This contradiction-in-terms seems to hold true for Toronto developer Urbancorp. A recent article in the Financial Post (National Post, 17/12/16) by P. Kuitenbrower is entitled “Developer could reap #$31 Million from bankruptcy”. It has prompted much head-scratching. It’s a headline which would have caused our grandparents to roll over in their graves. How can someone profit from his own financial meltdown? How can a developer use deposit money of his clients (freehold home deposits are uninsured), how can he make off with the loot for an undisclosed purpose, and resurface from bankruptcy later, possibly a millionaire?
It gets crazier.
Another article published a few days later in the monthly magazine Toronto Life (Jan. 2017 issue) by S. Kupferman covers the same real estate disaster and is entitled: “Screwed. Anatomy of a Real Estate Disaster”.
We read on pg. 54 of this article:
“Ontario law offers no formal support system to pre-construction purchasers who have been burned by a developer.”
Whaaat? Isn’t that like saying there’s no formal support for bank clients robbed of their deposits? It seems in Ontario developers can make off with their customer’s cash and leave them to flap in the wind, trying to connect on-line to understand what’s happened to them. Tarion Warranty Corporation, the industry regulator, gave Urbancorp purchasers this helpful advice via their media spokesperson: “Get a lawyer“. Unfortunately, few other than Tarion executives, can afford legal fees of $500-$800+ an hour, and $30,000+ retainers.
What was Tarion’s role as regulator and licensor of builders under Ontario law, and as a “consumer protection” monopoly?
The article from Toronto Life explains, pg. 53:
“When developers fall short of their obligations, there’s one organization that’s supposed to keep them honest: Tarion, the private, not for profit corporation that enforces Ontario’s New Home Warranties Plan Act. By 2015 Tarion had started to worry about Urbancorp’s troubles. The staff met with the company several times and asked to send in a forensic accountant to review Urbancorp’s books, but as a non-government corporation, it had no formal investigative power. Urbancorp was free to refuse – and it did.”
If you’re a regulator asking to send in a forensic accountant, then you already know quite a lot.
Consumers have been telling their MPPS of all parties – for years – that Tarion is not effective as the province’s regulator of builders. It’s a watchdog with no teeth. The Urbancorp example shows the watchdog will go away with its tail between its legs when a builder says “boo”. No way they want a forensic accountant snooping around their business.
Could this lack of regulatory effectiveness have anything to do with the fact there are 8 builders on Tarion’s board who may favour builder-friendly polices? Could it have anything to do with the Tarion CEO’s compensation of close to $800,000, with a 60% bonus component based on undisclosed criteria? (see The Toronto Star investigative article, 03/10/16 “…Millions in Salaries...)
Consumers have been telling Queen’s Park elected officials for years that a regulator with no transparency and accountability to the public is ineffective. A regulator largely controlled by the industry it’s supposed to regulate is a train crash in slow motion. To make matters more murky, builders and developers are the largest donors to the two main political parties in Ontario. Political parties may be trying to look the other way to avoid stepping on the toes of their biggest donors. Large, powerful industries don’t like to be regulated. Seems they don’t like forensic accountants either.
Tarion’s CEO says he didn’t get any love from Urbancorp’s Israeli investors either. In the Toronto Life article he states:
“The investors in Israel never bothered to inquire what Urbancorp’s status was with Tarion “, says Howard Bogach, the watchdog’s CEO. “Had they inquired, we would have told them there were concerns.”
“Concerns”? Why wasn’t Tarion pro-active in red-flagging the financials they claim to have been so worried about? As a huge government monopoly with over $400+ million in investment income, they had less to lose than consumers who put up their life savings. On Tarion’s Builder Directory on their website there was no mention of Urbancorp’s shaky financials, dubious cheques, or shoddy construction raised by mainstream and social media by spring 2015.
Urbancorp’s foreign investors didn’t call Tarion? If they had, they may have gotten the same brush-off answers consumers get: “this is a live issue“, “we’re looking into it”, “privacy concerns, we can’t disclose“, “we lost the tapes“…
“Knock on doors” is the advice Tarion executives give to consumers who want information on builder track records. In the final paragraph of the Toronto Life article, one of the unfortunately duped purchasers says, “Maybe I’ll do a bit more research into the builder next time“. But research where? If he’d checked Tarion’s website for Urbancorp’s track record, there were no red flags there, even though Tarion says it scrutinizes each builder’s financial records annually before renewing licenses. Did Tarion keep their “worries” and “concerns” about Urbancorp to themselves, to the detriment of the public?
