Jason Bryk 

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Start thinking about the Manitoba New Home Warranty Act and its Regulations

November, 2016

The Manitoba provincial government originally proclaimed its (new) New Home Warranty Act and Regulation thereunder to come into force as of January 1, 2017.  However, this date has now been pushed back to January 1, 2018.  Although we have a year to go, it's not too early for those in the home building business (including both contractors and their financiers) to start preparing for what will be required of them under the legislation.

The following is an overview of the regulatory scheme:

(i)            In most cases, a builder is prohibited from building a new home unless:

(a)          the builder is registered as a builder under the legislation; and

(b)          a "warranty provider" (registered as such under the legislation) has committed to provide a home warranty for the home in accordance with, and containing the undertakings required by the legislation.

(ii)           In most cases, a "warranty provider" will be an insurer licenced to carry on business as an insurer under the Insurance Act.

(iii)          All warranty providers - even insurance companies which are already licenced under The Insurance Act - must additionally register as warranty providers under the Act.

(iv)          If a builder constructs a new home and sells it to an owner without the builder arranging for the provision of a warranty to the owner, then the builder itself is "deemed" to have provided the required warranty to the owner.

(v)           Provision is made for aggrieved owners to make claims under their warranties and for the mediation of disputes.

(vi)          Builders who fail to fulfill their obligations under the legislation are liable to prosecution with the maximum penalties being a fine of up to $300,000.00, imprisonment for a term of not more than three years, or both.

(vii)        Additionally, the legislation provides for the imposition of "administrative penalties" on those breaching the legislation's requirements.

(viii)       There are detailed specifications regarding what a new home warranty is to cover, set forth in both the Act and its Regulation.

(ix)          Local governments are generally prohibited from issuing building permits for new homes unless and until the builder provides the permit issuer with proof that the builder has been registered under the Act and that a warranty provider has committed to issue a warranty for the home.

(x)           The rights originally given to the first buyer from a builder continue to be enforceable against the warranty provider and/or builder by the first buyer's successors in title, subject to the coverage time limitations specified in or for the original warranty.

(xi)          In addition to new self-contained detached or semi-detached homes, the legislation also applies to:

(a)          residential condominium units and the common elements of a residential condominium regime;

(b)          a manufactured home;

(c)           a former non-residential building that is converted to residential use(s); and

(d)          a multi-unit project, including a co-operatively organized project, but excluding life lease projects (although a life lease project builder would still have to get project specific permission to build the project and to not have to provide any warranties);

However, hotels, motels, dormitories, mobile homes, residential camps, and, personal care homes are exempt.  Also, builders of apartment buildings may apply for authorization to construct a rental apartment building without having to arrange for warranty protection.

The foregoing is a "bare bones" summary, and persons interested in this matter would be well advised to study the Act and its Regulation in detail.

Builders will find it difficult to attempt to deflect the application of the new rules from their operations.  In particular, note:

(1)          The Act makes it clear that builders, home owners and warranty providers are not entitled to contract out of the legislation's requirements, in whole, and generally speaking, even in part only; and

(2)          The Ontario Superior Court case of Tarion v 15181621 Ontario Inc. and Turner (judgment released October 27, 2015) is instructive.  Here, a builder refused to provide or honour a new home warranty and claimed that by its simply not registering as a builder under the Ontario legislation, the legislation should not apply to it.  The Court held that the builder was required to comply with the legislation, even though it had not registered.  Additionally, the Court held that the builder's sole shareholder, director and officer, being the "guiding mind" of the builder, was liable.  In fact, the Court stated that while both the builder and its sole shareholder "concede…that the alleged breaches of the Act occurred (and) they acknowledge that they violated the statute, they deny any legal responsibility for its consequences".

Given that the Act and its Regulation are obviously consumer protection legislation, it is unlikely that the government will change its mind and do away with the new rules.  Some legislative "tinkering" and/or a delay beyond January 1, 2018 as the effective commencement date may occur, but in all probability we will have the existing legislative regime - or something fairly close to it - in effect sooner or later.  As initially stated, affected parties should prepare for this.  

Some additional matters

(A)          a builder can build a new house without being registered provided that the builder will be using the home for "personal" use and gets "authorization" to do so.

(B)          re warranties themselves:

(i)            generally, a new home warranty is to cover defects in materials, labour and design for 12 months and material Building Code violations and defects re electrical, plumbing, heating and HVAC systems for 2 years and structural elements for 7 years;

(ii)           generally, a warranty provider can put dollar limits on claims made under its warranties, but the limits can't be less than $100,000.00.

(C)          warranties do not have to cover:

(i)            "normal" wear and tear;

(ii)           defects created by persons other than the builder;

(iii)          contaminated soil, unless the builder supplied it and knew - or should have known - of the contamination;

(iv)          failure by anyone - other than the builder - to comply with warranty requirements for appliances, equipment or fixtures manufacturers;

(v)           Acts of God ("pure" accidents which are usually capable of being insured);

(vi)          fire, explosion or smoke; and

(vii)        flooding or sewer backup.

(D)          there are rules re what a warranty provider can - and cannot - specifically exclude form a new home warranty.

(E)          commencement date of a new home warranty is the date upon which the owner/purchaser becomes entitled to occupy it.

(F)          the government is obliged to establish a "public registry".  Accordingly, anyone should be able to search/examine the registry and will find particulars of:

(i)            each new home built by a registered home builder for which a warranty provider has committed to provide a warranty;

(ii)           each home builder who is registered as such;

(iii)          each new home constructed by an owner/builder who has received authorization to do so; and

(iv)          each apartment building constructed without a new home warranty with confirmation that the building is not covered by a home warranty.

(G)         new home builders' and new home warranty providers' registrations are for one year and must be renewed annually.

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