Signing a custom home contract is one of those “big life” moments. It should feel exciting. But it also needs to feel clear.
Most contract problems don’t happen because someone is trying to do something wrong. They happen because the contract is missing details, the scope is fuzzy, or the homeowner assumes something is “standard” that was never written down. And when you’re building in Ontario, there’s one more layer you should never ignore: builder licensing and warranty compliance.
Two names you’ll hear early in the process are HCRA and Tarion. Homeowners often mix them up, or assume they’re the same thing. They’re not.
This guide explains what each one does, what you should verify before you sign, and the exact contract items that reduce budget creep, timeline delays, and warranty stress.
HCRA vs Tarion in plain language
HCRA (Home Construction Regulatory Authority) is Ontario’s builder regulator. In simple terms, HCRA helps you confirm the builder/seller is properly licensed to build and sell new homes in Ontario.
Tarion administers Ontario’s new home warranty program and the formal warranty processes used after possession. The builder is responsible for providing the warranty, and Tarion is the system that manages the warranty framework, timelines, and dispute steps.
If you only remember one sentence, make it this:
HCRA is how you verify the builder is properly licensed; Tarion is how the warranty process works once your home is built and properly enrolled.
What “custom home contract” means in Ontario (and why it matters)
If you’re building on your own land, your project may be treated as a contract home (sometimes called an “on-owner’s-land build”). The contract still needs to be structured correctly, the builder must be properly licensed for the work they’re doing, and warranty obligations still need to be addressed clearly in writing.
That’s why you should treat the contract phase like the first construction phase: it needs planning, documentation, and professional review.
Before you sign: the smart verification checklist
1) Verify the builder’s HCRA licence and legal name
Ask the builder for:
- HCRA licence number
- Exact legal company name (the name that appears on invoices, contracts, and registrations)
Then make sure the contract uses the same legal name. A mismatch can create confusion later when you need accountability for timelines, deficiencies, or warranty-related steps.
Tip: Don’t accept “we’re licensed” as a verbal answer. Licensing is not a vibe. It’s a detail.
2) Confirm how warranty coverage will be handled (in writing)
Before you sign, ask for a written explanation of:
- How warranty coverage applies to your build
- Whether the home will be properly enrolled/registered (and who is responsible for each step)
- What the homeowner must do (timelines, reporting, documentation)
If the builder says, “Don’t worry, we’ll take care of everything,” that’s not enough. You want the process clearly described in the contract package.
3) Make the scope impossible to misunderstand
Scope confusion is the #1 cause of painful change orders. Your contract should clearly list what is included and what is not included.
You want clarity on:
- Full build scope (structure, insulation, drywall, finishes, mechanical, electrical, plumbing)
- Exterior scope (grading, driveway, decks, fencing, landscaping, irrigation rough-ins)
- Basement scope (unfinished vs finished vs partial, ceiling height, bathroom rough-ins)
- Demolition, disposal, temporary utilities, site protection, and cleaning
This is also where budget questions start. If you want a realistic view of where the money goes, link your contract review to your cost planning early. A helpful reference is Xavieras’ cost breakdown guide: Custom Home Building Costs
4) Attach the real “contract documents” (not just a pretty drawing)
You need a signed, referenced set of documents that the contract legally relies on, such as:
- Architectural drawings
- Structural drawings
- Mechanical/HVAC design intent (at least at a clear level)
- Finish schedule (flooring, tile, cabinetry, plumbing fixtures, lighting, paint level)
- Allowance schedule (if allowances exist)
If it’s not attached or referenced properly, it’s hard to enforce later.
5) Control allowances so the budget doesn’t drift
Allowances are normal in custom homes. The problem is “soft allowances” with no rules.
Your contract should specify:
- Allowance amounts per category (kitchen, tile, lighting, plumbing fixtures)
- What happens if you pick over the allowance
- Markup rules (if any) and what’s included (delivery, tax, installation)
- The selection timeline and what delays mean for the schedule
A professional allowance system prevents surprise invoices.
6) Make change orders formal, priced, and timed
Change orders are where custom builds either stay clean—or get messy fast.
Your contract should say:
- No change is valid without a written change order
- Each change order must include price and schedule impact
- How change orders are priced (fixed price vs time-and-material)
- When change orders are payable
If you can approve a change by text message, you can also end up arguing about it later by text message.
7) Build a milestone payment schedule that matches real progress
A safe payment schedule is tied to clear milestones, not calendar dates.