Tarion’s lack of transparency in builder records has been highlighted in the press since July 2013 and underlined by former Minister MacCharles as an important “cornerstone of consumer protection“. Another article on Tarion (31/08/2016) in the Toronto Star is entitled “Consumers Lack Faith in Tarion’s Builder Records” and raises this concern again. No meaningful action.
Knocking on doors is often useless since many homeowners fear negatively affecting their sales values by talking about construction defects, some have been muzzled by settlements, others have on-going litigation, or say they feel intimidated by builders for speaking out.
It’s the job of the provincial building licensor/regulator to red-flag shaky financials of builders and shoddy construction. As long as Tarion is a watchdog heavily run by the builders it’s supposed to regulate, there may unfortunately be more Urbancorp-like disasters.
Justice Douglas Cunningham was hired by the Ontario government in Nov. 2015 to conduct a review of Tarion. The review has not yet been released, as of this writing. The Premier knows a review is not legislation. She has for years refused, as did her predecessor McGuinty, to vote in favour of bills to reform Tarion. She shuffles ministers on this portfolio every year or so, resulting in too little time to understand the complexities of this opaque monopoly and its multiple roles.
A review could be shelved by the governing party, if they think that’s politically expedient for them, or they could commission yet another review. We as volunteer consumer advocates hope for the best outcome for Ontario’s new home buyers in this “consumer protection” review.
As a well-known journalist once said, politics can change your life. For many consumers affected by this faulty government policy, it sadly has.
Dear Premier Wynne,
Premier of Ontario,
Consumers have written to you for years with serious concerns about the Tarion Warranty monopoly. You continue to refer these concerns to the Minister of Government/Consumer Services. Unfortunately, there have been about eight of these ministers in as many years. None of them seem to have been in office long enough to understand this complex monopoly, let alone fix the myriad problems with it.
You have been present in the legislature for many years listening to debates on bills to bring transparency and accountability to Tarion, two of the principles you say are key to your government. The legislation governing Tarion is over 40 years old, yet your party has refused to support every bill to reform it, without explanation.
Many feel the revolving door of ministers is a deliberate delaying and deflection tactic; many also feel your refusal to support Tarion reforms is to avoid running afoul of your biggest donors, the building industry.
Whatever the reason, you seem to avoid all things Tarion, and consumers are left to bear the consequences of this out-dated legislation and flawed policy.
A devastating recent example is Urbancorp.
The financial demise of this developer has left thousands of new home buyers stranded, losing their hard-earned deposits on these new homes. Yet for years the regulator Tarion has received complaints about shoddy construction and unfinished projects of this builder. Social media sites and blogs have for over a year reported a shaky financial record and bounced cheques.
Why wasn’t the building regulator regulating? No red flags on Urbancorp were noted on Tarion’s builder track record. Why not? Whose interests did that serve?
Consumers and MPPs have pointed out for years the apparent conflict of interest in the building regulator being dominated by the industry it’s supposed to regulate. Premier Wynne, you have never responded to consumer concerns about this. Except to shift responsibility to a revolving door of junior ministers who say they’re happy with Tarion’s progress, and “working with Tarion”. Working with is quite different from overseeing, which is what consumers rely on.
We understand you recently asked a consumer in a constituency meeting in August what Tarion has to do with the Urbancorp debacle. We hope you were being tongue-in-cheek. As you know, Tarion is responsible under Regulation 892 (ONHWP Act, RSO 1990) for scrutinizing the financials of all builders it licenses each year. This Regulation (under 10 (3) states Tarion will review “financial statements of the applicants and such other information relating to the applicant’s financial affairs.” It also states an applicant who fails to comply “may be refused registration.” Which as you know, Tarion rarely does.
How can it be that the regulator, “protecting new home buyers”, administering legislation on behalf of government, failed to red-flag this shaky financial record? How can it be the regulator didn’t take action immediately after seeing the red flags? Why was this license not revoked? Why was there no warning of shoddy building practices which had been reported to Tarion listed on its Builder Directory?
Financial debacles of this magnitude can’t happen overnight. The warranty corporation is in the business of assessing risk. How is it possible these financial problems were overlooked? How many more cases similar to Urbancorp may be looming in the future? If the regulatory body has no teeth, this could happen again.
Tarion recently advised consumers, the victims of the Urbancorp debacle, to “hire a lawyer”. These consumers have already suffered substantial losses of their deposits, some far exceeding the bare minimum covered by Tarion, the “consolation prize” as Tarion’s CEO nonchalantly referred to it last month. These consumers can hardly afford lawyers for prolonged legal battles.
