Howard Bogach, president and CEO of the Tarion Warranty Corp., was in the area to talk illegal building with members of the Grey Bruce Home Builders’ and Trades Association, recently. He said there are some “red flags” that might indicate a builder is not licenced. They include if the builder says the consumer doesn’t need a Tarion warranty because the company offers their own or if the builder pegs the warranty cost at around $10,000.
New home builders that do not follow the warranties plan act rules are not only operating illegally, but are more likely to build homes that do not meet building code standards or violate other provincial regulations, such as those related to health and safety, he said.
It could lead to new homeowners being financially responsible for problems down the road.
Prospective new home buyers should check Tarion’s website, www.tarion.com, and search the corporation’s database of licenced builders before signing a purchase agreement, he said.
- Buyers should also be suspicious if a builder says they built the home for themselves but then decided to sell it.
- A big red flag is if a home builder says a warranty is not needed if the prospective buyer puts their name on the building permit. People who build a home for themselves are not required by law to have a Tarion warranty. But being on the permit could make a buyer libel for any health and safety incidents on job sites, he said.
Bogach said he also wants to get the word out that Tarion can work with owners of new homes to try to provide warranty coverage that should have been in place in the first place. The corporation pays about $1 million a year in claims related to illegally built homes, he said. “My guess is that number could be three times higher because people just don’t know that they’re entitled to some coverage,” he said.
Builders and vendors of new homes are required by the Ontario New Home Warranties Plan Act to be licenced by Tarion. To receive a licence, builders must pass a written test on the Ontario Building Code and undergo a financial and business competency analysis.
The act also mandates that each new home must be covered by a Tarion warranty, which costs about $350 to $1,500 per house and remains with the home even after ownership changes.
The warranties cover homeowners for one year against Ontario Building Code violations, defects in materials or workmanship and unauthorized substitutions, for two years against problems with mechanical systems and for up to seven years against major structural defects.
Tarion employs a team of seasoned investigators to uncover builders and vendors in Ontario who fail to register and/or to enrol new homes with Tarion. Under the Act, fines of up to $100,000 can be imposed by Ontario Courts. In addition, convicted offenders may be imprisoned for up to one year or placed on probation.
Illegal building affects everyone in the new home industry. For a list of recently convicted builders, please see the latest Tarion Monthly Illegal Building Conviction Report.
Buyers of resale homes that are less than seven years old will benefit from Tarion backed warranty coverage. Statutory warranty protection follows the home and is valid for seven years from the original date of possession, regardless of who owns the home. See Tarion Resale Homes
Tarion publishes articles for consumers including Top Ten Tips for New Home Buyers