Unresolved Warranty Claims Under The Ontario New Home Warranties Plan Act

Post by: Evan Holt

A recent decision of the Ontario Superior Court of Justice – Blair v Tarion Warranty Corp. (Tarion) –  confirmed that warranty claims under the Ontario New Home Warranties Plan Act (ONHWPA) can only be pursued by the current owner of a home. The appellant, Blair, took possession of the subject property in February 2010 and complained to Tarion with respect to insufficient heating in the home. Tarion conducted an investigation that was completed in the summer of 2012 and concluded that duct modification needed to be completed. After the investigation, in November of 2012, Blair installed within her condominium unit, a gas fireplace at a cost of $17,000.00. This installation was completed without the approval of Tarion. Blair claimed the cost of installation but Tarion denied compensation on February 28, 2013. Blair appealed the refusal of reimbursement to the Tribunal. During the proceedings, Blair disclosed that she had sold the subject property on October 15, 2013. However, Blair stated that as part of the agreement of purchase and sale she had entered a collateral agreement with the purchaser to maintain her claim against Tarion. The Tribunal dismissed the appeal stating that when Blair sold the subject property she lost standing to continue her action against Tarion. In this appeal, Blair alleged the Tribunal failed to recognize that the collateral agreement assigned the rights of the current owner to Blair.

Blair relied on the decision of the Tribunal in Liddiard v Tarion Warranty Corp., which included the following statement:

Nothing in this decision should be constructed as denying the Applicants the right to approach the current owners of the home and to seek some form of assignment of their claim.

Liddiard v Tarion Warranty Corp. was appealed to the Divisional Court where it was confirmed that a warranty “runs with the home”. The ONHWPA does not extend warranty coverage to previous owners. Additionally, the consumer protection nature of the ONHWPA is best served though fixing buildings and not compensating individual owners. The court noted that the claim presented by Blair only dealt with the installation of the fire place and not with the insufficient heat provided to the unit. The current owners never assigned the right to pursue a claim with respect to the insufficient heat, such assignment would violate s. 13(6) of the ONHWPA.

In this case, the court concluded that as the purchaser of the subject property from Blair had no right with respect to the fireplace claim against Tarion, and therefore, such a claim could not be assigned. The purchaser acquired the property with the fireplace and benefited from its presence. Thus, when Blair sold the condominium unit she was compensated for the presence of a fireplace.Tarion submitted that a previous owner of a home subject to warranty coverage may be compensated for an unresolved warranty claim without contravention of the statutory warranties framework so long as:

• any warranty claims are pursued by the then owner of the home; and
• the arrangements still allow for the possibility of the builder or Tarion to remediate any valid defect, as opposed to providing only for the payment of compensation from Tarion.

Tarion goes on to provide 3 examples of how such a resolution could be reached:

1. the purchase price could be discounted to reflect the uncertainty the purchaser may face with respect to the outstanding claim;
2. the purchase price of the home is set to reflect the price of the remediated home. The purchaser would pursue the warranty claim and retain any compensation paid. This may also include a risk mitigation clause in which the vendor would be entitled to a portion of the compensation received by the current owner above a certain amount; and
3. the vendor could provide Tarion with a signed appointment and acknowledgement explicitly stating that the vendor has been appointed an agent for and in the name of the current owner with respect to unresolved warranty claims. Additionally there should be provisions relating to accessing the home, and the authority of the agent. An agreement would need to be in place between the vendor and the current owner so that the vendor could recover any compensation granted to the current owner.

The consumer protection nature of the ONHWPA is for the protection of an owner or subsequent owner within the warranty period of a new home. This decision illustrates that although a previous owner may benefit from a claim brought by the current owner, the rights of the current owner to pursue an outstanding warranty claim may not be assigned. To read the full decision click here.