Premier Wynne, why is your new minister, Ms.Lalonde, silent on this problem? Why are you silent?
The Tarion review now under way has been charged with looking at whether the regulator should be the sole warranty provider, and whether this is a conflict of interest. Minister Orazietti said in 2015 he anticipated the review would reaffirm Tarion’s good consumer protection; the Tarion reviewer stated several weeks ago he was unaware of Urbancorp details, and the new Minister Lalonde in charge of consumer protection and Tarion is utterly silent.
Consumers deserve an answer, Premier Wynne.
The Urbancorp debacle shows the human cost of failed government policies, the failure of the regulator to regulate.
We cannot afford another ORNGE, another arms-length agency of government without transparency and accountability, in this case governed by decades-old legislation, with regulatory powers it seems reluctant to use. This could bring further weakness to your leadership, with your popularity this week reported to be around 15%. (Toronto Star, 20/09/16, pg. A10)
Premier Wynne, with all of the policy advisors and lawyers available to you, and all the major media coverage on Urbancorp, it’s not credible you don’t see what’s going on.
We are waiting for you to take real action, however inconvenient this may be for your major builder donors. How can you let consumers pay the price for failed government policies, while shoddy builders and their regulators walk away virtually unscathed, shielded by their lawyers?
WHY URGENT REFORMS NEEDED AT ONTARIO LICENSE APPEAL TRIBUNAL
It’s common sense you can’t fix a problem unless you find the root cause. As the old Dutch saying goes, no sense mopping up if you ignore the source of the leak.
So, it seems, with the License Appeal Tribunal (LAT), the appeal court for Tarion warranty (ONHWPA) decisions. Consumers have pointed out problems with the LAT for over a decade, but no meaningful action has been taken to correct the dysfunction so many have experienced.
No one in authority in the legal establishment seems to be actually listening to the end-users of this flawed system. It’s not “dissatisfaction with the outcome”, as is often cited which ails consumers, it’s dissatisfaction with the process, the highly legalistic courtroom forum, and the imbalances inherent in a large corporation (Tarion) fighting the little guy.
Tarion, a government monopoly, is always represented by experienced lawyers at the LAT; consumers have to self-represent due to the high cost of experienced counsel. Under these circumstances, it’s no surprise consumers lose about 90% of the time. (See 10-year analysis of the LAT by Canadians for Properly Built Homes at http://www.canadiansforproperlybuilthomes.com)
A case in point is the following. In 2014-15, a young well-educated couple, Jeffrey Ferland and Aleksandra Ferenc, filed a public complaint with SLASTO, the LAT’s oversight body, about bullying by the adjudicator, and missing recordings of the bullying complaint itself. After months of delay, and partly due to MPP Hillier raising a question about this in the Legislature, SLASTO finally launched an “investigation”. A respected retired judge and a lawyer were hired as “investigators”. I suggested in writing to SLASTO that they include a member of the public on the investigative team to create a public perception of balance in the handling of the complaint. No response.
I attended the Ferland/Ferenc hearing as an observer for 12 of the total 26 days in 2014-15. I had no skin in the game, no financial interest in their investment, and I’m not an employee of the LAT, SLASTO or Tarion.
I was shocked, on several occasions, by the conduct of the adjudicator toward the applicants. I made hand-written notes on each day I attended the hearing. I also made an appeal to the head of SLASTO, Ms. Lamoureux, together with the applicants, in the winter of 2015 urging her to investigate the adjudicator’s conduct, and find out how the how recordings of the bullying complaint itself could have gone missing. No response.
Investigations into professional misconduct by the members of the same profession rarely seem to get at the whole truth. This was the case with the CBC’s internal investigation of Jian Ghomeshi’s conduct in the workplace, and more recently a major Toronto newspaper’s response to allegations of a “toxic” work environment. Employees often require anonymity, since they have too much to lose by speaking out against their co-workers or managers. Whistle-blowers are rare because they are often not protected by their employers for speaking the truth about the behaviour of management or co-workers.
That brings me to some of the major weaknesses I see with the SLASTO public complaint investigation (link below) published August 3, 2016:
- Of the 18 interviewees, 11 of them seem to have been employees of either the LAT, SLASTO, or Tarion. Many of these employees were not present in the hearing room, so could not have seen first-hand for any extended period of time the conduct of the adjudicator. Only 3 were members of the public; I was one. None of the interviewees are named. This is not a balanced or impartial feedback on what went on during the hearing. Several of the LAT employees interviewed were not in the hearing room, or were not there for enough days to witness patterns in the adjudicator’s behavior. The adjudicator was on her best behaviour when management’s eyes were upon her, in my observation.
