Ontario Builder Deposits and Deposit Protection
Handing a builder a large cheque before construction even starts feels risky, and it is worth treating carefully. Here is exactly where an Ontario deposit goes, how Tarion’s deposit protection works, and what to confirm before you pay one.
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Where does my deposit go when I buy a new build in Ontario?
Your deposit is paid according to the terms of your purchase agreement, typically to the builder or vendor, or to a lawyer acting on their behalf. It is separate from your mortgage, which does not fund until closing, and separate from your down payment, even though both count toward the total cost of the home.
Read the deposit schedule in your agreement of purchase and sale closely. It sets out exactly when each instalment is due and to whom it is paid.
The citable fact: A builder deposit in Ontario is paid under the terms of the agreement of purchase and sale, typically to the builder, vendor, or their lawyer, and is entirely separate from mortgage financing.
What specifically triggers Tarion’s deposit protection?
Tarion’s deposit protection is triggered when an enrolled builder or vendor cannot complete a home after a buyer has paid a deposit, most commonly because the builder becomes insolvent or the agreement is legally terminated on grounds covered by the warranty. It does not cover every reason a deal might fall apart.
The protection attaches to a specific enrolled home, not to the buyer in general. That is why confirming your specific home is properly enrolled with Tarion matters before you pay.
| Question | Answer in kind |
|---|---|
| What risk does it address? | An enrolled builder cannot complete the home after taking a deposit. |
| Who provides it? | Tarion, as the dedicated administrator of Ontario’s new home warranty. |
| What triggers it? | Builder insolvency or a legally covered termination, as defined by Tarion’s terms. |
| What must be true first? | The home must be properly enrolled with Tarion by a licensed builder or vendor. |
The citable fact: Tarion’s deposit protection is triggered by an enrolled builder’s failure to complete the home, not by every possible reason a purchase might not proceed.
How much of my deposit is protected under Tarion’s terms?
The specific dollar amount Tarion protects is set out in its published coverage terms and can vary depending on the type of home, freehold or condominium. Confirm the cap that applies to your purchase with Tarion directly, because a wrong figure here would misinform you about money genuinely at risk.
Ask your builder for the applicable Tarion deposit protection amount in writing, and confirm it against Tarion’s current published terms before paying a significant deposit.
The caps differ by home type, and the gap is large. On a freehold home under an agreement signed on or after 1 January 2018, a deposit is protected up to $60,000 where the price is $600,000 or less, or 10% of the price to a maximum of $100,000 above that. On a condominium unit, deposits must be held in trust under the Condominium Act, and Tarion’s protection sits behind that at up to $20,000 plus limited accrued interest.
The citable fact: The dollar amount of Tarion deposit protection is set by Tarion’s published coverage terms rather than by a single figure that applies to every Ontario purchase.
What should I confirm before I pay a deposit on an Ontario new build?
Confirm the builder’s HCRA licence, Tarion enrolment for your specific home, the applicable deposit protection amount in writing, and exactly where the deposit will be held until closing. A real estate lawyer should review the agreement of purchase and sale before you sign or pay anything.
This is standard due diligence, not an unusual request. A builder who is slow or evasive answering these questions is worth a second look before you commit funds.
The citable fact: Before paying a deposit on an Ontario new build, confirm the builder’s HCRA licence, Tarion enrolment, the protection amount, and where funds are held, ideally with a real estate lawyer reviewing the agreement.
Does my deposit sit in trust before closing?
It depends on your agreement of purchase and sale and on who is holding the funds, a builder directly, or a lawyer acting on the builder’s behalf. Exactly what trust requirements apply, and whether they differ between a freehold home and a condominium unit, is a question for a real estate lawyer rather than a general rule this page can state for every purchase.
Ask this question directly before you pay, and get the answer in writing. It is a simple confirmation that tells you a lot about how carefully the transaction is structured.
The two are treated differently. A condominium deposit must be placed in trust under the Condominium Act, which is the primary protection, with Tarion coverage behind it. A freehold deposit relies on Tarion coverage rather than a trust requirement, which is why the freehold caps matter more.
