Licence Tribunal

Appeal d'appel en

Tribunal matière de permis

DATE:

2015-02-18

FILE:

9031/ONHWPA

CASE NAME:

9031 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

Appellants

Appellants

-and-

Tarion Warranty Corporation

Respondent

-and-

Richcraft Homes Ltd.

Added Party

REASONS FOR DECISION AND ORDER

ADJUDICATOR:

Simon Dann, Member

APPEARANCES:

For the Appellants:

Self-represented

For the Respondent:

Mario Gravel, Counsel

For the Added Party:

Steve Black, Agent

Heard in Ottawa:

November 19, 2014

REASONS FOR DECISION AND ORDER

This is an appeal by the Appellants (“the Appellants”) to the Licence Appeal Tribunal (the “Tribunal”) from a Decision Letter of Tarion Warranty Corporation (“Tarion”), dated July 28, 2014, regarding a new home purchased from Richcraft Homes Ltd., (the “Added Party/Richcraft”), in which Tarion denied the Appellants' claim that a “Basement wall crack led to basement flood”.

Tarion denied the claim on the basis that (1) the amount of water which leaked into the basement was contained within the same area and the amount of water reported did not constitute a flood; and (2) while cracks were noted, they are not the result of a Major Structural Defect ("MSD").

Appellants’ Evidence

One of the Appellants gave testimony on behalf of both. He described himself as an industrial engineer with experience in project structure processes and specifications development. He confirmed occupancy of the home in 2010.

The diagram in Exhibit 3, Tab 22, shows the foyer area which was finished by the builder and was the area in which the water leak occurred. The basement was not finished when he took possession, but he finished the basement on his own in 2013.

The Appellant said that when he found the soaked carpet in the foyer area in 2014, he tried to find the source and cut out a 6" section of drywall to see into the wall. He pointed to a photo in Exhibit 3, Tab 8 to show there was a "stream of water".

The Appellant testified he was able to soak up the water with some rags and that over the next three days, he observed the water ingress to be slowing until there was nothing coming in on the third day. There has been no further leak since that event.

The Appellant stated his situation met the definition of a MSD which refers to an effect on the use of a significant part of the home. The water penetration had affected his use of a significant part of the home.

In cross-examination, the Appellant acknowledged his claim did not meet the definition of being a load-bearing defect nor did he have any information to support such a claim.

When asked about the reference to cracking on the parging around the house (Exhibit 3, Tab 5, item 29), the Appellant said he was not sure whether there is any correlation between the cracking in the parging and where the water came into the basement area of his home.

He did not request a conciliation inspection to review the cracked parging and he did not make any reference to water penetration in the 1st and 2nd year forms to Tarion. While there was reference to a crack in the parging beside the downspout (photo in Exhibit 3, Tab 8), there was no evidence to indicate any water penetration into the home from that area.

In Exhibit 3, Tab 12, a photo shows a planting bed beside the foundation wall and the Appellant confirmed that he installed the planting bed. He confirmed that during February 19 to 23, 2014, the period when the temperatures went above freezing, he had not removed any accumulated snow from that bed. The water penetration was said to have occurred on February 21, 2014.

The Appellant confirmed he is not aware of any other water penetration issues. While the Appellant has not submitted any expert reports regarding the complaint, he did present two quotes for repair (interior) of the foundation crack (Exhibit 7) - one in the amount of $650 and the other for $950.

Respondent’s Evidence

Terry Harkin has been with Tarion for 25 years and is currently Manager of Warranty Services, with responsibility for field services in Eastern Ontario. He became involved with the Appellants’ matter as the regular field services representative was then on leave.

After briefly reviewing the Appellants’ complaint, the Warranty Assessment Form (Exhibit 3, Tab 15), and the MSD definition of structural impact and/or adverse impact on a home, the witness testified that he did not see any shifting or lateral displacement in the home's foundation or structural integrity. He said the product material wrapped around the basement wall, up to the grade level, was there to protect the foundation or basement walls against any water penetration, even if there is a crack in the wall.

Mr. Harkin noted the homeowner had done his own planting against the wall and had also raised the grade level. As a result of the raised grade level, and with the above freezing temperatures at the time, it was his belief that the leakage could have occurred above the basement wall wrap where accumulated snow could have melted on the frozen earth. If there was a vulnerability in the wall, then the water sitting on top of the snow could have found its way into a crack but not where the basement wrap was installed.

The witness said the cracks in the parging (Exhibit 3, Tab 16) were “typical cracking of concrete and nothing out of ordinary". He believed the crack referenced by the homeowner could be filled on the exterior by digging down to the basement wrap and injecting sealant into the wall as the basement wrap appeared to be protecting the foundation wall.

The witness observed that the homeowner's quote from one source was just a price list because there was no site visit. The work described in the other quote for interior injection could be a problem because the material injected into the wall could come out the exterior side and push out the basement wrap, which would then create a tear in the wrap. It would be much better to seal on the outside, and above the basement wrap.

In cross-examination, the Appellant focused on the point that an MSD is not only about a load bearing issue but also about how the use of a “significant portion” of home was being adversely affected.

The witness cited the example of a two-foot-deep flood in a basement and while that would not be a structural defect it could suggest problems with materials and workmanship.