- I was not questioned about my affidavit I signed (03/15) after witnessing the Nov. 27th 2014 “missing recording” incident. I find it odd that investigators didn’t ask me about it, a sworn statement regarding one of the specific incidents under their investigation. My observation differs from what the adjudicator and respondent said happened. I was not asked for my recollection of what happened on that day. I gave the investigators a copy of my affidavit and some of my hand-written notes made during the hearing. The adjudicator claims she simply “forgot” to record the bullying allegation on Nov. 27th, 2014. The investigators believed her version of events: “human error”, no one to blame. On pg. 21 the investigators wrote: “Without a recording, we will never know for certain what Mr.Ferland said during the portion of the hearing when the recording device was not running.” No one asked me what was said and what I noted down during this exchange. Seems odd for an investigation of this important point.
- No explanation was given in the report why the COO of the LAT, Mr.McDermott abruptly left the LAT around the time the public investigation was announced. He had previously told the applicants the LAT wouldn’t investigate the bullying allegations until after the hearing was over. I believe the LAT management failed to take meaningful, and timely action, perhaps to protect their own reputation and head off potential negative public feedback.
- No explanation seems to be given for why the adjudicator herself resigned from the case before it was completed.
- In late 2015, the applicants asked the adjudicator, on the record during the hearing, and later they asked LAT staff, for someone in management to be present in the hearing room because they felt bullied. On the record, the Adjudicator denied this request, citing cost concerns. LAT management also denied this request. This was a clear cry for help by the applicants, and it was brushed aside. The adjudicator then ruled in March and April 2015 that her conduct did not constitute bullying. The adjudicator may have had good reason to keep management’s eyes away from the hearing room, and management may have had good reason to turn a deaf ear to complaints of bias and bullying against an adjudicator.
- The recommendations in this report seem weak. The investigators advise (pg. 2), more “skills-based train for adjudicators and staff“, more “templates, (…) checklists, and other materials for adjudicators to make sure they are “well-prepared“; and more “practical, accessible materials for self-represented parties..” .
More training of LAT staff and adjudicators is a vague and long-term goal. What about the self-represented litigants who come to the LAT today? Are they expected to experience the LAT a work-in-progress, and continue to suffer the financial and emotional consequences? Even the investigators themselves stated on pg. 25 of their report: “We were surprised by the degree of formality and rigidity we observed in the process to resolve homeowner appeals, especially since the tribunal system was set up to avoid costly adversarial and complex court procedures.”
We can all agree on that. But this is not new information, and it’s hard to see why it took an 8-month investigation to find out a lot of what SLASTO already knows.
The LAT is a highly legalistic and complex forum; it’s not a problem-solving body. It costs taxpayers and new home buyers dearly, but seems a good source of revenue for prominent Bay Street law firms who charge an hourly rate higher than what most adjudicators earn per day.
Even the Assistant Deputy Minister of the “working-with-Tarion” Ministry of Consumer Services stated in Oct. 2014, in a letter to Tarion’s CEO, that the LAT processes were too complex and adversarial, and not solving problems for consumers.
Another red flag, ignored.
The Attorney(s)-General of Ontario, both the former A-G Ms.Meilleur and the current A-G Mr. Naqvi are silent on the issue of reforms to the LAT. Both are also members of the legal profession.
One of the suggestions the report makes is to use a round table for hearings to “create a more informal and less intimidating atmosphere.” In the category of band-aid solutions, this takes the cake. This completely ignores the long-lasting financial and emotional toll the LAT takes on consumers.
The behavior I witnessed from the adjudicator in the Ferland/Ferenc hearing was inappropriate for an officer of the court, or for any member of the legal profession. It doesn’t matter how long the hearing went on, or how frustrating lawyers and adjudicators find it to deal with self-represented consumers. The adjudicator’s conduct in the Ferland/Ferenc case was shocking and intimidating to me as a member of the public. I believe it clearly violated SLASTO’s own published code of conduct.
The investigation side-steps the real problem: the courtroom should not be used for ONHWPA appeals where applicants are self-represented. Mediation could be a better option, but only with fair representation for each side. The LAT is an uneven playing field. The rules are made by the big battalions who have a map of the battlefield and the most powerful weapons and tactics. The principles of natural justice, and even human decency, how we expect to deal with each other as human beings, were not observed by those in authority in the Ferland/Ferenc hearing.
