When I took my new car to be fixed years ago, after it had been leaking oil, I asked the mechanic why a new car would leak oil. You don’t need to know, he answered, just get it done.
That didn’t sit well with me back then. Neither does Doug Ford’s refusal to release certain information I’d like to have before voting. Information is power, and less information raises doubt.
As a consumer advocate for the last 14 years for new home buyers, I’m struggling to see a reason to vote for Mr. Ford, and part of my concern is his growing secrecy. Secrecy in keeping the monopoly model for Tarion after saying the government shouldn’t be running monopolies, secrecy in not releasing his instructions to each minister (the “Mandate Letters”), secrecy in not responding to voter questions, especially about a local candidate’s affiliations with the building industry.
The build-more-faster-with-less-red-tape platform of the PC party has come across loud and clear to us, but there are several missing links. Increasing the supply of a product usually results in lower prices, that’s basic economics. But with rising costs of materials and labour in home building, and the scarcity of both, what makes these 1 million new homes, IF they can be built, suddenly affordable?
How does building homes faster make them properly built? With virtual inspections and talk of builders doing their own inspections, how will buyers be protected against the growing problem of short-cutting and shoddy work?
Then there’s the broader context of the weak warranty administrator, Tarion, and an even weaker fledgling regulator, HCRA (the Home Construction Regulatory Authority). Without adequate scrutiny and oversight of the industry, how can buyers be protected from bad builders, and avoid shouldering the cost of poorly-built homes?
I’ve been waiting for Ford to utter the words consumer protection during the campaign trail. I’ve not heard him speak these words even once, nor have his candidates, to my knowledge. Gone is the For The People slogan of 2018, with promises to consumers of “I will fight for people like you.” The construction unions have his ear now.
That makes me more skeptical. Any time we’ve had a government with cozy ties to big industry, it hasn’t resulted in better consumer protection. I don’t hear PC candidates mention anything about building properly, adhering to Building Code, or who’s going to take the cut to make homes more affordable. How can you build faster, with shortages of skilled labour, without further compromising quality and safety?
Ford promised a “complete overhaul” of the warranty administrator Tarion in 2019, but hasn’t done this. He’s promised to cut red tape for builders, while consumers want the opposite, strong regulators to protect them from bad builders. We don’t want virtual inspections or builders doing their own inspections. Cutting red tape for builders doesn’t protect consumers.
What’s in the “Mandate Letters”, Ford’s instructions given to the Consumer Minister about these issues? We’re not allowed to know. Ford has refused to release them. “It’s so important to protect the builders,” said the current Consumer Minister earlier this year. Really? But this ministry is responsible for consumer protection, not builder protection. What’s in Ford’s official instructions, still secret, to this ministry?
There have been four Consumer Ministers in four years, a revolving door which doesn’t do much to encourage credibility or confidence. Tarion has been declared broken, then apparently overhauled, but we’ve seen not much more in four years than a repositioning of the deck chairs.
In my mailbox this week I found a flyer from the Ford campaign, saying “Only Doug Ford and Blake Libfeld will Get it Done”. Say “YES to building houses you can afford.” Is Mr. Libfeld associated with the Libfeld family of developers, or the Tarion board member? No answer. Some things you just don’t need to know, it seems.
Ford may Get it Done. But we may end up paying for “it”, in more ways than one.
This was the conclusion of a year-long independent review of Tarion, so why have two successive Ontario governments done so little about it?
The government agency with the sole right to administer new home warranties in Ontario is Tarion. The agency was forced to drop the word “warranty” from its name last year, because it doesn’t provide a warranty, according to a report by the Auditor-General of Ontario in 2019.
This has been confusing for new home buyers for years. The new home warranty is the builder’s, but the home buyer pays a fee to Tarion for it, bundled into the price of the new home. Tarion is a third party administrator between the homeowner and builder.
Tarion’s second role as builder regulator has also been removed, since they were found to be in a conflict of interest as both warranty administrator and regulator, according to the Justice Cunningham and Deloitte Consultants Tarion reviewin 2017.
So what’s left of Tarion now?
All the top executive salaries and most of their top personnel, it seems. They are now a monopoly administrator of the builder’s warranty, and are supposed to step in, under certain circumstances, if the builder doesn’t fulfill his warranty obligations.
The current PC government admitted in Feb. 2019 that Tarion was “broken”. Hard for them to conclude otherwise, after the two independent studies came up with a total of 69 recommendations for change to protect consumers.
What has this government and its predecessor done so little since these two studies to fix this broken system?
The Tarion review’s #1 recommendation was to give Tarion competition, opening up the field to other warranty providers. This hasn’t been done. The review cost taxpayers over $1 million, but has been largely ignored.
Many think the government’s build-more-faster platform is one of the reasons, plus the need to fuel the economy, create more jobs, and get re-elected. The less oversight and scrutiny of bad builders there is, the more new homes can be built, the more builders can enter the marketplace, escape consequences for shoddy work, and leave the purchaser to try to fight heavily-lawyered corporations to get the home fixed.
Opposition MPPs and concerned consumers have been advocating for an end to Tarion’s monopoly for years. That includes many PC MPPs now in power who were vocal in supporting an end to the monopoly while they were in Opposition. Many advocates themselves had bad experiences with Tarion, and continue to try to help others get their homes fixed. Many have participated in several government consultations, the Tarion review, the Auditor-General’s report, and made depositions on new legislation at Queen’s Park. Consumer input has been noted, filed, and largely ignored by the PC government.
Here are three important reasons why the monopoly isn’t working, and should be ended.All of these points were brought to light in the above two independent studies:
1) Tarion doesn’t provide a warranty. Under a competition-based, multi-provider model, warranty providers would be licensed to provide an actual insurance product, a new home warranty, and all providers would all come under oversight of the Insurance Act. Neither is the case with Tarion.
2) There’s no meaningful government oversight of Tarion’s operations. Tarion still enjoys one of the most laissez-faire oversight models in government since 1976, which gives Tarion the latitude to interpret its own governing legislation, what is covered unde the plan, and how, or if, they resolve disputes.
3) There are too many players involved when defects are discovered. This often produces a pass-the-buck, lengthy, frustrating experience for consumers. Tarion acts as a middleman between builder and homeowner, and various other parties such as municipalities, technical experts, and lawyers. None of this should necessitate the homeowner having to hire his own lawyer to fight the warranty administrator/builder/municipality, all passing the buck between them.
Here’s a further explanation of each of the above three reasons:
1) Not a warranty. Tarion is an arms-length agency of government, and has been granted a special monopoly by government to administer the builder’s warranty. But as the Auditor-General stated in her Oct. 2019 report: “Tarion does not provide the warrantyunder the Act (..) that’s the builder’s responsibility (even the name “Tarion Warranty Corporation” contributes to this confusion.”) A competitive model, where actual warranty providers provide an insurance product to the consumer, is used in Alberta, B.C. This has been reported to be “working well”, according to a consumer protection official in B.C. (feedback to Ont. Consumer Ministry consultation, Feb. 2019).
2) Lack of effective oversight by government has been a problem with Tarion since its creation, a critique often raised in the Ontario Legislature and in several Auditor-General’s reports in 2002, 2009, and most recently in 2019. But both Liberal and PC governments have taken a hands-off approach to this problem, basically letting Tarion make its own interpretation of its governing legislation, and saying they can’t intervene. This is a nonsensical strategy if the intent of the legislation was consumer protection. The Consumer Minister Thompson simply re-stated this problem to me in a letter dated June 15, 2021: “As youknow,my ministry is unable to intervene in Tarion’s operations.“
What are they waiting for to provide more effective oversight? Tarion’s permission?
Several PC MPPs blasted the former Liberal government for this lack of scrutiny of Tarion, but now in power, they’ve mostly looked the other way. That leaves consumers to fend for themselves in this broken system.
Why has government given a monopoly to an agency they can’t, or refuse to, effectively oversee? That’s definitely good for Tarion, and perhaps what some well-connected lobbyists and their lawyers want. But it’s not protecting consumers.
The Ministry advises consumers to hire lawyers, knowing full well that only a small percentage can afford this. The hands-off-Tarion approach has also increased the growing problem of self-represented litigants and lack of access to justice in Ontario.
3) Too many players involved. There should be one contact only for the homeowner when he discovers symptoms of a defect, such as for example, mould, a leaking roof, or crack in the foundation. That one contact should be a person at the warranty provider, preferably someone with a real name, contact data showing their responsibility, meaningful construction knowledge, and someone who will give continuity in the communication with the homeowner. No third parties, communications middlemen, or in-house lawyers.
The Auditor-General’s report found that if builders refuse to fix defects, there are often no consequences under the Tarion regime. In 65% of the cases the Auditor looked at from 2014-18, builders should have fixed defects and didn’t. (pg. 7)
“Wecan’t force the builder to do anything”, said Tarion’s former CEO Bogach at an annual public meeting. So the ministry can’t intervene in Tarion’s operations, and Tarion can’t force builders to do anything. Great. What kind of consumer protection does that leave us with?
On this point the Auditor-General stated (pg. 33): “About 80% of the investigations into these complaints [i.e. consumer complaints to Tarion about builders] cleared the builders. Tarion staff who conducted the investigations told us that it was difficult to determine when builders acted dishonestly or without integrity because Tarion has no code of conduct to define these terms.”
