“Protecting”…really? “Guaranteeing”…really? A Consumer Perspective on Tarion’s New Home Warranty

Tarion, the monopoly provider of new home warranties, and licensor/regulator of new home builders in Ontario, has been on a recent media blitz to convince consumers they should have more “confidence” in the warranty, and believe its promises of “protecting new home buyers”, and “guaranteeing” all new homes. You may have read several of the positive spin articles resulting from this “charm offensive”, as its been dubbed, for example an article in The National Post on July 5th, and another in Urbantoronto.ca on August 29th. All portray Tarion as the white knight coming to the rescue of new home buyers, saving them from what they refer to as “underperforming” builders.

What Tarion omits to tell the public, and what journalists seem to have omitted to ask, can be found in a short list of inconvenient truths below. Many consumers have found out the hard way what’s not covered under the Tarion warranty. Forewarned is forearmed. 

Here are four points you might find useful before buying a new home:

1) Even the best qualified building inspector cannot discover latent or concealed defects. HVAC defects, faulty support beams hidden under drywall, faulty patio foundations, may not be visible even to the most qualified inspectors pre-delivery of your new home. Also, some items are not included in municipal inspections and there are also usually exclusions in private inspection contracts. “But we can’t inspect every two-by-four in a new home“, an Ontario Building Code official stated in February, 2012. Tarion does not do inspections of new homes either, they say: that’s the responsibility of the municipality. But defects happen during construction when there are usually no inspectors around. Faulty workmanship, inadequate supervision of sub-trades, lack of expertise, short-cutting in materials, unqualified trades, builders squeezing sub-trades to do work faster or for less money… all these may result in defects which are latent or concealed at time of an inspection. Many homeowners who’ve discovered defects after the 2-year warranty are out of luck: Tarion tells them they’re not covered. But how can you report a defect you can’t see? If you try to get compensation under the remaining 7-year “major structural defect” “MSD” warranty, you’re usually told you’re not covered either, since that usually only applies to near-catastrophic failures of the structure.

Tarion’s in-house “ombudsman” will tell you you can dispute Tarion’s decision by appealing to the “Ontario License Appeal Tribunal” (LAT). What he should also warn you about is you’ll be up against not just one lawyer, but two: Tarion’s and the builder’s. Tarion also has a seemingly unlimited budget to hire outside legal expertise to fight you as well. He should also tell you the failure rate for consumers for “MSD” claims at the LAT is close to 90%. (CPBH research 2012)

Many homeowners have complained they’re not being properly informed by Tarion about the unlevel playing field at the LAT from the outset. The LAT seems to work well for Tarion and its builders, since both can afford lawyers, and they can align their interests against the homeowner to get claims dismissed. Lawyers are interested in winning cases for their clients, not necessarily getting a cost-efficient and fair outcome for all parties. Remember the famous quote of a prominent U.S. judge: “we’re not in the justice business, we’re in the legal business”.

The LAT has ended up costing some consumers $40,000+ in legal fees for several days of hearings, excluding expert reports and time lost away from work. If you can’t afford legal representation, (and most consumers can’t), it will cost you several weeks in preparation, several thousands of dollars in expert technical reports, costs to serve court documents, etc., and your chances of success as an unrepresented party are dismal.  When asked how much an LAT hearing usually costs, Tarion’s President and CEO replied at the Annual Public Meeting on April 30th, 2014 “about $100″, (the court filing fee). Wonder how many LAT hearings he’s attended.

IF the Ontario Small Claims Court limit is ever raised to $50,000 from the current $25,000, (as in Alberta), many consumers feel they’d have better chances of getting resolution under contract law, by avoiding Tarion and the LAT completely, and pursuing the builder directly under breach of contract. In some Ontario Provincial courts, you can bring a claim within 2 years AFTER DISCOVERING the defect. It never made much sense to consumers you have to bring a Tarion claim within 2 years if its a concealed or latent defect. Tarion’s CEO, Mr. Bogach, replied in June 2012 in a meeting with consumers, “well, we can’t warranty everything.” Maybe not, but then don’t tell us Tarion “guarantees” all new homes.

