It has been reported that Tarion – the independent and not-for-profit organization that administers Ontario’s new home warranty program – is facing the “largest claim event” in its history, with the organization expecting to owe more than $90 million to home buyers.

“The claims are expected for deposits from homebuyers who purchased homes or condos from builders that either cancelled projects or were operating illegally, and didn’t comply with warranty legislation,” a Toronto Star story states.

When buyers sign a purchase agreement for a new home or condominium unit and pay a deposit, the builder provides a warranty in return. If problems arise and homeowners cannot satisfactorily resolve warranty disputes with builders, they can turn to Tarion to help resolve their disputes in a number of circumstances, including when:

• the builder fails to honour its warranty obligations;
• the builder goes bankrupt; 
• the builder fundamentally breaches the purchase agreement; or
• the purchase agreement is considered to be terminated.

In principle, Tarion’s consumer protection mandate provides peace of mind to consumers. They trust that its decisions about determining warranty claims will be made without a view to profits or anything else other than what Tarion believes to be the right and just answer.

A Concerning Change in the Tide

But as a lawyer with extensive experience in resolving residential construction and real estate disputes in court, mediations and arbitrations, I am unsure that Tarion is being as unbiased as possible. This public interest mandate is now resulting in large payments made to people who make the most fuss. This is unsustainable.

While Tarion has been criticized in the past for being too builder-friendly, the pendulum appears to have swung so far in the consumer direction, that Tarion is now making warranty payments to homeowners that are not based on reasonable values for the work, even a reasonable scope of work for the warranted defects.  When Tarion turns to the builders to be indemnified, they are finding builders less willing to work with them since these payments to homeowners are so inflated. This situation is untenable and cannot last long.

I have seen Tarion making overly homeowner-friendly decisions that are not grounded in business realities, with outsized indemnities claimed from builders.

In my experience, Tarion uses very aggressive tactics without notice when handling claims against builders. I have seen Tarion change its position mid-stream and side with homeowners, even when the homeowner has acted unreasonably by any objective measure and the resolution to warranty items is not grounded in construction realities.

This stance is unfair to builders and perhaps can be traced back to a 2019 Special Audit of the Tarion Warranty Corporation. Penned by then-auditor general Bonnie Lysyk, it criticized Tarion for favouring “the interests of builders at the expense of homebuyers.”

So has Tarion gone too far in the other direction?

I truly believe this to be the case. The trend we are now seeing is Tarion making overly generous offers to homeowners, even when claims have not been adequately investigated. I have seen Tarion pay huge sums to owners while not taking evidence or offers to make repairs from the builder into account.

This stance is leading to a financially untenable situation. If Tarion pays these sums to owners that get overturned on appeal, the organization will be unable to recoup those costs. This is a hard loss to the guarantee fund. 

Private Insurance Model Discussed

The auditor-general’s report also floated the idea of having new home warranties delivered through a competitive, multi-provider insurance model in which builders obtain warranty insurance from the private-sector.

“Insurers could offer different products, but legislation would set out the minimum warranties,” the report states, adding “a multi-provider approach has been used in British Columbia since 1999 and Alberta since 2014 to deliver new-home warranties.”

While Tarion has its faults, a private insurance model is not the way to go. If home warranties are opened to competition, consumers would end up being in the same boat as those with other types of insurance policies. There would then be an incentive for the insurance provider to refuse to cover the claim.

New home buyers in the province need Tarion. As president and CEO Peter Balasubramanian noted in the group’s 2022 Annual Report, Ontario is looking to build 1.5 million new homes by 2031.

“These homes will come with the comprehensive warranty that we administer, and I am pleased to say that this warranty is well-positioned to protect these new home buyers,” he states. “Tarion is a critical backstop for the housing industry, and we will work with all stakeholders to help Ontario consumers have peace of mind that their homes are backed by a best-in-class builders’ warranty.”

With the current model mandating that Tarion should act in the public interest, I believe the agency ought to be kept honest, as best as possible. And this will very often happen through engagement between Tarion, builders and consumers as well as through the courts.

I am hopeful that Tarion will re-examine the positions it takes toward builders, for the benefit of all involved.

Contact me for assistance

Whether you are a homeowner or a builder, speaking to a lawyer with expertise on the Tarion warranty process can help bring more clarity about your rights and responsibilities. As firm founded by former Tarion in-house senior counsel, Siskind Doyle LLP is uniquely well-placed to assist you with any Tarion or HCRA-related issues that arise.

NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Siskind Doyle LLP professionals will be pleased to discuss resolutions to specific legal concerns you may have.