This isshocking. Why, at the very minimum, was there no code of conduct, ever, at Tarion to define what a bad builder is?
After this revelation and 31 others, Tarion said yes to all of the Auditor’s recommendations. Then they went ahead to promote executives who must have known about these failings, but seem to have just been content with the status quo. Tarion’s recently-promoted CEO, Mr. Balasubramanian, a 10-year veteran of Tarion’s legal and executive team, said in a Nov. 27, 2019 Legislative Committee hearing, when asked why Tarion never initiated on its own any of these 32 recommendations, said – because there had been no Auditor-General’s report before. (Hansard, Nov. 27, 2019, P-281)
This is a jaw-dropping statement from a senior executive, but most of all, extremely sad for the consumers who’ve suffered under this dysfunctional system.
For the 14 years I’ve been observing Tarion, I’ve seen them act as a go-between, a communications agent between builder and homeowner, sometimes trying to nudge builders to fix problems, or dismissing claims at the outset for late reporting or denied entry, or delaying repair periods, or burying the homeowner in rules and regulations, letting multiple parties enter into an increasingly hostile fray.
The lengthy, back-and-forth sometimes ends up suddenly in the hands of Tarion’s lawyers, whose client is Tarion itself, not the homeowner. Some builders don’t want to pay for repairs, or don’t want to indemnify Tarion, and they want no mention of defects on their record. These interests are often aligned with Tarion’s, to avoid a pay-out and make the whole thing just go away, or the homeowner give up.
The Auditor-General stated in her report (pg. 8) “Tarion’s senior management was rewarded for increasing profits and minimizing financial aid paid to homeowners.” Tarion’s top executives denied this at Committee hearings on the Auditor’s report in Nov. 2019. But they’ve now promised this had changed. We’re to believe no one at Tarion or the board of directors knew this was going on, and we should trust it’s a good idea to promote many of these executives within Tarion. It’s been a “complete overhaul” says the Consumer Ministry.
Who’s the homeowner’s friend when he discovers a defect?
The purchaser paid for a new home free of construction defects, built according to the Building Code, that’s what the law says he’s entitled to. The Tarion fee is mandatory, and you can’t refuse to pay it, even if you’re skeptical about Tarion.
The warranty provider, a real one, should be the homeowner’s only contact from day one. Fix the problem, leave the homeowner to get back to his own work. No more blame games, delays, forbidding homeowners from recording inspections, using denied entry excuses, or making cash payments in off-the-record “gestures”.
When my car was damaged at a car wash, for example, my insurer told me I didn’t have to get involved, they would handle it. Two weeks later, my car was repaired. No finger-pointing, no dueling inspectors, no multiple visits of reps and employees in training.
Some construction disputes end up at License Appeal Tribunal, with the homeowner self-representing, due to the high cost of legal help. It’s often a terrifying, drawn-out ordeal. I’ve witnessed it several times, both personally and as a friend of homeowners, and I’ve seen it end up destroying families, their health and finances, usually ending up in a win for Tarion and builders, or a settlement with an agreement to be quiet about everything.
Builder influence on Tarion’s board and senior management was supposed to have been addressed by the Auditor’s report, but it seems to have gotten only window-dressing from the PC government. To call this an overhaul is misleading.
Here’s one example of how governance at Tarion seems to have gotten worse in the last two years since the Auditor’s report. In the fine print of the Tarion 2020 Annual Report (pg. 31, below) a new industry advisory council has been created on Tarion’s board, replacing the former so-called consumer council. Now both councils seem to have equal weight, as highlighted in yellow below.
There still seem to be no consumer advocates on Tarion’s board: home buyers are just one of several “stakeholders”, of which Tarion itself is one. But this is supposed to be a consumer protection agency. The building industry has two builder board members, and now its own advisory council, plus four board members with ties to the real estate industry. Who’s representing the consumer experience with the warranty on the board?
Previous Auditor-General’s reports in 2003, 2009 found an imbalance at Tarion “which favoured theinterests of builders at the expense of homebuyers.” So why has this never been properly addressed? The interests of the building industry clearly take a front seat with the current Ford government. His oft-stated priority is to get more homes built faster, and cut red tape for builders, and he avoids ever mentioning that homes must be properlybuilt to protect consumers.
Adding to consumer concerns, Minister Romano recently said at an annual public meeting of the new regulator HCRA, via a virtual Zoom session, that he himself was having a new home built “by one of themembers“, and had “promised to not go too hard on him.” We’re hoping this was a very bad joke. The overseer of the regulator talking about going easy on a regulatee is not a good look for the ministry.
Those who insist on keeping Tarion as a player in the new home warranty field were also taken into account in the Tarion review. The judge recommended Tarion could continue (under a different not-for-profit organization and under the Insurance Act) to compete with other providers. The review states pg. 28, recommendation #4, “A new not-for-profit corporation should be established to assume responsibility for existing enrollments and be permitted to participate in the competitive model.” So this wouldn’t eliminate Tarion, it would give them competition
Some PC MPPs seemed to be grasping at reasons to keep Tarion as a monopoly model last spring, and said at Legislative depositions they worried small builders might not be able to get insurance under a competitive model. But that’s not correct, according to insurance industry people I’ve spoken to: some warranty providers actually specialize in the small business sector. If it’s a bad apple builder, no one wants to buy a home from them. So if these marginal builders can’t get insurance, that’s ok with most consumers. Let these builders first improve their performance, then get insurance, not use our life savings as a learning experience.
“The role of warranty provider is not a natural monopoly”, justice Cunningham wrote in his review, (pg. 6). Utilities like gas and oil are natural monopolies, since they require an expensive infrastructure to deliver product, and smaller companies usually can’t afford this.
But new home warranties are a service, not a utility. There are no examples of monopolies which come to mind which deliver excellent service at a good price. There’s no incentive for monopolies to do so, since they own the entire market and have no competitors. In Tarion’s case, government gave them the monopoly, and only government can remove it. In a competitive model, if you don’t like one warranty provider, at least you have choice of another through your choice in builders.
The stories of Daniel Emery, Earl Shuman, and the Ferland family, are three of the very tragic ones I’ve seen, and I’ve written about each of them in this blog. Treating consumers like this is harsh and unnecessary. Requiring homeowners to sign non-disclosure agreements after mediation, or after a chat in the CEO’s office, only protects builders and Tarion, not the homeowner, and leaves no trace of a builder’s record for anyone to research.
Ontario needs an actual warranty provider, a true insurance product, regulated as one, and only one contact, the warranty company, if construction defects are discovered.
Here’s how judge Cunningham stated this in his review:
“I am recommending the introduction of a competitive multi-provider model for warranty protection.” […] I am recommending that the warranty be clearly characterized as an insurance product, and made subject to Ontario’s Insurance Act.” […] “Tarion is providing an insurance-type product to homeowners, but neither Tarion nor the warranty protection are subject to oversight that would ordinarily apply to an insurance company delivering a similar insurance product.” (pg. 7, Tarion Review)
There’s no clearer way to state this problem and its solution. That’s it.
Now is the time for the PC government to stop making cosmetic touch-ups to Tarion selling it to us as an overhaul. Fixes have been tried and failed. It’s time to follow the advice given to government in 2017 after the costly and extensive Tarion review, for which taxpayers paid about $1 million.
Affordable housing can’t be achieved by burdening new home buyers with the cost of somebody else’s shoddy work. Premier Ford himself has said he’s against government running monopolies. So why the special status for Tarion?
Tarion’s former CEO, Mr. Bogach reportedly said in March 2017 after the judge’s review was released: “We’re going to really lobby hard against this.”He seems to have done so. His salary of over $800,000 and his retirement handshake of $1.9 million, seem to have made the lobbying worthwhile.
Tarion’s financials are still concerning to many, and cry out for more scrutiny. In 2020, Tarion paid out salaries of (approx.) $31 million for about 200 employees, administrative expenses of $14 million, but only approx. $21 million in claims. And they have amassed over $680 million in investments, mostly earned through fees collected from new home buyers, (see Tarion Annual Report 2020, pg. 48).
New home buyers have been mislead to thinking something may have improved in 2021, after Tarion’s immediate yes to all of the Auditor’s 32 recommendations. The Auditor didn’t make a decision on whether to keep the monopoly or not, that was beyond the scope of the audit.“That’s a decision for government”, she told me in a phone call in Dec. 2019.
The PC government’s failure to take action is one of the reasons which prompted the NDP party in December 2021 to introduce bill 77, the Consumer Watchdog Act, to help consumers who’ve been victim of unfair practices, and to establish a way to impartially investigate complaints. A Consumer Watchdog Office is necessary.
The new home “warranty” monopoly in Ontario is flawed and outdated. Attempts to fix it have been timid and ineffective. Tarion doesn’t provide a warranty. And it’s a fickle friend when you need one, and it’s the only game in town.
Subject: New Agency of Government, HCRA, Seems to Promote Builders’ Interests, not Consumers’
Date: Oct. 12, 2021
Dear Minister Romano,
Many consumers were taken aback to read the article published Oct. 9, 2021 in The Toronto Star, (image below) written by your new CEO of the builder regulatory agency, the “Home Construction Regulatory Authority, (HCRA).
In this article, the new CEO and Registrar, Ms. Wendy Acheson, says builders can re-negotiate new home sales contracts they’ve already signed, due to the rising cost of building materials and “other construction costs”, as long as they’re “acting with integrity and honesty”.