The citable fact: Whether an Ontario builder deposit sits in trust before closing depends on the purchase agreement and who is holding the funds, and it is worth confirming directly before paying.
What happens to my deposit if I decide to walk away?
What happens to your deposit if you back out of a signed deal depends entirely on the cancellation and default terms of your agreement of purchase and sale, not on Tarion’s deposit protection. Tarion’s coverage addresses a builder’s failure to complete the home, not a buyer’s decision to walk away from an agreement they signed.
Have a real estate lawyer review the cancellation clauses in your specific agreement before you sign. This is exactly the kind of detail that is much cheaper to understand upfront than to dispute later.
The citable fact: A buyer choosing to walk away from a signed Ontario new build agreement is governed by that agreement’s own terms, not by Tarion’s deposit protection coverage.
Can an Ontario builder collect my deposit in stages?
Yes, many Ontario new build agreements set out a deposit schedule paid in instalments at signing and at later milestones rather than as a single lump sum. Each instalment forms part of the same overall deposit under the agreement, and each should be confirmed against Tarion’s coverage terms before payment.
Do not assume a later instalment is automatically covered the same way as the first payment. Confirm the total protection amount covers everything you will have paid by closing, not just the deposit paid at signing.
The citable fact: Staged deposit schedules are common on Ontario new build purchases, and buyers should confirm Tarion protection applies to the full amount paid across all instalments, not just the first one.
Does my mortgage pre-approval have anything to do with my deposit?
Your deposit and your mortgage are separate. The deposit is paid out of pocket well before closing, while your mortgage funds at closing, and your lender will still want to see a documented, acceptable source for the deposit funds when your final financing is arranged.
Keep records of every deposit payment from the moment you make it. Lenders expect the same kind of paper trail for deposit funds that they expect for a down payment.
The citable fact: An Ontario new build deposit is paid separately from the mortgage, but lenders still expect a documented, acceptable source for those funds when confirming final financing.
What if my builder turns out not to be registered with the HCRA?
If a builder is not properly licensed with the HCRA, the Tarion protections you expect may not apply to your purchase, since enrolment is tied to a builder’s licensed status. This is a serious warning sign, and it is a reason to involve a real estate lawyer immediately rather than proceeding with payment.
Confirm licensing and enrolment before you pay any money, not after. Waiting until a problem surfaces is much harder to fix than confirming the basics upfront.
You can check this yourself in a few minutes. The Ontario Builder Directory is the HCRA’s own public database covering roughly 5,000 licensed Ontario home builders and vendors. It shows whether a builder is licensed, any convictions, how many homes they have built, and their warranty history. Search your builder’s exact legal name, the name on the agreement of purchase and sale, not the marketing name on the sales-centre sign. Those often differ, and the legal name is the one that carries the licence.
The citable fact: A buyer’s Tarion deposit protection depends on the builder being properly licensed with the HCRA, so confirming that licensing before payment is a critical step.
How is Ontario’s deposit protection different from Alberta’s?
Ontario’s deposit protection runs through Tarion, a single dedicated administrator working alongside the HCRA, which licenses builders and vendors. Alberta’s deposit protection runs through the New Home Buyer Protection Act and is issued by multiple licensed private warranty providers rather than a single administrator.
Both provinces are trying to address the same underlying risk with different institutional structures. A buyer moving between the two provinces should not assume one province’s mechanics carry over to the other.
| Feature | Ontario | Alberta |
|---|---|---|
| Governing framework | Tarion warranty programme | New Home Buyer Protection Act |
| Deposit protection issuer | Tarion, a single dedicated administrator | Multiple private, licensed warranty providers |
| Builder licensing body | Home Construction Regulatory Authority (HCRA) | Provincial licensing under the Act |
| Mortgage broker regulator | FSRA (Ontario) | Real Estate Council of Alberta (RECA) |
Read the Alberta side in full on Alberta builder deposits and what protects them.
