Date: 2018-02-20

An Appeal of a Decision of Tarion Warranty Corporation under the Ontario New Home Warranties Plan Act to Disallow a Claim

Between:

C.H., Q.H. and A.W.

Appellants

and

Tarion Warranty Corporation

Respondent

and

Cal-Crown Homes Inc.

Added Party

REASONS FOR DECISION AND ORDER

Adjudicator: Barbara Hicks, Member

Appearances:

For the Appellants: Self-represented

For the Respondent: Ted Weredynski, Paralegal

For the Added Party: Anna Fera, Agent

Place and Date of Hearing: Toronto, ON May 1, 2017

REASONS FOR DECISION AND ORDER

Introduction

1The appellants are the owners of a custom built home in the [ ] subdivision in Vaughan, Ontario which they purchased from the added party (“builder”). Tarion Warranty Corporation is the respondent and is the regulator of all new home builders and administrator of the province’s new home warranty program.

2The appellants made a number of warranty claims, which claims were denied by Tarion in a Decision Letter dated July 11, 2016.

3All of the claims fell under section 14(3) of the Act.

4Although the Notice of Appeal filed by the appellants indicated that they wished to appeal all 24 items referenced in the Decision Letter, the appellants agreed at the outset of the hearing, or during the hearing itself, to withdraw items numbered 21, 41, 50, 96, 109, 112 and 134.

5The issues under appeal generally relate to interior and exterior finishes, electrical work and the roof line.

POSITIONS OF THE PARTIES

6It became very clear at the hearing that the biggest issue for the appellants, in terms of importance and dollar value, was the height of the ceiling in the basement. They expected the home to be constructed with a 9 foot high basement ceiling and instead the home was delivered with an average basement ceiling height of 7’5”. The other items concerned interior and exterior finishing details, electrical work and the roof line.

7The appellants have been disappointed with the house and the conduct of the added party since the house was under construction. They expected to receive a luxury home reflective of the quality and features they observed in the sales office, depicted on the plans and in the illustrated marketing materials. The appellants are frustrated, and want the added party to “do the right thing” and give them the house they expected to receive. The appellants have found the home-buying process very stressful and painful. Even after three years in the house, the house does not feel like home and is not as it should be. They had no appliances for their first Thanksgiving and Christmas in the home, which was very upsetting and disappointing. In addition, C.H. is self-employed and has had to take a lot of time away from her work to deal with contractors, the builder’s workers and the problems with the house.

8The respondent’s position is that the items claimed are not warranted. Tarion takes a three-pronged approach to all claims: (1) Is there a violation of the Ontario Building Code? (2) Is the item covered by the Tarion warranty? (3) Is there a health and safety violation? The “Construction Performance Guidelines” are referenced by Tarion for all warranty claims since they provide an objective standard by which to determine if there has been a breach or not. The standard is not perfection. For a claim to be successful, there must be a proven breach and damage resulting in a loss to the homeowner. The respondent could find no warranty breach in this case and denied the appellants’ claims, as noted in their Decision Letter.

9The added party is proud of the work it does and insists that it has fulfilled all of its obligations. The added party feels that the appellant homeowners were impossible to please. The added party agrees with Tarion’s position as outlined in the Decision Letter.

10The added party says that its relationship with the appellants has been contentious. The history of the difficult interactions between the parties include:

(i) At one point during a visit to the home to take photographs, Anna Fera, Customer Service Manager for Caliber Homes, said she was physically attacked by the appellant C.H., which C.H. denies;

(ii) C.H. made it difficult for repair work to be scheduled and refused to sign off on work that was done;

(iii) C.H. started a petition against the builder regarding nearby train noise and got signatures from other home owners in the neighbourhood;

(iv) The appellants’ contractors were adversarial with the builder’s workers, making it difficult for the two crews to work together inside the home at the same time; and

(v) Appliances were not present during the Pre-Delivery Inspection (PDI) or on the date the 30-day Form was completed. The appellants attempted to deal directly with the supplier, The Brick, to resolve this. The added party was upset about this and felt the appellants were trying to deceive The Brick in an effort to obtain more than they were entitled to.

