As some of our readers may recall, we mentioned in our first blog of 2018 that the provincial government has passed the Protection for Owners and Purchasers of New Homes Act, 2017 (the “Act”), which relates to the new home warranty program administered by Tarion. What will this mean for owners who purchase new condominiums?
On October 5, 2017, Ontario’s Minister of Government and Consumer Services (the Honourable Tracy McCharles) introduced the Strengthening Protection for Ontario Consumers Act, 2017.
If passed, this new legislation would bring dramatic changes to the new home warranty process in Ontario, following on the heels of Justice Douglas Cunningham’s comprehensive review of Tarion (the non-profit corporation that currently oversees new home warranties in Ontario).
The notice from the Ministry includes the following:
“The legislation (the Strengthening Protection for Ontario Consumers Act, 2017), if passed, would help strengthen consumer confidence in Ontario’s new home warranty program, promote properly built residential construction, and further enhance consumer protection. Proposed changes would:
• Provide for two administrative authorities – one to administer the new home warranty program and one to regulate new home builders and vendors;
• Make the dispute resolution process easier for homeowners if they discover a problem in the construction of their new home;
• Strengthen the regulation of new home builders and vendors;
• Give government power to make rules and set standards; and
• Introduce modern oversight measures to improve accountability and transparency.
Should the bill pass, the ministry plans to consult with the public and other stakeholders during the regulation development phase on proposed regulations that would give effect to these legislative changes.”
We wholeheartedly support these proposed changes, which should greatly improve the warranty process for new home owners in Ontario. See our previous blogs respecting Justice Cunningham’s Review. And stay tuned for our further blogs on this topic, as we receive the draft new Regulations.
As readers will know from my previous blogs on this issue, Tarion is under review.
Justice Douglas Cunningham has released his final report containing over three dozen recommendations about new home warranties in Ontario and about Tarion, the non-profit corporation that currently administers Ontario’s new home warranty program.
Here are some of the key findings and recommendations in Justice Cunningham’s report:
1. Under the current arrangement, Tarion plays all of the following roles:
⋅ Provider of the Warranty Coverage
⋅ Administrator of the Warranty Program
⋅ Adjudicator of Disputes
⋅ Regulator of Builders and Vendors
⋅ Maker of Rules respecting the types and levels of Warranty Coverage
Justice Cunningham says that this “multiplicity of roles, at a minimum, gives rise to a perception of conflict of interest and can also result in actual conflicts of interest”
2. A new not-for-profit corporation should be established to manage the warranties for homes currently enrolled with Tarion. This new not-for-profit corporation could also participate as a warranty provider in a new competitive model (described in 3 below).
3. In terms of warranty providers: Justice Cunningham says: “Warranty coverage would move from today’s monopoly, with Tarion as the only provider, to a multi-provider insurance system. The warranty coverage should be an insurance product” (as exists now in other provinces). Homeowners, would be required to deal with the warranty provider chosen, for their home, by the Builder.
4. The warranty provider would still attempt to resolve warranty claims (just as insurance adjusters do in relation to other types of insured claims). But unresolved disputes would be taken to an independent, neutral adjudicator. Justice Cunningham says: “Where there is a dispute, a dispute resolution process must not only deliver justice but also be seen to deliver justice”.
Justice Cunningham says there should be an independent dispute resolution body that has a process for engaging a neutral adjudicator from a roster of adjudicators having practical knowledge of disputes relating to new home construction. The independent adjudicator would decide the dispute. Costs of the process (for the homeowner) would be limited to relatively-low administration fees (that would be fully refundable if the homeowner succeeds on only one claim). [The report also says that special procedures, costs and timelines might apply to warranty claims involving condominium corporations – recognizing the larger size and complexity of such claims.]
[Many commentators – including me – had recommended that there be independent adjudicators for warranty disputes.]
5. The claimant should only be required to prove the symptom resulting from a defect – not the specific cause – and “if an expert is required, an adjudicator should be able to engage the expert directly at no cost to the homeowner. The expert would be engaged in a neutral capacity to provide input to the adjudicator and not as an advocate for one or the other of the parties. As with the selection of the adjudicators, experts should be neutral and preferably drawn from a roster established independently of the warranty providers.”
