8232 v. Tarion Warranty Corporation, 2013 CanLII 83569

Licence Tribunal

Appeal d'appel en

Tribunal matière de permis

DATE:

2013-12-13

FILE:

8232/ONHWPA

CASE NAME:

8232 v. Tarion Warranty Corporation

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

The Applicants

Applicants

-and-

Tarion Warranty Corporation

Respondent

-and-

Anthony Joseph Abraham and

1413506 Ontario Limited

Added Parties

REASONS FOR DECISION AND ORDER

ADJUDICATOR:

D. Gregory Flude, Vice-Chair

APPEARANCES:

For the Applicants:

Self-Represented

For the Respondent:

Danielle Peck, Counsel

For the Added Parties:

Anthony Joseph Abraham, on his own behalf and as Agent for 1413506 Ontario Limited

Heard in Chatham:

November 25, 2013

REASONS FOR DECISION AND ORDER

1The Applicants appeal the decision of Tarion Warranty Corporation (“Tarion”) to deny their claim for warranty set out in a Decision Letter dated June 27, 2013. The Added Parties, Anthony Joseph Abraham and 1413506 Ontario Limited, are the builder and vendor of the home and are liable to either effect warranty repairs or to reimburse Tarion for the cost of those repairs in the event this Tribunal finds in favour of the Applicants. The Added Parties support Tarion’s position in this matter.

2The Applicants’ claims were made in the second year following their occupancy. They made a first year claim and all of the outstanding issues in the first year claim appear to have been settled (Ex 4, Tab 2). The Tribunal has before it three issues: reimbursement for the replacement of six windows, repair or replacement of a carpet in the basement and extra insulation or vapour barrier in the basement, particularly around electrical outlets and under the stairs in the storage space. Of the three items in dispute, Tarion takes the position that all but the basement insulation issue are items for which there is a one year warranty and that, not having complained about these matters in the first year, the statutory warranty scheme prohibits recovery to the Applicants. Tarion concedes that a problem with the insulation and vapour barrier in the basement may carry a two year warranty because of potential health and safety concerns, but argues that there is no defect in work or materials or breach of the Ontario Building Code (“OBC”).

3The Applicants’ right to warranty coverage is set out in s. 13 of the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 (the “Act”):

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.

Term of warranty under subs.(1)

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

4Ss. 14 and 15 of O. Reg. 892 prescribe a number of warranties for a period of two years:

14. (1) Every vendor of a new home warrants to the owner that there will be no water penetration through the basement or foundation of the home.

(2) The warranty described in subsection (1) applies only in respect of claims made during a two-year warranty period ending on the second anniversary of the date of possession.

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;

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

“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.

(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.

(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.

5The Applicants are mother and daughter. The mother testified. The Applicants also called two other witnesses, a neighbour, D.M., who provides assistance as a handyman and has some general experience in construction and a friend, M.D., who has had extensive experience in construction as a manager and an estimator. Mr. D. holds a bachelor degree in Architectural Science.

While both these witnesses stated their opinions freely, neither was properly qualified to give expert evidence. Indeed, both stated on several occasions that they were not subject matter experts. Accordingly, the Tribunal has given no weight to any particular opinion they expressed. The Added Parties called Michael Bell, a person whom they use to check window framing, insulation and final finishes both during construction and prior to the pre-delivery inspection. Mr. Bell has been involved in the production and installation of windows since leaving school over 30 years ago. Again, no attempt was made to formally qualify Mr. Bell as an expert and his testimony focussed on checks he carried out and inspections he did at the Applicants’ home. The last witness was Tim Semenuk, a senior warranty services representative with Tarion. He attended the house twice and gave evidence of his observations and the reason he denied the Applicants’ claim.