11The history of challenging interactions made it more difficult for the parties to work together toward a resolution. Complicating matters even further, the appellants brought in their own tradespeople after closing to do work in the home, including finishing the basement. As a result of this, it was difficult for Tarion to assess whether some alleged defects were caused by the added party during construction or by the appellants’ workers who came into the home later. For instance, one of the appellants found water in the basement shortly after they took possession of the home and after the appellants’ workers had completed some work in the basement, which resulted in damage to the finish on the basement stairs and the drywall in the basement.

12The hearing took one full day. The appellant C.H. gave testimony on behalf of all the appellants. The respondent called one witness, Kirk Rowe, who was the author of the Decision Letter. Anna Fera gave evidence on behalf of the added party.

ISSUES IN DISPUTE

13The issue to be determined is whether there is a breach of warranty with respect to the following items as referenced in the Decision Letter:

(i) Whether the delivery of a home with a basement ceiling height of less than 9’ is a breach of the general warranty? (being Items 7, 8 & 9)

(ii) Whether the following interior finishes were completed in a workmanlike manner or had defective materials:

a. Item 23 – damaged kitchen island countertop

b. Item 41 – missing water supply box trim in the laundry area

c. Items 47(a) – (c) & 68 staircase from basement to second floor – finish was not smooth and railing rough to the touch and drywall below curved staircase not finished

d. Item 67 – missing central vacuum system caps

e. Item 71 – blue paint mark beside family room fireplace

f. Item 72 – workmanship of paint & caulking on the trim in the family room and around the kitchen window

(iii) Whether the following exterior finishes were completed in a good workmanlike manner or had defective materials:

a. Item 113 (a) & (c) stone masonry at the front bay window

b. Item 131 key stones above the front porch

(iv) Whether the following electrical work was constructed in a workmanlike manner or had defective materials:

a. Item 10 – missing three-way light switch near the basement entry door

b. Item 130 – missing pair of front porch lights

(v) Item 135 – whether the roof was constructed in a workmanlike manner or had defective materials

14If I find there is a breach of warranty, then I must determine the damages resulting from the breach of warranty.

RESULT

15I am very sympathetic to the appellants; however, after hearing from the witnesses, considering the evidence and applying the law to the facts in the case, I find that the appellants have not succeeded in their appeal.

ISSUES & Analysis

BASEMENT CEILING HEIGHT (Items #7-9)

16As mentioned above, during negotiations to purchase the home, the appellants were shown the “Features Sheet” which indicated, among other things, “Featuring 10ft Main, 9ft 2nd Floor and 9’ Ceiling in Bsmt” at the top of the list of features. There are no exclusions or exceptions indicated with respect to this feature. There is also no disclaimer at the bottom of the page. It is necessary for me to determine whether the discrepancy between the actual height of the basement and the height represented in the Features Sheet is a breach of the warranty in section 19 of the Regulation.

17C.H. testified that the 9 foot ceiling in the basement was important to her and she communicated that to her realtor, C.K. The realtor reassured C.H. that these were standard features that were included in the specifications for the home and that they need not be specifically included in the Agreement. C.H. relied on the realtor’s expertise in this regard. C.H. therefore understood when she signed the Agreement that the basement of the home would be completed with a 9’ ceiling height in the basement, along with all of the other features that were listed on the Features Sheet.

18C.H. admits that the Agreement does not say that the home is to be constructed with a 9 foot ceiling in the basement. She also admits that the Features Sheet is not attached as a schedule to the Agreement. C.H. stated that she did not read the Agreement line by line before signing it but put her faith in the real estate agent and her lawyer, J.C.P., to ensure that the Agreement was drawn up correctly.

19C.H. recognized early in the construction phase that the basement ceiling would not be high enough. She notified the builder right away in the hopes that construction would halt and the height could be adjusted. She also contacted C. A., a representative of the added party who worked in the sales office, about this concern who advised her to speak to her lawyer. C.H. then contacted her lawyer, who wrote an email to the builder and the builder’s lawyer, R.G., on July 11, 2014. In the email, J.C.P. asked the builder to stop construction immediately and correct the problem with the ceiling height in the basement. He also pointed out that the lack of the specified ceiling height in the basement would have a material impact on the value of the house and would be treated as a material breach of contract.