The the SLASTO-commissioned investigation did not properly balance input from the consumer point of view with that of SLASTO/LAT employees. Nor did it recognize the fundamental absurdity of the little guy up against a large powerful corporation in the courtroom.
The problems are not hard to see if one looks at what happened outside the lens of the legal establishment. Meaningful solutions can only be found by getting at the root cause of the problem: access to a courtroom is not access to justice, it’s access to a courtroom.
The consumer’s voice must be heard and respected in much-needed, urgent reforms to the Tribunal system. But that’s a step apparently too big for the legal establishment to make.
SLASTO and the LAT management, as well as the Attorney-General himself, continue to turn a blind eye to consumer cries for help, mopping up the floor while the tap’s still running.
– – –
Ontario NDP leader Andrea Horwath recently signed a petition at change.org to end the Tarion monopoly. Tarion is an arms-length agency of government, a “Delegated Administrative Authority” (“DAA”) with a monopoly in new home warranties and responsibility for regulating the new home building industry.
In her statement accompanying her signature, Ms. Horwath explains why she’s in favour of ending Tarion’s monopoly status: “The NDP has long recognized that Tarion is an unaccountable monopoly that protects the developers who control it, and not the home buyers who pay the bills. Other provinces give consumers a proper choice when it comes to home warranty protection, and it is time for Ontario to catch up.”
Many MPPs of both the NDP and PC parties have also signed.
Premier Wynne, on the other hand, has remained silent on all things Tarion, refusing to meet with or respond to consumers who’ve written to her about “horror stories” they’ve experienced with Tarion. A revolving door of Liberal ministers during the last 12 years has brushed aside problems, saying they’re “working with Tarion“, while their mandate is to oversee it. Working with and overseeing are two entirely different things, but no one in government has answered concerns about this contradiction.
A recent revelation in The Toronto Star (29/03/16 by M. Regg Cohn) that Liberal ministers have “fundraising targets” does not surprise consumers who’ve raised red flags about this for years with both Premiers Wynne and McGuinty. No answer from either. It’s no secret the top donors to the governing Liberals are the building and construction industry, the same industry the government is supposed to be overseeing through its monopoly, Tarion.
The only people who seem to favour the monopoly model are government officials and Tarion executives. Tarion’s former board Chair, a real estate lawyer and 10-year Tarion board member said in an interview with The Ottawa Citizen (May 15, 2015): “The model that we fall under is a really good one. It allows for efficiency (…) and keeps the government’s nose out of doing things.” That’s the problem: keeping the government’s nose out of doing things, like the butcher inspecting his own meat.
No economics textbook or any concrete examples we’ve been able to find can demonstrate that monopolies benefit consumers. Here’s the Wikipedia definition:
“In economics, a government-granted monopoly is a form of coercive monopoly by which a government grants exclusive privilege to a private individual or firm to be the sole provider of a good or service; potential competitors are excluded from the market by law or regulation.” The words “coercive” and “privilege” set off alarm bells with many consumers. Alberta, Manitoba, and B.C. all have gone to the multiple-provider model for new home warranties. There, the regulatory function is the responsibility of government, not the provider.
Premier Wynne herself seems to be no fan of monopolies, however, since she was quoted in The National Post in April 2015 as saying: “the days of monopoly are done.”
Tarion is not only a monopoly, it’s also exempt from oversight by the Auditor General and the Ombudsman of Ontario, and all its executive salaries are secret. This seems very outdated. Response to the petition at change.org to #EndTarionMonopolyNOW indicates consumers want choice, and independent regulation of the industry.
What may change the landscape is the recent scandal revealed in March this year regarding political fundraising. The current Wild West rules are to be significantly reformed by January 2017. This means generous donations the government has enjoyed from the building industry will be hopefully banned. This may level the playing field for consumers and reduce the influence of big corporations on public policy-making.
Before this political fundraising scandal was revealed in March 2016, the Minister responsible for Tarion had announced a wide-ranging review of Tarion by a respected Ontario Superior Court Judge, J. Douglas Cunningham. Public complaints and pressure from Opposition MPPs had been mounting for years. The review was seen at the time either as a political stalling tactic, or a way to back into reforms the building industry may find uncomfortable.
