Licence Tribunal -

Appeal d'appel en

Tribunal matière de permis

DATE:

2011-10-21

FILE:

6428/ONHWPA

CASE NAME:

6428 v. Tarion Warranty Corporation

An Appeal of a Decision of Tarion Warranty Corporation under the Ontario New Home Warranties Plan Act – to Disallow a Claim

Applicants

Applicants

-and-

Tarion Warranty Corporation

Respondent

-and-

1483751 Ontario Limited Added Party

REASONS FOR DECISION AND ORDER

ADJUDICATOR:

DOUGLAS R. WALLACE, Vice-Chair

APPEARANCES:

For the Applicants:

CHERYL FLAGLER, Agent representing the Applicants

For the Respondent:

GENA ARGITIS, Counsel representing Tarion

Warranty Corporation

MICHAEL KRYGIER-BAUM, student-at-law, representing Tarion Warranty Corporation

For the Added Party:

ALLAN W. EVANS, Agent representing the Added Party, 1483751 Ontario Limited

Heard in Kingston:

August 16 and 17, 2011

REASONS FOR DECISION AND ORDER

BACKGROUND

Section 16 of the Ontario New Home Warranties Plan Act, R.S.O. 1990, c.

O.31 (the “Act”) requires Tarion Warranty Corporation (“Tarion”) to decide whether alleged defects in the construction of a new home are covered by a warranty as defined by the Act and Regulations, and grants homeowners the right to appeal any decision by Tarion denying them coverage by way of a hearing by this Tribunal. In conducting this hearing the Tribunal exercises its own judgment, independent of any prior decision by Tarion.

PRELIMINARY MATTER

At the opening of the hearing, the homeowners presented an expert’s report prepared by an engineering firm for use at a prior hearing respecting the half of this double residence adjacent to the subject property. Tarion had seen the report and in fact paid for its preparation when dealing with complaints arising out of the construction of the adjoining half of the subject property. Tarion was, however, not aware that the homeowners intended to use the report in connection with this appeal. The Added Party (the Builder) had never seen the report. Both Tarion and the Builder objected to the introduction of this report as an exhibit on the grounds that it had not been disclosed to them in accordance with the Tribunal’s Rules. The use of the report was also contrary to an order for disclosure made by the panel member holding the pre-hearing in this matter. The report had been in the homeowners’ possession for several months. It dealt almost exclusively with alleged defects in the adjoining half of the double residence and was only relevant to one of the items in dispute in this hearing. In light of its limited relevance and possible prejudice to the Builder and Tarion the Tribunal ruled that it would not exercise its discretion in favour of admitting the document

FACTS

The following facts were not in dispute and are found as facts by the Tribunal:

1. The homeowners took possession of their new home on March 13, 2008.

2. The homeowners filed a Year-End Form listing a number of incomplete or unsatisfactory items. This form was accepted by Tarion on Mach 11, 2009. Warranty inspections were carried out on November 20, 2009 and January 27, 2010. A Warranty Assessment Report issued on January 28, 2010 accepted a number of items as warranted under the one-year warranty provided by the Act and rejected a number of other items. The homeowners and Tarion reached agreement on the settlement of a number of items on the Warranty Assessment Report and no Decision Letter was either requested or given.

3. On March 14, 2010, the homeowners filed a Second Year Form with Tarion and the Builder itemizing a number of items requiring completion or correction. The items listed include the items forming the subject matter of this hearing:

4. On September 15, 2010, a Tarion Representative inspected the property and issued a Warranty Assessment Report on the next day. A number of items in the Second-Year Form were found to have been settled prior to the inspection, a few items were found to be warranted, more were found to be unwarranted and the greatest number were found to have been submitted outside the warranty period. .

5. On December 15, 2010, Tarion issued a Decision Letter denying coverage for 21 items on the grounds stated in the Warranty Assessment Report.

6. The homeowners requested this hearing on all 21 items by filing a Notice of Appeal on January 13, 2011.

7. Tarion issued a Supplementary Decision Letter, with minor modifications to the Reasons stated for denying warranty coverage of one item on January 15, 2011.

