Manufacturing News from the Engineered Designer Perspective

Greater transparency, accountability called for in new homes warranty plan for Ontario

 

Following the completion of a study of Ontario’s new homes warranty plan, the government says it will follow the study author’s recommendations and end the monopoly currently held by Tarion Warranty Corporation, changing to a competitive, multi-provider, more insurance-like warranty system. The four essential functions of the warranty program are to be taken over by new authorities. As currently set up, consumers must rely solely on Tarion when they make a warranty claim on a new home, the same body that makes the rules, manages the program, resolves disputes, and regulates builders. As the report’s author, justice J. Douglas Cunningham, put it, having the same leadership team responsible for all the rules of the warranty program “will inevitably give rise to situations where financial objectives compete with other objectives such as consumer protection.”

The current system is prone to conflict of interest, or the appearance thereof, something the Government and Consumer Services Minister Tracey MacCharles has admitted and wants to eliminate.

Home warranty coverage will now be treated as an insurance product, subject to financial sector oversight and accountability. At present, says the report, Tarion provides an insurance-type product to homeowners, but neither Tarion nor the warranty is subject to the oversight that would apply to an insurance company delivering a similar product. It is recommended that a new, not-for-profit corporation be set up to assume responsibility for existing enrolments and to participate in the competitive model.

Home owners would no longer have to prove the cause of a defect they find in a new home.

An area that has been “particularly contentious” is dispute resolution, writes Cunningham, one which “does not always reach the level of accessibility and effectiveness that it could.” This will now be delivered through a separate organization independent of the warranty providers and the regulator, making it easier for homeowners who discover a defect or problem in the construction of their new home to get satisfaction. Homeowners would no longer have to prove the cause of the defect, as they must do now.

Warranty providers would still have a role in facilitating disputes between builders and homeowners, and the homeowner would be required to deal with the warranty provider chosen by the builder. However, a homeowner would have the option of appealing any decision to the independent adjudication body. At present, the only route of appeal is to Tarion.

What is included in the warranty coverage will also be subject to greater government oversight, the government assuming final approval on changes to warranty coverage and duration, and changes to standards that apply to builder and vendor registration. Minimum standards for mandatory warranty protections will also be set out in legislation, removing that power from Tarion’s board of directors, many of whom are developers.

To regulate builders and developers, Cunningham favours creating a new administrative authority, noting that the model has worked well in electrical safety, real estate, motor vehicle sales and the travel industry. The new authority would continue to work with builder groups such as the Ontario Home Builders’ Association, which represents more than one thousand builders. The head of that body, Joe Vaccara, has said previously that they support separating the regulator from the warranty provider.

Cunningham wants to see builder and vendor eligibility requirements, which include the financial position and past conduct of applicants and are now totally within the discretion of Tarion, to be expanded and set out in new legislation. The eligibility framework should be robust, and reflect the reality of today’s market place, in which there are large and small builders performing a wide range of home construction, from single family homes to high-rise condominiums.

Given the complexity of home construction and the extent to which building practices evolve, I recommend that the appropriate individuals across all registrants be required to satisfy periodic continuing education requirements. Mandatory initial and continuing education requirements could be introduced gradually and should be based on a risk assessment. Educational requirements could be tied to the role performed by individuals personally or within an organization.

Continuing education in the building industry will receive more emphasis in new legislation regulating Ontario’s new home warranty system.

Measures to ensure builder competency and continuing education should also be strengthened, with new applicants required to undertake a written examination and interview in order to meet technical competencies requirements. For a corporate entity or partnership, there should be one or more individuals who satisfy the technical competency requirements. The regulations should specify whether one or more of the officers, directors or senior executives of a corporation or one or more partners, must satisfy the technical competency requirements.

Regular continuing education for builders and vendors can support compliance with construction that meets the most current requirements of the Building Code, Cunningham believes, and educational requirements could also be tied to complaints, discipline, and warranty claims. The goal should be for programming that is accessible by the range of builders in the sector, large and small, and throughout the province.

Another area about which there have been consumer complaints pertains to the transparency of the builders’ directory maintained by Tarion, which has “shortcomings” that arise from the existing legislation, finds Cunningham. One of these is that it does not make readily available information about builders who have been convicted of illegal building or other offences, and it is difficult to find information because the database is not searchable by individual name. He wants to include more information about discipline proceedings and such so that consumers will have that transparency regarding past builder conduct.

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