Warranty does not eliminate client’s rights

Feb 17, 2007 | 2007 Toronto Star Columns

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Bob Aaron

Bob Aaron bob@aaron.ca

February 17, 2007

Warranty does not eliminate client’s rights

Primary purpose of Tarion is to administer Ontario New Home Warranties Plan

In the summer of 1999, Brian Griffin bought a new house to be built by T & R Brown Construction Ltd. in the City of Kawartha Lakes.

In March and August of the following year after taking possession, Griffin became unhappy with defects in the house and served notice on what is now the Tarion warranty program of a breach of warranty under the legislation. A conciliation was conducted at the house in August, 2000 and some repairs were made. The warranty program did several re-inspections and then issued a formal report to the owner.

Griffin was still not satisfied and filed a further claim listing 33 separate complaints. After the program responded to the complaints, Griffin launched a formal appeal of the decision. The Licence Appeal Tribunal scheduled five days for hearing the appeal, but a few days before the hearing, Griffin abandoned it and decided to sue the builder and the City of Kawartha Lakes instead.

In November, 2006, Brown and the city asked the court to terminate Griffin’s lawsuit as "frivolous and vexatious." They argued that Griffin could not sue because he was obliged to accept the decision of the warranty program in place of any right to collect damages in a civil court.

Section 17 of the Ontario New Home Warranties Plan Act says that every contract to buy a new home is deemed to contain an agreement to submit future differences to arbitration. At first blush, it looks like this provision eliminates the right of any homeowner to sue under the terms of the contract.

At the court hearing on the application to kill the litigation, Griffin’s counsel, William F. Kelly, argued that his client’s rights under the contract with the builder are not eliminated by the provisions of the warranty program legislation, which is designed to protect the rights of new homebuyers and not truncate them.

Justice Robert A. Clark dismissed the application to toss out Griffin’s case without a trial. His view was that the legislation contains no express prohibition against a lawsuit. As a result, he ruled, the jurisdiction of the Licence Appeal Tribunal to decide warranty appeals exists alongside that of the courts, and a homeowner can choose which route to take.

The builder and the city argued that the issue of whether the builder had breached any of the statutory warranties had already been decided by the warranty program, and it would be improper for the owner to litigate the issue all over again in a courtroom. Justice Clark dismissed this argument as well.

Notices of appeal have been filed by Brown and the city.

In this column last week, I quoted from a decision of the Ontario Divisional Court, which ruled last year that the law governing the Tarion program is "consumer protection legislation and should be given broad and liberal interpretation."

This ruling, in the Keith Markey case, was a bold step forward since neither the Ontario New Home Warranties Plan Act nor the regulations passed under it contain any specific statement to that effect. The legislation itself simply states that the primary purpose of the Tarion Warranty Corp. is to administer the Ontario New Home Warranties Plan.

Following the ruling of the Divisional Court in the Markey case, everything that Tarion does will now have to be re-examined in light of Tarion’s clarified mandate to protect consumers.

Tarion is an independent, self-governing, arm’s-length organization created by the Ontario government. Its annual report states: "Tarion’s mandate is unique in Canada. No other province or territory so completely transfers responsibility and liability for management of the home building industry to an independent organization."

Soon that mandate may be subject to further oversight this time by the Ombudsman of Ontario.

Karen Somerville is president of Canadians For Properly Built Homes (CPBH), an Ottawa-based group that speaks for homeowners across the country. Last month, Government Services Minister Gerry Phillips advised Somerville that he is considering having the mandate of the ombudsman extended to include the Tarion warranty program.

That would certainly be good news for people like Brian Griffin and other buyers of new homes and condominiums in Ontario. Having the ombudsman investigate a case would no doubt be faster and cheaper than pursuing a claim for defects in the province’s courtrooms or even before the Licence Appeal Tribunal.

Somerville told me that many homeowners have advised CPBH that the option of appealing Tarion’s decisions to the Licence Appeal Tribunal (LAT) is not one that they are interested in pursuing for a number of reasons.

These reasons include: the relatively low success rates of those who have taken their cases to the LAT, and the need to retain the services of a lawyer (with no guarantee of success), given that the builder and Tarion are usually represented by a lawyer at the LAT.

My guess is Brian Griffin chose to abandon the tribunal appeal because he would have had to pay his lawyer for a five-day hearing, and might not be any further ahead at the end of it.

In recent months, Ontario ombudsman Andr Marin began investigations into the Ontario Lottery and Gaming Corp., the Municipal Property Assessment Corp., and the denial of certain out-of-country benefits by the Ministry of Health and Long-Term Care.

Buyers of new homes in Ontario will benefit considerably if minister Gerry Phillips expands the ombudsman’s mandate to include oversight of the Tarion warranty corporation. In my view, he can’t do it soon enough.

Bob Aaron is a Toronto real estate lawyer. He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.
Visit the Toronto Star column archives at http://www.aaron.ca/columns for articles on this and other topics or his main webpage at www.aaron.ca.

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Contact Bob Aaron

Bob Aaron is a Toronto real estate lawyer and frequent speaker to groups of home buyers and real estate agents.
He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.

Aaron & Aaron specialize in Real Estate Law, specifically Sale of Rental, Condominium, Residential, Rural Recreation, Offer to Lease, Commercial, and New Construction