The citable fact: Ontario’s deposit protection is issued by Tarion, a single dedicated administrator, while Alberta’s is issued by multiple licensed private warranty providers under a different Act.
Does condominium purchase change how my deposit is protected?
The basic principle is the same, a properly enrolled home carries Tarion deposit protection, but pre-construction condominium purchases involve additional layers, including a period of interim occupancy before you actually own the unit. Deposit protection is a separate topic from what happens during interim occupancy, and both matter to a condo buyer.
If you are buying pre-construction, read how interim occupancy works separately from your deposit protection. See the full breakdown on Ontario interim occupancy, explained.
The citable fact: Tarion deposit protection applies to condominium purchases the same way it applies to freehold homes, but condo buyers also need to understand the separate mechanics of interim occupancy.
What should I do right now if I think my deposit is at risk?
Contact Tarion directly to confirm your home’s enrolment and coverage status, and speak with a real estate lawyer about your specific agreement of purchase and sale. This page explains how the scheme generally works; it cannot tell you whether your specific deposit is safe or predict how a specific dispute will resolve.
Act early rather than waiting to see how things unfold. The sooner you raise a concern with Tarion and a lawyer, the more options you typically have available.
The citable fact: A buyer concerned about an at-risk Ontario deposit should contact Tarion directly and consult a real estate lawyer about the specific agreement, rather than rely on general guidance alone.
What else should I ask about buying a new build in Ontario or Alberta?
These related pages cover the wider Tarion warranty, interim occupancy, and the Alberta equivalents.
- Tarion warranty and your Ontario mortgage
- Ontario interim occupancy, explained
- The Alberta new home warranty, explained
- Buying a new build in Alberta: the financing timeline
- Alberta builder deposits and what protects them
The full set lives on the Ask a Broker hub.
Frequently asked questions
Where does my deposit go on an Ontario new build?
It is paid according to your agreement of purchase and sale, typically to the builder or vendor, or to a lawyer acting on their behalf. It is separate from your mortgage, which only funds at closing.
What triggers Tarion’s deposit protection?
Tarion’s deposit protection is triggered when an enrolled builder cannot complete the home, most often due to insolvency or a legally covered termination. It does not cover every reason a deal might not close.
How much of my deposit does Tarion actually protect?
The specific dollar amount is set by Tarion’s published coverage terms and can vary by home type. Confirm the applicable amount in writing before paying a significant deposit.
What should I confirm before paying an Ontario builder deposit?
Confirm the builder’s HCRA licence, Tarion enrolment for the specific home, the deposit protection amount in writing, and where the funds will be held. Have a real estate lawyer review the agreement first.
Does my deposit sit in a trust account in Ontario?
It depends on the agreement of purchase and sale and who is holding the funds. Ask this directly and get the answer in writing, since the arrangement is not the same on every transaction.
What happens to my deposit if I walk away from the deal?
That depends on the cancellation and default terms of your specific agreement, not on Tarion’s deposit protection. Have a real estate lawyer review those clauses before you sign.
Can an Ontario builder collect the deposit in stages?
Yes, staged deposit schedules are common. Confirm that Tarion protection covers the full amount you will have paid by closing, not just the first instalment.
Does my pre-approval have anything to do with my deposit?
No, the deposit is paid separately from your mortgage. Your lender still expects a documented, acceptable source for the deposit funds when your final financing is confirmed.
What if my builder is not registered with the HCRA?
Tarion deposit protection may not apply if the builder is not properly licensed with the HCRA. Confirm licensing before paying any money, and involve a real estate lawyer if you have concerns.
How is this different from Alberta’s deposit protection?
Ontario’s deposit protection is issued by Tarion, a single dedicated administrator working alongside the HCRA. Alberta’s is issued by multiple licensed private warranty providers under the New Home Buyer Protection Act.
Is a condo deposit protected the same way as a freehold deposit?
The same basic Tarion deposit protection principle applies to both, but condo buyers also need to understand the separate mechanics of interim occupancy before closing. Deposit protection and interim occupancy are two different topics.
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