The New Home Buyer Protection Act, Canada – What Does it Mean for You?
Several versions of the New Home Buyer Protection Act (NHBPA) are present in Alberta, British Columbia and Ontario, though not all over Canada. At its core, the NHBPA requires mandatory home warranty coverage for new homes and provides consumer protection for homebuyers. First-time homebuyers in Toronto or Edmonton would do well to contact real estate professionals to ensure they understand the eligibility criterion for their homes and rest assured about warranties.
This article discusses how the New Home Buyer Protection Act can improve home-buying experiences.
The New Home Buyer Protection Act (NHBPA) is Canadian legislation that sets out licensing requirements for residential builders and makes third-party home warranty coverage mandatory for new home construction.
Before the NHBPA, there were no mandatory requirements for minimum coverage for new home warranties, and home warranties were not obligatory. The NHBPA provides better protection for new home buyers in Canada and improves the quality of residential construction.
What is the NHBPA?
Under the latest version of the NHBPA, all new homes in Alberta, including duplexes, condominiums, single-family homes, multi-family homes, manufactured homes, and recreational properties where permits were pulled starting February 1, 2014, must have minimum warranty coverage for labour and materials, delivery and distribution systems, building envelope, and major structural components.
The NHBPA applies to new homes built by a residential builder on land owned by a residential builder, new homes built by a residential builder on land owned by the owner, and new homes built by a residential builder on land the owner does not own. In the latter case, the transfer of land title is impossible, so the home warranty coverage is provided without the transfer of land title.
The Act excludes apartments and rental buildings from its scope. Additionally, the act does not cover hotels, motels, care facilities, dormitories, relocatable work camps, and other similar types of buildings. The act only applies to newly constructed homes sold by a builder, including detached homes, duplexes, townhouses, and condos.
The warranty provider evaluates new builders based on their experience, training, claim history, and financial solvency. They will examine whether they have worked with experienced builders or expert trades and claim history, looking for any patterns of leaving other warranty providers. Financial solvency, including the builder’s assets, credit history, and liabilities, will also be considered. If the builder has a good track record, the warranty provider may not conduct further inspections, but if they find poor-quality work during an inspection, they may request more assessments. Inspection costs are typically included in the warranty provider’s fees.
Minimum Coverage of New Home Warranty
The legislation sets out minimum coverage requirements for a new home warranty.
The coverage typically includes four terms: 1 year for labour and materials, two years for delivery and distribution systems, five years for the building envelope, and ten years for structural components.
Homeowners should carefully review their warranty coverage documents to understand the requirements and limitations for each term. Optional insurance may be available to provide additional coverage. If a defect makes the home uninhabitable, compensation may be available for the homeowner to live elsewhere while repairs are ongoing.
The Homeowner Protection Act in British Columbia has three primary purposes: to strengthen consumer protection for new homebuyers, improve the quality of residential construction, and support research and education related to residential buildings in the province.
The Licensing and Consumer Services Branch of BC Housing is responsible for implementing the Act’s provisions, including licensing residential builders and building envelope renovators, monitoring third-party home warranty insurance provisions, administering Owner Builder Authorizations, and conducting research and education that benefits the residential construction industry and consumers.
The Act was amended in 2019 to simplify and streamline the process of Continuing Professional Development (CPD) for residential builders. This CPD program requires builders to complete certain educational hours yearly to maintain their licenses. The changes are aimed at making the program more efficient and effective.
The Act ensures that consumers are protected when purchasing a new home and that builders meet certain quality and safety standards.
Homebuyer Protection Period
British Columbia has also introduced a New Homebuyer Protection Period to give people buying a home more time to secure financing or arrange home inspections before finalizing the sale.
The Province of British Columbia is implementing a mandatory homebuyer protection period for resale properties and newly constructed homes. With limited exceptions, this three-business-day protection period applies to all residential real estate sales, including private sales. Cooling-off periods for pre-construction sales of multi-unit development properties are already under the Real Estate Development and Marketing Act.
The introduction of the homebuyer rescission period makes British Columbia the first province in Canada to implement this type of protection for homebuyers.
Ontario New Home Warranties Plan Act
The Ontario New Home Warranties Plan (ONHWP) Act protects new home buyers in three main ways: mandatory registration of most new home builders and vendors, a warranty program that protects consumers from various defects, and a deposit protection mechanism in case of builder failure.
To ensure that new home buyers are fully informed, the ONHWP Act requires vendors to provide certain disclosures to the purchasers. The Act also specifies the conditions that must be met for registration as a vendor or builder.
In addition, the ONHWP Act outlines the core elements of the warranty program, which includes coverage for defects in work and materials, major structural defects, and delayed closings or occupancy.
It is important to note that the ONHWP Act only applies to newly constructed homes sold and built in Ontario. Specific eligibility criteria must be met for a house covered by statutory warranty coverage.
The definition of a “home,” “vendor,” “builder,” and “owner,” as defined under the ONHWP Act, are essential factors in determining whether a new home is eligible for warranty coverage.
The definition of a “home” refers to the types of dwellings that meet the criteria for warranty coverage.
The “vendor” of a home is the person or entity responsible for honouring the statutory warranties and protections owed to the purchaser/owner of the new house.
The “builder” of a home is the person or entity who undertakes to construct the house in question.
Finally, the “owner” of a home is the person who receives the transfer of land and dwelling or enters into a construction contract with a builder to construct a home on their land.
Tarion, the organization responsible for administering the warranty program, is authorized to make by-laws regarding the program. These by-laws are considered regulations under the Act.
However, while Tarion is responsible for administering the warranty program and guarantee fund, its role is limited to backing up the statutory warranty provided by the vendor. The vendor is responsible for warranting that the home is constructed professionally, is free from defects in material, is fit for habitation, is built by the Code, and is free of major structural defects. Tarion only pays a claim if the vendor fails to provide the required warranty coverage or fails to pay for or perform a repair covered by the warranty program.
Canada has implemented legislation to protect homeowners from unscrupulous builders.
The Ontario New Home Warranties Plan Act (ONHWP Act) provides statutory warranty coverage to newly constructed homes sold and built in Ontario. The Homeowner Protection Act in British Columbia ensures that consumers are protected when purchasing a new home and that builders meet certain quality and safety standards. The New Home Buyer Protection Act (NHBPA) in Alberta sets out licensing requirements for residential builders and makes third-party home warranty coverage mandatory for new home construction.
The legislations establish a dispute resolution process for homeowners with problems with their builders. These laws are essential in ensuring that homeowners are protected and have legal recourse if issues arise with their new homes. As more homebuyers start investing their money in new homes, it is vital that they learn more about the home buyer protection act and whether their property is eligible for the warranty.