Canada: Changes To The New Home Warranty Program – Part 1: Goodbye Builders Arbitration Forum?!

This article is the first in a new series that will focus on the upcoming changes to Ontario's new home warranty program. After an independent review of the Ontario New Homes Warranty Plan Act (the "Act") conducted by Honourable Justice Cunningham, the government introduced two new laws that will change the new home warranty regime in Ontario.  The Protection for Owners and Purchasers of New Homes Act, 2017 (the "New Act") deals with the warranty program, while the New Home Construction Licencing Act, 2017 deals with builder licensing. This article will focus on the New Act and the enhancement of consumer rights over builders.

Although the New Act is a law of the Province of Ontario, it is not in force and does not have any regulations.  Regulations are rules that contain the details necessary to carry out a law.  In the absence of regulations, there is insufficient information to engage in a substantive comparison of the content of the warranty, claims and appeals regimes under the Act and New Act.  That being said, the New Act has the potential to dramatically change the status quo.  Changes include:

  • The warranty that a home is free from major structural defects ("MSD") is now a warranty that the home is free from "major defects".  There is currently no definition of "major defects".  The generalization of the term suggests a broadening of that warranty.
  • There is no specific reference to the Builders Arbitration Forum, which is the current tribunal that hears builders' appeals of warranty assessment reports, in the New Act.
  • There appears to be a lower evidentiary threshold for consumers making a warranty claim.   Generally speaking, as long as a claimant explains his or her concerns giving rise to a claim, there is no requirement for the claimant to prove the cause of the concern.  Presently, it is common for homeowners to hire an expert or a consultant to opine on the cause of an alleged defect.  As well, homeowners sometimes omit the cause in their warranty claim, leading to some wiggle room for builders regarding the characterization of an alleged defect.
  • Once the above threshold is met, the "warranty authority" will investigate the claim and determine whether compensation should be provided.  In the course of the investigation, the warranty authority may use an expert to conduct an investigation.
  • A warranty decision made by the warranty authority (i.e., warranty assessment report) must be served on the claimant and "other persons, if any, that are prescribed".  It is unclear whether the builder would be entitled to receive a copy of the warranty decision.  Builders always receive a copy of the warranty assessment report under the Act, so it is odd that the New Act does not explicitly require that the builder should get a copy of the warranty assessment report.
  • The claimant has an express right to appeal the warranty decision to the "Tribunal".  "Tribunal" means the Licence Appeal Tribunal or whatever tribunal that the government sets up.  Again, the New Act is silent on the Builders Arbitration Forum.  It is of great concern that there is no express right of appeal for builders.  It is anticipated that a right of appeal for builders will be implemented, but it is unclear what form that right will take.

The absence of an express right of appeal for builders is very concerning in light of the low evidentiary threshold and new right of appeal for consumers.  The warranty performance of a builder (e.g., history of chargeable conciliations) is currently published online for consumers to view.  In the absence of a right of appeal, the warranty performance of good builders could be negatively affected where the wrong warranty determination is made.  Hopefully, the right of appeal for builders will be included in the regulations.

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.

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