Tarion Warranty Corporation recently published on its website a review of its Dispute Resolution processes. It was commissioned by Tarion itself in early 2015, after negative consumer feedback at its Annual Public Meeting (05/2014). (See Review at http://www.tarion.com, “About Us”, “Dispute Resolution”)
Tarion chose a well-known dispute resolution specialist, Ms. G. Chorneneki as reviewer, and limited the scope of the review to the narrow lens of dispute resolution only. The review is scholarly, detailed, and undoubtedly costly. But its 69 pages are not written in language easily accessible to the general public.
Here are some of my thoughts about it, and several important omissions I see.
Ms. Chornenki states, pg. 6, of the review: “Readers should understand that this review is limited to Tarion’s dispute resolution functions and is not directed at its governance, regulatory function, or finances.“
That’s a problem. Tarion is a complex, multi-faceted government monopoly with both builders and consumers as stakeholders, and has many potential conflicts of interest. The tools available to solve a problem often alter the perception of the problem itself, and limit the solutions. If your only tool is a hammer, then every problem looks like a nail.
A dispute resolution (DR) specialist whose analysis is limited to DR only, is likely to only be able to identify problems through the narrow DR lens. The narrow scope has limited the usefulness of the findings, in my opinion.
Some of the recommendations may be worthwhile, for example producing more evidence-based reports at an earlier stage of the claims process, and recommending employees use their “discretion” more often to hire third party experts. (Recommendation 6). But training Tarion employees in evidence-based report-writing, or dispute resolution skills is costly and time-consuming. Consumers expect Tarion has already competent employees on staff for the jobs they were hired to do. Using more money from the warranty fund to make “field representatives” more like dispute resolution officers is costly. It would undoubtedly create more jobs for outside DR consultants. But Tarion already spends approx. $9 million on administrative costs, $26 million on salaries, and only $3.5 million in claims, (annual report 2014) so the review recommends more expenditures, which may or may not solve systemic problems.
Why has Tarion not not hired qualified building inspectors as is required in Section 18 of its governing legislation, the ONHWPA?
A group of 8 consumers I organized on a volunteer basis to give 2 hours of input into this review (29/07/15) asked why Tarion has not hired inspectors as required by its own legislation. The Act states clearly “Tarion shall hire inspectors for the purpose of this Act.” If Tarion hired qualified inspectors, there would be no need to train its representatives to be more like building inspectors or dispute resolution specialists. Tarion has never answered this question, asked repeatedly by consumers and MPPs. Omitting this from the review is puzzling.
Why do new home defects have to become disputes at all?
Experience with other warranties seems very different. I recently discovered a leaking valve in HVAC equipment in my home. The installer sent a qualified HVAC expert, inspected it, and told me they’d look after me under the warranty. It was fixed within a week. I didn’t have to investigate the cause, find the villain, or defend myself from accusations I might be the villain. A similar experienced was cited by a friend whose car was deeply scratched in a car wash. She discovered it when she got home, and her insurer immediately said they’d do an investigation, and take care of it. She didn’t have to get involved in a whodunnit either. These companies take the side of their client, not the person who caused the problem. But they have competitors in the market, Tarion does not: we are required by law to buy their warranty.
Who is Tarion’s client, the builder or the homeowner? “Tarion was created to serve as the regulator of new home builders and administer a new home warranty plan to protect new home buyers“, the Annual Report states. Ms. Chornenki’s review makes no mention of Tarion’s role as regulator/licensor of builders. Nor does it point out that 8 out of 15 Tarion board members are builders, no consumer advocates.
The narrow parameters set by Tarion for this review are too restrictive to allow a proper analysis of all the tentacles of these problems. That’s a serious shortcoming since these problems give rise to many disputes: serving two masters, no transparency regarding whose interests are being served, or whether all consumers and builders are treated equally.
The Tarion Builder Directory (builder track record) is not mentioned at all in this review either. A builder might be motivated to do a quick cosmetic fix on a major defect, let the warranty expire, and walk away with no responsibility, and therefore no defect listed on his record. Tarion would benefit in this case as well by turning a blind eye, letting the 2-year clock tick, avoid paying out a claim, and avoid setting a precedent for future claims. The different motivations of these stakeholders are not examined in the review.
Many consumers would be more interested in dispute prevention experts. Why can’t Tarion prevent disputes before they arise and balloon into costly, lengthy disputes? The answer would require looking at the complex stakeholder relationships and dual role of regulator/warranty provider, all explicitly out of scope in this review.
Tarion’s Annual Report also talks about “balancing the interests of all its stakeholders. “Tarion strives to establish policies and business practices that balance the interests of its stakeholders: new homeowners, home builders, and the government of Ontario” (pg. 4, A.R. 2014). “Balancing stakeholder interests” is different from “protecting new homebuyers.” These are the potential conflicts of interest which remain unexplored in this review. The builder-heavy board often passes builder-friendly amendments such as Builder Bulletin 20 on chargeablility. The review recommends removing the word “Builder” from “Builder Bulletin”. This will not address builder bias in policy-making however, which is seemingly a no-go area due to the limited scope of this review.