8. Three of the 21 items appealed were withdrawn prior to the hearing.

9. The 18 remaining items may be classified as follows:

a. Foundation parging (Claim 6)

b. Claims arising out of the failure to finish the foyer (Claims 11, 12, 13, and 19).

c. Claims concerning the drywall in the kitchen (Claims 31 and 34).

d. Claims arising in the living room walls (Claims 36 and 37)

e. Claims arising in the upstairs and downstairs hallways (Claims 48 and 39)

f. Claims relating to the work done in the ensuite bathroom (Claims 52 54 , 58 and 59).

g. Claims relating to the installation of the jet tub (Claims 55, 56, and 57).

THE LAW

The first year warranties applicable to new homes are set out in section 13 of the Act as follows:

Warranties

13. (1) Every vendor of a home warrants to the owner,

(a) that the home,

(i) is constructed in a workmanlike manner and is free from defects in material,

(ii) is fit for habitation, and

(iii) is constructed in accordance with the Ontario Building Code;

(b) that the home is free of major structural defects as defined by the regulations; and

(c) such other warranties as are prescribed by the regulations.

R.S.O.1990, c. O.31,

Subsections 13 (3) and 13 (4) specify the date these warranties take effect and the date within which claims for breach of these warranties must be submitted in the following words:.

(3) The vendor of a home shall deliver to the owner a certificate specifying the date upon which the home is completed for the owner’s possession and the warranties take effect from the date specified in the certificate.

(4) A warranty under subsection (1) applies only in respect of claims made there under within one year after the warranty takes effect, or such longer time under such conditions as are prescribed.

Regulation 892 contains a number of provisions relating to Year-End warranty claims. Of particular relevance are the following provisions:

4.1 (3) During the first year of the warranty period, the owner shall submit to the Corporation a warranty claim only within one or both of the following time periods:

1. The initial claim period.

2. The year-end claim period. O. Reg. 320/03, s. 3; O. Reg. 483/05, s. 3 (2); O. Reg. 9/09, s. 2 (2).

(4) The Corporation may, in its sole discretion, extend or abridge any times specified in this section, sections 4.2 to 4.6 and section 5.1 if it determines that,

(a) the vendor is unable or unwilling to repair or resolve the claim items covered by a warranty;

(b) the warranty claim involves items requiring seasonal repairs including air conditioning, items involving health and safety or items involving other extraordinary circumstances; or

(c) the specified times begin in, end in or span the period from December 24 of one year to January 1 of the following year, both inclusive. O. Reg. 320/03, s. 3; O. Reg. 483/05, s. 3 (3).

4.3 (1) In this section,

“year-end form” means the form that the Corporation requires for a warranty claim that an owner submits to the Corporation during the year- end claim period. O. Reg. 483/05, s. 5; O. Reg. 9/09, s. 4.

(2) In order to make a warranty claim during the year-end claim period, the owner shall complete and submit to the Corporation a year-end form. O. Reg. 483/05, s. 5; O. Reg. 9/09, s. 4.

(7) If a home has a date of possession on or after September 1, 2005, an owner may submit only one year-end form for the home and only the first year-end form that the Corporation receives for the home shall be effective for the purpose of the Act and the regulations. O. Reg. 483/05,

s. 5.

Warranties extending beyond the one-year period are set out in sections 14 and 15 of the Regulations. Section 14 deals with water penetration which is not an issue here. Subsection 15 (1) defines certain terms and subsection 15(2) enumerates the defects that qualify for a two-year warranty.

15. (1) In this section,

“building envelope” means the wall and roof assemblies that contain the building space, and includes all those elements of the assembly that contribute to the separation of the outdoor and indoor environments so that the indoor environment can be controlled within acceptable limits; (“envelope”)

“delivery and distribution systems” include all wires, conduits, pipes, junctions, switches, receptacles and seals, but does not include appliances, fittings and fixtures; (“réseaux de distribution”)

“exterior cladding” means all exterior wall coverings and includes siding and above-grade masonry as required and detailed in the relevant sections of the Ontario Building Code under which the Building Permit was issued. (“habillage extérieur”) R.R.O. 1990, Reg. 892, s. 15 (1).