THis is a surprising article from a regulatory body. it would seem more appropriate coming from a Builder lobby group. The regulator’s mission is to protect consumers, not the industry it’s regulating.
There are several serious problems with this article from the consumer point of view. I outline a few below.
New home buyers, just as builders, have suffered significant financial hardship during the pandemic. They have also experienced delay after delay in new home construction, while scrambling to find alternative accommodation or financing, as the delivery of the home is pushed further and further into the future. None of these hardships are taken into account in this article.
If builders can re-negotiate sales contracts, can purchasers also do so, if their costs have gone up as well?
But even if they could, few consumers have the extra funds or time to hire experienced lawyers.
The advice from the HCRA CEO is “don’t let yourself be bullied or intimidated“, and “never be misled into thinking there is no choice but to accept new terms”. This doesn’t reflect the real experiences of consumers in the current tight supply market especially when up against large corporations.
Builders must act “honestly and responsibly“, says the HCRA CEO. Have you ever met a builder who would say he doesn’t act honestly and responsibly?
HCRA has a new Code of Ethics we’re told. Most businesses do, but that doesn’t mean it’s enforced, or that anyone has the means to prove anyone else acted unfairly. Unless the purchaser can afford a top lawyer, and has hours of free time, it’s a costly, lengthy battle to try to prove this.
Nowhere in this article does the CEO say that HCRA is the regulator of builders, she only mentions the licensing function. In paragraph 7, she writes “HCRA is responsible for licensing the builders…” This may be a mistake, since it’s in the title of the organization, but for consumers it’s a concerning omission in this article. After the failure of the previous regulator Tarion, consumers need to see the new regulator is doing its job. They want to see clear standards, monitoring of compliance, and transparency in the results and builder track records. Giving permission to builders to renegotiate signed contracts should be at the bottom of the new regulator’s list, if at all.
New home builders already write their own water-tight contracts with the help of top lawyers, and can fend off consumer scrutiny they don’t want during the sales and construction process. Many contracts by major builders I’ve seen include “weasel clauses”, for example forbidding class actions, preventing critiques on social media, and forbidding complaints during construction, …or else the builder can terminate the contract.
HCRA’s CEO admits “builders are in a position of power relative to home buyers”. But her advice – “don’t let yourself be bullied or intimidated” – is useless.
She must know builders write their own contracts and include all the extra clauses they like to protect their own interests. Anyone who objects will be shown the door.
Consumers have limited choices in homes they can afford, which might be close to their work or other family members. One buyer told me the advice he got from his own lawyer was to keep quiet about construction problems, or the builder could cancel the contract, since the terms allowed him to do so. For the industry regulator to tell consumers “don’t let yourself be bullied” seems out of touch with what’s really going on in this tight supply market. Some builders may be unfair, unethical, or even by-passing consumer protection laws, but to prove it you’ll need deep pockets for lawyers and months of free time for complex legal battles.
The worn-out advice given to consumers by the Ministry and the HCRA CEO is to “obtain independent legal advice”. This can only make sense coming from government and agencies like HCRA who have their own in-house counsel paid for by taxpayer or home purchaser, and don’t have to pay out of their own pocket.
Sure, lawyers can be “helpful“, as Ms. Acheson says. But these fees could eat up $20,000+ of one’s savings for a simple dispute when the opposing party is a large corporation. HCRA’s advice is blind to the consumer experience and the uphill battle for individuals fighting large builders.
“The HCRA is here to protect new home buyers”, says HCRA’s new CEO. But this article is promoting builders’ interests, not consumers’.
Contracts are supposed to balance the rights and responsibilities of both parties. But if terms are as movable as sand, what credibility do contracts have?
It’s concerning that HCRA in the first months of its operation is coming up with this idea on how builders can protect their profit margins, and promoting this in the pages of major media. If you order a new car to be delivered in six months, and the price of steel goes up, can the dealer renegotiate the price you both agreed to pay in the contract? Would a government agency advocate for this?
This article exemplifies the larger problem: government agencies like HCRA tell us they’re protecting consumers, but show a lack of understanding of the consumer perspective.
A possible solution, which has been suggested to the Consumer Ministry several times, could be to create a Consumer Watchdog Office, to make sure consumer perspectives are understood in policy-making.
After 42 years of the failed regulator Tarion, consumers need to see if HCRA will protect new home buyers, not act as a lobby group for builders. The industry has several of thier own well-financed politically-connected lobby groups to do this.
HCRA still has not answered what is the status of the 95 complaints about licensed builders it received within the first two months of operation, or the Auditor General’s finding that 65% of the time between 2014-18 builders did not repair items they should have under the warranty. These are important questions for consumers who put their life savings into a new home and rely on a well-regulated industry.
We look forward to your response as Minister for consumer protection, part of a government which tells us it’s For The People. How does this article fit into HCRA’s mandate? How does the renegotiation of contracts help housing affordability? How does it create the “fair” marketplace which your ministry promises?
Serious problems were brought to light after 43 years of Tarion operating in near secrecy: bias toward builders, lack of deterrents to bad building, and incentives for executives to deny claims, all this from a “consumer protection” agency of government.
Tarion says it has implemented 19 of the 25 recommendations directed to them. The Consumer Ministry has, predictably, rubber-stamped just about everything Tarion says. To try to silence decades of consumer and Opposition complaints about Tarion, they’ve called this “a complete overhaul”.
Like all self-congratulatory claims from government and its agencies, this needs a fact-check. With my 10 years experience observing Tarion and participating in legislative change, here’s mine below, looking at each of the Auditor’s recommendations one by one.
1)Auditor General’s Recommendation #1:
Tarion’s board was told it must balance the interests of homebuyers and builders, and that there should be no more financial sponsorship to the Ontario Home Builders Association (OHBA).
– Tarion’s board still has no consumer advocates, still two builders, and a total of four people with ties to the real estate industry. Tarion still co-sponsors a Builder Awards programme with the builder lobby group, OHBA. Where’s the advancement in consumer protection?
2) Recommendation #2:
Tarion must make sure home buyers understand the Home Buyer Information Package and the importance of the Pre-Delivery Inspection.
– Pre-delivery “inspection” (PDI) is only a visual walk-through of the new home with a builder’s representative, whose vested interest is completing the sale, not identifying defects. The word inspection is misleading. – To be meaningful, this inspection should be done by a qualified independentinspector. Consumers should be allowed to video or voice record these walk-throughs (Tarion has always forbidden this), and in the PDI material it should be clear the homeowner can bring his own home inspector. – Tarion says a new “Warranty Information Sheet” will now be attached to all purchase agreements. No information on how/if this is being enforced.
3) Recommendations #3 and #4
The Auditor’s Report stated that information on warranty coverage and consumer’s rights should be less confusing. Tarion was to stop telling consumers it provides a warranty since it doesn’t. It’s role is to “hold builders accountable for addressing unresolved homeowner warranty claims to builders.”
No meaningful action
Tarion has finally removed the word “warranty” from its name, but not from executive titles such as “VP Warranty Services”. After 43 years, Tarion says it’s only a financial backstop to the warranty provided by the builder. There is still vagueness about Tarion’s responsibility to the consumer. Defects are to be reported to the builder and repaired by them. But the problem still remains: Tarion waits in the background as a “financial backstop” if builders refuse to fix defects. There are still too many extended repair times, while Tarion tries to coax the builder to do repairs. This is still a passive role, and there are too few deterrents to builders who don’t fulfill their obligations.
– Tarion has added a “Homeowner Learning Hub” to their website. This is addressing the wrong problem: the problem of bad building is not lack of consumer education.
4) Recommendation #8:
Tarion is to create a simpler, less costly, homeowner-friendly appeal process for consumers whose claims have been denied.
Tarion has made outside mediation available in some cases, on an ad hoc basis, but this week this has been put into regulations by the Ministry. There should be clear guidelines on when mediation can be used, it should be available to all, and the fact that it had to be used to resolve a dispute should be published on Tarion’s or HCRA’s website. Oversight of this process by the Consumer Ministry is needed, or by an independent administrator.
Consumers should be entitled to have a friend or representative of their choice present at mediation, Tarion cannot veto the consumer’s representative; all persons at mediation should be identified on screen in virtual sessions, and Tarion and builder representatives should be limited in number to avoid imbalances of power and perceptions of intimidation.
Tarion should pay the full cost of mediation, (not half as suggested), and this should be seen as part of the warranty fee, as in multi-provider warranty systems.
5) Recommendation # 10
Builders who do not honour their warranty obligations should be held accountable by Tarion, and their poor record taken into account in future licensing decisions.
No meaningful action
All Tarion seems to have done on this, according to their own “Implementation Plan” published in Fall 2020, is to say they will “review and up-date” evidence given to them by builders, “provide more guidance“, and “train staff“.
But the problem the Auditor General pointed out (pg. 30, of her 2019 report) remains. There are still too many “exemptions” builders can use to avoid inspections, and documented defects sometimes do not impact future licensing decisions. It is unknown how or if Tarion’s new companion organization, (Home Construction Licensing Authority, HCRA), will disclose these defects, or if they will suspend/revoke licenses when necessary. The pitfall again is lack of independent oversight of these agency’s activities.
There is still few meaningful consequences to builders who deliver shoddy work. This problem, and the same builder-friendly corporate culture, seems now spread across two agencies, both Tarion and HCRA, since HCRA has hired Tarion employees and adopted without sufficient scrutiny their builder track records.