Examples of milestone language:
- Deposit (defined)
- Foundation complete
- Framing complete
- Rough-ins complete and passed
- Insulation and drywall complete
- Interior finishes substantially complete
- Substantial completion / handover stage
If a builder asks for large payments “up front” without corresponding deliverables, treat it as a contract issue—not just a financial preference.
8) Clarify timeline, delays, and what “completion” means
Many contracts have a timeline that sounds good but isn’t enforceable.
You want:
- A reasonable start window
- A realistic completion target (or defined phases)
- A clear definition of excusable delays (permits, extreme weather, supply chain disruptions)
- A clear definition of non-excusable delays (poor scheduling, lack of manpower)
Most homeowners don’t need a “perfect” schedule. They need a fair schedule with clear rules.
9) Put permits and approvals into the contract (with responsibility clearly assigned)
In Toronto and many Ontario municipalities, approvals can drive the whole timeline. Your contract must state:
- Who is responsible for the building permit submission and revisions
- Who pays permit fees, resubmission fees, engineering updates, and consultant costs
- What happens if zoning relief is needed (like a minor variance)
If you’re building in Toronto, permit responsibility should never be vague. A good background read for homeowners is Understanding Building Permits in Toronto
, because it helps you ask better contract questions.
10) Confirm insurance, site safety, and WSIB basics
Before signing, ask for proof (or contract commitments) for:
- General liability insurance
- Builder’s risk / course-of-construction coverage approach
- WSIB clearance (where applicable)
- Site safety rules (site access, protective measures, visitor policy)
This protects both sides and reduces conflict when something unexpected happens.
11) Define deficiency management and the handover process
A strong contract defines:
- Walkthrough process
- How deficiencies are listed (written, dated, with photos)
- Target timelines for deficiency fixes
- What counts as deficiency vs normal finish variation
This section alone can prevent months of “back-and-forth” after you move in.
What Tarion warranty covers (and what homeowners often assume incorrectly)
Most homeowners hear “warranty” and assume everything is covered the same way. In reality, warranty coverage is time-based and category-based, and the process matters.
Generally, warranty frameworks often address:
- Workmanship/material issues (within defined periods)
- Certain code-related issues (within defined periods)
- Major structural protection (longer-term category)
But warranty discussions commonly get complicated by:
- Normal shrinkage and minor cosmetic movement
- Owner-supplied items or owner-directed changes
- Maintenance issues (where the homeowner has responsibilities)
- “I don’t like it” vs “it’s defective”
That’s why your contract must be clear about scope, specs, and responsibility. Warranty is not a replacement for contract clarity.
Red flags that should pause the deal immediately
If you see any of these, stop and fix the paperwork before signing:
- The builder won’t provide an HCRA licence number or the legal name doesn’t match the contract
- Warranty is described vaguely (“we’ll handle it, don’t worry”)
- The specs are marketing words instead of real selections (“luxury finishes” with no schedule)
- Payments are not tied to milestones
- No written change order process
- No written timeline (or promises that sound too good to be real)
- Pressure tactics (“sign today or the price changes tonight”)
A quality builder won’t rush you through a contract. They’ll help you understand it.
Final thought from Xavieras Custom Homes
A custom home contract isn’t just paperwork. It’s the foundation of your budget, your timeline, and your peace of mind. When HCRA licensing is verified, warranty responsibilities are clearly written, and your scope and change orders are controlled, the entire build gets smoother—because decisions are made before problems happen.
If you want, send me your current contract outline (even a rough one) and I’ll convert it into a homeowner-friendly “Schedule A” style checklist that matches how custom home projects actually run in Toronto and the GTA.
People Also Ask questions
Is Tarion required for a custom home built on my land in Ontario?
Many owner-land custom builds are treated as contract homes and should follow Ontario’s warranty framework with proper licensing and enrollment steps. The smart move is to confirm the builder’s licensing and get warranty/enrollment responsibilities written into your contract package before signing.
How do I check if a builder is licensed in Ontario?
Ask for the HCRA licence number and confirm the builder’s exact legal name matches what appears on the contract. Don’t rely on brand names alone.
What’s the difference between HCRA and Tarion?
HCRA regulates and licenses builders and sellers. Tarion administers the new home warranty program and the processes and timelines used for warranty issues after possession.
What should be included in a custom home construction contract?
At minimum: scope, drawings/specs, allowances, payment milestones, timeline rules, change order process, permit responsibility, insurance basics, deficiency/handover process, and written warranty information.
What if my builder won’t fix a warranty-related issue?
Start by notifying the builder in writing and documenting everything with dates and photos. If it doesn’t get resolved, follow the formal warranty process and timelines that apply to your situation.