Added Party's Witness

Steve Black is the warranty manager for Richcraft Homes Ltd. and oversees all warranty claims. He has been with the company for 15 years and estimates that he carries out about 10 to 12 conciliations a year.

He referred to various documents contained in Exhibit 8 as work that was completed and approved on the home (the foundation inspection, the contract to install the basement wrap, and the final occupancy permit). He said he is in full agreement with Tarion's findings.

When asked how he evaluates a “use” test for an MSD issue, the witness said he would consider what the percentage of the affected space is in relation to the whole house size. Then he would consider whether the issue is temporary or permanent as well as the longer term possibilities.

He repeated his recommendation that any crack repair should be done by injection, whether inside or outside, above the basement wrap and that he would use his foundation contractor to do that work.

Closing Submissions

The Appellant submitted that there is no dispute about the fact that water penetration did occur and that in his view, it is a defect. He questioned why it would have been covered for repair in the first two years of occupancy but not after two years.

He submitted that the basement foyer area is the pathway to the basement and therefore has an adverse effect on the use of the basement area. This may not be serious to others but to a homeowner, this is a serious situation.

The Appellant acknowledged that the water penetration only occurred in a short or limited time frame but he is concerned about a repetition.

The Appellant questioned whose position and understanding should prevail; whether it should be the homeowner who is experiencing this condition or those who administer the warranty program. The Appellant concluded by stating his belief that Tarion is ignoring the “use” test component of the MSD definition.

The Respondent's Counsel, Mr. Gravel, submitted that there were no complaints prior to February 21, 2014, by which time the homeowner had been in the house for almost 4-years. The MSD complaint was submitted two-years after the expiry of the warranty periods for this type of complaint.

It was submitted that the Appellant's situation was not a case of significant water penetration even though it took 3 days to "play out". The Appellant was only dealing with the landing level (approximately a 7' x 8' area) at the bottom of the stairs to the basement. The homeowner acknowledged he cleaned the area and then described that landing area as being significant enough to prevent his use of the whole basement.

Mr. Gravel referred to the case of Re Grudzinski et al. and Ontario New Home Warranty Program 1997 CanLII 16252 (ON CTGD), [1997] O.J. No. 291 ("Grudzinski"), in which the homeowners complained they were unable to use 1/3rd of the home's total area.

Regarding the crack referenced by the Appellant, Mr. Gravel referred to the evidence that this type of crack is considered to be normal concrete shrinkage and does not qualify as a major structural defect - for a defect to have an adverse impact on a home must be established by an objective standard and the Appellant has only submitted his personal views.

In closing, Mr. Gravel asked the Tribunal to reject the appeal as the claim to qualify as a major structural defect as defined by the regulation.

THE LAW

The applicable provisions of the Act are as follows:

Warranties

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

(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.

Notice of decision under s. 14

16. (1) Where the Corporation makes a decision under section 14, it shall serve notice of the decision, together with written reasons therefore, on the person or owner affected.

Notice requiring hearing

(2) A notice under subsection (1) shall state that the person or owner served is entitled to a hearing by the Tribunal if the person or owner mails or delivers, within fifteen days after service of the notice under subsection (1), notice in writing requiring a hearing to the Corporation and the Tribunal.

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.

Parties

(4) The Corporation, the person or owner who has required the hearing and such other persons as the Tribunal may specify are parties to proceedings before the Tribunal under this section.

ISSUES

The issue before the Tribunal is whether the Appellants’ claim is warranted under section 13 of the Act and, if so, what is the appropriate remedy.

ANALYSIS

The issue in this matter, based on the Tarion decision to deny the Appellants' claim because it does not qualify as a major structural defect, is fairly straight-forward.

In his testimony, the Appellant acknowledged that his claim did not meet the definition of being a load bearing defect but stated that the water penetration had affected his use of a significant part of the home. The Tribunal finds as follows:

• the water coming into the home was only in the basement foyer area (approximately a 7 ft by 8 ft area of the two-storey, plus basement, home);
• the affected foyer area does not represent a significant part of the total home area (Grudzinski);
• the water described as a "stream of water" was of such limited significance that it was soaked up and removed by the Appellant with some rags;
• while water reportedly continued in some manner to come into the basement, the ingress was slowing until there was nothing coming in on the third day;
• there was no material evidence to show a correlation between an observed crack on the exterior wall parging and the ingress of water into the basement foyer area;
• there is no evidence of any other water penetration;
• there is no evidence of any significant or lasting damage or impact to the home, or any structural element of the home; and
• there is no evidence to indicate the water ingress resulted in water accumulation of any amount (which was not soaked up and removed) to prevent the Appellants’ use of a major or significant portion of the home.

In sum, the evidence before the Tribunal related to a single incident of water penetration. It may well have had an impact on the Appellants, but not to an extent such that the use of the home itself or the basement has been materially or adversely affected. There is no material evidence to conclude that there is a major structural defect, as defined by the regulation.

ORDER

Therefore, and pursuant to the authority vested in it under the provisions of the Act, the Tribunal directs Tarion to deny the Appellants’ claim for warranty.

LICENCE APPEAL TRIBUNAL

Simon Dann, Member

Released: February 18, 2015