Too Little, Too Late

Tarion’s self report card gives them an “A”. But what’s actually been done in two years since the Auditor General’s report on this government agency responsible for protecting new home buyers and regulating builders?

Not much.

Here’s a fact-check.

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).

Not accomplished:

– 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.

Not accomplished

– 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 independent inspector. 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.

Marginal change

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.

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.

Marginal Change

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.

Marginal Change

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).

If it is to have any credibility or value at all to consumers, and that’s still a big if, this office should help resolve warranty disputes, and report independently to the Ministry, not to Tarion.

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.

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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.

Not Accomplished

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.

Not Accomplished

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.

Not accomplished

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.

No Progress

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.

No Change

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.

No Change

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.
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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.

B. Captijn

Consumer Advocate

April 25, 2021

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Related links:

Click to access tarion_ag_implementation_fallupdate20201.pdf

https://consumersreformtarion.com/wp-content/uploads/2021/04/tarion_ag_implementation_fallupdate20201.pdf