6) Recommendation #11
Tarion is to consider all data about a builder’s past warranty performance when deciding whether to grant a future license.
No meaningful change
Tarion says it has now adopted “a more comprehensive approach” to assessing a builder’s record. But other than promising to “finalize an internal memo and policies“, (pg. 14, Tarion’s draft copy, on implementing Auditor’s report, Jan. 4, 2020 ), it’s not clear anything has changed, either at Tarion or the new HCRA.
The Auditor’s report stated Tarion continued to grant licenses to builders with shoddy records. This is a huge consumer protection failing, and has not been adequately addressed. A commitment to “consider” this information is not the same as fixing it.
Three steps forward, five steps back
7) Recommendation #12
The Auditor’s report stated Tarion should make sure builders have the financial stability to complete proposed projects, and honour their warranty obligations.
No meaningful change
Tarion says it developed “a new process to collect and review this evidence” on a builder’s financial history (see Tarion’s Implementation Plan, pg. 8). But what’s to stop builders from citing “privacy reasons” (as in the 2016 case of Urbancorp), to avoid disclosures, or giving vague reasons for cancelling projects, like not being able to get financing. There’s nothing here to show this consumer protection failing has been fixed.
8) Recommendation #13
Tarion is to protect consumers who purchase pre-construction homes if they are later cancelled or delayed by legal restrictions on land.
No meaningful change
Tarion says it has “conducted an analysis” on what construction projects require a review of the land title. It’s concerning this wasn’t being done before. Why is a builder with dubious legal right to build on a site taking deposit money from consumers? “Publicly disclosing” restrictions, as Tarion says it will now do, seems too little too late.
Why does a project get a building permit in the first place, if the builder has a dubious legal title to build on the land? What’s to stop builders from refusing or delaying to provide information? This is Tarion’s answer: “Tarion has determined the best approach for obtaining information in title searches and has made this a requirement“. What’s the “best approach“, and what are the penalties, if any, for not fully providing this information? No teeth, no effective policy.
9) Recommendation #15
Tarion should ensure homeowner complaints against builders are properly investigated.
No meaningful change
“Adding resources” and “eliminating the backlog of complaints” is what Tarion says it has done. That’s not enough to make a difference. The problem remains: lack of independent inspections during construction (it’s not enough to rely on municipal inspections), and lack of enforcement and disclosure of bad conduct or lack of integrity.
Setting up a builder Code of Conduct and establishing clear consequences for those who breach it has been shifted to the new agency, HCRA. There will be no clearly defined Code of Conduct till July 2021. Tarion has never had one, which has enabled many builders to escape meaningful scrutiny and consequences.
What of the problems cited in the past of hiring unskilled trades, no supervision of trades during construction? If Tarion rarely inspects on-site, the onus is on the homeowner after the home is built to be the whistleblower, which often creates animosity and may adversely affect repair work. Without a clear Code of Conduct, enforcement, and deterrents, this problem is much the same as before. No teeth in enforcement, no transparency, no credible independent oversight.
10) Recommendation #16
Tarion was asked to strengthen the builder licensing process, minimize warranty issues related to the Ontario Building Code, and inspect homes for compliance with the Code during construction.
Tarion says it has “conducted a pilot programme” for inspecting the work of “relevant builders”, and implemented a “permanent risk-based inspection process.”
This seems to indicate risky builders’ work may be checked, that Tarion knows who they are, but there seems no disclosure to the public. Where’s the list of “relevant builders“, as described above? Why are their licenses not suspended or revoked; where’s the transparency about their risk profile?
11) Recommendation #19
Tarion is to hold builders accountable for the cost of warranty obligations Tarion has to pay on their behalf. The results of this are to be made public.
Tarion says it has “implemented a new collections strategy”, without specifying what it is. They say they will “publicly report collection efforts” each year. Will Tarion report this to their companion organization, HCRA, who decides licensing matters?
Builders can still cite “privacy concerns“, and there may still be exceptions and excuses for not paying back the cost of warranty obligations. This is important information for consumers to see on a builder’s record. Making this public, despite builders objections, may be a small incentive for them to pay up.
12) Recommendation # 20
Tarion is to disclose more information on builder track records to help home buyers make informed choices. For example, major structural defects, lack of integrity, not paying back money owed to Tarion, warranty work builders refused to repair, etc.
No Meaningful Change
This responsibility has been shifted to HCRA, which has simply published Tarion’s builder records, with the same content, without apparently fact-checking it.
Tarion says it “sought public input” on what should be added, and “up-dated the Ontario Builder Directory with this information“. This says nothing, and there’s no evidence any records have up-dated or corrected, other than a few cosmetic changes made to the website.
The practice of giving “customer services gestures” to homeowners to settle disputes enables Tarion/HCRA to avoid listing these payments on the builder’s record, as a way to pay to make problems go away and leave the builder a clean record. This should also be disclosed for what it is, a cash payment to settle a dispute regarding defects.
The same for “non-disclosure agreements” or NDA’s: they should be forbidden, since they don’t help consumers, they help hide a builder’s poor record. Most reputable builders will repair defects immediately and never let problems get adversarial or litigious. The public has a right to have access to complete builder track records in order to make informed decisions.
13) Recommendation # 23
The Auditor’s report found that Tarion should investigate illegal building (i.e. builders who build without registering the new homes under the warranty), in a timely way.
No Meaningful Change
This task has been shifted over to HCRA. Tarion says it has “added the necessary resources to eliminate the backlog of investigations”. A back-log of investigations indicates homes are being built and sold without the warranty coverage. This problem has been known to Tarion for over a decade, with minimal real action to stop it. There are too many exceptions builders can use to avoid enrolling homes under the warranty.
ALL new homes should be under the warranty, no loopholes, no exceptions.
14) Recommendation #27
Tarion is to require their staff who are sent on-site to inspect Building Codeviolations to have the Building Code certification.
No Meaningful Change
One of the on-going criticisms of Tarion for years is that they send personnel to inspect defects who have no training in the area of the defect. Tarion says it has implemented a “training programme“, and future warranty assessments “will be reviewed by staff with relevant training“.
ALL Tarion staff sent to inspect homes should have at least minimum Building Code certification, the bare minimum standard. Staff sent to inspect should have expertise in the area of the problem being reported, for example HVAC. This should be obvious, but has not been done, enabling Tarion to say defects are not warranted.
Tarion staff attending inspections have told consumers they “don’t have any construction knowledge“, and have forbidden consumers from recording or video-ing the inspection. This raises mistrust, and should never be forbidden, under the threat of Tarion walking away from the inspection. More training is a long-term goal, and doesn’t fix the problem of ingrained bias toward builders, or fear of offending the the powerful players, which is still part of the Tarion culture. This is perpetuating an organizational culture problem, not fixing it.
15) Recommendation #28
The Auditor’s report advised Tarion to provide homeowners with accurate information in a timely manner through its call center staff.
No Meaningful Change
Tarion says it has hired more staff, trained them properly, and is reviewing phone calls “for quality assurance“.
This may be a goal, but is not a statement of anything achieved. What are the “clear service standards” Tarion says it has implemented? Without independent monitoring outside Tarion, this is of little value.
Examples of inaccurate information given by Tarion office staff are: the LAT is less formal and more consumer-friendly than courts, without saying consumers lose over 83% of these cases; the internal Ombudsperson handles fairness issues, without advising that this office is not independent of Tarion. There is no assurance the information given is consumer-focused, and not biased toward Tarion’s or builder’s interests.
This is one of the reasons the Opposition parties called in 2020-21 for an independent administrator to oversee Tarion, to make sure problems of past decades are not repeated. This is sill a good idea, not the self-monitoring and self-reporting Tarion still does with most of the same employees and senior executives as before.
16) Recommendation #29
The Auditor’s report expressed concern over the lack of independence of the internal Tarion ombudsperson. The report stated this office should report to and be evaluated by Tarion’s board.
No Meaningful Change
Tarion says the internal ombudsperson now reports to the board, and her “self-review” will be reviewed by the board. This does not make the ombudsperson independent of Tarion, or gain consumer trust. How would the board evaluate the ombudsperson’s self-review, since complaints given by consumers to her are confidential?
This office has no mandate to get involved in warranty disputes either, so what’s its point of it at all? Consumers have, for over a decade, said this office is a waste of their time, and has in the past shared confidential consumer information with Tarion’s internal legal department (see Auditor’s report, 2019, pg. 48).
17) Recommendation # 30
Tarion is to review its compensation to be more in line with the intent of legislation it administers. Bonus pay methods must be consistent with public-sector practices.
No Meaningful Change
Tarion has now been forced by the Ministry to disclose executive pay, which has been kept secret for 43 years. This disclosure shows compensation for the retiring CEO of $1.9 million in 2020, with the current CEO still earning $552,000, and seven Vice Presidents, two earning over $400,000. This is still the current pay level, in spite of half of Tarion’s responsibilities having been moved over to the new regulator, HCRA. Tarion paid salaries and benefits of $30 million in 2019, while the total claims paid out were only $13 million. (2019 Annual Report, pg. 8).
These are alarming financials for a government agency, a not-for-profit monopoly.
