News & Events

Consultation and Timing

Members continue to discuss the implementation of mandatory warranty in Alberta initiated by the former Minister of Municipal Affairs, Hector Goudreau. Stakeholder consultations with government took place in spring and summer; and several further meetings were held between the government and warranty companies in early September. The proposed framework is based on the BC model with some consideration of the Ontario model and Alberta specific issues. Our members have been actively engaged and their input has been valuable. The open, realistic discussions have resulted in the insertion of practical parameters into the proposed mandatory warranty framework.

Originally the former Assistant Deputy Minister, Ivan Moore, was hoping to present a ministerial report to the cabinet in the fall. This has been delayed due to the reorganization of the Ministry, however; this will likely remain a high priority for the Ministry under the New Minister,s Doug Griffiths. The details regarding the regulations will likely be sent forward in spring 2012 and implementation/compliance is anticipated by the end of 2012. It is possible that the industry will have further opportunity to make constructive suggestions regarding the detail required in the mandatory warranty framework between now and spring 2012.

Goal of the Consultations

The ultimate goal is to produce a level playing field where all new home buyers and recipients of substantial renovations are protected equally. Another part of this is to ensure builders and contractors related to the new home building industry are responsible for providing a quality finished product and for attending to resolution of any issues that do arise. Ideally the issue would not arise in the first place or, if an issue arises, the builder resolves it with the homeowner. Warranty coverage is a backstop only to be used in the rare case when issues are not resolved. This means that quality assurance (via training and experience) and accountability of all parties involved (e.g., trades, builders, professionals, homeowners) are goals of this framework as well as compliance in the unfortunate instances where parties are not providing quality product or are not behaving responsibly.

Current Proposals

The following sets out the proposals being considered at this time. In some instances, recommendations that have been put forward are also noted. 2

Scope

The warranty is proposed to apply to:

• Single and multi-family dwellings of single and mixed use, including amenities, parking structures, private sewage systems, site grading, surface drainage, retaining walls and driveways;
• Manufactured and modular homes
• A home or building that has been 75% or more reconstructed.

There are exemption for hotels, motels, dormitories, care facilities, relocatable work camps and some types of rental accommodations.

1. Minimum Standards of Coverage

The scenario for coverage will likely be 1/2/5/10:

1 year on workmanship;

2 years on major systems (e.g., HVAC, electrical, plumbing);

5 years on water penetration;

10 years on structural.

A 7-year period for water penetration was considered, however; there is no statistics to backup 7-year coverage. The longer product coverage creates greater risk that substantially increases costs. It has been recommended to put in place a tracking mechanism to gather data to determine if a longer period of water penetration warranty is justified.

The new framework should increase consumer knowledge and attention to the expiry of warranty and may result in scrutiny of structures prior to expiry of warranty.

2. Limits on Coverage for Single Family Homes

Original discussion centered on the B.C. coverage model that is set at $200,000 for single family homes. The initial proposal from the Alberta government was to set the limit at the lesser of the first owners’ purchase price or $300,000 for single family and modular homes. The recommendation is to have coverage in the amount of $200,000 with additional $100,000 coverage available for purchase for a total of $300,000.

3. Limits on Coverage for Multi Unit Homes

Condominium coverage was proposed as the lesser of the first owners’ purchase price or $100,000. Common property was proposed as the lesser of $200,000 times the number of dwelling units or $5 million per building. This will be difficult to fund for warranty providers.

The recommendation is to provide up to $100,000 workmanship coverage per unit and up to $200,000 per common area. The overall limit would be $2.5 million per building with maximum number of units utilizing a sliding scale for coverage based on the number of units in the building.

There is still discussion around commencement dates for warranty on condominiums and a requirement for a third party technical audit after registration, but prior to the date of legal transfer of title. 3

4. Deposit Protection

This would be optional, not mandated. In order to protect the consumer, there has been discussion regarding deposits being held in trust.

5. Owner Builders

Both B.C and Ontario require owner-builders to have warranty coverage. Builders in Alberta support a level playing field with warranty coverage for all. The government is concerned about restricting owners who want to build their own homes, especially where builders are not easily available. The Alberta government has agreed that owner builder warranty should also be mandatory, but there is still work to be done to ensure an adequate and available product is offered at this level.

There is a concern around restricting small new companies from entering the market because they may have to pay more for coverage. This may be a perception not a reality as fees are based on level of risk which takes into consideration financial information, experience, track record etc., not company size.

6. Exemptions

There were discussions around exemptions for commercial structures such as hotels, dormitories, care facilities, and single and multi-family homes constructed for rentals. A 10-year restriction on sale for new multi-unit buildings or groups of 3 or more homes constructed for rental purposes was also discussed Dealing with condo conversions was an area that emerged and it requires further consideration. These exemptions can lead to the creation of an uneven playing field.

There are ways, such as risk pooling as it is done with the car insurance or licensing, to eliminate the need for exemptions and ensure the level playing field remains intact in the future.

7. Dispute Resolution

Dispute resolution will be handled in accordance with the procedures under the Insurance Act. This involves the appointment of a representative from each party who then appoints a mediator. Each party is responsible for the cost of their representative and 50% of the cost of the mediator.

8. Renovation/Reconstruction

The B.C. warranty model has a substantial warranty requirement for renovation as there is interest in protecting all major construction projects. The government of Alberta proposed warranty on a renovation project where 75% or more of the home is reconstructed. The discussion centered on whether mandatory warranty should cover renovation and how “substantial reconstruction” could be solidly determined and verified. This requires further discussion. 4

9. Training

The role of homeowners, condominium boards, builders, and safety codes officers was considered at the meetings. It was recognized that education of each of the above groups is a critical component to reducing issues. A key piece in this discussion was the role of homeowner maintenance and the accountability of condo boards.

We encourage members to continue to be engaged in this process and have their views heard.

For more information please contact:

Joan Maisonneuve

Manager, Technical & Safety

Canadian Home Builders' Association - Alberta

Phone: 780-424-5890 (Ext 226) Toll free: 1-800-661-3348 (Ext 226)

joan.maisonneuve@chbaalberta.ca