Real estate lawyers say new regulator will better protect buyers
Ontario strips home warranty corporation, Tarion, of some responsibilities
The Ontario government announced this week it is setting up a new regulatory body responsible for monitoring the province's home builders because it says the current one has too many conflicting roles.
Tarion Warranty Corporation, which was created by the provincial government in 1976, provides warranties, creates rules, regulates builders and even mediates problems between buyers and developers.
"In today's world of modern oversight and governance we wouldn't have set things up this way," said Tracy MacCharles, Minister of Governance and Consumer Services.
Not only will Tarion be stripped of its responsibility to regulate home builders, creating warranty terms on new builds will now be part of the new regulator's responsibilities.
The new body will be a not-for profit agency that will govern builders on behalf of the government.
Most real estate lawyers CBC Toronto spoke to welcome the move.
Lawyer Mark Weisleder says that the current Tarion program seems to be closer to the builders than to the public, with many developers sitting on the board.
"Having the government assume some of these powers, there's hope that there's someone looking out for the consumers and someone making sure that the builders are doing what they're supposed to do."
Changes should address construction delays, says lawyer
Lawyer Leslie Brown says changes are needed to the way Tarion treats long construction delays.
"The government should address some of the lengthy delays builders put clients through, I've had one client whose project was delayed seven years," said Brown.
"It's very easy for a builder to send a letter saying [something] constitutes a delay under the Tarion legislation and no one gets to second-guess it. The consumer is the weak party trying to prove that it was not a legitimate delay."
Brown says one of his clients, Mohsen Yazdi, is suffering through delays now.
In 2014, Yazdi bought a pre-construction home in Richmond Hill for nearly $900,000. The first tentative occupancy date was Dec. 31, 2015.
That date was pushed back a few more times and now the date is in August.
"I don't know how they are going to get it done by then," said Yazdi. "The frame just went up and it will be summer before they start working on the inside of the homes."
Even if Yazdi was able to pull out of the deal, which he can't until after the closing, he says it wouldn't be worth it.
"I put down $140,000," said Yazdi. "I can't buy anything right now with my money at that location. In that area the average inflation of homes has been 30 per cent each year."
Buyers to get more of their deposit if project goes south
Another change both Weisleder and Brown welcome is getting Tarion to immediately introduce new deposit protection measures that better reflect the amount buyers put down in Ontario's hot housing market.
Currently, the maximum buyers get if a new-build project goes awry is $20,000 for condos or $40,000 for houses. This doesn't change even if the required deposit was double those amounts, something almost 200 buyers brought to light last year when developer Urbancorp went bankrupt.
The government also plans to make the dispute-resolution process easier when owners find an issue with the construction of their new home.
Ontario's announcement comes after former associate chief justice John Douglas Cunningham was appointed to examine Tarion and the Ontario New Home Warranties Plan Act in 2015. In his final report, he found that Tarion's "framework has given rise to real and perceived conflicts of interest."
In a statement, Tarion's senior strategic communications manager, Laurie Stephens, said that even though the company has always looked for ways to improve its process, it has "serious concerns about some of the recommendations contained in the Justice's Final Report.
"We worry that the recommendations will have the effect of seriously weakening consumer protection; increasing costs for the administration and regulation of the warranty, new costs that ultimately new home buyers will have to pay; and creating barriers to entry for builders that could further impact a marketplace already struggling to keep pace with consumer demand."
MacCharles says the government plans to present a new bill in the fall that will draw from Cunningham's recommendations.