The residential development and homebuilders industry requires a guarantee before a project commences.
In some provinces, like ONTARIO, the Tarion Warranty Corporation requires home and residential developer’s to post security for the commitments made by them under the Ontario New Home guarantees Plan Act (www.tarion.com). A letter-of-credit (LOC) or surety bond, may be placed as security. A surety bond, presented as a form of security, helps the developer to utilize cash available to them in supporting the construction process.
The Condominium Act requires the buyer’s money to be held in trust until the recommended security is issued. This security ensures the purchaser’s money is utilised for only the financing of the project.
In the event a developer’s surety bond is required Ai Surety Bonding – Affinity Insurance offers Tarion bonds and Excess condominium insurance required in the province of Ontario.
Ai Surety Bonding provides TARION warranty corporation bonds to new home and condominium builders that satisfy TARION’S security requirements. The bond provides protection from any deposit losses or risk up to but not exceeding $20,000 per dwelling unit, and after transfer of title, the subsequent single-year and double-year warranty coverage offered to purchasers by TARION.
The cost of a Tarion Bond depends on many factors as the size and type of the project being built, the financial strength and background of the developer and the security being offered. Besides the annual TARION bond premium, you may expect to pay legal costs associated with the set up of the trust account and/or the mortgage, legal opinion with regard to title and corporate matters.
You may take into account that TARION bonds require less cash collateral than letters of credit once a project is completed. A TARION bond application can be processed in a reasonable time frame and a terms and condition letter can be sent for your acceptance in a period of 2 to 5 days as long as you deliver all necessary documents and materials. You can apply for a TARION bond as soon as your marketing strategy and preliminary budgets are ready.
Subdivision bonds provides a guarantee/security to local municipalities that the project will be completed by the contractor appropriately. Surety bonds are better approach then a letter-of-credit (LOC) as it’s beneficial to contractors as well as the municipality. These bonds allows the contractor to free up cash flow.
EXCESS CONDOMINIUN DEPOSIT INSURANCE
Ai Surety Bonding offers insurance for deposits that exceed the TARION warranty protection of $20,000 for condominium homes and $40,000 for freehold homes.
Under the Condominium Act of 1998, all purchaser deposits must be held in trust until title is transferred to the purchaser. However, the Condominium Act of 1998 does permit builders to withdraw these monies from the trust as long as the developer has provided an excess condominium deposit insurance policy for said project.
Ai Surety Bonding also offers deposit insurance on projects that fall outside of the TARION warranty coverage such as condominium conversions and commercial condominiums.
Condominium Deposit Insurance is paid as a one-time premium or on an annual basis when deposits are released from trust. The cost depends on the size of the facility, the duration of construction security being offered, and financial strength of the developer. Besides the annual premium, you may expect to pay legal costs associated with the set- up of the trust account and/or the mortgage, legal opinion with regard to title and corporate matters.
Approval for an excess deposit insurance facility may be given at the same time the TARION bond is approved. Generally, an excess condominium deposit insurance application can be processed in a reasonable time frame and a terms and condition letter can be sent for your acceptance in a period of 2 to 5 days as long as you deliver all necessary documents and materials.
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