Licence Appeal Tribunal
Appeal d'appel en Tribunal matière de permis
FILE: 7240/ONHWPA
CASE NAME: 7240 v. Tarion Warranty Corporation
An Appeal of a Decision of Tarion Warranty Corporation under the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O. 31 – to Disallow a Claim
Applicants
-and-
Tarion Warranty Corporation Respondent
-and-
Northridge Homes Ltd. Added Party
REASONS FOR DECISION AND ORDER
ADJUDICATOR: Simon Dann, Member
APPEARANCES:
For the Applicants: Self-Represented
For the Respondent: Brent Arnold, Counsel
For the Added Party: Brenda McArthur, Agent
Heard in Toronto: August 20, 2012
REASONS FOR DECISION AND ORDER
This is an appeal by the Applicants to the Licence Appeal Tribunal (the “Tribunal”) from a Decision Letter of Tarion Warranty Corporation (“Tarion”) dated February 8, 2012, with respect to a new home purchased from Northridge Homes Ltd. (the “Added Party”), in which Tarion denied the Applicants’ claims regarding a breach of the Major Structural Defect Warranty (“MSD”).
In his opening statement, the Applicant “BV” referred to concerns about the foundation, brick work, and problems with the septic system. Counsel for the Respondent, Mr. Arnold, noted there was no item in the claim which met the structural defect definition.
Applicants’ Evidence:
Vito DiSumma was called by the Applicant to discuss issues about his home which had been examined by Mr. DiSumma’s company.
Mr. Arnold submitted that Mr. DiSumma should not be permitted to give evidence as a witness since he was not the author of the reports to which he would be referring.
The Tribunal noted Mr. Arnold’s objection and that it was fully cognizant of the merits of the objection, but ruled to allow Mr. DiSumma to testify.
Mr. DiSumma is an employee of Mike Holmes Inspections, where he has worked for two years. He stated he has read the reports (Exhibit 5, Tab 4).
The witness said there have been several reports and that more testing and information is required. Based on his reading of the reports, Mr. DiSumma said the foundation issue needs a geotechnical examination and the cost could be major. He did not believe the homeowner had “all the information [needed] to make a decision”.
Mr. DiSumma said a typical home inspection is visual and not invasive which also limits the assessment ability.
During cross-examination, Mr. DiSumma stated he was not a structural engineer and that he had never been to the home but only drawn his observations from the documents he had read. When asked if he thought the documents refer to structural defects in accordance with the Tarion Construction Performance Guidelines, Mr. DiSumma replied “no”.
Witness BV described her views about the agencies and contacts from whom she obtained information regarding the ground settlement issue.
She referred to the expenditures which had been made and expressed her concern about the disclosure that would have to be made about the history of the home. She was concerned that she would be unable to sell the home.
During cross-examination, BV confirmed that she was still living in the home with her family and they were also using the basement for storage.
Witness JV expressed his view that someone should be taking responsibility for the issues with the roof shingles, the septic tank and the brick work. He said he would like to sell the house, but has concerns about being able to do so due to these problems.
Respondent’s Evidence
Lee Jamieson has been a Tarion Field Claim Representative for five years. He has a construction technology diploma and worked for developers for seven years. This was followed by experience as an independent contractor for 15 years.
He received a call about the current concerns in December 2011 which followed his prior experience with the home (Exhibit 3, Tab 5). These concerns were about water penetration and issues with the septic system. Based on the information he received, he suggested that a claim would need to be made for major structural damage (“MSD”).
Mr Jamieson said he scheduled a conciliation meeting for January 12, 2012. His report from that meeting (Exhibit 3, Tab 4) expressed the position that the homeowners’ concerns did not amount to a breach of the MSD Warranty and therefore the items were found not warranted.
In brief, the Decision Letter (Exhibit 3, Tab 1) noted that:
there was some soil settlement around the septic tank and the plumbing system was working without any back up of effluent;
the claimed moisture problem and water penetration at the top of the foundation wall were not found as the reported leak points were found to be dry and the signs of efflorescence had been cleaned and removed from the bottom of the wall;
at the time of the inspection, the roof shingles which were said to be defective were covered with snow and no damages were found; and
the reported condensation between the sealed window units did not reflect a major structural defect in the home.