Tarion should report all defects it has “inspected” – whether or not they warrant them – to give an accurate picture of a builder’s track record. Consumers would reasonably expect this from the licensor and regulator of the industry. The question “is it warranted?” should be a separate one from “did we find the defect to exist?”. Otherwise, Tarion is shielding shoddy builders from accountability. Exposure of their records could act as a deterrent to shoddy builders. What few consumers know is that builders can dispute defects getting reported on their records through another internal Tarion forum called the “Builder Arbitration Forum” or BAF.  Few builders turn up here self-represented.

2)  When you buy a  newly built home on the re-sale market, for example if its 2 1/2 years old, the advertisement for the property may say “it has a Tarion warranty!“. This makes the sales pitch more enticing, but in reality the 7-year warranty is very limited and narrowly defined. Not many real estate agents, and even some lawyers, won’t point out to you that this only covers “major” and “structural” defects, of a near-catastrophic nature. This warranty may prove useless to you since the definition is so narrow. It doesn’t cover HVAC defects, for example, one of the most costly systems in a home. If Tarion denies coverage under the 7-year warranty, your recourse is the LAT, which many consumers refer to as a legal “meat-grinder”, for reasons outlined above.

3)  Tarion says they take all measures to “work with homeowners” and “step in to resolve claims” before they get to the LAT. Sounds like a great idea, if that’s what they’re actually doing. Many consumers however have not been offered this service. If mediation is offered, it should be more than just an e-mail cooked up between Tarion and the builder’s lawyer: it should involve the homeowner as a full and equal participant in resolving the issue. A home is the largest investment consumers will make in their lives; the homeowner deserves to be taken seriously.

The various Liberal-appointed Ministers of Consumer Services, (about five of them in six years), continue to tell the public “Tarion is making a concerted effort to resolve complaints at an earlier stage than in the past.” Why does it always sound as though this is a near-Sisyphean task for them, like rolling a mammoth boulder up a cliff only to have it come barreling back down each time? Consumers are fed up with platitudes from the Ministry such as “we’re working with Tarion“, we’re striving for “better customer service” and “better communication“, we want consumers to have “additional confidence in Tarion’s decision-making process“. They could save themselves this trouble and expense. What consumers really want from Tarion as regulator of the industry and from the Ministry as “oversight” authority, is a home free of defects in workmanship and materials as promised under Ontario law.

4)  Tarion’s “Ontario Builder Directory” which is supposed to disclose track records of Tarion-licensed builders has been under criticism for years as incomplete and inaccurate. Consumers have told Tarion it is misleading; former MPP Marchese called it in November 2013 “less than useless“.  Buried deep in the Tarion website, you could easily miss it. Yet new home buyers are entitled to rely on the regulator of the industry to disclose information it has in its files on construction defects it has inspected caused by its licensed builders. Whether they were covered under the warratny or not. Again the rolling-the-rock-up-the-mountain agonizing: “we don’t want to take away someone’s livelihood” or “we can’t hold someone responsible for what happened in the past” says Tarion’s CEO (Annual Public Meeting, April 2014).  Even major structural defects reported to and inspected by Tarion in homes built before 2012 are not published on this Builder Directory.  Consumers have repeatedly said they want ALL construction defects reported to and inspected by Tarion’s “field representatives” to be listed. The public interest should override any previous agreements Tarion has made with builders to keep this information off the public record.

Perhaps the rock of Sisyphus is actually the building lobby’s influence over Tarion and provincial politics.