There’s no indication that bonuses are no longer linked to dismissing claims, which was a concern raised in the Auditor’s report. Tarion says it has published “key performance indicators’‘, “adjusted bonus pay“, and “hired a third party expert” to review comparable organizations. This expert concluded that all was good with this pay scheme, comparing Tarion’s pay to that of Walmart, while Tarion has 200 employees, and Walmart over 90,000.
This financial picture cries out for further scrutiny.
18) Recommendation #31
Tarion must confirm the sufficiency of assets in the Guarantee Fund to cover any future catastrophic defects.
No Meaningful Change
Tarion says it has hired “independent experts” to review its Guarantee Fund annually. With over $500 million in the Fund, and claims pay-outs in the range of $10 to $13 million, this is of little help to consumers who’ve had their claims denied.
The focus should be on preventing bad building up-front, properly regulating and licensing builders, thus avoiding most catastrophic building deficiencies and pressure on the Guarantee Fund. A multi-provider warranty system would have put the risk assessment on individual insurers, not one warranty fund. But his government decided against opening up this field to competition, without following the advice of the 2017 independent Tarion review.
These following 6 items have been defined by Tarion as not complete, two years after the Auditor’s report:
19) Recommendation #5
Tarion is to ensure consumers who move into new homes which are partially complete have full warranty coverage, even for unfinished items.
A new definition of “finished house” is to yet to be released; no new warranty has yet been decided upon to protect homeowners for unfinished items.
20) Recommendation #7
Tarion is to make sure homeowner disputes with builders are resolved in a timely manner.
Tarion says it has begun an analysis of these timelines and has “implemented a process to notify all parties if they are unable to meet their own timelines for decisions”. They promise to “conduct training for staff” and “conduct compliance audits” of the new processes.
This shows little hope of change from the current system. Warranty decisions can be drawn out, builders given too much time to delay fixing problems, and then more extensions. Tarion seems still overly concerned with keeping builders happy. All this time during disputes the consumer has to take hours or days off work for multiple visits from Tarion and builder staff, with no resolution to their under-heated home or leaking basement.
If the builder doesn’t repair within a specific time frame laid out in the warranty, Tarion should provide another qualified independent trade to do the work at the cost of the warranty.
Any audits of this process should be done by an independent compliance officer, not by Tarion itself. Cash settlements and “customer service gestures” are often not helpful, since the consumer has to research and hire trades, supervise the work, which could void the home warranty in some cases. Remedial work should be Tarion’s responsibility, through its engineering and trades network, many of whom testify for Tarion at LAT appeals.
21) Recommendation #24
Tarion has not followed many recommendations of its own internal ombudsperson since 2008. There have been 38 in total since 2018, Tarion says it has completed 25 of these, and 13 remain unaddressed.
Tarion says it has addressed “all but one” of these items, and will report on its progress on its website.
The fact that 30 recommendations on “fairness” issues have been made by the internal ombudsperson since 2008, and Tarion has not implemented ALL of them, indicates they themselves don’t take this internal office seriously.
The ombudsperson’s office fulfills no useful purpose for consumers. If Tarion is not even meeting its own internal monitor of “fairness”, that’s a failure of oversight by the ministry. Posting publicly the ombudsperson’s reports on fairness won’t fix a leaking roof or mould in new homes.
This office should be dismantled, and the money used to solve warranty disputes and fix homes.
22) Recommendation #6
Tarion is to make it easier for homeowners to seek its help.
Tarion says it is “taking public feedback” on this, and has proposed extending some reporting deadlines by 10 days, enabling consumers to add items to lists, and expanding the definition of emergency claims to include water penetration.
This seems like a stalling tactic, and more window-dressing. Two years after the auditor’s recommendations, Tarion is still seeking public input. Why hasn’t the extra grace period of 10 days ever been done before in its 43-year history?
This is another indication a builder-friendly, insular culture, not a transparent, consumer protection, pro-active one. A 10-day grace period seems a meager gesture.
23) Recommendation #17
Tarion is to report to municipalities builder instances of non-compliance with the Building Code.
Why is Tarion not reporting violations of the Building Code to municipal authorities who grant building permits? Tarion’s concern is that “the sharing of this information raises privacy considerations”. That indicates protecting the builder’s privacy takes precedence over protecting new home buyers.
“Seeking public input” and “establishing working groups” is a timid plan, Tarion looks torn again between builder protection and consumer protection.
24) Recommendation #32
Tarion is to schedule annual public meetings where consumers can physically attend to ask questions and voice concerns.
Tarion says it will reinstate in-person annual meetings as in 2009-15, after the current pandemic restrictions of 2020 and 2021 are lifted. Tarion cancelled its in-person meetings after homeowners angrily voiced concerns at the 2015 annual meeting.
Tarion forbids consumers from recording the meetings, and cuts off the microphone when questions become highly critical. They post a redacted, softened version of questions on their website, which has been criticized by consumers, advocates, and media reports since 2011.
Webcasts where Tarion makes speeches and cherry-picks questions by email from anonymous virtual attendees are largely useless. For transparency and accountability, consumers should be allowed to record in-person meetings, the “consumer appointees” to the board should be present to answer questions, as well as at least one senior Ministry official. All questions should be posted verbatim on the website and answered. ————————–
As I finish this analysis, I’m left with the starting point of my work 10 years ago: lack of transparency and accountability of this government agency, lack of independent checks and balances and oversight, a builder-friendly monopoly with the same corporate culture as the last 4 decades, writing its own report card, nodding publicly to the Auditor’s directives, but leaving us with the same monopoly, which has now spawned a second one, HCRA.
Tarion cannot be left to fix itself and write its own report card. It may have changed its coat, not its colors.
Daniel Emery’s heartbreaking story: from home-believer to home-wrecked, to advocate for change
Photos of Daniel, from 2015 and 2019
I hope one day, after almost 10 years of writing about the broken Tarion warranty legislation in Ontario, I’ll be able to write a story on how Tarion has protected consumers in crisis, instead of abandoning or over lawyer-ing them to death.
This is not that day.
Last weekend, homeowner Daniel Browne-Emery passed away after a long battle with a cruel and relentless cancer, and the government agency Tarion, which seemed to him just as cruel and relentless.
This is my personal thank you to Daniel and his family for their years of efforts to make Tarion the consumer protection agency the legislature once intended it to be.
Like the rest of us advocates, Daniel wanted the government to follow justice Cunningham’s #1 recommendation in his 2017 review to open the warranty field to competition, and end Tarion’s government-granted monopoly and bias toward builders.
Like most advocates who work toward this goal, many have been victims of Tarion themselves, and have advocated at the Ontario legislature for years for changes to the laws governing Tarion. Daniel was one of us.
I didn’t know Daniel well, but within a few moments of hearing his nightmare story in 2013, anyone could empathize. How is it even possible this could happen in Ontario, a modern democracy with a government agency regulating builders and protecting consumers? Each time I tell his story, it’s met with incredulity and anger. The story continues to haunt us, and should haunt our legislators. But other than the usual platitudes about protecting consumers, they seem focused on keeping the building industry happy.
I first met Daniel at the office of an Opposition MPP at the Ontario Legislature in 2013. We were there to support a bill brought by the NDP to fix broken Tarion. That, and many other meaningful bills were never passed by either the Liberal or the PC Parties, both well-known to have close relationships with builders and developers, while telling us they’re champions of the little guy.
In short, here’s Daniel’s troubling story, which I wrote about on this blog site http://www.consumersreformtarion.com in 2018. I hoped after that the Consumer Ministry would take action, but nothing happened.
Daniel moved into a newly-constructed home in 2007. A few weeks later, he discovered water on the basement floor, which led to flooding. He contacted Tarion, and the builder; Tarion requested the builder take action, but little was done. Months and years passed with Daniel pleading with Tarion to help him. Mold began to take hold, with black slick and patches “as big as pizzas” in Daniel’s words. Tarion finally did some visual mold remediation, but didn’t fix the underlying cause of the water infiltration. By 2008, Daniel said there were four feet of standing water in his basement, and slimy black mold on the staircase carpet and walls.
Financially devastated, he then was hit with bad health news, a diagnosis of throat cancer. His oncologist asked if he’d ever been exposed to mold. “My heart sank when I heard this”, Daniel explained.
When I spoke to him in the summer of 2018, he could barely talk due to the ravages of cancer and the on-going treatments. He was at work, driving a heavy truck, on one of the routes he liked to drive from Toronto to Quebec City. He stopped to have a coffee at a roadside shop and half-joked to me that he seemed to scare people away now, they looked askance at him with his weight loss, long hair, and misshapen smile.
He said when he read my blog post, it made him break down. He was grateful I’d sent it to the Minister and various journalists to try to get someone to do something about the nightmare he’d suffered.
When a consumer threatens to go public, Tarion often swoops in to stop the wheels turning, secret meetings are held, consumers are sworn to confidentiality, and many who are in dire financial straits have no choice but to sign a non-disclosure agreement (NDA).
Now this long-time PC MPP is part of the current PC government, but he’s gone silent. In the meantime, the builder has gone on building more homes, with nothing mentioned on his Tarion record, and no way for future home buyers to be forewarned.
In the fall of 2019, Daniel felt the cancer again pressing at his heels. He wanted to make sure, if he couldn’t do anything in his own case, that others wouldn’t be devastated like him. He offered to drive to Toronto and tried to arrange meetings with journalists, even though he was weak and could barely speak.