6Given that the issues in this matter largely revolve around whether claims were made in a timely manner, it is enlightening to consider events in chronological order. The Applicant who did testify was extremely vague about the chronology despite questions from the Tribunal to attempt to clarify the sequence of events. That vagueness bordered on misleading, especially when it came to evidence about the timing of the Applicants’ decision to replace six windows at a cost of in excess of $10,900.00. It also flirted with the limits of veracity when addressing the fact that the Added Parties had offered a settlement of a first year claim relating to a basement window. It took a thorough cross-examination with reference to disclosed documents to bring the chronology into sharp focus. Of the six windows in the claim, it came out in cross-examination that one of the six was a window for which the Applicants had been paid a $350.00 settlement in the first year claim, and another “window” was in fact the sliding patio door. Of windows, then, there were four.

7The Applicants took possession of their home on December 14, 2010 and moved in on December 15, 2010. They made no claims within the first thirty days. They did make a year-end claim on December 14, 2011 that listed eight items (Ex 4, Tab 2). No claim was made for carpet deficiencies and no claim was made with respect to air penetration around window frames or through electrical outlets despite the fact that the Applicants had lived in the home through a full winter season. There were two claims relating to windows in the year-end list. The first identified a window in the basement that had bowed. The second complaint was of a general nature applicable to all of the windows and stated that all of the windows were “sweating.” When pressed for an explanation of the term used, the Applicant stated she was referring to condensation but was vague about whether the condensation was on the inside of the glass or between the panes. The thrust of her evidence suggested that the condensation was on the inside surface of the window and not between the panes.

8A Tarion warranty service representative conducted a conciliation inspection on June 11, 2012. She warranted the bowed basement window but found that the Added Parties’ offer to address the problem was reasonable. The Applicant’s evidence regarding the settlement offer was that she had been forced to accept a cash settlement of $350.00 because the Added Party would offer no more.

She then stated that when she tried to get window contractors to replace the damaged window, they laughed at the idea that the work could be done for $350.00. The Added Parties’ offer was not as one sided as the Applicant suggests and, in fact, had three options including replacement at the Added Parties’ expense (Ex 5, Tab 2). The Applicant opted for the cash settlement.

9The Tarion representative denied warranty coverage with respect to the general window claim. In her view, the sweating condition was due to poor ventilation. She could not actually observe the condition as it was a cold weather phenomenon and the inspection took place in June, but, presumably she drew her conclusions from the Applicants’ description of the problem. The Tarion representative suggested that better ventilation would assist, including running the furnace fan continuously to circulate the air.

10The Warranty Assessment Report (“WAR”) for the first year inspection was issued on June 13, 2012 and sent by regular mail to the Applicants (Ex 4, Tab 3). The Applicants did not dispute any of the findings, nor did they ask for a Decision Letter and appeal to this Tribunal. During her testimony, the Applicant answered questions from the Tribunal about the WAR and subsequent events. It came out in evidence that the windows and patio door had been replaced on June 29, 2012, approximately two weeks after the release of the WAR. The Tribunal asked the Applicant about what efforts she had made to get quotes for the replacement of the windows and patio door in that two week period. She answered that she had gotten a couple of quotes about replacing the warranted basement window but had decided to hire Centennial Windows to replace all six of the windows because of their reputation. In cross-examination the Applicant then testified that she had never received the WAR.

11It turns out that the Applicants had come to their decision to replace all six windows quite independently of any involvement by Tarion. As stated above, the conciliation inspection took place on June 11, 2012. On June 7, 2012, the Applicants entered into a contract with Centennial Windows to carry out the window replacement work (Ex 8). They did not notify Tarion or the Added Parties of this intention. While the actual installation date was June 29, 2012, the contract pre-dates the conciliation inspection.

12Mr. M. was working at the Applicants’ home building a small deck on the rear of the house on the day when the six windows were installed. He testified to seeing copious amounts of water flow out of the framing around the master bedroom window when it was removed. He stated that the flow was about as thick as his little finger for about five minutes and it was still dripping several hours later. He also observed that water had accumulated on the bottom corners of the patio door. Despite the amount of water he observed, both he and the Applicants agree there was no water penetration into the building envelope. He observed that there was a total lack of insulation around three of the windows including the master bedroom and that the patio door had no screws or nails holding it in place to the frame of the house. It was held in place only by the trim. Mr. Bell was sceptical about this claim.

