TRUSTED ADVISOR AND ADVOCATE
TRUSTED ADVISOR AND ADVOCATE
As of February 1, 2021, new home builders and the sellers of new homes ("vendors") in Ontario are regulated by both the Tarion Warranty Corporation and the Home Construction Regulatory Authority.
The Home Construction Regulatory Authority (“HCRA”) regulates the builders and vendors of new homes by requiring them to be registered as such to ensure they meet and maintain specific levels of financial responsibility, honesty, integrity, and legal compliance. The HCRA employs a “Registrar” to make administrative decisions about whether a builder’s licence should be refused, limited, suspended, or revoked. The registration and regulation of builders and vendors is outlined in the New Home Construction Licensing Act, 2017 (“NHCLA”).
The Tarion Warranty Corporation (“Tarion”) backstops mandatory warranties provided by new home vendors for new homes built in Ontario pursuant to the Ontario New Home Warranties Plan Act, 1990 (“ONHWPLA”). Homeowners can seek Tarion's assistance in enforcing warranties against a vendor. If the homeowner is unsuccessful in making a valid claim with a “vendor”, Tarion will provide payment from a guarantee fund. New homeowners can appeal Tarion refusals of compensation or the compensation amount.
Burokas Law acts as a Tarion Lawyer and HCRA Lawyer in representing builders, vendors, and homeowners in their dealings with Tarion and the HCRA. Our services include:
· advocacy and advice when applying for registration with the HCRA;
· compliance advice with the ONHWPLA, the NHCLA, and its regulations;
· conducting hearings at the Licence Appeal Tribunal regarding the refusal, refusal to renew, suspension, or revocation of a registration;
· appealing warranty assessment reports and chargeable conciliations on behalf of builders at Tarion's Builder Arbitration Forum;
· conducting appeals of denied or inadequate compensation on behalf of new homeowners and affected persons at the Licence Appeal Tribunal;
· representing vendors and new home builders in conciliation with Tarion;
· defending charges laid under the ONHWPLA and NHCLAat the Ontario Court of Justice;
· conducting appeals of Licence Appeal Tribunal decisions to Divisional Court and;
· conducting appeals of decisions and sentence at the Ontario Court of Justice.
Registration of New Home Builders and Vendors
The NHCLA prohibits individuals and companies from acting or holding out as “vendor”; selling or transferring a home not previously lived in, or; offering to do so without acquiring registration from the HCRA as a “vendor”. A “vendor” is defined as someone who is selling a home not previously occupied to someone else and includes a builder when the builder sells the new home they built. A registered vendor will receive a vendor “licence” and be considered a “licensee”.
The NHCLA prohibits individuals and companies from acting or holding out as a “builder”; constructing a new home, or; offering to do so without acquiring registration from the HCRA as a “builder”. A “builder” is defined as a person who undertakes the performance of all work and supply of all materials necessary to construct a completed home (ex. one or more self-contained one-family dwellings, detached or attached, condo dwellings etc), regardless of whether the builder is selling the home to the new owner or is under contract by a third party. A registered builder will receive a builder “licence” and be considered a “licensee”.
A builder/vendor applicant is entitled to registration if in the registrar’s opinion:
· the applicant can reasonably be expected to be financially responsible in the conduct of business having regard to their past and present financial position;
· the applicant’s past and present conduct affords reasonable grounds for the belief that they will carry on business with honesty and integrity and in accordance with the law, and;
· neither the applicant, nor any employee or agent has made any false statements with respect to the conduct of the applicant’s business;
· for corporations:
o the corporation can reasonably be expected to be financially responsible in the conduct of business having regard to the past and present financial position of the corporate applicant and its interested persons;
o the corporation can reasonably be expected to be financially responsible in the conduct of business having regard to their past and present financial position of its officers, directors, and all their interested persons;
o the past and present conduct of its officers or directors affords, and all interested persons in respect to the corporate applicant affords reasonable grounds for the belief the corporation will carry on business with honesty and integrity and in accordance with the law;
o no officer or director of the corporation has made any false statement with respect to the conduct of the applicant’s business;
· neither the applicant, nor any interested person in respect of the applicant, has carried on or is carrying on activities that are in contravention of the NHCLA or would be if registered;
· the applicant is not in breach of a condition of the licence it is seeking to renew;
· the applicant meets the prescribed requirements, including competency requirements;
· the applicant has complied with all tax laws and regulations;
· granting a licence to the applicant would not be contrary to the public interest, and;
· the applicant fails to, or refuses to, provide the information requested of him/her/it in relation to the application.
If the Registrar believes the applicant is not entitled to registration, he/she will refuse the application. The Registrar may also refuse to renew, suspend, or revoke a registration if he/she believes they would be disentitled to registration under this same criterion above.
If the Registrar wishes to take any of these administrative actions, he/she must issue a "Proposal” to refuse/refuse to renew/suspend/revoke a registration", which will outline what administrative action is being taken and why. An applicant or registrant (as the case may be) has the ability to appeal this decision to the Licence Appeal Tribunal, an independent adjudicative body that will conduct a hearing to determine whether the Registrar’s proposed action should be carried out or not; or whether some other action should be taken including attaching conditions to an order to register.