20R.G. responded to J.C.P. by way of letter dated July 14, 2014. R.G. indicated that the home would be constructed with 8 foot basement ceilings only. R.G. referred to the fact that Schedule B of the Agreement did not specify the basement ceiling height would be 9 feet high and that the builder’s standard height for basement ceilings is 8 feet. R.G. indicated that homes built on 60 foot lots, not 42 foot lots as this one is, featured 9 foot basement ceilings. R.G. stated that his client would not halt construction and would build the home in accordance with the terms of the Agreement.

21On July 15, 2014, J.C.P. wrote back to R.G. urging the builder to correct the problem while it is still relatively easy to fix. J.C.P. stated that the details contained on the Features Sheet were representations and warranties made to the buyers to induce them to purchase the home.

22R.G. responded to J.C.P. in writing on July 18, 2014, indicating the marketing material does not form part of the Agreement and stating that they are relying on the language in paragraph 12 of Schedule X of the Agreement which is the boilerplate provision about the entire Agreement being in writing and no other oral or written representation affecting the Agreement.

23On December 19, 2014, Anna Fera emailed C.H. to advise her that she should have included a specific provision for a 9 foot basement ceiling height in the Agreement if it was important to her.

24The fact that the appellants continued to make their deposit payments as scheduled and then proceeded to close the transaction anyway was interpreted by the added party to mean that the appellants accepted the home the way it was constructed. In C.H.’s mind, however, this was still a matter she thought she could pursue, either with the builder directly or through the Tarion warranty program.

25The appellants did not list the basement ceiling height as a deficiency on the PDI although it was noted on the 30 day Form.

26The respondent’s position in the Decision Letter was that there is no warranty under the Act concerning ceiling height. Since the Agreement did not specify a 9’ ceiling height, the lower ceiling height could not be found to be a defect. Instead, an “Honesty & Integrity” complaint could be made to Tarion if the homeowners felt the marketing materials were misleading. Tarion would then investigate and determine if any action should be taken.

27A Builder Honesty & Integrity Complaint Form was completed by C.H. dated December 4, 2015 which solely identified the issue of the basement ceiling height. I was not informed about the outcome of that complaint and it is not relevant to the matter before me in any event.

28At the hearing, the respondent referred to two similar cases: Re Mulveney [1997] O.C.R.A.T.D. No. 56 and the Re Witham [2000] O.L.A.T.D. No. 20 which were both concerned with marketing materials and ceiling heights. The added party tendered the cases for the proposition that marketing materials do not form part of the Agreement of Purchase and Sale. As such, a reduced ceiling height could not be considered to be a substitution within the meaning of the Act and therefore is beyond the jurisdiction of the Tribunal. Finally, the added party argued that the appellants have not proven their damages in any event.

29The added party acknowledges that there was an error on their Features Sheet regarding basement height which was subsequently corrected. Nonetheless, the added party’s position is that the Features Sheet did not form part of the Agreement of Purchase and Sale and therefore they were not bound to build to that height.

30I am satisfied that the 9 foot basement ceiling height was of fundamental importance to the appellants at the time they entered into negotiations to buy the home. According to C.H.’s testimony, this fact was repeated to the real estate agent several times during the negotiations. In addition, once C.H. discovered that the home being constructed would not have 9 foot ceilings in the basement, she raised the issue with the builder, her realtor, the sales office, and her lawyer, and persistently pursued the issue for the next several months. She tried to get the matter resolved before closing. When that didn’t work, she pursued it via the Tarion warranty claim process. It continues to be a major disappointment for the appellants.

31The Tribunal accepts C.H.’s evidence that this particular feature was material in her buying decision. C.H. believes that she overpaid for the home or, alternatively, that the home has lost value due to the low ceiling height in the basement. She estimates her loss to be around $35,000 based on an estimate from another builder, which estimate was not produced as part of the disclosure in this case. In addition, C.H. has a negative emotional reaction to the low ceiling height.

