New Brunswick, PEI and Newfoundland, and its builder registration checklist asks for personal guarantees from all principals, a net worth statement, credit and technical references and proof of $2 million liability insurance — not a Tarion bond or letter of credit. Coverage is $70,000 per home including engineering fees, with one-year builder, two-year distribution systems and ten-year major structural defect protection. The security Atlantic builders actually post is municipal servicing security and contract bonds.
