Home Construction Regulatory Authority launches – what does it mean for Ontario home buyers?

It now has extensive controls in the province

Home Construction Regulatory Authority launches – what does it mean for Ontario home buyers?

From the realtors who sell it, to the mortgage brokers who fund it, to the consumers who ultimately buy it, virtually every party involved with the buying and selling of newly constructed homes in Ontario has been waiting for the day when the province’s builders would finally be held to a higher degree of accountability.

With yesterday’s launch of the Home Construction Regulatory Authority, that day may have arrived.

The HCRA is now the watchdog for licensing and regulating the province’s builders, removing the burden from Tarion Warranty Corporation, the provincial body that had, for years, come under severe criticism for its close ties to, and alleged unwillingness to punish the transgressions of, Ontario’s builder community.

“The HCRA will enforce high professional standards for competence and conduct in the homebuilding industry, giving new home buyers confidence in one of the biggest purchases of their lives,” Tim Hadwen, interim CEO of the HCRA, said in a statement. “We will also ensure consistency across the sector, curtailing unethical and illegal builders and maintaining a fair marketplace.”

To ensure the Authority has the resources to adequately monitor, police, and potentially litigate the actions of the province’s more than 5,000 new home builders and vendors, the HCRA will be implementing a new series of licensing fees. New, “umbrella”-type licences will cost builders $750, an increase of $150 compared to Tarion’s previous charge, while new, non-umbrella licences now cost $3,000, a $500 increase over Tarion’s. A $145 regulatory oversight fee will also be charged to builders on a per-home basis.

How authoritative is the Authority?

According to Leor Margulies of Robins Appleby Barristers and Solicitors, the HCRA has a “much broader authority” than what was previously seen under the Tarion regime.

“They’re going to look at all the financials, all the records, the experience, and background,” of prospective builders during the vetting process, and punish those who have engaged in improper activities, Margulies said. “That’s something Tarion never had before. Now the consumers can go to HCRA and say, ‘Here’s all the bad things that [my builder] did.’ It doesn’t necessarily mean he gets de-registered, but he should get fined for these kinds of activities. There’s now a process for consumer complaints that are not warranty-related.”

But after years of frustration with Tarion, homeowners may be wondering just how effective the HCRA will be in cracking down on unethical builders. Stephanie Donaldson, the HCRA’s director of consumer and industry relations, told MBN that the Authority’s compliance measures will be “informed by a risk management framework” that includes risk of harm to home buyers, past complaints about conduct, evidence of competency gaps, and broader risk to the public “that develops escalating and proportionate responses to potential consumer harms.”

But how does that translate to accountability for builders? Donaldson said the HCRA is “determined” to “take action” against builders or vendors operating outside provincial standards by conducting investigations and undertaking enforcement actions “whenever necessary”.

“Those who knowingly choose to avoid their legal obligations,” Donaldson explained, “can expect the HCRA to use a broad range of regulatory tools to curtail this unacceptable behaviour, which include but are not limited to, the power to set conditions unilaterally at any time, to suspend licences, to issue compliance orders, to issue warnings, require education courses and, in the future, we will have the ability to impose fines and administrative penalties.”

To avoid confusion among consumers who may not be aware of the HCRA/Tarion split in duties, the Authority has instituted a “no wrong door” approach to handling homeowner complaints. If a consumer or builder brings the HCRA a Tarion issue, or vice versa, staff, Donaldson said, “will strive to ensure that their concern is directed to the right organization in a manner that does not create extra work for the consumer.” 

An added resource

In addition to providing what the HCRA deemed a “streamlined complaints process” intended to provide “a clear, straightforward way for a new home buyer to raise real concerns about a builder or vendor’s conduct”, the Authority is also managing the Ontario Builder Directory, “the official source of information” relating to the province’s builder community.

The OBD will provide consumers current information on each builder and vendor’s license status, including information specifically related to past convictions, the number of homes a builder has completed, and their track record regarding warranties. While the OBD provides details around legal charges brought against builders and includes outfits that have been defined as illegal, the HCRA, in an attempt to keep its data “completely objective and quantifiable”, does not attach any ratings or rankings to builders in the database.

“The HCRA will ensure that the information is accurate, fair and consistent,” the Authority said in a statement accompanying the launch.

Despite the HCRA’s efforts, some, like Michael and Associates founder and principal lawyer Emma-Christina Michael, feel that the relationship between builders and buyers remains tilted in the former’s favour.

“The contracts are undoubtedly in favour of the builder, and the average Canadian doesn’t understand the extent of the fine print, additional costs, and overall power the vendor has in the transaction,” Michael said. “It’s rare to find a purchaser who isn’t disappointed in one way or another at the quality of the final product or the final cost implications.”

Despite the increased scrutiny builders will now be under, Michael worries that buyers may still find themselves in a take-it-or-leave-it scenario if their builders deliver a substandard product. Once their deposits have been made, many of them may feel as if they have no leverage, no recourse, and no escape.

“With a one-sided contract and process, lawyers for new-home vendors have the reputation to be ruthless,” she said. “There is no real spirit of negotiating deficiencies and buyers are left to deal with Tarion” – which still administers the province’s warranty program – “directly, or, more often than not, just accept the property the way it is.”