32On June 23, 2015, C.H. met with L.G., President of Intercity Realty. He offered C.H. $1,000.00 from his own funds to make up for the disappointing basement ceiling height. This was not acceptable to C.H. because it was not enough to fix the problem but also served as confirmation to her that a mistake had been made. She continued to press for a suitable resolution, offering instead to have the added party finish a portion of the basement for her and install a bathroom in the basement. This offer was rejected by the added party. C.H. continued to be very frustrated and she felt ignored by the added party.

33Although I find C.H.’s testimony and evidence on this issue compelling and forthright, I do not find in favour of the appellant.

34While there was a lengthy written Agreement in this case, nowhere does it specify what the basement ceiling height would be. Therefore, this was not a term of the Agreement and therefore the claim is not warranted. I would not have hesitated to find a breach if the Agreement had been specific on this point. The added party says it only had to build an 8’ high ceiling in the basement (which I note they also failed to deliver) as that is their normal building practice; however, this is also not specified anywhere in the Agreement.

35It is unfortunate for the appellants that the realtor did not include the Features Sheet as a Schedule to the Agreement or otherwise incorporate a specific reference to the basement ceiling height somewhere in the Agreement. Then, when the lawyer reviewed the Agreement during the conditional period, there was another opportunity to ensure that the language in the Agreement captured this important detail for the appellants. This was not done.

36In closing submissions, the respondent referenced several substitution cases under sections 18 and 19 of Regulation 892. Although the appellants did not make the argument that the reduced ceiling height in the basement constituted an unacceptable substitution under the Act, the line of cases on substitutions do not support this finding either.

(i) Re Mulveney was a decision of L.A.T.’s predecessor, the Ontario Commercial Registration Appeal Tribunal. In that case, the appellants expected to receive a 9 foot ceiling in the kitchen but ended up with an 8’ 6 1/2” ceiling instead. There was no mention of the ceiling height in the Agreement and therefore it could not be treated as a substitution.

(ii) In Re Witham, there was no quantifiable loss due to the reduced ceiling height in two rooms and therefore it was not a material loss in value.

(iii) I take note of 7963 v. Tarion, 2013 CanLii 58469 (ON LAT) which confirms that to be successful on a substitution case, the item complained of must be specifically mentioned in the Agreement and the substituted item must not be of equal or better quality.

37In this case, the appellants expected to receive a home with a basement ceiling height of 9’. Instead, the basement had an average ceiling height of 7’5” in most places, with the lowest points being a mere 6’4”. This is a material difference from what the appellants expected. I note that it is also materially different from what even the builder’s lawyer said would be delivered. However, the ceiling height was not specified in the Agreement and this proves to be fatal in a substitution argument. In addition, the appellants merely made a bald assertion as to the quantum of loss without providing any evidence of it. While the added party’s representations in the Features Sheet may potentially be characterized as a private warranty, it is not a statutory warranty and therefore there is no remedy available under the Act.

38Although I am very disturbed by the way this particular issue was handled by everyone, and keeping in mind the consumer protection purpose of the Act, it would be an untenable extension of the legislation to provide a remedy for this claim in these circumstances. The appellants were clear during the negotiations that the basement ceiling height was very important to them and rightly put their trust in the realtor and the lawyer to ensure that the Agreement reflected their wishes. Unfortunately, these experts failed to ensure the Agreement contained any reference to the basement ceiling height. Then, to add insult to injury, when the added party had an opportunity early in the construction process to try to remedy the situation, they ignored C.H. and later blamed her for the lack of specificity in the Agreement and then took a hard-line position when it may have been possible to come up with a solution that would have satisfied the appellants.

39While the appellants may have other legal remedies available to them, they have not established a breach of a statutory warranty under the Act and therefore cannot obtain relief at this Tribunal.

INTERIOR FINISHES (Items 23, 41, 47 (a), (b) and (c), 67, 68, 71, 72)

40There were a number of claims pertaining to interior finishes.

