Canada's Condominium Magazine

Preliminary report released on new home warranties in Ontario, final expected this fall

Last November, the Ontario government initiated an independent review of the Ontario New Home Warranties Plan Act and the Tarion Warranty Corporation that administers it. The Act was passed in 1976 to protect new home buyers, and the not-for-profit Tarion corporation was created and given the responsibility of administering warranties and of regulating builders and vendors of new homes in Ontario. The review of the Act was undertaken by a special advisor appointed for the purpose, with the aim of identifying opportunities to improve consumer protection, given that so much has changed in the home building industry over the past forty years. One of the biggest of these changes is the fact that today more than 50 per cent of all new homes built in Ontario are condominiums, which differ in many key legal and structural ways from freehold homes. Should a new section be added to the Act to better reflect these differences?

The special advisor, Justice Douglas Cunningham, QC, has now released his preliminary report, which addresses that and many other important questions. His final report will follow later this fall. In consulting with builders, condominium boards and associations, consumer advocacy groups, real estate professionals, lawyers and home inspectors among others, Justice Cunningham identified seven key topics to be dealt with in his final report, and summarized these topics in the following questions:

  • What model would best deliver consumer protection? Can Tarion effectively perform each of the roles of regulator, warranty provider, adjudicator and rule maker?
  • Is there a way to resolve warranty disputes more effectively and expeditiously?
  • How can Tarion best ensure that consumers are educated about the new home buying process and the warranty program?
  • What is the appropriate warranty/deposit coverage and duration?
  • How should Tarion regulate builders and vendors, in order to drive quality in the home building sector and protection for consumers?
  • What should be the composition and skill sets of the Tarion Board of Directors, and how should members be selected to best meet Tarion’s mandate under the ONHWP Act and its fiduciary obligations?
  • What additional measures, if any, could be implemented to improve accountability, transparency and oversight?

Cunningham notes that more than 85 per cent of new home owners in Ontario never submit a claim to Tarion, and that the “vast majority” of claims submitted are resolved. It is, however, in the “seemingly legitimate and serious concerns” of those who expressed dissatisfaction with their new homes that the Justice sees an opportunity to learn and improve the program.

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For example, at present Tarion is the only new home warranty provider in Ontario. In reviewing this business model, Cunningham identified four different options that could be considered for Ontario, including keeping the present model, or introducing a multi-provider model as is done in some other provinces. A third option would be to eliminate warranty program administration altogether, leaving dispute resolution to the courts, as in California. Voluntary warranty coverage is a fourth option.

Dispute resolution was perhaps the most contentious issue to be dealt with, and the topic to which the greatest attention is paid in the preliminary report. Key issues around dispute resolution include processes and timelines for making a claim and for needed repairs to be done. Options to be considered include extending the time during which a claim submission may be made while shortening the time during which builders must make repairs.

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Consumer education is vital to consumer protection; therefore, Cunningham says, new home buyers need to learn more about the role of Tarion and the various warranty claim processes, about proper home maintenance, and even about the construction process itself. To this end, Tarion, builders, real estate professionals, home inspectors and others with a role in the new home buying process should help to educate consumers about the new home warranty program. A possible outcome could be the establishment of some form of Consumer Advisory Office to help home buyers navigate the claims process.

Most stakeholders in Ontario’s new home warranty program, from home buyers to builders to vendors, believe, says Cunningham, that the program should remain mandatory. The real issue is “how and by whom it should be delivered.”

The public are invited to read the interim report and provide their feedback by email by October 14, 2016.

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