He testified that trim was the last thing to be installed on the construction of a house. If the patio door was not fastened to the frame, air pressure changes as doors were opened and closed throughout the house, during construction before the installation of the trim, would have caused it to fall out.

13The Applicant described two problems with the carpet in the basement family room. The first was a seam that is now visible with part of the thread having unravelled in some manner. She did concede that the seam problem may have resulted from a beater bar on the vacuum catching a thread and ripping it out but felt that a properly installed carpet would not be caught in this manner. The second problem is that there is a difference in colour across two seams consistent with a different dye lot being used on each side of the seam. Neither problem was listed on the year-end form. This failure is interesting given the Applicant’s evidence that she had complained frequently about it. There is no doubt that there was an installation problem along one seam of the carpet. The Added Parties took steps to make repairs. In her evidence, the Applicant identified documented visits to carry out repairs in April and May, 2011. Thereafter, no other visits are documented, but the Applicant testified that such visits occurred though she is not sure when. Given the Applicant’s insistence that she had ongoing concerns with the carpet, both seam and dye lot, its omission from the year-end form is hard to explain.

14The Applicants claim that there is insufficient insulation in the basement. There are two elements to this claim. The first concerns insulation in a storage area under the stairs and the second concerns air infiltration around electrical outlets. In his testimony concerning the first of these claims, Mr. Semenuk testified that he understood that the Added Parties had remedied the situation. He then examined the air infiltration problem. At issue is the fact that the vapour barrier in the basement, and presumably throughout the house, simply has a hole cut in it around electrical outlets. A home inspector retained by the Applicants stated that this might cause condensation in the walls and the electrical outlets should be wrapped in such a manner as to bring them inside the vapour barrier on the warm side of the wall.

15It is the Applicants’ position, advanced in evidence by the neighbour, that the OBC requires the vapour barrier to wrap around electrical junction boxes. In the alternative, a builder may install plastic airtight boxes and install electrical boxes inside them. Mr. Market based his knowledge on the fact that he has built three houses of his own and has worked with his uncles in construction. He admitted to a lack of specific knowledge of the wording of the OBC. His source of information on OBC issues came from discussions at the building store when he had questions about the applicable standards. He was unaware of the difference between an air barrier and a vapour barrier, and based his criticism on his understanding of the applicable standards.

16The Applicants asked the local municipal building inspector to conduct an examination of their home. His report was an exhibit in this proceeding (Ex 4, Tab 6). He concluded that the manner in which the vapour barrier is installed is adequate and in compliance with the OBC. He came to the same conclusion with respect to the under-stair insulation.

ANALYSIS

17It has been stated many times that the Act is consumer protection legislation. It should be given a broad and liberal interpretation consistent with its objectives, but such an expansive approach cannot become the basis to ignore the clear wording of the Act and regulations or to expand the statutory scheme beyond its intended purpose. The statutory scheme creates a limited warranty offered by the vendor of a home. If the vendor and a homeowner are unable to agree whether an item falls within the scope of the warranty, or the vendor has failed to carry out repairs within a certain time, a homeowner may request an inspection by Tarion to settle the dispute. Tarion acts somewhat as a referee when carrying out the inspection. As is apparent with referees’ decisions at sporting events, one side is often dissatisfied with the decision. When the dissatisfied party is the homeowner, the legislation creates a right of appeal to the Tribunal. Dissatisfied vendors have their own appeal rights.

18While the Act creates homeowners’ rights, it also creates obligations. Similarly, while the Act imposes obligations on vendors, it gives them rights. A homeowner has the right to have a home constructed to certain minimum standards. The corresponding obligation is that claims must be made within certain time frames and the vendor must be given an opportunity to remedy any defects. The vendor has the obligation to remedy warranted defects but has as well, the right to inspect the alleged defect and agree or disagree with the homeowner about warranty coverage. If the vendor agrees that a defect is warranted, it has the right to carry out the repairs within a set timeframe.