Tarion refused to give Daniel certain reports, like the mold report they had commissioned, and which was requested by his oncologist. Tarion told him repeatedly his case was closed, because he no longer owned the house. They also refused to issue him a “Decision Letter” which would have allowed him to have his claim heard at the License Appeal Tribunal.
If two major corporations want to battle it out for years on a legal matter, fine, they’re equal adversaries, and fighting on a level playing field, with comparable finances and resources. But most new home buyers are on their own, self-represented, and can’t afford $400-$1,000 per hour for experienced lawyers, and even more for engineering reports. This is not the time for a consumer protection agency to bring out the heavy legal artillery, hard-hitting emails, and heavy-handed tactics. But that’s what Tarion did in Daniel’s case. And too many others I’ve seen.
One of the serious problems with Tarion is it says it can’t force the builder to do anything, the warranty is the builder’s, and Tarion is only there to ‘back-stop” it, and make sure they fulfill their obligations. But often they don’t even do that. The Auditor General’s report (Oct. 2019) found that in 64% of cases from 2014-18, Tarion did not get builders to fix warranted defects.
Daniel and his wife finally got a meeting with Tarion’s CEO in early 2020, thanks to the continued advocacy of a not-for-profit consumer organization. The current Tarion CEO is a former in-house lawyer, as are many of his VP colleagues. All are well-versed in legal tactics to protect Tarion and builders, and get claims dismissed.
This last contact Daniel had with Tarion top executives at their head office, was physically and emotionally painful, he told me. He was asked to sign a non-disclosure agreement. A dying man? What’s the objective of that, where’s the decency?
He told me a few details of the meeting. One made him smile, he said, telling me he knew it sounded childish, but as he was leaving, he asked the CEO if he knew where he could get one of the glass coffee mugs with the Tarion logo they had in their offices. The CEO said he wasn’t sure. His colleague lawyer then disappeared into the kitchen and came back with a mug.
After 13 years of battling Tarion, maybe this was for Daniel a spoil of war, something physical taken from the enemy to prove you’ve survived.
Refusing to give this dying man a mold report so he could give it to his oncologist, is an unnecessary bully tactic; making a dying man sign a non-disclosure agreement for a meager settlement while he’s lost his life savings through the actions of a shoddy builder, while he relied on this government agency to protect him, is unforgivable. Not listing these defects on the builder’s record is adding insult to injury, and worse, complicit with shoddy builders, and a disservice to future new home buyers.
I know Daniel would have liked to hear that his work in the end counts, and won’t be forgotten. The house may have killed him, but Tarion and our lawmakers look like willing accomplices.
That’s the conclusion many have made after looking at Tarion’s progress report it issued this month on the implementation of the Auditor-General’s 32 recommendations.
The spin-masters are back in full force.
Why hasn’t government learned from their past lapses in oversight, why do they still expect Tarion to fix itself and write its own report card?
Tarion’s task was to implement the 32 recommendations of the Auditor General after what the Toronto Star called in July 2020 a “blistering” report on their operations.
The problem with Tarion’s self-evaluation is they re-frame serious systemic issues as simply a lack of communication, lack of training, lack of resources, or misunderstandings. As if we new home buyers just don’t get it, or are confused.
But the major problems the Auditor revealed in her 2019 report were not miscommunications or misunderstandings. They were conflicts of interest favouring builders over homeowners, executive incentives to minimize claim pay-outs, letting builders off the hook for warranty obligations and pay-backs, not reporting builder performance accurately, bias toward builders in the investigation of honesty and integrity complaints, and corporate governance imbalances favouring builders.
Here’s part of Tarion’s self-evaluation below. Of the 25 recommendations under their control, 19 have been “completed” they say, with 6 to be done next year. Let’s check this.
Based on the continuing desperate calls from homeowners to consumer advocates, the Tarion problems have been getting worse, not better.
It would be too long to go through all 25 of these in one blog post, but for brevity’s sake, let’s fact-check 6 of them.
The auditor advised Tarion take all information about a builder’s track record into account before granting a future licence to build.
Tarion has marked this item as “completed” by saying it “has revised its processes and currently requires this type of information to be considered when deciding to grant a license.”
Problems with this:
This process is not transparent; who knows what information Tarion is taking into account before licensing builders? Is the oversight ministry checking this?
“Considering information” is too vague to mean anything; not the same as taking action on it or disclosing it on a builder’s record;
No specifics on what “processes” Tarion says it has “revised”.
This is another “trust us” from Tarion
Tarion is to confirm that builders have the financial resources to complete projects and cover cost of their warranty obligations.
Tarion has checked this item off as “completed”, saying it has “reviewed the best available external evidence to determine which information builders should provide“, the “reasons they cancel construction projects“, and that they’ve “implemented a new process to collect and review this information.”
What is this “new process”? How is this different from before? Does it protect consumers, just because it’s “new”?
In the past, builders have refused to disclose to Tarion certain key information in their financial records, (eg: the Urbancorp case), by refusing investigations, and Tarion has said it has no authority to require a closer look at the builder’s books.
The same has been the case with the reasons builders give for cancelling condo projects. The reasons are often vague, such as not being able to get financing, while they quickly go onto to build other projects.
What is the “new process” to “collect and review” this information? Saying it’s new and improved doesn’t make it so. Especially since Tarion considers builders as one of their main stakeholders, and two builders are long-term Tarion board members and builder lobby group members.
This recommendation states that Tarion is to ensure homeowner complaints against builders are properly investigated.
Tarion has checked off this item saying it “has added additional resources to initiate and complete investigations… and eliminate the backlog”.
But this is not an under-staffing problem, it’s a conflict of interest problem. It can’t be remedied by adding staff and clearing the backlog of complaints. This seems like re-framing the problem to minimize it and chose a desired solution.
Another similar problem of bias toward builders is reported in the Auditor’s analysis, pg. 9. When builders say homeowners denied them entry to the home to fix defects, Tarion didn’t bother to get the homeowner’s side of the story. This is an ingrained problem of bias toward builders, not an under-staffing problem, or a lack of training.
Tarion was told to make the Builder Directory show results of their investigations into honesty and integrity issues, show the amount of money still owing to Tarion by builders, show the number of defects under warranty the builder refused to repair, and number of Building Code violations builders refused to repair. This has been checked off as “completed”, but it hasn’t been.
In the vaguest language possible, Tarion says it has added “past convictions” to the list (meaning when builders were building homes without providing the Tarion warranty), but for the other important aspects of builder records we read: “Tarion sought public input on additional information that should be posted on the Builder Directory”, […] “and has up-dated the Builder Directory with this new information”.
Tarion was to make sure their staff had Building Code certification before they inspect homes for Building Code violations. This item has also been checked off as completed.
Tarion says it’s added “a training program” for staff in this area. But the Auditor’s report called for Building Code certification, not training of internal staff.
Building Code violations are now going to be “reviewed by staff with the relevant qualifications” or “byexternal experts as needed.” But this gives too much discretion to Tarion to decide if defects are Building Code violations or not, and to use outside experts only if they decide to do so. This is an on-going problem with Tarion: lack of specific training in the defects they are sent to investigate, lack of qualified Building Code inspectors, and secrecy surrounding what experts are hired and when, and often no action even when engineer’s reports are obtained.
What has changed here? More training and reviewing.
The Auditor’s report said the internal Ombudsperson’s office is to have formal independence from Tarion.
This has also been checked off by Tarion as complete, but that’s not correct.
The Ombudsperson is to report to Tarion’s board and be reviewed by the board, after doing her own “self-review”. There were serious problems cited in the Auditor’s report regarding exorbitant pay raises for the Ombudsperson herself, and the potential sharing of confidential homeowner information with the internal legal department. These are all huge conflicts of interest, and should have prompted resignations, but all this was kept secret until October 30, 2019.
This Ombuds office is still paid by Tarion, and housed within their offices. Although it is formally supposed to be reporting to the board, it is not in any sense independent of its employer. The office has recently changed its name to New Home Ombusperson’s Office, eliminating the word Tarion, but that fools no one.
There has recently been – you guessed it – a consultant, another lawyer, hired to find out whether this office adheres to the general ombudsperson principles. Undoubtedly chosen and paid for by Tarion, so one can already guess the outcome.
Since the Ombudsperson doesn’t have a mandate to get involved in warranty claims or disputes, it’s hard to see what purpose the office has at all. Most consumers say it’s a time-consuming, frustrating, and useless exercise to contact this office. This money would be better spent fixing homes.
We rely on the Ministry of Consumer Services as oversight authority and the Auditor general’s office in her next audit, to see through the PR and do their fact checking, instead of relying on Tarion’s version of reality. We’ve seen what that has yielded after 43 years.
In early 2020, the Ministry promised the public a “complete overhaul from top to bottom”, after admitting repeatedly Tarion was “broken”. But it’s a sad joke on consumers to call this an overhaul.
For many consumers still suffering in newly-built homes with serious construction defects, this report card is no more than a promise to consult, review, hire more consultants, and conduct pilot projects. That’s what Tarion has been doing all along, it’s a gold mine for consultants.
The same executives are in place at this monopoly, and many have been at Tarion for over a decade, including the board Chair, CEO, and several senior VPs. So….
Why does the government allow Tarion to keep this lucrative monopoly which forbids other providers from entering the field? What’s the product or service they provide? Why is it mandatory?