An alarming statement is found on pgs. 49-51, under “Homeowner Appeals to the License Appeal Tribunal (LAT)”. The reviewer states: “… the tribunal member presiding at a LAT pre-hearing conference often asks to meet privately with Tarion and the builder in the absence of the homeowner in order to determine prospects of a settlement.” The review recommends Tarion “decline” this “invitation”. Most consumers were shocked to hear this has been going on. The reviewer states in her backgrounder (pg. 57) that she has also consulted for the LAT in her private DR practice. The LAT has been criticized by consumers as an imbalanced forum, and with this new revelation, there is more cause for concern. Consumers have complained that Tarion often confers with the builder’s lawyers to discuss “strategy” without the knowledge of the homeowner. Recommending Tarion decline these LAT invitations is not enough. With no transparency, the public is being asked again to trust Tarion, and trust the LAT.
The review also doesn’t mention the growing number of cases where consumers bypass Tarion and the LAT entirely and take their cases to provincial court. Here the builder can’t rely on Tarion to defend him at the expense of the warranty fund. Many consumers have lost confidence in the impartiality of the LAT and Tarion. With a homeowner failure rate at the LAT of over 90%, it’s no surprise.
In recommendation 17 (v), pg. 69, Tarion is advised to reduce its use of external counsel. This is a sensible idea to reduce costs. The review states this would “bring a less intimidating, person-to-person approach”. No one observing Tarion’s in-house counsel at the LAT would conclude they’re less intimidating or more person-to person than external litigators. Has the reviewer witnessed hearings where the homeowner is self-represented? The suggestion to use a Tarion senior executive to bring “a fresh, problem-solving perspective” to disputes still assumes Tarion only acts in the interests of consumers, and seems to ignore the various conflicts of interest cited above.
Another omission in the review, a problem raised in our consumer focus group (29/07/15) was the role of the internal “Homeowner Ombudsperson”. This office was critiqued for not being impartial since it reports to Tarion’s board. It seems to waste homeowners time, confuse them, pass them on to the legal department without prior notice, share internally information given in confidence, or recommend consumers go to the LAT where Tarion wins over 90% of the cases. The reviewer says Tarion does not “consciously” stream files to the LAT. Without examining the role of the internal ombudsman, this is not a complete picture. Omitting the internal Ombudsperson’s role is another shortcoming of this review.
Consumers suggested looking at other warranty programmes in Canada for dispute resolution experiences, for example in Alberta and B.C., which have six or more providers. There is no mention of this in the review, except one line “consultant’s research”, pg. 58. Tarion is unlikely interested in anything which might question its monopoly status. Out of scope.
The reviewer states (pg. 6) that her analysis covers claims assessed in 2014 and part of 2015. This seems a very narrow window. Many who’ve observed Tarion for over 5 years know there are many disturbing cases of serious defects, often Building Code violations, which have not be addressed and have been allowed to drag on for 8-10 years, with devastating emotional, health, and financial consequences for homeowners. Limiting the time-frame further limits the reliability of the conclusions.
In summary:
The reviewer made 17 recommendation, (pgs. 60-69). A majority of Tarion’s board would probably have to approve them if this is to go further. What is the likelihood of majority board approval, given that 8 out of 15 board members and its Chair are builders, and none are verifiable consumer advocates?
Even if the board did approve the recommendations, the root causes of the problems have not been examined. This is like treating the symptoms of a disease without diagnosing the underlying cause: short-term, costly, and may not remedy the problem.
Any long-lasting solutions need to look at the Tarion monopoly in its entirety, examining the many tentacles of this problem, examining all its stakeholder vested interests and lack of transparency issues.
Another appraoch may be promising:
The Ministry of Government and Consumer Services announced (05/11/15), 2 months after the current Tarion DR review was completed, that there will be a general review of Tarion by a ministry-appointed former Judge, Douglas Cunningham. The scope of the review will be wide, and will include governance, transparency and accountability issues, as well as examining Tarion’s monopoly business model. This is a positive step, although the Minister oddly announced publicly (Toronto Star 10/11/15) that he expects it will bring no major changes to Tarion.
The DR reviewer concludes her report by stating (pg. 54) that Tarion has a “customer-service culture“, and is “an open, values-based organization.” Tarion’s CEO, obviously pleased with this broad assessment, repeated it in his introduction to the review: “Dispute Resolution Review affirms Tarion’s customer-service culture“ (…) “I am pleased that an external expert has recognized Tarion as an open, values-based organization...” Its puzzling to read these broad conclusions about the organization after you’ve just gone to great lengths to limit the scope of the review.
Its no surprise to seasoned Tarion observers that they make the rules, referee the game, move the goalposts as needed, and proclaim the winner.
———————-
link to Tarion DR review: http://www.tarion.com/About-Tarion/Pages/Dispute-Resolution-Review.aspx
———————-
CONSUMERS' REFORM TARION 