On February 1, 2014, the New Home Buyer Protection Act, SA 2012, c. N-3.2. (the "Act"), came into force. Pursuant to the Act, every new home built in Alberta is now required to be covered under a new home warranty insurance contract (the "Warranty"); the province has stated that new homebuilders will not be issued a building permit prior to purchasing a Warranty.

What is a Warranty?

A Warranty is an assurance from the homebuilder that the new home is reliable and free from all known defects. Upon the discovery of a defect, within a specific period of time and under certain conditions, the homebuilder will, without charge, repair or replace the defect.

Defect is defined in the New Home Buyer Protection (General) Regulation, Alta Reg. 211/2013 as any design, construction or material used in the construction of a new home that is: (1) contrary to the building code; (2) requires repair or replacement due to the negligence of the home builder; (3) constitutes an unreasonable health or safety risk; or (4) has resulted in material damage to the new home.

The Warranty Terms

The standard new Warranty terms under the Act are as follows:

  • One year: defects in labour and materials;
  • Two years: defects in labour and materials relating to the delivery and distribution of certain systems including gas, plumbing and electrical systems;
  • Five years: defects in the building envelope, such as protection against water damage; and
  • Ten years: defects in the structure including the frame and foundation.

Coverage under the Warranty will commence on the earlier of either of the following two dates: (1) transfer of title to the new home is registered; or (2) an accredited agency/municipality/regional services commission grants the homeowner permission to occupy the new home (the "Warranty Commencement Date").

Applicable Building Structures

The Act applies to all new buildings including houses, condominiums, recreational properties and modular and manufactured homes; however, exceptions have been granted for purpose-build rentals, social housing, habitat for humanity, care facilities, detached garages, hotels and motels.

The Owner-Builder

Individuals who intend to build a new home for their own personal use (the "Owner-Builder") are not required to obtain a home warranty if an exemption is granted by the Registrar. The Registrar shall issue an exemption if the Owner-Builder meets the following requirements:

  1. Registers the new home with the Registrar;
  2. Meets the required criteria:

a.intends to personally reside in the new home for at least 10 years;

b.is the registered owner;

c.intends to personally engage in, arrange for or manage all or substantially all of the construction of the new home;

d.does not make any false or misleading statements in previous applications;

e.does not contravene the Act;

f.has not been issued an authorization for at least three years following the date of first occupancy of the new home; and

g.has not been ordinarily resident in a new home for which another individual was issued an authorization in the previous three years.

  1. Pays required fees, if any.

If the Owner-Builder decides to sell the new home either while the new home is being constructed or within the ten year period following the Warranty Commencement Date (the "Warranty Period"), the Owner-Builder is required to: (1) ensure that the new home has Warranty coverage for the balance of the Warranty Period and (2) disclose to the prospective owner of the new home the Warranty coverage.

Registry

Pursuant to the Act, homebuilders are required to register each of their properties online with the New Home Buyer Protection Office's registry (the "Registry"), found at www.homewarranty.alberta.ca. The Registry shall increase transparency in the home buying process by providing prospective owners with information on their future home such as critical Warranty dates and details on homebuilders who have been subject to administrative penalties or compliance orders under the Act.

Fines

Contravention of the Act by any person or company can result in a maximum fine of $100,000 for the first offence and $500,000 for subsequent offences. A government appointed registrar and compliance officers shall oversee the administration and enforcement of the Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.