Again at that time, Andrea Horwath hit the nail on the head. In a statement to The Toronto Star (05/11/2015) she explained: “The review is not necessary. The problems are rampant. If the government doesn’t know what’s wrong with Tarion yet, after all the private members bills and all the criticisms we’ve been raising, then they simply have been turning a blind eye to a very bad situation.”
The government’s excuses for turning a blind eye to problems with Tarion for over a decade may have run their course. The tide seems to have turned on the outdated monopoly model. Tarion is finally under the microscope of a seasoned judge.
Sometimes a perfect storm, a confluence of unrelated events, produces unexpected results. Sometimes, as the Dutch saying goes, the shore stops the ship.
The tragic circumstances surrounding the passing of Earl Shuman last week are one of the reasons I decided to write this piece.
For those who didn’t know him, he fought for 27 years to rectify injustices he saw in the Ontario government monopoly, Tarion Warranty Corporation, and the abysmal access to justice problems faced by ordinary people trying to get their homes fixed under Tarion and the License Appeal Tribunal.
Earl took on the legal establishment by challenging the lunacy of some Tarion case law and its heavy-handed use of the justice system. He explained one of the absurdities to me this way: if you buy a new home and install a 24 carat gold toilet in it, you’re the builder of the home under law because you contributed more than a certain dollar amount to the home’s overall value. So even if you’re a dentist, you can be deemed a builder under Ontario law. He called this the Shuman Test “Fraud“. Many cases have been decided since his own case years ago following this principle, which sounds like something out of George Orwell’s “Animal Farm”.
I met Earl Shuman and his wife at Queen’s Park several years ago at one of the many meetings to try to bring transparency and accountability to Tarion. Real reforms have not been made to this government monopoly in over 40 years. Builders interests are the best understood by policy-makers; consumers are often labelled “unscrupulous”, trouble-makers, whiners, or malcontents who wouldn’t be happy with the Taj Mahal. Builders, on the other hand, are politically well-connected, they have the loudest microphones, the deepest pockets, and lobbyists and lawyers to make their views well understood by policy-makers.
Earl was engaged in a Sisyphean task up against these Goliaths, rolling a huge rock uphill only to have it come crashing back down on him each time. He didn’t play by the rules, but he often tried to. Many of us who are accustomed to crusty, irritable, feisty figures learned with time how to read him. He was a rule-breaker, rubbed many people the wrong way, but he knew that nice, polite, people seldom bring about real change.
He attended a Tarion Review town hall meeting a few weeks ago. When he saw me come in, he motioned for me to sit down next to him. He brought a well-used copy of the Ontario New Home Warranties Plan Act which Tarion administers for the public on behalf of government. He read from it to the attendees, ministry lawyers and officials present. He pointed out the intent of the legislature was not to have the law drift so far away from its consumer protection intent. Since Tarion makes its own regulations, with oversight as thin as a spider’s web, he knew this was flawed, outdated legislation. He knew this was the 900-pound gorilla in the room.
He drove from Cobourg the night before, suffering from a cold, paid for his own hotel room to attend the impossible weekday timing of the meeting from 9 a.m. to 12 noon. He tried to keep his years of anger and frustration at bay, tried to keep his cool. He did. Giving me a big hug when he left, he thanked me for being there and contributing. I wrote him a short e-mail afterward saying he’d done well under what we all knew were difficult circumstances.
Earl wanted these injustices to be exposed by the media in a sustained and front-page way like the press covered the Ghomeshi, Ford, and Duffy scandals, and various messy society divorces. Journalists often told us they wanted “sexy stories”. This was a decidedly un-sexy story, until you buy a new home and find out how flawed and out-dated the policies are which govern this important financial decision in your life, buying a new home.
Earl asked me last November to keep a file of all the documents relevant to his 27-year work, and correspondence with senior officials. A few times he said, now eerily meaningful to me, that he wanted to make sure someone would take his work forward and all these years wouldn’t go to waste, “If something ever happens to me…“, he said several times. I assured him I have well-organized files, not as extensive as his pool-table full of documents, but all his years of work wouldn’t be lost.
He’d from time to time e-mail me and ask what I thought of a letter he’d sent to a top official, or what I thought of his Supreme Court of Canada application, for example. He’d say to me, see if you can spot the game-changer words in this document. Anyone in our communication groups who’s worked on Tarion/LAT issues could pick out those words.
Earl knew every nook and cranny of the legislation, the Criminal Code, all the legalese, the double-speak, and the political games. He used to commiserate with me how hard it is to write to politicians and journalists, how achingly long it takes to craft a persuasive, well-researched e-mail, and wait endlessly for no answer. Many of us struggled with this, without the benefit of PR people, legal advisers, and researchers, all we have is our sense of right and wrong, and our kitchen tables. Over the years Earl became an expert at clear, well-documented, persuasive writing; though his style was lengthy, he mastered it.
