The Scoop on Warranties!

Have you ever wondered how home warranty works?

Some home buyers think it is a knight in shining armour that will rescue them if something goes wrong with your home? Not exactly.

Here are the facts. Since Feb 1st, 2014 there are new rules that came into effect. All new homes must offer a certified new home warranty program. Prior to this date a builder could offer a “builder provides” warranty which was not certified. “Certified” means it is backed by an insurance company. The warranty program that has been around the longest is Alberta New Home Warranty who has been in business for 42 years. Followed by Progressive, National and Blanket.

Since the new regulations a few more companies have popped up as well. Any building permits pulled after Feb 1st, 2014 are under the new regulations. All certified new home warranties cover: 1year material and labour, 2 years distribution Systems, 5 year building envelope & 10 year structural.

If you are a new owner and cannot work with the builder to get deficiencies completed, most sites will have an online portal you can log onto and start a claim process. A representative from the warranty program will come out and draft a report which will be handed into the warranty. A copy will be sent to the builder and the client in which time warranty will help to enforce the builder rectifying the issues if they truly fall under the guidelines of deficiencies or defects that the builder should cover. If the builder refuses to fix these items they risk that the warranty program may not cover them in the future or they could drop down a tier within the warranty program.

Alberta New Home Warranty is membership based and builders are rated in tiers. The builder will pay based on the value of the home, square feet, etc. Builders must provide financials, corporate structure and take two courses. Most other warranties are not this stringent and easier for builders to get into.

What happens if your builder goes bankrupt?

Unless you inquired at the beginning of the offer process there is probably not much the buyer can do. Additional deposit insurance is required and needs to be discussed with the builder as to who pays for this and what it includes. Otherwise a purchaser will not have any recourse if their builder leaves the country or goes bankrupt. Also, not every program has this type of protection. Asking questions is very important to ensure you are covered if things do go wrong.

You can also visit for any more details.