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Ruling may impact on Tarion warranty

An appeal decision by the Ontario Divisional Court released in April could result in a significant change in the way homeowner claims are treated under the Ontario New Home Warranties Plan Act. Joao Luis DaSilva Cecilio purchased a new home from a builder back in June 2000. After closing, he was unhappy with the quality of the house and made numerous deficiency claims to the Tarion warranty program.

Tarion responded to the complaints in July and October 2005. Cecilio was dissatisfied with their position and appealed to the Licence Appeal Tribunal (LAT) in November that year.

One main complaint was that he heard too much noise from his neighbor's house through the shared wall between their homes. The Tribunal had to decide whether the wall complied with the Ontario Building Code requirements for limiting sound transference.

In January 2006, the Tribunal ordered Tarion to conduct testing to check for any Code infractions and to repair the party wall, if necessary.

Tarion's position was that it had no obligation or authority to do testing after the house was completed and it appealed the LAT decision to a three-judge panel of the Ontario Divisional Court.

At the appeal hearing, Cecilio's lawyer, David J. McGhee, argued that Tarion's position was contrary to the underlying purpose of the legislation, which is intended to protect the homeowner against breaches of the warranty.

Tarion's interpretation, he told the court, "gutted" the protections meant to be in the Act and freed Tarion from its duties under the Act to inspect and test and, if necessary, do work to mitigate the breaches of warranty.

The three-judge panel, in a decision written by Justice Dennis Lane, ruled Cecilio's "submissions make sense out of the Act, whereas the Tarion interpretation does not." Justice Lane wrote, "(Tarion's) warranties only begin when the construction has been completed. It makes no sense that the power of inspection would exist only during construction ... I conclude that (the legislation) authorizes inspections and tests for all purposes of the Act and is not confined to the construction period."

The purpose of the Tarion legislation, the court wrote, "is clearly remedial consumer protection legislation and should be liberally construed...Tarion has taken the side of the builder in opposing the homeowner."

The court ordered the case to be sent back to the Tribunal to consider whether the builder or the homeowner ought to have the test performed by an independent tester and the report distributed to the parties.

Janice Mandel, Tarion's vice-president of corporate affairs, says Tarion won't appeal the Divisional Court decision.

As I see it, the Cecilio case is a watershed decision, which should affect the way many Tarion claims are dealt with in the future. It could also open the floodgates of claims for similar noise complaints.

The decision clearly implies that future Tarion decisions, which do not "make sense" in light of the consumer protection mandate of the program, will be reversed by the courts.

The case also establishes that Tarion's inspection obligations extend beyond the completion of the house, and that post-completion inspection and testing could result in a finding of responsibility by the program. I also read the Cecilio decision as a criticism by the appeal court of Tarion's interpretation of the legislation.

The case could well point the way to a sea change in the way consumers are treated under the ONHWPA legislation - if not by Tarion, then definitely by the courts.


Bob Aaron is a Toronto real estate lawyer whose Title Page column appears in the Toronto Star on Saturdays. He can be reached at [email protected] Visit his website at www.aaron.ca.

July 24, 2007 in New in New Homes | Permalink

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