Licence to Build New Homes – Without One it's Illegal in Ontario

Jul 12th, 2022

You’ve probably heard the old saying that the three most important things in real estate are “location, location and location.” We’d like to add one more, of even higher importance: “Licence”.

The law in Ontario is very clear. Anyone building or selling a new home in the province is required to have a valid licence with the HCRA. There are a few exceptions (such as an owner-builder who is building a new home for their own personal use on land they own), but in most cases building or selling a home without being licensed to do so is illegal.

Otherwise, there’s no way to prove they have the necessary requirements to be a builder in Ontario. Without a licence, these questions can’t be answered with certainty:

  • Can the builder demonstrate a minimum understanding of technical and business competencies?
  • Is the builder aware of Building Code requirements?
  • Can the builder be reasonably expected to be financially responsible?
  • Is the builder registered to enroll new homes in warranty with Tarion?

Bad For Everyone

As a home buyer, engaging with unlicensed builders could put you at risk of working with dishonest people operating outside of the HCRA’s regulatory framework that helps to protect consumers and their interests. Other than suing the builder in Court, you would be faced with limited resources and little recourse if something goes wrong.

Illegal building also hurts licensed builders – those who do operate within the rules. It creates an unfair competitive marketplace and damages the reputation of the entire industry.

If you ever become aware of illegal building, please inform the Home Construction Regulatory Authority (HCRA). Protect yourself, and others.

Unethical vs. Illegal

We have to make a distinction between illegal building and unethical conduct – although illegal building is most certainly unethical.

Licensing is done by the HCRA, based on specific requirements and standards. Part of getting (and keeping) a licence means following a Code of Ethics. Among other qualifications, the HCRA demands that builders don’t do anything that could be regarded as disgraceful, dishonourable or unprofessional.

What happens if they don’t meet these standards? The builder may face some restrictions or have to meet certain conditions to maintain their licence and keep operating. They could also be denied when they go to renew their licence – licences must be renewed annually. In the most serious cases, a licence could be revoked immediately.

But what if there’s no licence to restrict or revoke?

Operating without a licence is illegal. A conviction for illegal building may lead to fines; imprisonment; and/or an order to pay compensation and/or make restitution.

It is also illegal to build a new home without it being enrolled in warranty with Tarion, even if the builder is licensed.

The HCRA will investigate reports and complaints of illegal home building activities – laying charges where warranted. Again, please tell us if you think such activities are happening.

Look for the Licence

Ontario has plenty of licensed builders – more than 6,500 of them.

As noted in an earlier post, when choosing a builder the best place to start is the Ontario Builder Directory. Hosted by the HCRA, the directory will confirm that the builder is licensed. It also provides historical information on the builder, such as previous building projects and any conduct records. If you are buying a new home already built, you can also check the directory to see if the home you are interested in was built and warrantied by a licensed builder.

Yes, location is important, as are many other considerations when buying a new home. But none more crucial than confirming the licence to build.