Hearings at the Licence Appeal Tribunal are conducted similar to a trial in court, albeit more informally, whereby both the Registrar and the Appellant will have the opportunity to call oral and documentary evidence, challenge the other’s evidence, and make submissions on what the tribunal ought to do. The tribunal will often make findings of fact on the central issues of the case and apply those findings to ultimately decide whether the Registrar’s proposed action should be taken or not.
A registration may be subject to additional conditions that are either prescribed by law, consented to by the applicant, or imposed by the Licence Appeal Tribunal. Consenting to conditions is a common way applicants can alleviate the Registrar’s concerns without having to go to a hearing at the Licence Appeal Tribunal.
The HCRA has a complaints process whereby it processes complaints from the public about possible breaches to the NHCLA and its regulations, and requests relevant information from a licensee. The registrar then has a variety of powers including mediation, written warnings, and require the licensee to take educational courses.
The HCRA employs inspectors (with the assistance of experts) to inspect the business premises of a licensee and review their books and records to ensure compliance with the NHCLA.
The NHCLA contains a series of offences. These include:
· knowingly furnish false information in an application for registration or any statement required by the NHCLA;
· failing to comply with a condition of a licence, and;
· failing to comply with the NHCLA, its regulations, or an order made under it.
Penalties for being found guilty of these offences range from a $50,000 fine ($250,000 for corporations) and imprisonment up to two years less a day. Officers and directors of corporations, partners in partnerships, and other similar persons in charge who fail to take reasonable care to prevent a licensee from committing an offence is guilty of an offence.
These offences are tried in the Ontario Court of Justice similar to a criminal trial. Although a finding of guilt will generate a criminal record, it will seriously prejudice a builder or vendor’s ability to obtain and retain registration from the HCRA.
New Home Warranties - Tarion
The ONHWPLA mandates builders and vendors to provide a warranty to owners that can be enforced by Tarion. The warranty cannot be waived or altered by the owner despite any other rights or warranty they may have. The new home warranties plan covers:
· compensation for delayed closing or occupancy;
· deposit protection;
· unauthorized substitutions;
· financial loss for contract homes;
· certain defects in work and materials (1-2 years);
· major structural defects (7 years), and;
· common (shared) elements of condominiums.
The warranty does not cover:
· defects in materials, design, or work supplied by the new homeowner;
· normal wear and tear;
· normal shrinkage of materials;
· damage cause by improper ventilation or maintenance;
· alterations made by the owner;
· subsidence (sinking of land) or "acts of god";
· defects in work or material specified and accepted in writing by the owner at the date of possession.
Tarion has a guarantee fund to compensate owners who qualify for the coverage described above but their vendor will not compensate them. The owner’s eligibility for compensation from the guarantee fund depends on the type of claim made.
For unreturned deposits, an owner can receive compensation if they exercised a statutory right to rescind their contract or they have a cause of action (an actionable case in civil court) from the fact that the title to the home has not been transferred because the vendor has gone bankrupt or fundamentally breached the contract.
For owners of land, an owner can receive compensation if the builder fails to substantially perform the building contract equal to the amount paid by the owner exceeds the value of the work and materials supplied.
For structural defects, an owner can receive compensation for the cost to remedy the structural damage if the claim is made within seven years (subject to further conditions).
For other defects, an owner can receive compensation for damages resulting from a breach of warranty listed above if the person became an owner through the transfer of title or substantial performance of a building contract and they have a cause of action for damages resulting from the breach of warranty.
In considering the amount of compensation, Tarion will consider any benefit, compensation, indemnity, or value of work and materials provided by any source.
Once Tarion has made decision regarding whether a person or owner affected is entitled to compensation, it will serve them with notice of their decision and written reasons. The person or owner has the right to appeal Tarion’s decision to the Licence Appeal Tribunal where a hearing will be held regarding the propriety of the decision. After a hearing the tribunal has the power to direct Tarion to take any action considered appropriate and substitute it’s opinion for that of Tarion's.
Owners can also request Tarion to conciliate any dispute between them and registered builder/vendor whereby Tarion will request particulars from both parties to effect conciliation.
Builder Arbitration Forum
Tarion administers a binding arbitration process to deal with warranty related disputes between builders and Tarion by utilizing independent arbitrators who hold informal hearings. Issues heard by this mode of appeal relate to:
· whether an alleged defect or deficiency in a Warranty Assessment Report is warranted or not;
· whether a conciliation is chargeable, and;
· whether Tarion should be ordered to reimburse the builder for repair work or compensation made "under protest".
These issues are determined by an arbitrator after an informal hearing. The entire timeline from receiving a warranty assessment report to a hearing is approximately 84 days.
If you are a builder, new home vendor, or owner seeking compensation from Tarion's guarantee fund, and you need assistance protecting your interests, please contact Burokas Law