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 offering a 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.”
6 responses to “Premier Ford: Follow the Review’s Advice – End Tarion Warranty Monopoly”
it is highly obvious after years of consumer pleading, fighting, proving, suffering, that the government benefits from this monopoly in one shape or another …and this to the detriment of Ontario homeowners…..
There are some excellent points here including the fact that currently, the Ontario New Home Warranty Program “backstopped” by Tarion does not fall under the insurance regulators. As a result, Tarion is allowed to collect the obscene amount of revenue they do in relation to the amount they pay in claims. The current system I believe is not insurance but more of a rip off for homeowners, a protection scheme for builders and a fraud by Tarion on the province of Ontario.
In our circumstance we had a custom home built for us. Our builder turned out to be an incompetent contractor and fraud…contemptuous of any complaints. We found Tarion over the years to be in bed with that builder. Of course legal counsel, parasites themselves, only compounded our losses.
It would be a gargantuan effort to replicate here our chronology of the events to support our condemnations. Nor is it fair to you readers to wade through hundreds of pages of our files.
From your own experiences you may understand why we condemn the current Rob Ford government for overlooking Tarion’s conduct. This PC Government resembles the powerful political friends and beneficiaries, who overlooked the chronic behaviour of the infamous predators Jeffrey Epstein and Harry Weinstein.
One other comment, Consumer Reform mentioned that …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.”
We believe that a major step forward to substantially reducing major incompetent and dishonest building contractors is to establish a Report Card system on all contractors, much the same as Consumer Reviews of products on-line – Amazon, Costco…by verified purchasers i.e. homeowners. Leave Tarion out of the picture!
Hoping I can contact you, I too am having massive issues with my builder and tarion keeps siding with them. I have documented evidence of damages caused by them, poor installations, and quick fixes which are only ruining my home more and more. I’m beyond angry and at a point where I believe it’s time to rally new home owners/ voters to take a loud stand against Tarion. The corruption and conflict of interest here is not only undeniable but stands to prove this agency is not helping the consumer one bit.
aside from the merits of this Blog (Consumers Reform)…no viable ‘home owners’ efforts to organize has ever crystallized in our opinion – home owners do not exist ‘for-profit’ as does the construction industry – Tarion, the Bodyguard for the construction industry can ruthlessly launch legal action against any organized efforts to rally new home owners
– it is possible for us to organize but it takes some shrewd strategy and persistence to rally homeowners and at the same time to fend off that Bodyguard
I agree with your points.
However, it is due to homeowner pressure on the various Ministers and Opposition MPPs which brought us the hard-hitting 2017 judge’s Tarion review, then the critical Auditor General’s review of 2019. These two independent analyses of Tarion have shed light on what otherwise would have remained a black box.
Homeowner pressure works, but it takes time and perseverence. Sometimes it seems we’re getting nowhere, I totally get that, and we get discouraged. But the tortoise can win the race from the hare. Our perseverence is something none of these deep-pocketed lobbyists or well-connected MPPs ever counted on.