Province stripping Tarion of builder-regulator role

Citing ‘conflict of interest’ concerns, the Ontario government will create a standalone home builder regulator separate from the warranty provider.

Thestar.com
March 28, 2017
By Kenyon Wallace

The Ontario government is stripping Tarion new home warranty corporation of its responsibility to regulate the province’s homebuilders.

“Tarion’s multiple roles and responsibilities can give rise to a perception of conflict of interest, and could result in an actual conflict or conflicts of interest,” Government and Consumer Services Minister Tracy MacCharles said Tuesday. “The new home building sector is an important driver of Ontario’s economy and, quite frankly, I believe it deserves a stand-alone regulator.”

Tarion, created by the province 40 years ago, fulfils multiple roles, including rule-maker, homebuilder-regulator, warranty provider and adjudicator between buyers and builders.

An ongoing Star investigation has found Tarion was keeping secret records of poor or incomplete work in new homes. The Star found many cases where Tarion ruled problems in new homes should be fixed, but the deficiencies were not published on the corporation’s public builder database.

The government’s planned bill will draw from a report by former associate chief justice J. Douglas Cunningham, who examined Tarion and the Ontario New Home Warranties Plan Act.

While a new standalone regulator for builders is to be created, Tarion will remain responsible for administering warranty claims made by homebuyers on deficiencies in new homes and condos, the minister said.

The government will also assume responsibility for approval of warranty terms on new builds. Since Tarion’s creation in 1976, the corporation’s board of directors - half of whom are developers - has had the unique power to enact its own regulations, such as those governing warranty terms and builder performance.

“Tarion is too far removed from government,” MacCharles said Tuesday in a speech to the Empire Club of Canada. “We believe that consumers can be better protected by giving government the lead in making rules and setting standards.”

MacCharles added that she has asked Tarion to bring in new deposit protection measures that better reflect today’s home prices. The maximum protection for new condos in Ontario is currently $20,000 and $40,000 for new homes. The new protections would be implemented Jan. 1, following consultations, the minister said. In addition, deposits on upgrades and amenities in new builds will be added to the warranty plan.

During its investigation, the Star heard from many frustrated and angry families who said they struggled to get what seemed like simple defects, such as incomplete painting, cracks in a garage floor and faulty furnaces, recognized as warrantable repairs by Tarion.

MacCharles said her government believes a homeowner should only have to establish credible symptoms of a defect, but should not have to prove the cause of that defect.

The province appointed Cunningham in late 2015 to conduct an independent review following the Star’s stories and calls for reform from homeowners and opposition MPPs. Cunningham interviewed more than 200 individuals, including homeowners, builders, engineers and home inspectors. His report contains 37 recommendations.

Among them:

• New home warranties should be provided through a competitive, multi-player model, as other provinces, such as Alberta and B.C., do;

• Warranties should be characterized as insurance products with 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 and consideration should be given to including information about any discipline proceedings and provincial offences;

• Condominium-specific provisions for warranty coverage should be reviewed, including timelines for submitting claims for defects given the complexities of condominium ownership.

In an interview, MacCharles said moving to a multi-provider model for warranties would be a “very significant change” and that she is confident the plan her government is proposing “will solve most of the problems.”

Tarion spokesperson Laurie Stephens told the Star the organization is worried some of the recommendations in Cunningham’s report “will have the effect of seriously weakening consumer protection, increasing costs for the administration and regulation of the warranty — new costs that new home buyers will ultimately have to pay — and creating barriers to entry for builders that could further impact a marketplace already struggling to keep pace with consumer demand.”

She said some recommendations that would improve consumer protection, specifically those dealing with illegal building, should be implemented quickly.

Stephens stressed that Tuesday’s announcements will result in no immediate changes to the warranty process in Ontario. “It is business as usual for Tarion. Consumer protection remains our number one priority, as it has been for more than 40 years. We encourage new home buyers, owners or builders 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 his organization continues to support a mandatory warranty requirement in Ontario and that “separating the regulator from warranty provider should resolve the perceived 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 fighting Tarion over what he considered hundreds of deficiencies in his new home and who feels he never received an equitable settlement, called Cunningham’s report “thoughtful and balanced.”

“It is a great first step,” Patinios said. “It’s still critically important that Tarion has more oversight by government and the Ontario ombudsman. Tarion should be more transparent with salaries and provide more access for homeowners with questions. I am hopeful that the government will follow through with all of Justice Cunningham’s recommendations.”

Karen Somerville, president of Canadians for Properly Built Homes, a national not-for-profit consumer organization that has long called for changes to Tarion, said she is pleased with Cunningham’s recommendation to separate the warranty provider from its regulatory role.

“But the government needs to go further and end Tarion’s monopoly,” she said. “A competitive model, like other provinces have introduced, will further strengthen Ontario’s new home warranty system.”