[I particularly like these recommendations about the use of experts. In my experience, input from an expert, like an engineer, architect or other building scientist, can be extremely beneficial – often essential – to determining the full nature and extent of a building deficiency, and to determining a complete and reasonable repair. At present, thorough input from an expert is often lacking, simply because the claimant can’t afford it. (This was another of my comments to Justice Cunningham – and I’m sure others made similar comments.)]
6. The warranty claims process should continue to be simpler and speedier than ordinary Court claims. But claimants should have the right to pursue ordinary Court claims if they wish. Furthermore, the limitation period (for commencement of ordinary Court claims) should be suspended during any statutory warranty claims process.
7. Builder and vendor regulation should be delivered through a new regulator – a provincial administrative authority operating separating from, but in cooperation with, the warranty providers.
8. There should be a code of ethics for Builders and Vendors; and there should be required continuing education for Builders and Vendors.
9. Information about Builders and Vendors should be more accessible and more transparent.
10. Rule-making respecting the types and levels of warranty coverage should be subject to greater government oversight. Government should make the final decisions in these areas (after thorough consultation with the new home construction sector and with consumers).
11. There should be enhanced consumer education about Home Purchasing and Home Ownership, including education about the Warranties and about the Warranty Process.
12. New home deposit protection should be reviewed / increased to reflect current markets.
We don’t yet know for sure what steps the province will take in light of Justice Cunningham’s report; but initial indications are that the province may well implement many of Justice Cunningham’s recommendations. At a speech given on March 28th, Government and Consumer Services Minister Tracy MacCharles had the following to say: “The new home building sector is an important driver of Ontario’s economy and, quite frankly, I believe it deserves a stand-alone regulator” and “We believe that consumers can be better protected by giving government the lead in making rules and setting standards.” See also the Ministry’s Press Release from the same date.
The province is expected to present a draft bill in the coming months. For more information, go to the Ministry’s website.
Stay tuned to Condo Law News for more blogs about the changes to Tarion.
As our readers will know, Tarion is currently under review. See our previous blog posts Tarion is Under Review and Tarion Program Review – Interim Progress Report Released to learn more.
Justice Douglas Cunningham has completed his Interim Progress Report. In my view, the report is excellent – very thorough and well-written.
Justice Cunningham is now seeking additional input before he prepares his final recommendations to the Minister of Government and Consumer Services later this year.
Toward this end, I look forward to participating in a further focus group session, scheduled by Justice Cunningham for the afternoon of October 4, 2016.
Here are my overall comments about the Tarion Warranty Corporation.
I’m primarily concerned about the role of Tarion in the dispute resolution process (respecting construction deficiencies) and in relation to required deficiency repairs.
In my view, Tarion is essentially the insurer for new home builders in Ontario. And I think Tarion should be recognized as such. Therefore, I don’t have any particular problem with the make-up of the Tarion Board, or with Tarion passing by-laws and otherwise setting warranty coverage and handling the regulation of builders (all under the oversight of the province). My view is that Tarion should be recognized as fulfilling these functions in its role as insurer. And as an insurer, Tarion can certainly be involved in the dispute resolution process, but it should not be the decision-maker in the dispute resolution process. Furthermore, Tarion (and the builder) should not be deciding on required repairs without direction from an independent expert who is looking out for the best interests of the “home and the homeowner”.
For more information about the Tarion Warranty Corporation, contact us.
As you may recall from our previous posts on the subject, the Tarion Warranty Program is under review. The Honourable Justice Douglas Cunningham was appointed in 2015 by Ontario’s Minister of Government and Consumer Services to review Tarion’s process and warranty coverage.
Jim Davidson offered comments to Justice Cunningham, and has been honoured to participate as part of a “focus group” providing feedback to Justice Cunningham respecting Tarion.
Justice Cunningham has now released his Interim Progress Report, which outlines the key concerns that he is exploring. The report can be found here.
In the interim report, Justice Cunningham has listed his key questions as follows:
- 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 Ontario New Home Warranties Plan Act and its fiduciary obligations?
- What additional measures, if any, could be implemented to improve accountability, transparency and oversight?
Justice Cunningham has indicated that these questions will be the focus of his ultimate report. He is currently inviting input from the general public, which may be submitted by email to: TarionReview@ontario.ca. Input must be submitted by October 14, 2016.
To read more about the review, see our previous blog post Tarion is Under Review.
And if you have further questions about the Tarion Warranty Program or the review process, contact our Condominium Law Group.