I suggested he write a book, and use social media to his advantage. The press was obviously not covering these problems in-depth and in a sustained way as he knew they deserved. He looked forward to his retirement in a few months, and promised he’d do more work when he finally had more free time. Then you will really see me fly, he told me in February.
A few months ago he retired. He attended the Tarion Review town hall meeting on April 5th, his birthday, and according to his wife, Krista, he descended after that into a black hole of frustration and despair.
The news of his sudden death and the circumstances surrounding it, described to me by his shaken wife, caught me off guard and made me cry like a grade school kid. Earl’s story is heart-breaking and complex. He worked on justice and consumer protection issues for almost 30 years. Many of the injustices he exposed are still festering, some getting much worse. Too many consumers continue to suffer under builder-biased policies administered by a monopoly claiming it’s protecting consumers, while protecting the builders it’s supposed to regulate.
Earl and Krista drew together a communication group of concerned consumers determined to fight for reforms to Tarion, the LAT, and justice. All of us will make sure his 27 years of work were not in vain.
To the Ministry of Municipal Affairs/Housing official who inquired several months ago why these issues were so urgent:”Did anyone die?”, she asked.
Well, actually yes, someone has.
In memory of Dr. Earl M. Shuman, April 5th 1951 – May 6th, 2016
There has been much talk over the past few years in legal and academic circles about improving access to justice (A2J). The growing phenomenon of self-represented litigants (SRL’s) is taking a toll on society, middle-class families, and the courts.
Many self-represent due to financial necessity, not choice. The cost of hiring a qualified litigation lawyer is $3,000-$5,000 a day for the Licence Appeal Tribunal (LAT), for example, excuding the cost of expert witneses. Most middle-income families don’t have this discretionary income, especially when up against big litigious corporations like Tarion Warranty with unlimited legal resources. LAT hearings are often complex and lengthy, and the chance of SRL’s losing is over 90%.
With all the talk about improving access to justice these days, one would expect the LAT to welcome consumer feedback on making the system more accessible and levelling the playing field. One would expect the same of the oversight body SLASTO, the Ombudsman of Ontario and/or the Attorney-General. Not so. These taxpayer-funded authorities seem to turn a blind eye to these suggestions.
Below are a few simple changes which could be made TODAY if there were really a will to improve A2J. These suggestions have been made repeatedly to the above authorities. They continue to say they’re content with the pace of reforms, without citing any concrete examples.Often we get no reply at all.
Five of these suggestions are listed below. Hopefully this month with renewed interest in access to justice issues, someone in authority will read this and put words to action.
- Complaints of “missing recordings” at License Appeal Tribunal hearings should be investigated at the time the complaint is made, not after the decision has been rendered. Complaints of “gaps” in the LAT’s official recordings seem to affect the applicant’s case, not the defendant’s. These complaints should be taken more seriously, and investigated promptly.
- Complaints of bias or bullying made against an LAT adjudicator regarding or his/her conduct should not be decided upon by the adjudicator him/herself. An independent investigation should be held in a timely manner. The current self-judging policy does not seem impartial.
- A self-represented litigant should be allowed to bring a friend as support or note-taker to a pre-hearing. This is currently forbidden: only lawyers/paralegals are allowed. This often leaves the SRL alone against 5-7 opposing counsel and their employees, which is clearly over-loading the bases.
- SRL’s should be allowed to voice record their own hearings. Lawyers routinely bring court reporters with them, SRLs can’t afford this. Court testimony should be public, since there’s a public interest to testimony about new home construction defects, shoddy building, and the testimony of engineers.
- There should be no conferring of Tarion’s/builder’s lawyers behind closed doors without including the SRL. This is forbidden in the LAT’s own Code of Conduct (pg. 4 under “Integrity”), but it’s still taking place. The LAT’s Code of Conduct states: Members should not communicate directly or indirectly with any party, witness or representative in respect of a proceeding, except in the presence of all parties and their representatives.” Yet Tarion revealed in Dec. 2015 (on its website under Dispute Resolution Review, pg. 48) that it is doing this: “The tribunal member presiding at a LAT pre-hearing often asks to meet privately with Tarion and the builder in the absence of the homeowner…” This came as a huge shock to SRL’s who’ve gone through the LAT without knowing this was going on. It appears to be clearly against the LAT’s own Code of Conduct.
