Volume 22, Issue Number 4, Summer 2017
Purchasing/Living in a Condominium

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Changes at Tarion Warranty Corporation

Consumer Protection, Warranty Coverage: What's Going to Change at Tarion?

By Henry Jansen | Other articles by Henry Jansen

Everyone needs a place to live. Currently, every 1 in 8 people across Canada live in a condominium. Today over 50% of all new homes built are condominiums. In Ontario, Tarion is the builder regulator and warranty provider and implements the Ontario New Home Warranty Protection Act.

The warranty protection program has been under review since November 2015, when the Ontario Government initiated a review of the Tarion organization, warranty coverage and builder regulation. Retired Justice Cunningham was asked to complete this review and make recommendations for changes or improvement. CCI was and is at the table, advocating for our members and all condominium corporations across Ontario. Justice Cunningham has now completed his final report, which was released on March 28, 2017. While some of the recommendations have little impact on condominium living, most recommendations will improve the conditions under which warranty coverage will be delivered and protect owners when dealing with deficiencies. The New Home Warranty Act started in 1976, so this review reflects growing pains. Buildings have become more complicated and the legislation around builder registration, consumer protection and warranty needs to be brought up to date. We have taken Justice Cunningham's consolidated list of the recommendations and added CCI's commentary regarding impact.

Delivery of Warranty Protection for New Homes

1. New home warranty protection should be delivered through a competitive model.

Tarion, which administers the Ontario New Home Warranty Protection Act ,is the only insurance and warranty provider for new homes in Ontario. The recommendation is to eliminate this monopoly and have competitive programs, long term.

2. Minimum standards for mandatory warranty protections should be set out in legislation.

This recommendation takes the rules around minimum standards out of the hands of Tarion and makes it the government's responsibility by incorporating minimum standards into the legislation.

3. Warranty protection should be treated as an insurance product with oversight by the insurance sector regulator.

Warranty protection will become a regular insurance product rather than a monopolized surety fund administered by Tarion.

4. A new not-for-profit corporation should be established to assume responsibility for existing enrolments and be permitted to participate in the competitive model.

This provides protection to existing homeowners. You do not need to worry if you have already purchased a new home.

Regulation of Builders and Vendors

5. A separate entity should regulate builders and vendors.

The intent is to regulate builders and vendors separately from the warranty coverage. This will stop the potential "conflict of interest".

6. The regulator entity for builders and vendors should be structured as an administrative authority.

This is a balance of allowing industry input and government approval.

7. The new regulator should be subject to accountability, transparency and oversight requirements that align with provisions in place for similar administrative authorities.

Currently Tarion has rather loose accountability reporting. This eliminates this problem.

8. The legislation should articulate the purpose of builder and vendor regulation: to protect consumers and to promote high quality new home construction. This will put into words what consumer protection means.

This should provide better quality to home purchasers.

9. The legislation should include minimum requirements for registration as a new home builder or vendor.

Currently, Tarion administers the minimum requirements. Justice Cunningham is suggesting the addition of minimum requirements into the legislation. This eliminates "the guess work."

10. Appeals of registration related decisions should continue to be to the Licence Appeal Tribunal.

This is an existing process that already works. No need for change here.

11. The legislation should provide for an enhanced compliance and enforcement framework for the regulator.

Currently, Tarion has limited compliance and enforcement tools. This recommendation allows a regulator to enforce the rules or a builder/vendor will have penalties.

12. All new applicants for registration as a builder should be required to meet minimum technical competencies.

Tarion has already made this change for new applicants. Writing this in a more defined way into the legislation will continue to ensure higher quality new home builders.

13. Employees of builder registrants carrying out key functions and responsibilities of the builder, such as site managers and those officers, directors, senior executives and partners, as are stipulated in regulation, should be required to meet minimum technical competencies.

Buildings are complicated. It takes more than one person to build a community. This change defines the minimum technical competencies for those involved. This is a good thing.

14. There should be mandatory continuing education requirements for all registrants and other individuals required to meet technical competencies.

Again, making the quality of builders more robust. A good move towards ensuring consumer protection.

15. A code of ethics should be established for builders and vendors.

While many builders and vendors are part of the Ontario Home Builders Association which requires its members to adhere to a code of ethics, there is no mandatory requirement. This will establish a mandatory code of ethics under the scrutiny of the proposed regulator.

16. The current builder directory should be enhanced to improve the accessibility and transparency of information that is available on the directory.

Currently, Tarion has not published builder issues consistently on the builder on-line directory. The goal is to provide more information for consumers to make better informed decisions.

17. The regulator should adopt a proactive approach to sector outreach.

This is to address all of Ontario. Many small or remote communities do not have access to Tarion. This recommendation, whether practical or not, is intended to provide all Ontarians with better consumer protection.

