Executive summary

Background and context

Buying a home is the single largest purchase that many Ontarians will make in their lifetime.

In 1976, the Ontario New Home Warranties Plan Act (ONHWP Act) was passed to protect new home buyers during this critical time. A not-for profit corporation was delegated responsibility to administer the warranty program and to register and regulate home builders and vendors of new homes. Today that corporation is known as Tarion.

I understand that over the past 40 years home building has become increasingly complex. Homes today are more technologically advanced in design and construction. Today, more than 50% of new homes are condominium units footnote 1. Amendments to Ontario’s Building Code (Code) have been made to keep pace with new standards and technologies.footnote 2

Tarion has been proactive in responding to this changing environment in a number of ways. Among other things, it has increased warranty coverage, introduced Construction Performance Guidelines, enhanced builder registration requirements, and implemented minimum customer service standards. However, very few changes have been made to the ONHWP Act over the last 40 years and Tarion has been criticized for not doing more to protect new home buyers.

Objectives and focus of the review

It is in this context that, in November 2015, Ontario’s Minister of Government and Consumer Services appointed me to examine and make recommendations regarding Tarion and the new home warranty legislative framework it administers.

The objective of this review is to develop recommendations on various aspects of the program including consumer protection, accountability and transparency, and board governance.

Since being appointed, I have met with and heard from a range of interested parties. This includes ten focus group sessions and nine regional consultations with industry professionals and homeowners, as well as meetings with over 20 individuals including subject matter experts. I have also met with the Tarion management team and with the Tarion Board of Directors. In total, I met with over 200 individuals. I also reviewed new home warranty programs in other provinces and internationally to understand how similar programs are being delivered elsewhere.

Through these meetings and written submissions, I heard about a range of different experiences from those affected by the new home warranty program. I heard from builders and homeowners about what is working well as well as areas that they thought needed improvement.

Builders I met appear to be very committed to building quality homes and ensuring home buyers are satisfied. They were eager to provide their ideas on how the system could be improved.

Over 85% of new home owners never submit a claim to Tarion, and the vast majority of claims submitted are resolved. However, I also heard a number of seemingly legitimate and serious concerns about new homes that were not built properly. These homes had defects that, in the view of some people I spoke to, were not appropriately resolved by the builder or by Tarion. While this has not been the experience of the majority of homeowners, I am mindful of the impact this has had on those affected. Though it is difficult to assess the frequency of these experiences, I believe there is an opportunity nonetheless to learn from them.

Tarion delivers a challenging mandate and operates within a complex environment. It is not reasonable to expect that everyone they serve will be satisfied given they often need to make a decision favorable to one party at the direct expense of the other. In my interactions with Tarion’s senior management team and staff, and the Tarion Board of Directors, the impression I was left with is that they are dedicated and committed to consumer protection. I believe that Tarion delivers important value to new home buyers and builders in Ontario. In addition, Tarion has made, and continues to make, a significant effort to work with multiple players and to respond to the changing needs of the sector.

Throughout my consultations, several questions were often raised, and have become the focus of this interim progress report (Report):

  • what model would best deliver consumer protection? Can Tarion effectively perform each of the roles of regulator, warranty provider, adjudicator and rule maker?
  • is there a way to resolve warranty disputes more effectively and expeditiously?
  • how can Tarion best ensure that consumers are educated about the new home buying process and the warranty program?
  • what is the appropriate warranty/deposit coverage and duration?
  • how should Tarion regulate builders and vendors in order to drive quality in the home building sector and protection for consumers?
  • what should be the composition and skill sets of the Tarion Board of Directors, and how should members be selected to best meet Tarion’s mandate under the ONHWP Act and its fiduciary obligations?
  • what additional measures, if any, could be implemented to improve accountability, transparency and oversight?

Interim report summary

This Report outlines the concerns that I have heard to date. It also identifies some potential options that correspond to the key questions listed above. The report summarizes my findings and is organized as follows:

Tarion’s role and business model

I heard from some that Tarion’s multiple roles creates a perception of a conflict of interest. Others believe there may be synergies and benefits in having a single entity perform the various functions. I have also heard some suggest that Tarion as the sole provider of the new home warranty in Ontario has little incentive to improve. On the other hand, others suggest that a single, non-profit provider is favourable as it allows for consistent delivery and effective management, while maintaining low costs for consumers. I will consider whether Tarion should continue to perform all of the functions it does today and whether it should remain the sole new home warranty provider in Ontario.

Dispute resolution process

The dispute resolution process was the primary concern of most of the homeowners I spoke with. While Tarion has made progress in resolving disputes earlier and more effectively, I believe there are opportunities for improvement in some areas. These include the timelines for submitting warranty claims, the builder repair period, the Construction Performance Guidelines, the conciliation inspection process, the Licence Appeal Tribunal, and the Builder’s Arbitration Forum.

Consumer education

Almost everyone I spoke to said that consumer education is fundamental to consumer protection. Given its importance, I will consider options relating to what type of consumer education should be provided, who should provide it, and the optimal format.

Warranty coverage and duration

While Tarion has made enhancements to warranty coverage and duration, some have questioned the adequacy of the coverage given the rising cost of homes in some areas of the province. I will look at Tarion’s process for assessing the warranty coverage amounts and duration to address these concerns.

Regulation of builders and vendors

Tarion’s regulation of builders is a critical function in maintaining building quality and customer service satisfaction within the industry. Monitoring and addressing building quality and service at the outset may prevent, or at least minimize, issues downstream. To this end, I have identified options related to the initial registration and renewal process, builder education requirements, compliance tools and the Builder Directory.

Board governance

Over the past decade, there have been significant changes to diversify the composition of Tarion’s Board of Directors. However, many continue to perceive the Board to be builder dominated and motivated to favour builders over homeowners. I believe getting the Board composition right is critical. I will consider options to diversify the Board, including changes to the Board selection process.

Accountability, transparency and oversight

Many people I met expressed a desire for greater accountability, transparency and oversight. This was especially noted by homeowners, many of whom spoke of Tarion as a government agency acting on their behalf and wondered why the government did not play a more active role. In my Report I consider options relating to external oversight, the government’s role and disclosure of information.

Other

Other issues raised in my discussions included the lack of clear definitions in the ONHWP Act , illegal building, the need for more condominium specific provisions in the legislation, Tarion’s organizational structure, the lack of Tarion representation in smaller communities, the lack of transparency of Tarion’s Consumer Advisory Council and the builder liaison committee.

A summary of the potential options can be found in Appendix A: Summary of options.

Readers should note that the options presented throughout this report are not meant to be exhaustive, and I welcome additional ideas.

I have not yet decided on any recommendations. I have committed to the Minister that I will deliver a final report with recommendations in the fall of 2016.

A note of appreciation to all participants

I would like to thank everyone who took the time to participate in this review, either in person or in writing. I respect the wide variety of perspectives on this topic, and have listened to and am considering all input. I have been impressed by the dedication and commitment to consumer protection that is shared across so many different people and organizations.

I am seeking input on this report before I make my final recommendations, and would welcome feedback by email to TarionReview@ontario.ca by October 14, 2016. (Please do not use shortened URLs (e.g., Bit.Ly, Ow.Ly, Tinyurl) or include attachments larger than 25 MB.)

Respectfully submitted,

The Honourable Douglas Cunningham
July 22, 2016

Footnotes