19Tarion also has rights and obligations under the legislation. Tarion has an obligation to conduct a conciliation inspection in response to homeowner complaints made in a timely manner. When the vendor fails to carry out the required remedial work, Tarion has an obligation to enter into settlement discussions with the homeowners and either arrange for remedial work to be carried out or pay a cash settlement. Central to the remediation scheme is Tarion’s right to inspect and determine the scope of work necessary for the repair.

20Time limits are key to the statutory warranty scheme. As with all warranties, the warranties under the Act have time limits. There is a general warranty for the first year that the house will be built in a workmanlike manner, be free from defects in materials and be built in accordance with the OBC. The house must be fit for habitation and not have any major structural defects. There are three major steps in enforcing the one year warranty. The first step is the pre-delivery inspection. The vendor and purchaser conduct an inspection and note down any defective items. The vendor then has an obligation to repair those items. The homeowner has a right to make a claim to Tarion at the end of thirty days after occupation. The items in this list may include outstanding items from the pre-delivery inspection and any other items the homeowner finds in the first thirty days of occupancy. In the last thirty days up to the anniversary of the date of occupancy, a homeowner may make a second claim for deficiencies to Tarion.

21After the end of the first year, the general warranty expires and there remain two limited warranties. The first, in issue in this case, is what may be referred to as the systems and water penetration warranty in place until the end of the second year from occupancy. The second is a seven year warranty for a major structural defect.

22Warranty claims trigger vendor rights. When a homeowner submits a thirty day claim, a year-end claim or a second year claim, the vendor is given 150 days to determine the scope of work and carry out repairs. If repairs are not completed within 120 days, a homeowner may seek a conciliation inspection from Tarion. Prior to that inspection, Tarion will confirm with the homeowner if the repairs are still outstanding. Should Tarion determine that an unrepaired item is warranted, the vendor is given another thirty days to carry out repairs, in default of which Tarion will step in as guarantor of the warranty and settle with the homeowner. Tarion may then recover the costs of remediation from the vendor.

23The difficulty for the Applicants with respect to the windows is that they chose to completely ignore their obligations and chose to deny both the Added Parties and Tarion their rights. The essence of the complaint concerning the windows was one of poor installation. They complained of draughts from around the window frames and led evidence about there being a lack of adequate insulation. They also complained that a couple of windows did not close properly. They did not allege that there was water penetration around the windows. Had they done so, the defect may have come within the second year warranty coverage. Whether they reported the full range of window problems to the Added Parties is unclear, but what is clear is that they did not report those problems to Tarion at year end. It must be remembered that year end was in December when any cold air penetration would be acute. It appears self-evident that the remedy for air penetration around a window frame is to address the framing problems, not to unilaterally assume that the only remedy is to replace the window. By accessing a self-help remedy, the Applicants took themselves out of the legislative warranty scheme. The Tribunal denies the claim for replacement windows on the ground that it was made outside of the one year warranty period. If it can be established that there was water penetration around some windows such that it might be considered under the two year warranty, the Applicants’ actions of replacing the windows themselves rather than giving the Added Parties and Tarion the right to inspect and remedy vitiates any applicable warranty coverage.

24The carpet defects are clearly items that fall within the scope of the first year warranty. The Applicants’ failure to make this claim in a timely manner is fatal to them. Their claim in this regard is denied.

25To succeed in their claim for lack of insulation in the basement, the Applicants bear the onus of establishing all of the elements of the claim, that is, the vapour barrier and insulation are not installed in a workmanlike manner, there is a defect in materials or the installation does not comply with the OBC. They have failed to satisfy any aspect of that onus. The best evidence from the municipal building inspector is that the basement insulation and vapour barrier comply with OBC requirements.

The Applicants did not point to any defect in the materials themselves. While the Applicants’ neighbour gave evidence of his understanding and what might best be described as best practices, there is no statutory requirement to employ best practices. Accordingly, this aspect of the appeal must fail.

ORDER

26By virtue of the authority vested in it by the Act, the Tribunal orders Tarion to deny the Applicants’ claims for warranty.