18. The board of the new regulator should continue to have strong builder expertise.

The regulator, which will not be Tarion, stills needs to have people with intimate builder expertise. While builders may not have control of the regulator board, builder expertise and experience are needed.

Dispute Resolution and Adjudication

19. Where homeowners disagree with a decision of a warranty provider they should have access to neutral and independent adjudication delivered by a body separate from the warranty provider.

Again, this is an independent model of reviewing decisions not made by the actual warranty provider. This is a good improvement to the current process.

20. There should continue to be a process for a court to review an adjudicator's decision.

This process exists and Justice Cunningham is recommending to keep it.

21. Homeowners should continue to have a right to sue.

In any democratic society, you have rights. You currently have this right and will continue to have this right.

22. Each warranty provider should be required to have an internal dispute resolution process in place to facilitate the resolution of disputes between new home owners and builders and an internal review process for its decisions.

This intent of this process is to try and resolve disputes outside of the courts, hopefully saving time and saving money.

23. The adjudicator should be empowered to use a range of hearing options from paper hearings, telephone conference hearings and technology based hearings such as online, through to in-person hearings or a combination of these processes.

This again is dispute resolution. This recommendation is to fit the process to the severity of the dispute. This will save time and money for the homeowner and the builder.

24. Costs of an adjudication should be set by the adjudicator with limited power to award costs against the homeowner in exceptional circumstances only.

This is to protect homeowners from high costs when submitting claims. The costs are recommended to stay at the same administrative fees in effect today.

25. The onus on the homeowner in advancing a warranty claim should be clearly articulated in the legislation and provide that the onus on the homeowner is to establish the credible symptoms of a defect and not the cause of a defect.

The builder is the expert on home building and the homeowner expects a final product. This clarifies the "muddy" water of who has to prove a defect; it is the builder's responsibility not the homeowner.

26. Warranty providers should be required to clearly communicate their policy on use of experts in evaluating claims and an adjudicator should be permitted to engage an expert with responsibility for the cost of the expert determined by the adjudicator.

There currently are no rules regarding hiring experts. This recommendation allows an adjudicator to engage an expert from an approved list with no cost to the homeowner.

27. The rules of procedure that apply to an adjudication hearing should be structured to support an accessible, affordable and timely process, with attention to the needs of self-represented homeowners.

This recommendation provides an ability to respectfully represent yourself in the adjudication process.

Rule-making and Standards Setting

28. Government should have final approval of rule-making on warranty protection and standards for builder and vendor registration.

This removes any conflict of interest between builder and warranty protection.

29. Government, in collaboration with affected parties, should establish more robust, transparent, inclusive and regular processes for reviewing warranty rules and standards for builder and vendor registration.

This keeps the decision or approval process with government and invites knowledgeable industry partners such as home builders or building officials to provide input into warranty rules and standards.

30. Government should establish a more robust, transparent, inclusive and regular process for reviewing the Construction Performance Guidelines and consider incorporating the Guidelines into regulation.

Currently this sits with Tarion and will move this to the regulator instead of the warranty provider.

Consumer Education

31. The regulator, warranty providers, and independent adjudication entity should be required to provide consumer education.

More consumer education is a good thing.

32. Consumer education should be accessible and delivered in a variety of formats including paper, electronic, online and in person and efforts made to engage more directly with consumers, particularly condominium boards.

The education is to be inclusive and directed at various audiences including condominium boards.

33. The regulator and warranty providers should actively engage with other parties who can support their consumer education responsibilities.

CCI can definitely help with this one. We already have the programs in place to provide education.

Other Matters

34. An immediate review should be initiated to consider the adequacy of current deposit protection rules.

Home prices continue to rise and security deposits have not changed since 2003. It is time for an update.

35. All new homes should have warranty coverage even if owner built and intended for personal occupation.

Currently there is a loop hole in the legislation allowing an owner to build a home for their personal residence. In many cases these homes get sold at a later date without warranty coverage. This recommendation closes this loop hole.

36. Key definitions and terms that have been problematic over the years should be clarified, including the definitions of builder and vender, what constitutes a home for warranty coverage purposes and what is meant by "previously occupied."

This recommendation is an attempt to "clean-up" terms which have not been clearly defined. It is an attempt to provide better consumer protection.

37. A review of the condominium specific provisions of warranty coverage, including timelines for submitting claims, should be undertaken to ensure they adequately address the complexities of condominium ownership and the shared responsibilities of unit owners and the condominium corporation.

This recognizes that condominium communities are complex and have specific issues with warranty coverage. Justice Cunningham is suggesting that specific legislation should be written for condominiums.

This is a summary overview of Justice Cunningham recommendations. For Justice Cunningham's complete report see www. ontario.ca/document/final-report-reviewontario- new-home-warranties-plan-actand- tarion-warranty-corporation.

CCI will continue to follow the next steps and be at the table to advocate for positive change on your behalf. Stay tuned for future updates in the Condovoice.