Why we need a Danish housing ‘Lemon Law’
Home inspections are an important part of buying a house.
By Mark Weisleder | Fri Jul 1 2011
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What we need in Ontario to protect resale home buyers from hidden defects is a lemon law like the one they have in Denmark.
Reader Anthony Caruso, living in Aalborg, reminded me that the Danes have a type of insurance — split equally between buyer and seller — that protects against unforeseen defects discovered after closing.
The policy costs between $1,200 and $3,000, depending on the age of the home, and is dependant on a home inspection. It will last for up to 10 years. The seller must not have done anything to deliberately cover up a defect or they may be held responsible later.
The insurer will then pay for hidden defects as they occur, as well as the costs of suing a seller who may have committed a fraudulent act in covering up any defects.
If Ontario had a similar process, I have no doubt it would result in sellers being more honest about the condition of their properties — and buyers, in turn, being more satisfied and protected.
But it won’t be easy. Kevin Hamilton of Moncton-based Lux Residential Warranty Program Inc. has offered a CMHC-approved new home warranty plan for Atlantic Canada for the past eight years. They are now finalizing a warranty plan that will soon be available for resale home buyers in Atlantic Canada and Ontario.
Their website lists all the things that could go wrong with your home after closing. There is also a detailed exclusion clause as to what will not be covered, including anything containing asbestos, flashing eaves, sewage backups or where there has been improper ongoing maintenance.
The maximum liability for any claim under this policy is $500 to $2,500, depending on the problem; the average premium will be about $385. Most buyers who find serious issues after closing need to spend much more than this. Still, this is a step in the right direction and Hamilton says they hope to increase these coverages as they learn more.
The lemon law column prompted a lot of mail from unhappy buyers, tradespeople, home inspectors and insurers. They all agree the current system does not work and buyers need much better education and protection when buying a resale home.
Doug McAllister, an electrician from Sudbury, commented that if he performs shoddy work, he will be held responsible. He figures he is probably more qualified than most home inspectors and says it is not right that anyone can put out a home inspector sign after taking courses for two weeks.
I think the government should get things going with regulations or a challenge to the home-inspection industry to develop continuing educational standards and avenues for consumer complaint.
Insurers can help by developing products that protect resale homebuyers.
In the interim, I encourage every resale homebuyer to include a clause in any contract that the seller represents and warrants that during their ownership they never experienced any water penetration, and if they have, to provide details of any repair work done.
If the seller refuses to sign, then ask for a more detailed inspection by a basement water or mould specialist, or adjust the price of your offer.