By: Jordan T. Overholt, J.D., April 20, 2017
On December 14, 2016, the provincial government received the final report on the Ontario New Home Warranties Plan Act and the Tarion Warranty Corporation itself.
One of the most interesting aspects of this report is its criticism of how the Tarion Warranty Corporation currently manages three distinct (and seemingly conflicted) aspects of the new home warranty scheme, being (1) warranty provision to buyers, (2) builder/vendor regulation, and (3) buyer-builder/vendor dispute adjudication. The report concludes that by assigning these tasks to three distinct, independent bodies, the new home warranty scheme would function better for all parties involved.
The following is a summary of the report’s proposals:
- Tarion Warranty Corporation’s monopoly on new home warranty protection should end, and warranty protection should instead be offered by both government corporations and private insurance companies in competition with one another in the private marketplace.
- New home warranty protection should be treated as any other insurance product, which would bring it within the scope of existing consumer-protection legislation.
- New legislation should set minimum standards for new home warranty “insurance policies”.
- A new not-for-profit corporation should be created to assume responsibility for all existing Tarion Warranty enrolments, and it too should be permitted to offer new home warranty “insurance policies” in the private marketplace.
- A separate entity should be created to regulate builders/vendors, and it should be structured as an administrative authority, much like those governing the electrical safety, real estate, and motor vehicle sales sectors. This regulator should have the same accountability, transparency, and oversight requirements as all other similar regulators.
- New legislation should provide this builder/vendor regulator with enhanced compliance and enforcement tools, including the ability to:
- levy administrative (monetary) penalties against builders/vendors;
- require that builders/vendors disclose financial and other important information, when necessary;
- impose individual conditions on builders/vendors at any time, not just when they are initially registered or when they apply for registration renewal;
- impose compliance orders on builders/vendors, when necessary;
- seek court approval for the appointment of receivers or receive managers in situations where there is evidence of builder/vendor financial and/or governance problems and a corresponding risk to the public;
- suspend builder/vendor registration immediately, if doing so is necessary to prevent harm to the public; and
- apply to court for an order to freeze builder/vendor assets, if necessary.
- All builder/vendor applicants for registration should be required to meet minimum technical competencies prior to being registered, as should any of their employees carrying out key functions and responsibilities (like site managers).
- There should be mandatory continuing education requirements for all builders/vendors and their key employees.
- A code of ethics should be established for builders/vendors.
- The online builder/vendor directory should be significantly overhauled so that, going forward, any member of the public can search for a builder/vendor by name and obtain important information about him/her/it, including details of past disciplinary proceedings, provincial offences, and building defect/deposit/delayed closing compensation warranty claims.
On March 28, 2017, the provincial government signalled its intention to move ahead with these proposals, so it will be interesting to see how this impacts the current process of buying and selling a new home in the months (and years) to come.