Through cross-examination, Mr Jamieson explained that he had authored the Decision Letter and had based his “not warranted” decisions on a consideration of each item and that not one of them represented a major structural defect.
James Wallace was called as an expert. His curriculum vitae (Exhibit 4, Tab 5) confirmed that he holds a degree in Civil Engineering and is a structural engineer. He was involved in the first and second year claims regarding this home and therefore is familiar with it.
Mr Wallace said that his understanding of the Tarion definition of a MSD requires some part of the home’s structure to have failed and thereby making it unliveable.
He did not find any MSD and in his report of August 14, 2012 (Exhibit 4, Tab 4), he confirmed he had read the documents submitted by the Applicants (Exhibit 5, Tabs 3 and 4, that is, the Criterium Jansen Engineers letter and the Mike Holmes Inspections report). While he did not dispute “any of the statements made in the Mike Holmes inspection reports”, he did not believe any MSDs were identified in either report.
It was also his opinion that “none of the deficiencies observed in the Criterium-Jansen report would meet the definition of a major structural defect”. He stated as follows;,
he did not inspect the septic tank but as long as it did not affect the house, it was not a structural part of the home;
he did not inspect the area of soil settlement and as long as that settlement did not affect the structure of the home it also did not represent a MSD;
the brick problem did nothing to make the house unliveable;
he did not inspect the window or shingle complaints as they are not structural elements of the house; and
while there have been cracks of various types in the foundation wall they were not found to represent structural problems; if there is leaking this can also be repaired.
Mr Wallace said he had installed two crack monitors in the largest cracks in the foundation wall. He wanted to monitor them and see if there was a change in size. He found no change after 2 months of monitoring.
Cross-Examination focused on the method he used to monitor the cracks in the foundation wall. Initially, he used a ruler and then two crack monitors. He agreed it would have been better to have monitored for a longer time than two month, but that was the extent of the monitoring.
It was Mr Wallace’s opinion that “the [foundation] wall is not a concern as long as the crack is stable”. As to whether there could be deeper problems, Wallace said that without a geo-technical report “we can neither confirm or dispute anything”.
Closing Submissions:
The Applicant BV submitted that the major concern is the foundation and that the brick and mortar are cracking. She stated the engineer has not returned to check again and he does not believe he has all the evidence. If the foundation is moving and cracking, she would like to know who bears responsibility.
BV submitted that the homeowners should not have to be responsible for brick repairs if the problem is caused by the foundation. She was not suggesting Tarion was responsible for the foundation but believed it was the builder’s responsibility.
BV said the house is on a wetland and they are unable to sell the house because they must disclose this to a prospective buyer.
They do not know if the house is sinking and if there needs to be a geo-technical report. BV said she wanted to know who should pay for such a report as the cost estimate for it is in the $10,000 range.
The Respondent’s Counsel stated the Applicants have failed to meet the onus on them to prove their case on a balance of probabilities and the claims should be disallowed. He also argued that the Applicant’s request for a geo-technical report is not within the Tribunal’s jurisdiction.
The Applicants filed expert reports whose authors were not called to testify and therefore the reports should be given no weight.
Mr Arnold argued that the witness Mr. DiSumma conceded the Holmes reports did not offer the opinion that there is a MSD. The Applicants are also still using the home and basement.
It was also confirmed by Mr. Wallace that the house is liveable and there is no MSD.
Mr Arnold noted that a number of the Decision Letter items before the Tribunal had already been adjudicated at a hearing in September 2011 (Exhibit 3, Tab 5) and that:
the septic system is not a structural item and there is no evidence that it is not functioning;
the brick cracks, the windows and the roof shingles are not structural elements;
while the foundation efflorescence might merit further study, the burden is on the Applicants to provide evidence to show that there is a MSD in the foundation wall.
Case law references provided were as follows:
- Gwilliam (Re) [2006] O.L.A.T.D. No. 274, para 51, represents the test which the Applicants were required to meet:
para 51 “… a major structural defect should be one, which renders a home virtually uninhabitable, uncomfortable beyond reason, unsafe or in a state of imminent collapse.”
Ontario (6013-ONHWPA-Claim) (Re) [2011] O.L.A.T.D. No. 248, para 35 to 39, 41 and 60, refer to items heard during the hearing held in September 2011. In para 49, Mr. Wallace testified that there was no major structural defect evident with the home and in para 55, the Tribunal found “the Applicants have failed to meet the onus on them to prove their case on a balance of probabilities”.