Tarion’s promises of “protecting the consumer” and “guaranteeing” new homes deserve much closer scrutiny. Sadly, there is no consumer watchdog with authority over Tarion. Neither the Ombudsman of Ontario nor the Auditor General have this oversight authority. Premier Wynne seems to have decided to follow McGuinty’s time-proven strategy of turning a blind eye to consumer problems with Tarion. Yet in 2012/13/14 she saw several petitions in the Legislature and Bills calling for increased transparency and accountability at Tarion. All to date in legislative limbo. Many consumers feel the Liberal government has allowed this problem to fester, and its Premier Wynne’s responsibility to fix it.  Undoubtedly an unpopular topic with building industry lobbies.

Social media sites such as this one, and the Facebook page: http://www.facebook.com/maketarionaccountable), have cropped up recently to give a voice to consumers who don’t have consultants, lawyers, PR firms, lobbyists, or pulpits in our national media to warn others of their experiences with Tarion. 

Consumers should do their research” says Tarion’s CEO. Indeed.

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5 Comments

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5 responses to ““Protecting”…really? “Guaranteeing”…really? A Consumer Perspective on Tarion’s New Home Warranty

  1. ” “Consumers should do their research” says Tarion’s CEO.” That’s right. You can’t rely on Tarion to disclose bad builders’ records. So who are we supposed to rely on?

  2. Daniel Emery

    I knew less than zero about my builder and the whole building process. I did the research. We all know what we know in our scope of life. I thought with a contract outlining the construction details and the understanding that Tarion was a warranty provider things would go well. Thirty days after moving in to my new home, basement flooded, mold beginning to grow on walls, I still thought Tarion and or builder would rectify. Little did I know it would take Tarion almost two years to investigate… and then blame me for water infiltration… Little did I know Tarion was a puppet of the building industry. Four years later, foreclosure on the horizon, I was sure Tarion would either get their member builder to rectify, or do it themselves. I was wrong. House foreclosed, I was homeless… This I now know for sure: Tarion is an out of control juggernaut, the building industry at the helm, floating in a sea of consumers money, doing very little for consumers. In the final analysis, no one cares, Tarion, the building sector, the government or the regulators… Wait a second, Tarion has no regulators, no oversight of their “warranty program”. Maybe that’s what some research should delve into. Consumers’ complaints have fallen on deaf ears for 20 years. The biggest purchase of our lives, 3-5-7 hundred thousand dollars and more, takes 25 years to pay. Tarion just floats along, media releases patting themselves on the back, saying all is well… I, and hundreds of other consumers beg to differ. Tarions process and procedures are broken and need to be addressed, peoples lives are being stressed, ruined, in some cases. Tarion warranty is a guarantee that things will go well, according to plans, contracts etc. This does not happen in a lot of cases, and I say again, nobody cares.

  3. nicole lalonde

    Research…do you mean adequate research other than visiting the project, the builder’s own home, a model home, asking the questions ,etc etc ??? how often does a prospective new home owner have the opportunity to 1) know the people for whom the chosen builder has already built a home 2) have the ABILITY to knock on those doors to ask if construction of the home is adequate ? and yes we are all wrong in the original trust we place in the ” SYSTEM ” , the builder, the contracts, the courts…and have the scars to prove it ….do they ???

  4. nicole lalonde

    and what I forgot to mention in the REPLY above….even IF one were to be a door knocker to ” do one’s homework ” (thank you MR BOGACH )…., would those who have signed the famous Tarion /builder legal release in a famous Tarion incited ” settlement agreement ” in which you swear to CONFIDENTIALITY …… would these people SPEAK UP in aid of your education, as a potential new homeowner ?? ?? where does one place the odds here ??

    • True. Many new home buyers have been “gagged” by builders, intimidated, or silenced by other property owners in the same building/development who have homes for sale. All the more reason why an accurate builder track record is the job of the REGULATOR of the building industry, Tarion. Unfortunately builders don’t want this, neither does the Ministry, apparently, who publishes a “Consumer Beware” list for many things, but not for new home builders.

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