(2) Every vendor of a new home warrants to the owner,

(a) that the home is constructed in a workmanlike manner and is free from defects in materials including windows, doors and caulking such that the building envelope of the home prevents water penetration;

(b) that the electrical, plumbing and heating delivery and distribution systems are free from defects in material and work;

(c) that all exterior cladding of the home is free from defects in material and work resulting in detachment, displacement or physical deterioration;

(d) that the home is free from violations of the Ontario Building Code regulations under which the Building Permit was issued, affecting health and safety, including but not limited to fire safety, insulation, air and vapour barriers, ventilation, heating and structural adequacy; and

(e) that the home is free of major structural defects. R.R.O. 1990, Reg. 892, s. 15 (2); O. Reg. 697/92, s. 1.

(3) The warranties described in subsection (2) apply only in respect of claims made during a two-year warranty period ending on the second anniversary of the date of possession, in respect of homes that were enrolled, or should have been enrolled, after December 31, 1990. O. Reg. 9/09, s. 8.

(4) The warranties described in subsection (2) are prescribed under clause 13 (1) (c) of the Act. R.R.O. 1990, Reg. 892, s. 15 (4).

ISSUES

The issue before the Tribunal is whether the complaints listed in the Supplementary Decision Letter of July 15, 2011 are warranted under section 14 or 15 of Regulation 892.

EVIDENCE

Evidence produced by the homeowners consisted of a number of documents filed as exhibits and the testimony of three witnesses; Cheryl Flagler, the Mother of one of the homeowners, the Building Inspector for Loyalist Township and a real estate developer. The Builder gave evidence in person and Tarion’s evidence consisted of a Book of Documents and the oral testimony of its Field Representative, Doug Lappan .

The evidence submitted by all parties is summarized under the classifications of the items in dispute set out above.

1. Foundation parging

Cheryl Flagler assisted the homeowners in the purchase of their home and in the documentation of their complaints against the Builder. Her evidence was that one of the plans forming part of the Agreement of Purchase and Sale showed concrete parging on the foundation between ground level and the bottom of the siding but when the homeowners took possession there was no parging on the foundation at all. When the homeowners complained to the Builder, he applied some parging but it did not adhere properly to the existing asphalt coating. She decided not to put the item on the One-Year Form relying on the Builder’s promise to provide it. The evidence of the Building Inspector was that concrete parging was required by the Ontario Building Code on concrete block foundations but that this foundation was a poured concrete foundation. For this reason, the parging could not be considered “exterior cladding” within the definition of that term in clause 15 (1) of the Regulation. The real estate developer testified that there were many meeting between the Builder and the homeowners during the course of construction during which plans, other than those forming part of the original agreement of purchase and sale, were produced.

The Builder’s position was that a clause in the agreement of purchase and sale stated that the agreement and all attached schedules constituted the entire agreement between the parties and the plan produced by the homeowners showing the parging was not a part of the Agreement of Purchase and Sale when the agreement was signed. He therefore had no obligation to provide parging. He did not deny that he had attempted to apply parging in answer to the homeowners’ complaint or that the parging he did provide fell off in large slabs. He entered the signed Agreement of Purchase and Sale showing no parging on the foundation plan as an exhibit.

2. Claims arising out of the failure to finish the foyer

The homeowners claimed that the original plans provided for a laundry room in the foyer coming in from the garage. When they agreed with the Builder that the laundry room would be better in the basement they expected the foyer to be properly finished. In their opinion, it was not. Photographs produced showed gouges on one wall, nails popping through the paint and the hook-ups for the washer and dryer that had not been removed or covered. Tarion denied warranty coverage for these claims on the basis that they did not fall within the terms of any two-year warranty. The Warranty Assessment Report found that one of the items (finishing work to the wall surfaces) was not completed in a workmanlike manner, but there was no finding as to whether the other defects complained of under this heading would have been considered a breach of the one-year warranty respecting workmanship if they were being assessed as part of a first year claim. In point of fact, the nail pops in this area and in other areas of the house had been included in the first-year claim form and had been assessed as unwarranted even at that time on the grounds that they were the result of normal shrinkage of materials due to drying after construction.