Ontario (3106-ONHWPA-Claim) (Re) [2006] O.L.A.T.D. No. 504, para 86, 87, noted that in the absence of evidence as to the damages “no recovery can be made upon this claim”.
In para 92, the Tribunal in that case also noted:
“… at a minimum one would have expected the Applicant to tender evidence from a real estate expert providing an opinion as to the difference in value ...”
THE LAW
The applicable provisions of the Act are as follows:
Warranties
- (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.
Definitions
“major structural defect” means, for the purposes of clause 13 (1) (b) of the Act, any defect in work or materials,
(a) that results in failure of the load-bearing portion of any building or materially and adversely affects its load-bearing function, or
(b) that materially and adversely affects the use of such building for the purpose for which it was intended,
including significant damage due to soil movement, major cracks in basement walls, collapse or serious distortion of joints or roof structure and chemical failure of materials, but excluding any defect attributable in whole or in part to a Year 2000 compliance problem, flood damage, dampness not arising from failure of a load-bearing portion of the building, damage to drains or services, damage to finishes and damage arising from acts of God, acts of the owners and their tenants, licensees and invitees, acts of civil and military authorities, acts of war, riot, insurrection or civil commotion and malicious damage; (“vice de construction important”)
Powers of Tribunal
(3) Where a person or owner gives notice in accordance with subsection (2), the Tribunal shall appoint a time for and hold the hearing and may by order direct the Corporation to take such action as the Tribunal considers the Corporation ought to take in accordance with this Act and the regulations, and for such purposes the Tribunal may substitute its opinion for that of the Corporation.
APPLICATION OF LAW TO FACTS
The principal issue in this matter is whether or not the claims fit within the Warranty Program definition of ‘major structural damage’.
The evidence presented by the Applicants fails to meet the definition, which is quite clear, as provided by the Regulation. As argued by Tarion’s Counsel, the claims do not render the home “virtually uninhabitable, uncomfortable beyond reason, unsafe or in a state of imminent collapse”.
The claim items regarding condensation in the windows and shingles being blown off the roof clearly are not structural issues.
The claim items regarding the septic tank and ground settlement were not personally inspected by Mr. Wallace but his testimony was that as long as there was no evidence of impact on the structural integrity of the home, these are not MSD items.
Regarding cracks in the foundation walls, Mr. Wallace described the measurements he had taken to monitor the cracks and to assess whether there was a potential problem. While he acknowledged it would have been preferable to monitor the cracks for a longer period than two months, it was his opinion that the cracks were stable and they did not represent a MSD.
The Applicants confirmed that they continue to live in the home and even make use of the basement for storage purposes. So while they may believe there is water penetration or leakage of some measure into the basement, this has not been proven and, by their own testimony, has not prevented them from making use of the space.
The testimony of Mr. Wallace was that there was no evidence to conclude that any of the claim items represented a major structural defect.
The witness, Mr. DiSumma, was quite clear in stating that based on his reading of the various reports (he had not personally been to the home to inspect the claims and whether they could impact the structural integrity of the home), he did not believe the Applicants had sufficient information to arrive at a conclusion of a MSD.
The Tribunal also notes the case law reference presented by Mr. Arnold, 3106-ONHWPA-Claim: central to the Applicants’ claims was their desire to sell their home. However, they presented no evidence to show that it could not be sold.
There was no report from any real estate expert to state it was unsaleable or to indicate what their financial loss might be if they were to sell it at a price that was less than their purchase cost.
Another argument submitted by the Applicants was that their home was built on “wetland”. But, here too, they presented no evidence to show the history of the land and what it may have been before it was developed for residential housing and the resulting impact, if any, on their home..
In summary, after consideration of all the relevant evidence and submissions from the parties, the Tribunal concludes that the claim items are clearly not structural elements.
While Tribunal empathizes with the Applicants and their difficulties , the Tribunal is faced with a complete absence of evidence to show, on balance of probabilities, that there are any major structural defects which could be connected to the claims made by the Applicants.
ORDER
Therefore, and pursuant to the authority vested in it under the provisions of the Act, the Tribunal directs Tarion to deny the claims.
LICENCE APPEAL TRIBUNAL
Simon Dann, Member
Released: September 24, 2012