Many consumers say Tarion has cost them more in a long, exhausting, costly whodunits, without resolution. They’ve lost years of their lives, and suffered financial ruin and health problems trying to get defects resolved through Tarion. It has cost many consumers more than it’s worth. Ask the Shuman family, the Emery, Bellefeuille, Ferland or Wheeler families, just to name a few.
Tarion executives and Consumer Ministry officials unanimously and immediately accepted all thirty-two of the Auditor’s recommendations. So you’d expect to see the marching orders have by now had some effect.
Hard to find any progress.
The executive team has been left largely the same, with some big promotions from within, and a long-time board member has been rewarded with the top position of Chair of the board. How could those who were fine with the broken system in the past be those you trust to fix it? Where have they been all these years? Seems an odd way to make a new start and bring about a major culture change.
Here’s what many consumers on the receiving end of Tarion’s broken system have found during the last year….
12 continuing problems:
1) Still – the burden of proof is often on homeowner to prove construction defects, whereas they should only have to show credible symptoms. Tarion’s representatives say they won’t climb up ladders or look on roofs, so they won’t warrant anything they can’t see. The consumer loses, Tarion and builders win.
2) Still – too many non-disclosure agreements and “services gestures” are being used by Tarion, which allow builders to avoid having defects listed on their records, and allow bad builder track records to remain hidden from the public. Consumers lose.
3) Still – too few investigative inspections on home defects by qualified inspectors. Consumers lose.
4) Still – no independent dispute resolution (DR). Tarion’s DR is not seen by consumers as independent of Tarion, or impartial. Too much discretion is left to Tarion to decide methods of DR without proper independent oversight. Consumers lose.
5) Still – no consumer advocates on Tarion’s board (or the new regulatory board, “HCRA”) . Two long-time board members are builders, four others have ties to the real estate industry, and none appear to have any background with the consumer experience with the warranty. Consumers lose.
6) Still – no transparency in policy-making: consumers have no idea what becomes of their input into policy consultations, or what influence builder lobby groups have had on the end result. Consumers lose.
7) Still – there are conflicts of interest in Tarion’s stated mandate: serving its own interests, those of builders, and government officials, but also the new home buyer. Serving the “public interest”, meaning everyone, is too broad, and no one has the same at stake as the homeowner. This is a 43-year-old flaw in governance. Why is everyone afraid of consumer advocates on a consumer protection board? We lose.
8) Still – no cap on legal fees used out of the warranty fund to fight consumers; no cap on executive salaries, and no transparency about how executive bonuses are calculated. Consumers lose.
9) Still – Tarion seems to be continuing to license builders with shoddy records. There are too few consequences if the builder doesn’t pay back money owed to Tarion, and there is continuing secrecy about their records. Consumers lose.
10) Still – consumers are told if they dispute a Tarion decision they can appeal it to the License Appeal Tribunal (LAT), where about 85% of consumer cases fail. The 2017 Tarion review recommended the LAT not be used for these appeals. It’s not a level playing field, since most consumers are self-represented, and Tarion is always represented by experienced litigators. Consumers lose.
11) Still – consumers are being blamed for denying entry to a builder to fix defects when this isn’t true. Tarion often doesn’t hear the homeowner’s side, and will use this to deny claims. If the relationship between builder and homeowner has broken down, Tarion should appoint another builder to do repairs, and not subject the homeowner to humiliating or hostile confrontations in their own home. Consumers lose.
12) Still – Tarion has kept the word “warranty” in its name, whereas the Auditor’s report said they don’t provide a warranty. Consumers misled, confused.
The PC government’s frenzy to build more homes faster, cut red tape for builders, and keep the Ontario Home Builder’s Association (OHBA) on side, has been their overriding objective, with the OHBA President describing Tarion as “a good system” in June 2020. (Legislative Committee on General Government).
The reason for creating a new home warranty in the first place is to protect new home buyers, full stop. Its purpose shouldn’t be to protect its own executives, or builders who build defective homes, or government officials who are lax in their oversight responsibilities.
Many parts of the the PC government’s new bill 159 on Tarion Warranty are concerning.
The bill purports to fix “broken Tarion”, but ignores much of the independent advice government has been given for over a decade on how to fix it. This advice has come not only from independent reviewers such as judge Cunningham, but also from the Auditor General’s special audit in 2019, and advice from senior ministry officials dating back to 2014, based on a decade of consumer complaints about the warranty provider.
Minister Lisa Thompson and her Parliamentary Assistant, long-time MPP Bob Bailey, led the praise for their own bill during Legislature debates, March 5th. The Opposition Critic, MPP Rakocevic, countered with thoroughly researched evidence from the independent review, and nightmare stories of consumer experiences with Tarion, which never should have happened under Ontario consumer protection laws.
A complex legal forum…
Let’s take just one example of one of the major failings of bill 159: the government decided to keep the License Appeal Tribunal (LAT) as the appeals forum for Tarion claims. Why? This goes directly against the advice of the Tarion review, and consumer complaints for over a decade to the ministry. The LAT is a complex legal forum, most consumers have to self-represent due to the high cost of legal assistance, and they lose 83% of the time.
The PC government has a chance to make this right in their new bill, and they have a majority in the Legislature, so why didn’t they follow expert advice and eliminate the LAT as a dispute resolution method, since it’s obviously not working for consumers? Perhaps because it’s working well for Tarion and builders.
It gets more concerning.
In his speech to the Legislature on March 5th, MPP Bailey said the new bill would also “remove builders and vendors as parties at the License Appeal Tribunal”. He claimed this would “restore balance for consumers.” As it stands now, Tarion usually adds the builder as an “Added Party” to the hearings. Removing the builder from the hearings will only encourage more behind-closed-doors legal strategizing between Tarion and builders on how to get homeowner appeals dismissed. Currently, the builder’s collaboration with Tarion is on the record, and transparent for the adjudicator to take into account before making a judgement.
More secrecy creates more imbalance, and doesn’t bring transparency which the LAT needs to show its decisions are fair. Who advised the government on this idea is unknown.
Minister Thompson and MPP Bailey also say Tarion will now have access to other dispute resolution methods. But they have all along, and have not chosen, to my knowledge, to use other methods such as mediation or arbitration. They win 83% of the cases at the LAT, they can afford to hire top outside counsel and engineers, so they have no incentive to look for other options. They can make their own regulations with very little oversight, and the governing legislation dating back to 1976 has given them the power to use arbitration (section 17 (4), which to my knowledge has rarely, if ever, been used.
To give more discretion to Tarion to decide when and which other dispute resolution methods are to be used is repeating the problems of the past: lack of transparency and accountability to the homeowner and the public.
Consumers should also not be made to sign “non-disclosure agreements” or NDA’s, no matter what type of dispute resolution is chosen. Future home buyers have the right to know who the shoddy builders are, and Tarion and the ministry often tell consumers to “do their research” on builders before buying. So their track records should be public.
The last point which has totally escaped the PCs in this bill is that the dispute resolution processes at Tarion, whatever they are, are not independent of Tarion. They should be. In order for justice to be done, it has to be seen as being fair, transparent, and balanced.
The judge’s review summed up this problem on pg. 5 of his 2017 review:
Keeping the LAT as the appeals forum, and giving Tarion more discretion which methods to choose, allowing them to train their own employees as in-house mediators (as was announced last year), is all reinforcing Tarion’s power, but not protecting consumers and building trust in a broken system.
There is no credible dispute resolution if it remains internal at Tarion.
This is not an “overhaul” as the Ford government tries to spin it, with the promotion of a few in-house lawyer executives, the retirement of the CEO, and more Liberal party platitudes about “enhancing consumer protection.” There’s no point re-arranging the deck chairs when you have a hole in the boat.
A year-long independent review of Tarion Warranty Corporation, conducted by Judge Cunningham and Deloitte Consultants in 2016-17 recommended: end the monopoly, open the field to competition.
The PC party was then in Opposition and fully supported this. But this year, the PC government, now with a healthy majority, has done a flip-flop. They’ve brushed the review under the rug like it never existed.
What’s changed in a year? What research does the government have to over-ride a year-long independent review, which interviewed a broad range of stakeholders, and surveyed warranty programmes around the world? We see none.
The conclusion of the review was clear: warranty providers are not “a natural monopoly”, as regulators are; competition in providers would better serve consumers.
The Minister of Consumer Services, Ms. Lisa Thompson, is not disclosing what research they may have to justify keeping Tarion’s monopoly. Two things are clear: the government wants more homes built faster, less red tape for builders, and builders themselves like to keep the monopoly, probably because they can control it better than several independent providers. Forty-two years of Tarion history have shown this to be the case.
In a recent public statement, the Minister cited “higher costs” for consumers if the government were to decide on the competitive model. Not true, according to a B.C. housing official, Mr. T. Gioventu, in one of the ministry’s consultations I attended in March 2019. He said the cost would be “about the same” as what Tarion charges now. He also said the multi-provider system was “working quite well” in B.C. He pointed out that dispute resolution was independent and timely, with both parties incentivized to reach a solution through arbitration if an initial resolution can’t be reached.
Keeping Tarion’s monopoly in Ontario means consumers are still stuck with the License Appeal Tribunal as an appeal court for Tarion’s decisions, where they are up against two adversaries with their lawyers, Tarion and the builder. Consumers are mostly self-represented, and lose 83% of the time.This makes no sense from the “For The People” government, and seems tone-deaf on consumer protection.
