Provincestripping Tarion of builder-regulator role
The Ontario government is stripping Tarion new home warrantycorporation of its responsibility to regulate the province’s homebuilders.
“Tarion’s multiple roles and responsibilities can give riseto a perception of conflict of interest, and could result in an actual conflictor conflicts of interest,” Government and Consumer Services Minister TracyMacCharles said Tuesday. “The new home building sector is an important driverof Ontario’s economy and, quite frankly, I believe it deserves a stand-aloneregulator.”
Tarion, created by the province 40 years ago, fulfilsmultiple roles, including rule-maker, homebuilder-regulator, warranty provider andadjudicator between buyers and builders.
An ongoing Starinvestigation has found Tarion was keeping secret records of poor orincomplete work in new homes. The Star found many cases where Tarion ruledproblems in new homes should be fixed, but the deficiencies were not publishedon the corporation’s public builder database.
The government’s planned bill will draw from a report byformer associate chief justice J. Douglas Cunningham, who examined Tarion andthe Ontario New Home Warranties Plan Act.
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While a new standalone regulator for builders is to becreated, Tarion will remain responsible for administering warranty claims madeby homebuyers on deficiencies in new homes and condos, the minister said.
The government will also assume responsibility for approvalof warranty terms on new builds. Since Tarion’s creation in 1976, the corporation’sboard of directors — half of whom are developers — has had the unique power toenact its own regulations, such as those governing warranty terms and builderperformance.
“Tarion is too far removed from government,” MacCharles saidTuesday in a speech to the Empire Club of Canada. “We believe that consumerscan be better protected by giving government the lead in making rules andsetting standards.”
MacCharles added that she has asked Tarion to bring in newdeposit protection measures that better reflect today’s home prices. Themaximum protection for new condos in Ontario is currently $20,000 and $40,000for new homes. The new protections would be implemented Jan. 1, followingconsultations, the minister said. In addition, deposits on upgrades and amenitiesin new builds will be added to the warranty plan.
During its investigation, the Star heard from manyfrustrated and angry families who said they struggled to get what seemed likesimple defects, such as incomplete painting, cracks in a garage floor andfaulty furnaces, recognized as warrantable repairs by Tarion.
MacCharles said her government believes a homeowner shouldonly have to establish credible symptoms of a defect, but should not have toprove the cause of that defect.
The province appointed Cunningham in late 2015 to conduct anindependentreview following the Star’s stories and calls for reform fromhomeowners and opposition MPPs. Cunningham interviewed more than 200individuals, including homeowners, builders, engineers and home inspectors. Hisreport contains 37 recommendations.
New home warranties should be provided through acompetitive, multi-player model, as other provinces, such as Alberta and B.C.,do;
Warranties should be characterized as insurance productswith oversight by the insurance sector regulator;
A code of ethics should be created for builders and vendors;
The online builder directory should be more transparent andconsideration should be given to including information about any disciplineproceedings and provincial offences;
Condominium-specific provisions for warranty coverage shouldbe reviewed, including timelines for submitting claims for defects given thecomplexities of condominium ownership.
In an interview, MacCharles said moving to a multi-providermodel for warranties would be a “very significant change” and that she isconfident the plan her government is proposing “will solve most of theproblems.”
Tarion spokesperson Laurie Stephens told the Star theorganization is worried some of the recommendations in Cunningham’s report“will have the effect of seriously weakening consumer protection, increasingcosts for the administration and regulation of the warranty — new costs thatnew home buyers will ultimately have to pay — and creating barriers to entryfor builders that could further impact a marketplace already struggling to keeppace with consumer demand.”
She said some recommendations that would improve consumerprotection, specifically those dealing with illegal building, should beimplemented quickly.
Stephens stressed that Tuesday’s announcements will resultin no immediate changes to the warranty process in Ontario. “It is business asusual for Tarion. Consumer protection remains our number one priority, as ithas been for more than 40 years. We encourage new home buyers, owners orbuilders to contact Tarion if they have any questions.”
Joe Vaccaro, CEO of the Ontario Home Builders’ Association,which represents more than 1,000 builders across the province, said hisorganization continues to support a mandatory warranty requirement in Ontarioand that “separating the regulator from warranty provider should resolve theperceived conflict of interest in Tarion’s structure.”
In 2015, there were more than 350,000 homes under warranty.
Homeowner Alex Patinios, who spent seven years fightingTarion over what he considered hundreds of deficiencies in his new home and whofeels he never received an equitable settlement, called Cunningham’s report“thoughtful and balanced.”
“It is a great first step,” Patinios said. “It’s stillcritically important that Tarion has more oversight by government and the Ontarioombudsman. Tarion should be more transparent with salaries and provide moreaccess for homeowners with questions. I am hopeful that the government willfollow through with all of Justice Cunningham’s recommendations.”
Karen Somerville, president of Canadians for Properly BuiltHomes, a national not-for-profit consumer organization that has long called forchanges to Tarion, said she is pleased with Cunningham’s recommendation toseparate the warranty provider from its regulatory role.
“But the government needs to go further and end Tarion’smonopoly,” she said. “A competitive model, like other provinces haveintroduced, will further strengthen Ontario’s new home warranty system.”