Licence Tribunal

Appeal d'appel en

Tribunal matière de permis

DATE:

2012-01-16

FILE:

7401/ONHWPA

CASE NAME:

7401 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

Applicants

-and-

Tarion Warranty Corporation

Respondent

-and-

Project 445 Queen East Inc.

Added Party

REASONS FOR DECISION AND ORDER

ADJUDICATOR:

Simon Dann, Member

APPEARANCES:

For the Applicants:

Self represented

For the Respondent:

Neil Abbott, Counsel

For the Added Party:

No One Appeared

Heard in Toronto:

November 20, 2012

REASONS FOR DECISION AND ORDER

This is an appeal by the Applicants to the Licence Appeal Tribunal (the “Tribunal”) from two Decision Letters of Tarion Warranty Corporation (“Tarion”) with respect to a new home purchased from 445 Queen East Inc. (the “Added Party”) and completed for possession on March 27, 2008

The first appeal is in regard to the Decision Letter, dated May 2, 2012, denying the claim for a Major Structural Defect on the basis that…

There is no defect in work or materials that amounts to a breach of the Major Structural Defects Warranty. The cracks observed in the foundation wall have not resulted in failure of the foundation wall, do not materially and adversely affect the load-bearing function of the foundation wall, and do not materially and adversely affect the use of the building for the purpose for which it was intended.

The second Decision Letter, dated May 16, 2012, noted the Second-Year Form was submitted on time, but Tarion denied the claim on the basis that the homeowners did not request a conciliation inspection of the outstanding item during the eligibility period between July 20, 2010 and August 18, 2010.

Preliminary Matters

The Applicants are self-represented, however, the male owner (“JG”) stated that he is a lawyer and identified himself as counsel for the purposes of this proceeding. He confirmed the Applicants were appealing the two Decision Letters. He referred to the reasons noted in the Notice of Appeal (“NOA”) form and the possibility of future major structural defect as the builder’s remedy did not address the underlying problems.

Mr. Abbott, Counsel for the Respondent, advised he had just received a curriculum vitae and documents regarding the qualifications of the Applicants’ expert. However, he noted the report had been submitted on time and he had no objections to the qualifications of the Applicants’ expert.

Applicants’ Evidence:

“MZ” is one of the Applicants. She discussed the first ‘Year-End Form’ on which it was reported the “mortar on the east wall is cracking and damp”. A Tarion inspection followed which was also attended by the builder’s representative (Exhibit 4, Tab 2). The homeowners were told that some dampness was normal and the homeowners should monitor the situation. The builder subsequently applied a sealant repair.

The ‘Second-Year Form’ also noted the homeowners’ concern about the continuing dampness (Exhibit 4, Tab 3).

The Applicants’ home is part of a condominium corporation which commissioned a consulting report regarding paver settlement and drainage problems with the corporation’s walkway area (Exhibit 4, Tab 5/”Genivar”). The consultant had also been asked to look into the dampness on the Applicants’ garage walls and the report contains their observations (“moisture entry”/”moisture staining”) Exhibit 4, Tab 5, pages 11, 12).

MZ is president of the corporation and she obtained a copy of that report.

The homeowners then wrote to Tarion and referred to section 3.2 of the Genivar report in expressing their concern that the builder’s repair to the garage wall was “ineffective” and they wanted Tarion to honour their repair claim. Photographs contained in Exhibit 4, Tab 14 were said to illustrate signs of dampness and efflorescence on the garage wall.

The Tribunal noted Mr. Abbott’s question about how the Genivar report was to be used as the author of the report was not being called as a witness. JG replied the report was only being used as “a prompt” for the homeowner to speak of their actions.

In cross-examination, MZ said she had not called the author of the Genivar report because “I didn’t think they needed to be here”. She acknowledged there were no accompanying photos from the First and Second-Year Forms.

MZ confirmed the homeowners currently live in the home and have always done so since occupying the home. She said nothing has been moved due to the claim issue.

When questioned about knowing the timing for requesting a conciliation meeting (the failure to do so formed the basis of Tarion’s May 16, 2012 Supplemental Decision Letter/Exhibit 3, Tab 2), MZ confirmed she had received the Tarion Homeowner Information package.

Cross-examination revealed the homeowners are both practicing lawyers and it was suggested by Mr. Abbott they would both be familiar with searching through the Act and Regulations to determine how to best address their concerns.

Additional questions about evidence to show water penetration confirmed there was no such evidence. There was only the dampness on the wall and efflorescence.

Gemil Lacroix was called as the Applicants’ expert witness. He has 15 years of construction experience and has been a certified home inspector since 2009 - he has current membership with the International Association of Certified Home Inspectors (“NACHI”) (Exhibit 8).

Through questioning by Mr. Abbott, it was learned that Mr. Lacroix is not an engineer and while he is familiar with the Ontario Building Code (“OBC”) he has not studied it. He acknowledged he had not reviewed the Act and was not familiar with the new home warranties or the Tarion Construction Performance Guidelines (“CPG”).

Mr. Lacroix said he only became aware of the possibility that his report would be used in a hearing after submitting it to the homeowners. He said he had previously testified in a court and been recognized as an expert.

The report Mr. Lacroix gave the homeowners was from his role as a home inspector and indoor air consultant. The homeowners did not provide him written instructions but asked him to try and identify where the water was coming from.

