8854 v. Tarion Warranty Corporation, 2015 CanLII 50461

Licence Tribunal Appeal d'appel en Tribunal matière de permis

DATE: 2015-06-16

FILE: 8854/ONHWPA

CASE NAME: 8854 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

Appellants

Appellants

-and-

Tarion Warranty Corporation

Respondent

-and-

Prospect Builders Ltd.

Added Party

REASONS FOR DECISION AND ORDER

ADJUDICATOR: Douglas R. Wallace, Vice-Chair

APPEARANCES:

For the Appellants: self-represented

For the Respondent: Danielle Peck, Counsel

For the Added Party: Lois Palmer, Agent

Heard in Ottawa: May 5, 6, and 7, 2015

REASONS FOR DECISION AND ORDER

This is an appeal by the Appellants to the Licence Appeal Tribunal (the “Tribunal”) from a Decision Letter of Tarion Warranty Corporation (“Tarion”) dated May 2, 2014 with respect to a new home purchased from Prospect Builders Ltd. (the “Builder”), in which Tarion denied the Appellants’ claim. The Appellants are spouses; the Tribunal heard evidence from the male Appellant only. Throughout these reasons, a reference to “the Appellant” may be taken as meaning the male Appellant.

FACTS

The Appellants’ sole claim before this Tribunal relates to the decision by Tarion to deny warranty coverage for hardwood floor squeaks throughout specified areas of their home.

THE LAW

The relevant warranty 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.

Exclusions

(2) A warranty under subsection (1) does not apply in respect of,

(d) normal shrinkage of materials caused by drying after construction;

(e) damage caused by dampness or condensation due to failure by the owner to maintain adequate ventilation;

(f) damage resulting from improper maintenance;

A homeowner’s remedy for a breach of a warranty set out in section 13 is found in section 14 (3) of the Act:

Breach of Warranty

Subject to the regulations, an owner of a home is entitled to receive payment out of the guarantee fund for damages resulting from a breach of warranty if,

(a) the person became the owner of the home through receiving a transfer of title to it or through the substantial performance by a builder of a contract to construct the home on land owned by the person; and

(b) the person has a cause of action against the vendor or the builder, as the case may be, for damages resulting from the breach of warranty.

Payments out of the guarantee fund are subject to the restrictions set out in subsections 14(6) and 14(7)

(6) In assessing the amount for which a person is entitled to receive payment out of the guarantee fund under this section, the Corporation shall take into consideration any benefit, compensation, indemnity payable, or the value of work and materials furnished to the person from any source.

(7) The Corporation may perform or arrange for the performance of any work in lieu of or in mitigation of damages claimed under this section.

In addition to its power to order a payment out of the guarantee fund, the Tribunal has the power in section 16 (3) of the Act to order Tarion to take such action as it considers Tarion ought to take in accordance with the Act and regulations and to substitute its opinion for Tarion’s.

ISSUES

Are the squeaky floors noted in the Decision Letter the result of a breach of warranty by the Builder and if so, what remedy flows from this breach?

EVIDENCE

The Appellant testified that he and his wife took possession of their home in July 2012. The home had remained vacant while being used by the Builder as its model home for approximately nine months prior to their possession. Prior to taking possession, they noticed noise which was later described in the Decision Letter as “squeaks and crackles” occurring whenever they walked on certain floors throughout the house. They were told by the Builder that this was normal and would resolve with time. It didn’t. Indeed, it got worse. The Appellant noted the complaint on the 30 day Warranty Claim Form but the claim was denied on the grounds that “There is no evidence that the minor isolated squeaking ….is the result of a builders defect in workmanship or materials nor is it a violation of 2.4 of Tarion Construction Performance Guidelines, the Ontario Building Code or manufacturer specifications”.

The Appellant introduced a video taken over the past year as he walked through the house showing the floors and indicating noise as he walked. He also indicated that he observed movement in the floor as he walked in certain areas.

It was the Appellant’s evidence that he managed the humidity levels in his home very carefully following an inspection by the hardwood manufacturer in December, 2012.

Possible causes of noisy or squeaky floors

The Tribunal heard evidence from a number of qualified expert witnesses as to the causes of the noisy or squeaky floors in general and this squeaky floor in particular.

Robert Hanna

Mr. Hanna was called as a witness by the Appellants. He is certified by the National Wood Flooring Association (“NWFA”) as a Wood Floor Installer and a Wood Floor Inspector as well as a Sales Counsellor. He has also been certified by the North American Laminate Flooring Association as a Flooring Inspector. Mr. Hanna has been employed for the past 14 years by one of the area’s largest flooring and window covering companies first as a claims inspector and latterly as a quality control inspector. In this capacity, he has inspected thousands of jobs for conformity with NWFA standards.