To legal professionals who say they’re in favour of improving access to justice for ordinary citizens, these are a few simple, cost-efficient suggestions.
The reasonable person, on whom so many legal principles are based, would be shocked to find out many of these things are going on in first place.
To encourage confidence in our legal system, meaningful action needs to be taken by the legal community itself and their oversight bodies, who are paid by our tax dollars. Many of these changes could be made today, if there’s really a committment to improving access to justice.
The legal profession is known to be risk-averse, conservative, and protective of its traditions and reputation. There’s a reason why those who have the authority to make meaningful change have not acted. For years. Perhaps as lawyers they’re fearful of liability if more people were to find out about these imbalances. The LAT has recently expanded its mandate to cover auto insurance disputes, so to admit these short-comings may be inconvenient.
Maybe social reformer Susan B. Anthony’s quotation applies here:
“Cautious, careful people, always casting about to preserve their reputations… can never affect a reform”.
Will anyone step up to the plate and reform the LAT?
“If your tool is a hammer, then every problem looks like a nail”: re Tarion’s “Dispute Resolution” Review
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.
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
Here’s an article (see below) I re-blogged from the National Self-represented Litigants Project (NSRLP) on why we need reforms to create better access to justice.
Equality before the law is what our society is based upon. We have more lawyers today than most other countries. Yet the middle class has been priced out of the market for legal assistance. No one wants to self-represent. If we could all afford the best lawyers out there, we’d hire them, since it would significantly increase our chances of winning. The hourly-billing model has placed justice out of reach for most people except large coporations and the very wealthy. Our ministers of justice have to lead change by fixing imbalances such as those at the License Appeal Tribunal for ONHWPA claims. They are fully aware of the problems and need to take real action.
When the NSRLP Advisory Board met in Windsor two weeks ago, we looked back at our 2015 Strategic Plan (which you can read here) and talked about progress made towards our overarching goal – to raise public and justice system professionals’ awareness of the SRL phenomenon, and its impact on Access to Justice for Canadians.
The NSRLP mandate
Board member and former SRL Jennifer Muller summed up the NSRLP mandate as follows:
“At the heart of our mandate is the intention to challenge the negative stereotype of SRLs. Each project and every interaction that the NSRLP had with anyone this year furthered this important goal of changing how others see and understand SRLs.”
Jennifer pointed out that this meant “building this understanding from the bottom up, beginning with law students.” Law student representative Erin Chesney added:
“We need to focus on law students because they are the future lawyers…
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The article below is a must-read for new home/condo buyers in Ontario. Please take a minute to read the excellent guest column published in The Toronto Sun (27/11/15.), by former MPP Rosario Marchese.
Many consumers have found out how hard it is to deal with Tarion, only when its too late.
Real estate agents and lawyers know surprisingly little about the Tarion warranty, its limitations, and its propensity to take the side of builders when homeowners discover defects.
If you discover construction defects in your newly-built home…..
… and we’re not talking paint smudges on mirrors, but serious HVAC or Building Code violations, you may find yourself facing Tarion and the builder with their experienced lawyers fighting you in court (the License Appeal Tribunal, LAT).
Several cases I’ve witnessed make you think the homeowner’s actually the bad guy, and the builder had nothing to do with building the home. “I don’t have to pay attention to Building Code”, scoffed one builder under oath to acquiescent faces of Tarion’s and his own lawyer. The adjudicator in this case actually said on record: “The Ontario Building Code is not really relevant to Tarion”. These are the same people who guarantee consumers a new home “free of defects in workmanship and materials”, under Ontario law.
Consumers hope the review of Tarion, recently announced by Minister Orazietti appointing respected judge Douglas Cunningham as reviewer, will be the silver bullet.
The system needs to solve problems, not create more at the taxpayer’s and new home buyer’s expense.
Minister Orazietti has oddly stated publicly he thinks the review will validate Tarion has having good consumer protection measures. Why do a review then?
He’s a politician, so this might be political posturing, an attempt at face-saving, since his government has known for over a decade there are serious problems with lack of transparency and accountability at Tarion.
“I thought Tarion was my friend“, explains one homeowner. Then you find them heavy-lawyering you, shielding the builder from accountability for his defects. You’re home alone.
Consumers hope for justice, finally. A fair, transparent, balanced, and public investigation, with a full examination of the consumer experience, not Tarion’s version of it.
We sincerely hope we won’t be left with Home Alone 2.