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As commercial litigators, the administration of Ontario’s new home warranty program is of tremendous interest to us. On Tuesday March 28, 2017, the Ontario government announced that it will be relieving the Tarion Warranty Corporation of its responsibility to regulate the province’s home builders.

Handshakes after contract signature

Tarion currently administers the Ontario New Home Warranties Plan Act, which provides warranty coverage to new home buyers. As noted by the Ministry of Government and Consumer Services, Tarion currently “registers new home builders and vendors, enrolls new homes for warranty coverage, investigates illegal building practices, and resolves warranty disputes between builders/vendors and homeowners.”

The announcement came following the release of a Final Report by the Honourable J. Douglas Cunningham Q.C. In November 2015, Ontario’s Minister of Government and Consumer Services appointed Justice Cunningham to make recommendations regarding Tarion and the new home warranty program.

In his report, Justice Cunningham opined that “many of the challenges flow from Tarion’s multiplicity of functions, including its dual role of regulator and warranty provider.” As such, Tarion will essentially be split in half. The government will be establishing a new regulator of the home building industry. Tarion will maintain responsibility for the administration of the warranty program and, for the time being, will maintain its monopoly on coverage.

Justice Cunningham delivered a number of recommendations in the final report, including the following:

  1. New home warranty protection should continue to be a mandatory program. Warranty coverage would move from today’s monopoly, with Tarion as the only provider, to a multi-provider insurance system. The warranty coverage should be an insurance product.
  2. Builder and vendor regulation should be delivered through an administrative authority operating separate from, but in cooperation with, the warranty providers.
  3. Adjudication of unresolved warranty disputes should be delivered through a separate organization independent of warranty providers and the regulator.

Justice Cunningham noted that various private sector insurance companies had expressed interest in participating as warranty providers should a competitive market replace today’s monopoly structure. Justice Cunningham also noted that an insurance-based, multi-provider model exists in British Columbia, Alberta and Saskatchewan and several international jurisdictions.

To date, the government has not taken any further steps in terms of opening up the monopoly to additional warranty providers, or establishing a new adjudication system to resolve disputes between purchasers and warranty providers. The only step taken thus far is to concede that the dual role results in conflicts and that regulation of builders must be independent of the administration of the warranty program.

With respect to the need for an improved system of adjudication, Justice Cunningham noted that the use of the term “conciliation” in the current dispute resolution process is somewhat misleading. The original idea behind “conciliation” was to avoid litigation. In reality, this has become an adversarial process.

As a component of a revised adjudication system, Justice Cunningham has recommended that adjudicators be granted the ability to retain independent experts to assist the parties in a neutral capacity. Justice Cunningham also recommended that the process be flexible, and allow for a different hearing process (that is, paper hearings where the quantum in dispute is minimal, and in-person hearings where the quantum is greater or the issues are more complex).

Despite Justice Cunningham’s detailed recommendations in terms of how to reform the dispute resolution system and improve the adjudication of home warranty disputes, the province of Ontario has yet to confirm whether it will be enacting such reforms. As we have written about previously in this blog (see To Arbitrate or Litigate, that is the Question), litigation in Ontario has become increasingly slower, more document-heavy, and less accessible for individual litigants. Reforming the process pursuant to which warranty claims are adjudicated will serve to benefit both home owners and builders going forward.

The Commercial Litigation Group at Nelligan O’Brien Payne and our colleagues in the Real Estate and Development Group will be watching these developments with interest.

Contact us today if you have further questions about Tarion.

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2021 Nelligan O’Brien Payne LLP.

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