Consumers, at every consultation I’ve attended over the past 3 years, have been unanimously in favour of ending Tarion’s monopoly status, having indirect choice in providers through the builder’s choice of insurer.
What’s happened to this feedback? Journalists, oddly, leave Tarion pretty much alone and don’t seem to want to poke a big litigious monopoly of government. But here’s an opportunity to find the story behind the story, and inform consumers before they buy new homes. Industry lobbyists and political donations are part of the picture, no doubt.
The Minister also stated her concern that smaller builders may not be able to get insurance if Tarion’s monopoly is removed. But that’s good for consumer protection, isn’t it? If a marginal builder can’t get insurance to build new homes because he has a poor record, who wants to buy a new home from him and risk their life savings? The consumer shouldn’t be a proving ground for those who want to build homes but don’t have the expertise or financial stability to complete the task properly.
It seems on this point the government is off-loading part of the risk of new home building to the consumer, the person least able to bear the financial burden of construction defects. Tarion has continued to license builders with poor records, says the Auditor General’s report, pg. 7: “builders with poor warranty records continued to get licenses from Tarion.” So consumers continued to buy homes from builders who should have had their licenses removed. The Builder Directory track record, administered by Tarion and a builder-heavy board, is no help either, and has been critiqued for a decade, as “less than useless”.
Another advantage of the competitive model is that warranty providers, for example in B.C. and Alberta, can inspect a builder’s work during construction. They do this to manage their own risk. Although Tarion has had the authority to inspect, it rarely has, and has not hired many qualified inspectors. So more risk is passed on to the consumer. But who’s been watching them?
Prevention is the best warranty. Preventing defects from happening in the first place can be partly done through professional inspections on worksites, and proper supervision of trades on site, but Tarion has had no incentive to do so. They often pass the buck to municipalities on inspections, who then pass it back to Tarion and the courts. And the Ministry’s advice has too often been “sue the builder”. Why should the taxpayer fund part of Tarion’s dispute resolution?
With no oversight by the Auditor General in 42 years, and minimal oversight by the Ministry, there’s been a mission creep from the original intention of consumer protection in 1976 to builder and Tarion protection. See pg. 8, of the Auditor General’s report stating that executives have been incentivized to deny claims and bolster their own pay. Shocking. Has it stopped?
Interesting that when Tarion was confronted with 32 hard-hitting recommendations of the Auditor-General in October 2019, they immediately accepted all of them without reservation. Makes one wonder what they’ve been doing all these years, and what the oversight Ministry has been doing: they knew the processes and compliance tools weren’t working, but did next to nothing. Because they could. What’s changed now? What will change by government keeping Tarion as the sole provider?
It’s hard to find an example of a government-granted monopoly which provides an excellent product. Monopolies have little incentive to improve: they have no competition which can keep them on their toes or coax away customers.
If there were competition, maybe some insurers could offer a 5-year instead of a 2-year HVAC warranty, or provide a menu of other warranty options. We are forced by law to buy Tarion’s product, whether we like it or not.
Tarion says it offers a “backstop” to the builder’s warranty, but according to the judge’s review this is not an insurance product, (pg. 5, Tarion review). And it shouldn’t be called a warranty either, according to the Auditor’s report, (pg. 22).
The competitive model for warranties would guarantee each provider is offeringa true insurance product, and would come under the regulation of the Insurance Act. Tarion offers an insurance-like product but isn’t regulated like an insurance provider. Too often the finger-pointing takes over after a defect is discovered, the buck gets passed back and forth between the builder and homeowner, then there are months or years of delays, and often the defects don’t get fixed at all. The Auditor’s investigation found “about 65% of the time between 2014 and 2018 the builder should have fixed defects under warranty but did not.” (Pg. 7 Auditor’s report, 2019).
Many believe Premier Ford’s “partnering” with the building industry to build more homes faster with less regulatory red tape has put this political agenda above consumer protection.
Premier Ford has been quoted saying governments shouldn’t be running monopolies. We agree. Both the Tarion review and the Auditor’s report show why Tarion is not protecting consumers. The government is not disclosing why they are ignoring the review and keeping the status quo, except for announcing the retirement of the CEO a few months ago.
This is not a ‘transformation” as the minster has announced, it is not fixing a broken system. It is leaving consumers with the same risks and un-transparent system that both judge Cunningham and the Auditor-General came to the table to solve.
Consumer protection is the responsibility of the Ontario government by law. But builders and Tarion seem to have gotten their wish lists. When will Premier Ford stop selling “we need a million homes”, and start making sure these homes are properly built and consumers are properly protected in the biggest purchase of their lives?
Tarion was created by the Bill Davis PC government in 1976 after a building boom and a rise in shoddy new home building. Here we are again at the same table four decades later. But Premier Ford has side-stepped consumer protection entirely in his new bill 159.
“Those who don’t learn from history are destined to repeat it.”
It’s hard to imagine a more serious critique of a government agency than the report released last week on Tarion “Warranty” Corporation by the Auditor-General of Ontario (link below, Oct. 30, 2019).
The report came as no surprise to consumers who’ve been hammering at the doors of Queen’s Park for over a decade with complaints about exactly the kind of corporate wrong-doing the report documented.
Just a few of the revelations of wrong-doing are:
– Tarion has given disproportionate influence to builders and their industry lobby group on its board and its policy-making;
– Tarion makes its own regulations without sufficient oversight by government;
– Tarion’s senior management was rewarded financially for minimizing financial aid paid to homeowners;
– Their legal department tried to obtain internal confidential information to use against consumers in court;
– Tarion doesn’t do enough due diligence to ensure builders have the financial stability to be licensed and build;
– Tarion keeps secret information on builder’s track records;
– 65% of the time between 2014-2018 builders should have fixed the defects under the warranty, but did not. (pg. 7, Auditor’s report).
– Tarion can’t call itself a “warranty” corporation because they don’t provide a warranty.
Added to this scathing critique of Tarion’s policies is the equally hard-hitting review of Tarion in 2017 by a seasoned judge and Deloitte Consultants, which recommended removing Tarion’s monopoly, opening the field to competition, a separate regulator for builders, and a total of 37 recommendations. Nothing meaningful has been done.
Many consumers have been sabre-rattled into silence by Tarion and some of their builders and lawyers over the years, warned not to use words like “corruption” or “collusion” regarding Tarion’s business practices, warned to stop saying there are loopholes in Tarion’s “warranty”, threatened with defamation lawsuits, spent time in jail for refusing to pay Tarion’s legal fees, (yes, jail), and some sternly admonished by the Chair of the board not to be “disruptive” at its Annual Meetings (see 2015).
Even a quick reading of the Auditor-General’s report shows Tarion has reason to muzzle its critics, block them on social media, and prevent them from speaking out publicly.
Tarion’s laizzez-faire model of oversight was praised by a former Chair of Tarion, (in a 05/15/15 article in the Ottawa Citizen) stating the oversight model “keeps the government’s nose out of doing things”.
Yes, no kidding.
Tarion was given a public trust mandate in 1976, a monopoly to protect consumers and regulate builders. They have clearly too often failed in both of these duties to the public.
Consumers feel they’ve been sent on a fool’s errand by the governing Liberals and PC’s for over a decade, some have lost their life savings and endured family hardships trying to get construction defects fixed in their new homes. This agency set up to protect us has too often failed in its mandate, and been successful in covering it up. What makes disturbing reading is the “Tarion agrees and accepts” text after each of the serious critiques of their activities. Where has the Tarion CEO been for 10 years? Where have the in-house lawyers been, with their professional code of ethics to act in the public interest?
The Tarion mea culpas seem fake and hollow. As does the well-meaning promise of the Minister of Consumer Services who welcomes the Auditor’s report, vowing to “work together” with Tarion, and better educate consumers.
What needs to be done?
1) The Tarion board and CEO should be asked to step down. They’ve lost credibility. They don’t deserve our trust any more.
2) Our legislators need to bring new legislation to protect consumers against shoddy builders, not builders against consumers.
3) Legislation needs to end Tarion’s monopoly. Other warranty providers will refuse to license bad builders due to their responsibility to manage their own risk. Let Tarion continue to license as many bad apples as they want, let’s see how that works out for them. They may fall on their own sword.
The response from the current PC government to the Auditor’s report is timid. Premier Ford himself has said not one single word. The minister says consumers need to be better educated, a page right out of the builder lobbyist’s and Tarion playbook. Tarion has seen the light, we’re meant to believe, and vows to “work with” the government to fix itself.
Premier Ford’s much-publicized plan in early 2019 to “partner” with the building industry to build more homes, faster, and cut red tape, seems directly opposed to any serious effort to rein in this rogue monopoly and make it accountable and transparent.
Tarion has failed in its responsibility to the public, while too often taking advantage of vulnerable consumers. We’re being asked to trust them. Again. We’re not buying it. They’ve been selling us a product they don’t have, and masqueraded as consumer protectors while protecting builders, their monopoly, and their pocketbooks.
The message to the public is we’re working with Tarion, and Tarion with the Ministry. Which is what brought us this policy failing in the first place.
This is a political problem, and only our governing MPPS can fix it. Have they already made promises to the building industry and its puppet? The refrain of we agree and we’ll do better is not credible. Too little, too late. Beware of the crocodile who sheds a tear before devouring his prey. Drain the swamp.