3. Claims concerning the drywall in the kitchen

The homeowners’ complaints relating to nail pops in this area of the house were well illustrated in the photographs entered as an exhibit. They too, had been the subject of a complaint in the first year warranty and had been denied at that time on the grounds that they were the result of normal shrinkage. Tarion’s decision to deny them this time was based on the fact that they were not covered by any two-year warranty.

Tarion’s representative gave evidence that, notwithstanding the fact that the initial assessment of the claim relating to nail and screw pops was that these were not covered by the first-year warranty, some negotiations took place on the item and a settlement was reached whereby the homeowners released Tarion and the Builder from all claims relating to this item.

4. Claims arising in the living room walls

Cheryl Flagler’s oral testimony and the photographs filed in support of these claims clearly indicate that besides nail pops, there was a crack in the living room wall under the window and a number of seams in the drywall that had not been properly mudded or sanded. These claims had not been the subject of complaint in the one-year form. They were denied as falling within the one-year warranty protection, but not the terms of the two-year warranty.

5. Claims arising in the upstairs and downstairs hallways

These claims involve exposed drywall screws, drywall patches, rough spots on the walls and nail pops. Some of these defects were noted on the Pre- Delivery Inspection Form and are covered by the Settlement Agreement signed by the homeowners, and others were brought to Tarion’s attention for the first time in the Second-Year form. Warranty coverage was denied as a result of being submitted after the expiration of the one-year warranty period.

6. Claims relating to the work done in the ensuite bathroom

The claims here were that there were paint drips along the window wall, nail and screw pops in the drywall, exposed seams above the shower stall and oversized holes through the drywall for the water pipes and drain serving the sink. It was agreed that none of the defects had been brought forward prior to the Two-Year Warranty period and warranty coverage was denied for that reason.

7. Claims relating to the installation of the jet tub.

Ms. Flagler testified that the homeowners had a great deal of trouble with water leaking around the jet tub. She introduced a number of photographs showing cracks between the top edge of the tub and the surrounding tile and between the bottom of the tub and the floor. Her evidence was that grout had been used instead of caulking and that the tub crib for the tub was improperly built. The Tarion Field Representative did not observe the problem where the top of the tub met the surrounding tile but did note the crack between the tub and the floor. He did not consider the crack that he observed to be warranted as it was submitted too late for the one-year warranty.

ANALYSIS

The onus lies on the applicants to show, on the balance of probabilities that they are entitled to warranty coverage, that the defects complained of and the scope of work necessary to carry out repairs and the cost of such repairs fall within the warranty coverage; The difficulty the homeowners face before this Tribunal is that, apart from the items which were brought forward and settled as part of the Year-End warranty conciliation process, all of the defects for which warranty coverage is now claimed, were brought forward for the first time long after the expiration of the prescribed period for the submission of first year warranty claims.

The Tribunal has considered whether section 4.1 (4) of regulation 892 authorizes Tarion, and by extension the Tribunal, to consider alleged breaches of the one-year warranty that are presented after the expiration of the time specified in the Act.

Section 4.1 (4) of the regulation provides that

(4) The Corporation may, in its sole discretion, extend or abridge any times specified in this section, sections 4.2 to 4.6 and section 5.1 if it determines that,

(a) the vendor is unable or unwilling to repair or resolve the claim items covered by a warranty;

(b) the warranty claim involves items requiring seasonal repairs including air conditioning, items involving health and safety or items involving other extraordinary circumstances; or

(c) the specified times begin in, end in or span the period from December 24 of one year to January 1 of the following year, both inclusive.

It is clear, from this section that the Corporation, Tarion, has been given discretion to extend the time for carrying out certain actions under the regulations. The discretion relates only to the times set out in the cited sections of the regulation, however, and does not include the time set out in section 13 (4) of the Act for making claims for breach of the one year warranty. In the absence of any provision giving the Tribunal such discretion. and in light of the Tribunal’s finding that none of the items in the Decision Letter constitute a breach of the extended warranty provided in Section 15 of the regulation, the Tribunal finds that the Homeowners’ claim for warranty coverage must fail

ORDER

Pursuant to section 16 (3) of the Act the Tribunal orders that Tarion disallow all claims.

LICENCE APPEAL TRIBUNAL

RELEASED: October 21, 2011

_. Douglas R. Wallace, Vice Chair