The Tribunal permitted Mr. Lacroix to give evidence as a qualified home inspector.

Mr. Lacroix said he inspected the perimeter of the home searching for evidence of water penetration. He also did a visual inspection of the inside and noted the efflorescence. He looked for water penetration and mould but did not find anything indicating mould.

Regarding the exterior, Mr. Lacroix said he believed “the garden is too close to the structure” and is above the water membrane. He said the garden should be 6-8” away from the structure and that the water from the house and deck goes into the garden and then into the wall.

Other issues of concern to Mr. Lacroix were (Exhibit 9) that the concrete stairs were not properly sealed for moisture. He considered there was improper grading and the finish on the concrete should be redone. His moisture readings on the wall were significant and he believed that was causing the efflorescence. He concluded the moisture penetration had not been remedied.

Mr. Lacroix acknowledged there is always water in concrete and if there is efflorescence, a sealant could typically remedy the problem but the efflorescence should be cleaned first to determine whether the concrete has been fixed or not.

He confirmed he could not state conclusively if there was a link between the garden water and the moisture in the concrete block.

In cross-examination, Mr. Lacroix acknowledged he did not see any water penetration in the garage. He also had not seen the Genivar report and neither was he asked for a cost to repair.

Respondent’s Evidence

Paula Koubar is the Tarion Field Claim Representative who investigated the warranty claim and wrote the Tarion decision letters. She noted the efflorescence on the east wall of the garage and that “there was a coating that was turning to dust”.

Ms. Koubar reviewed her decision to deny the claim for a major structural defect as there was no failure in the foundation wall. She said the space was being used and there was no evidence of water penetration (Exhibit 3, Tab 1).

Regarding the efflorescence on the wall, she referred to the Tarion CPG, s.1.1 and said there is no coverage for this condition. The shrinkage cracks she saw in the outside mortar were common and she has seen this many times.

Ms. Koubar acknowledged she did not have a moisture meter but at the same time she did not see any moisture, dampness or leaks.

In cross-examination, Ms. Koubar said that if a crack in a wall were seen to be significant, it could adversely affect the use of the building for the purpose for which it was designed.

Patricia Lutz is the Director of Customer Service and said the Applicants’ claim was submitted after the second year warranty had expired and therefore it did not qualify for a Second-Year warranty consideration.

She did not believe the claim would qualify as a MSD since there was no evidence of a load bearing failure or that the Applicants were not using the home or garage.

In cross-examination, Ms. Lutz reaffirmed that there is no warranty if a defect cannot be confirmed. While most defects are visible, Ms. Lutz said that if that was not the case, a homeowner is advised to obtain an expert report.

The builder was not present for the hearing as the MSD claim falls under the Tarion warranty.

Closing Submissions:

JG submitted the case was a simple one as the first claim was made in the first year warranty period and the second appeal is based on the possible future failure and inhabitability of the home.

He stated that Tarion should require the builder to remedy the problem, or affect it through Tarion. He referred to the case law of Tarion Warranty Corporation v. Kozy, [2011] ONCA 795, para 13 in noting that the “purpose of the Plan Act, [is for] a broad and liberal interpretation”.

The Respondent’s Counsel submitted the homeowners failed to establish water penetration and while there may be allowance for dampness on one wall of the garage, the homeowners did not complain about water penetration but did claim the “wall is damp”.

Mr. Abbott submitted there is no evidence of a major structural defect leading to the loss of use of the home or making it uninhabitable.

THE LAW

The applicable provisions of the Act are 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.

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 claim fits within the Warranty Program definition of ‘major structural damage’. The second issue is whether the claim is eligible for Second Year warranty coverage.

The evidence presented by the Applicants fails to meet the definition 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 evidence is also clear the Applicants did not request a conciliation inspection within the prescribed eligibility period. It is even noted in their appeal form reasons that “the problem had not worsened at the time, the Owners did not request a second year conciliation inspection” (Exhibit 4, Tab 13, item 10).

The MSD claim was then submitted by the homeowners on February 15, 2012, almost two years after the submission of the Second-Year Form (which was submitted on March 19, 2010).

It is noted that Mr. Lacroix testified he did not see any water penetration in the garage.

JG submitted the case was a simple one as the first claim was made in the first year warranty period and the undisputed testimony is that the builder carried out a repair.

The Applicants claim the repair was “ineffective”, but there is no evidence to show the condition of the wall at the time of the First Year repair or at the time of the Second-Year Form, when the homeowners reported the problem had not worsened. They did not request a conciliation inspection, which by inference suggests that they were satisfied that the condition was not a serious one.

The evidence is clear the Applicants continue to live in the home and while they may believe there is water penetration or leakage of some measure in the garage, it has not been proven that there is a MSD.

Regarding the case law reference presented by JG, the Tribunal notes that a full reading of the reference would include “in the event of loss” and, in this matter, there is no evidence that the Applicants have experienced any loss.

In summary, after consideration of all the relevant evidence and submissions from the parties, the Tribunal concludes that there is no evidence to show, on balance of probabilities, that there is any major structural defect.

In addition, the evidence is clear the Applicants failed to request a conciliation inspection regarding their claim under the terms of the Second-Year Form and therefore, the second appeal also fails.

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, Presiding Member

Released: January 16, 2013