Mr. Hanna reported that the flooring in question was installed in October 2011 and that the relative humidity was 41% on the day the floors were installed. On January 11, 2014 when he carried out his inspection, the humidity in the Appellants’ home was 30.1 %. During his walk around, he noticed the flooring was producing audible squeaking noise which was loudest in the traffic pathways of the house. He reported that “In many locations the squeaks were repeatable and some floor and board movement was felt under foot”.

Having eliminated the NWFA’s most common causes of noisy floors, including improper humidity, Mr. Hanna’s conclusion was that “the cause of the floor noise is installation of the wood flooring onto a subfloor that is not at the industry accepted minimum thickness. This conclusion was based on a finding that the subfloor consisted of 5/8” (20/32”) OSB rather than the 23/32” thickness recommended by the NWFA.

In cross-examination, Mr. Hanna agreed that the NWFA. is an international trade organization and that he had no knowledge of flooring standards prescribed by local authorities such as the Ontario Building Code (“OBC”) or the Construction Performance Guidelines (“CPG”).

Paolo M. Trevisan P.Eng

Mr. Trevisan was called as a witness by the Added Party. He is a professional engineer, licensed to practice in many provinces including Ontario. He has 22 years’ experience as a structural engineer and is currently employed as the engineering manager of a company which manufactures engineered wood products. He is well versed with the National Building Code of Canada and the OBC. Although not the engineer of record for this residence, Mr. Trevisan’s company supplied the flooring system used and he reviewed the design for compliance with the OBC. He agreed that the subfloor consists of 5/8” OSB as reported by Mr. Hanna but disagreed that this was below industry standards. In fact, Mr. Trevisan’s evidence was that a 5/8” OSB subfloor was universally used in flooring systems in Ontario and fully conforms to clause 9.23.14.5 of the OBC. Mr. Trevisan stated that the hardwood floors in his own home are installed on a 5/8th inch OSB subfloor. Mr. Trevisan’s review of the design specifications for the flooring system installed in the Appellant’s home allowed a degree of deflection but this deflection is well within the deflection parameters allowed by the OBC.

Tony Stinson

Tony Stinson has approximately 33 years construction experience including over 20 years in residential construction and seven years’ experience as a Tarion Field Representative where he was responsible for conciliations involving the interpretation and application of the OBC and the CPG. He visited the Appellants’ home on January 22, 2014 in response to a number of complaints including the Appellants’ present complaint regarding noisy floors. At that time, Mr. Stinson denied warranty coverage based on his finding that there was only “minor, isolated squeaking” in the floor. He did not indicate whether he observed any movement in the floor. He found the relative humidity in the house to be between 28% and 29% on the date of his visit.

Although Mr. Stinson denied warranty coverage based on his findings that the floors were not excessively noisy, he promised to review the findings of the NWFA representative (Mr. Hanna) who had inspected the floors earlier that month.

Mr. Hanna’s report did not change Mr. Stinson’s opinion as it appeared to be based on Mr. Hanna’s conclusion that the floor was installed on a subfloor that was not at the industry accepted minimum thickness and Mr Stinson knew that the thickness of the subfloor met the OBC and the CPG and was universally accepted in the industry. He accordingly issued the Decision Letter under appeal and declined the Appellant’s request for a further inspection.

Mr. Stinson was still confident in his conclusion regarding the thickness of the subfloor at the hearing. He did admit, however, that the evidence produced by the Appellant at the hearing, including the video, indicated a substantially louder noise when the floor was walked on than he had heard at the time of his visit. He also indicated that he has in his career warranted a substantial number of floors when he considered the noise excessive.

Lois Palmer

Ms. Palmer graduated as an Architecture technologist in 1996 and was registered as an Architectural Designer in 2006. She started work with the Added Party in 1984 and was appointed President in 2006. She has taken courses on the OBC offered by the Ministry of Municipal Affairs and Housing and received her certificate under Part 9 of the Code relating to the House Health and Safety and the House Building Envelope. She has had over 30 years experience designing, renovating and building homes including over 30 custom homes in the last 10 years.

Ms. Palmer agreed that the home had been used as a model home for approximately nine months prior to its sale to the Appellants. During that time, humidity had been maintained.

Ms. Palmer introduced the plans on which the building permit for the home was issued. The plans contained the plans for the flooring system and were stamped with the Building Inspector’s seal.

