More right than wrong with program

June 16, 2007 Bob Finnigan

There's a lot of ink devoted to Tarion this weekend but quite frankly, the bulk of it applies to a minority of the readers. While Tarion's warranties and consumer protections benefit every new home purchaser in Ontario, the vast majority of builders and buyers work out their after-sales issues directly, with Tarion coming to the fore only when the builder-buyer relationship breaks down.

Tarion has two key roles: licensing home builders and guaranteeing warranty service. Would-be builders are put through a rigorous review of their financial viability as well as their technical and business skills. Tarion can and does take financial security from builders who don't meet its thresholds, and can and does put limits on the number of homes a builder can construct until he establishes a good track record. As well, a builder must sign a detailed agreement which further cements Tarion's control over him.
In its other major role, Tarion guarantees that the builder fulfils his warranty commitments to the purchaser, including one- and two-year workmanship and material coverage, seven-year major structural defect protection, deposit protection, delayed closings, etc.

Tarion operates through a transparent Customer Service Standard, which sets out exactly how homebuyers can seek redress and how long builders have to respond. Most, if not all, service issues are resolved through the standard procedures; however a minority of disputes reach the conciliation stage where Tarion is called upon to determine whether the builder ought to have fixed a problem.

I use the term "guarantees" above because many homebuyers assume that the Tarion coverage is an insurance policy against which they simply make a claim. Tarion, however, is set up as a guarantor to ensure the builder lives up to his obligations and only steps in directly if the builder fails, or is unable, to perform. The builder can then answer to Tarion at licence renewal time.

One of the knocks on Tarion relates to the fact that a number of home builders sit on its board of directors, with some suggesting that the board is "builder-driven." I have to smile when I hear that because the industry perception is just the opposite. To many builders, Tarion is seen as another layer of government imposing more and more rules and regulations on their business.

Looking at the dramatic increases in consumer protection over the last few years, including a doubling of maximum warranty coverage and deposit protection, with pending enhancements to the delayed closing protection, combined with decreases in the enrolment fees (premiums) and new policies like the Customer Service Standard, I'd have to say that the home builders on the board are clearly taking their builder hats off at the door of the Tarion boardroom.

The other "noise" around Tarion emanates from a vocal minority of disgruntled homeowners who simply aren't satisfied with Tarion's final decision in their particular case. It would be nice if Tarion and all the other insurers could simply increase their coverage every time somebody fell outside of the policy, but it's simply not realistic. If you have a car accident, an adjuster, not you, determines the claim. If you have an 80,000 kilometre warranty and something goes at 85,000 kilometres, your dealer is not going to fix it free.

Overall, Tarion is doing a solid job administering the Ontario New Home Warranties Plan Act. No organization is perfect, but one that has successfully covered more than one million new homes over more than 25 years must be doing far more right than wrong.

The views expressed are those of Bob Finnigan, president of the Greater Toronto Home Builders' Association-Urban Development Institute. Email: president@gthba.ca