APPLICATION OF LAW TO FACTS

The warranty provided in the Act is that a home is

(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;

As there was no suggestion that the Appellants’ home was not fit for habitation and the evidence clearly established compliance with the OBC, the Appellants can only succeed by satisfying the Tribunal on the balance of probabilities that their home was not constructed in a workmanlike manner, or was constructed with defects in material.

The Tribunal finds that the Appellant was unable to establish in what respect the Added Party’s work or material was defective. Mr. Hanna’s opinion that the cause of the movement and noise he found was the use of OSB subfloor 3/32“ thinner than that called for by the NWFA seems unlikely at best, especially in light of Mr. Trevisan’s clear evidence, supported by Ms. Palmer’s, that the subfloor used met the OBC standard and was followed throughout the industry.

The Appellant’s alternate position, that the cause of the noisy floors must be damage to the material prior to or during construction or improper humidity control while the home was being used by the Added Party as a model home, was characterized by the Respondent as speculative. The Tribunal finds that there is no direct evidence supporting this position. Nor, however, would a purchaser in the Appellants’ position normally be in a position to provide such evidence.

The Tribunal finds that the position of the Added Party and the Respondent that the lack of humidity control was the cause of the noisy floors is equally unsupported by direct evidence. Although there is some evidence that the relative humidity in the home varied slightly from the recommended 37% to 45% levels at certain periods during the Appellants’ possession, the Appellants’ undisputed evidence was that he noticed the noisy floors and questioned the cause during his pre-delivery inspection, long before he could have contributed to any humidity problems and he certainly noted the problem within 30 days of taking possession.

The contractor who installed the floor may have been able to some light on the cause of the noise in the floor had he been called as a witness. However, the absence of his evidence is not fatal. The Tribunal did hear, through the evidence, that the subfloor sheathing flexed vertically when the floor above was walked on, with audible squeaking. Regardless of the particular cause of this movement and associated noise, this condition is contrary to clause 2.4 of Tarion’s own CPG which read as follows:

2.4

CONDITION

Floor Squeaks

Acceptable Performance/Condition

Some squeaking resulting from normal shrinkage of materials after construction is acceptable however; floors shall be reasonably free from squeaks caused by movement in the floor system connections under normal seasonal indoor humidity and loading conditions.

There was no evidence that these squeaks resulted from normal shrinkage.

The Respondent referred to the case of 5188-5457-ONHWPA –Claim (Re), a 2010 decision of the Tribunal where the panel member quoted with approval Teitelmann (1987) 16 CRAT 178 where it was said:

Floors and stairs will squeak, wood will shrink and warp, cracks will appear and paint will peal. All that can be done is to keep these imperfections at reasonable levels. The limited warranty provided by the Ontario New Home Warranties Plan Act recognizes these facts, and this Tribunal is obliged to make findings in accordance with the statutory provisions and not otherwise”

While this Tribunal accepts this statement, it finds in this case that the noise produced by the movement of the floor noted by the Appellant, Mr. Hanna and even Mr. Stinson on reviewing the video produced by the Appellant, went beyond the imperfections a new home owner may reasonably be expected to tolerate.

The Tribunal finds that, although not having the force of law, the CPG are acceptable evidence of good workmanship and material and finds that the floors here do not meet this standard and are therefore in breach of the warranty provisions of s.13(1) of the Act.

With regard to the issue of the Appellants’ remedy, the Tribunal notes that to succeed in establishing a claim for payment from the compensation fund under section 14 (3) the Appellants’ have the onus of proving not only a breach of warranty but that damages flowed from that breach and the quantum of those damages. Here the Appellant introduced two quotations that were entered as exhibits, indicating the cost to the homeowner of removing and replacing all the hardwood flooring in the home in the amount of approximately $25,000. No evidence was introduced to indicate that such extensive work was necessary to correct any defect in the limited areas where squeaking floors are accompanied with observed movement of the underlying subfloor. For this reason, the Tribunal finds that the amount of these two estimates does not accurately reflect the amount of the damages flowing from the breach of warranty. .

In the circumstances, the Tribunal finds recourse to the Tribunal’s powers under S.16 (3) of the Act to be more appropriate than an award of damages under S.14(3) and orders Tarion to repair or replace those areas of the floors in the Appellants’ home that exhibit repeatable noise accompanied by observed movement in the underlying subfloor. The replacement or repairs shall be warranted for one year from the date of completion.

ORDER

Pursuant to the authority vested in it under the provisions of the Act, the Tribunal directs Tarion to allow the Appellants’ claims for warranty.

LICENCE APPEAL TRIBUNAL

Douglas R. Wallace, Vice-Chair

Released: June 16, 2015