41Item 23 concerned damage to the kitchen countertops. The appellants claimed the countertops were either not installed in a workmanlike manner or the material was defective. C.H. did not provide much testimony on this. The respondent inspected the countertops and viewed the damaged areas from a normal viewing position in normal lighting conditions per the Construction Performance Guidelines. It appeared that an attempted repair had been done. After considering the evidence, including photographs that were submitted by the appellants, I am not satisfied that there has been a breach of warranty concerning the countertops. The photos are inconclusive as to what, if any, aspect of the countertops is defective and therefore the appellants’ burden has not been satisfied.

42Item 41 concerned a missing trim piece for the water supply box in the laundry area. The added party indicated that the trim kit had been discontinued by the supplier; however, the added party was willing to fabricate a trim kit so long as the appellants removed the washer and dryer so that the worker could have access to the supply box to install it. The appellants never provided the access required and therefore the installation could not be done. C.H. admitted that she did not comply with the request to remove the appliances. In addition, the trim kit is not required by the Building Code and was not specifically included in the Agreement. I appreciate that the added party was reasonable in trying to address this claim. Since it does not appear that the added party was obligated to provide this trim piece and the appellants have not proven that it was required under the Building Code, there is no breach of warranty. This claim is denied by the Tribunal.

43Items 47 (a) – (c) involved the finish on the staircase and railings. The appellants complained that the finish was rough to the touch; however, very little testimony was given on this subject. The photographs supplied by the appellants make it very difficult to assess the smoothness of the finish. When the respondent inspected these items, no issue could be detected from a normal viewing position under normal lighting conditions. The Construction Performance Guideline only requires the visual appearance of a smooth finish. The stairs do not have to be smooth to the touch although the hand railing should be. Perfection is not the standard. Furthermore, these were not mentioned on the PDI Form. Accordingly, the respondent denied these claims. I am not satisfied based on the photographs that the staircase and railings lack the appearance of a smooth finish. I am also not satisfied based on the evidence that any roughness in the railings that the appellant’s may perceive rises to the level of faulty workmanship. Therefore, there is no breach of warranty and I deny this claim.

44Item 67 had to do with the fact that the caps on the central vacuum system were missing. The appellants did not tender any evidence that the caps were required under the Building Code. The respondent inspected the central vacuum system and agreed that the trim pieces were not installed; however, after the inspector checked the Agreement, it was clear that the vacuum would only be “roughed-in” and therefore there was no requirement to install trim pieces. Therefore, there is no breach of warranty.

45Item 68 concerned drywall on the underside of the main floor staircase. The appellants alleged that the drywall had not been finished in a workmanlike manner and supplied some photographs of the drywall that were taken by them. The respondent inspected this area and found that although the work was not perfect, it had been done in a good workmanlike manner with no visible defects. After considering the testimony and viewing the photographs, I am not satisfied that there are visible or other defects in the drywall. I find that the appellants have not met their burden of proving on a balance of probabilities that a breach of warranty has occurred. This claim is denied.

46Item 71 concerned the fireplace in the family room. The appellants complained about a blue line on the fireplace surround. When the respondent inspected this, the blue line was noted; however, it had not been mentioned on the PDI Form and therefore there was no way to know when the line appeared or who put it there. There was no evidence that the builder caused the blue line. In the absence of evidence as to how and when the blue line appeared near the fireplace, I am not satisfied that the blue line was caused by faulty workmanship and therefore deny the claim.

47Item 72 concerned trim in the family room and around the kitchen window. The appellants complained that the trim was not smooth to the touch. No oral evidence was provided by the appellants to support this claim. A few photographs taken by the appellants were submitted. The trim was inspected by the respondent. Applying the Construction Performance Guidelines, since the trim appeared to be smooth in normal lighting conditions from a normal viewing distance, Tarion denied the claim. I have considered the photographs of the trim that were submitted by the appellants, but the photographs do not contain sufficient evidence for me to conclude that the trim is not smooth. I find that the appellants have not met their burden with respect to this issue and it is therefore denied as well.

EXTERIOR FINISHES (Items 113(a), (c) and 131)

48Items 113(a) and (c) referred to the front turret of the home. The appellants complained that the stone masonry was chipped and there was a significant variation in the colour of the masonry, rendering it unattractive. No oral evidence was given by C.H. about the extent of the chipping or colour variation although a number of photographs of the masonry were provided to the Tribunal. The respondent inspected the turret and found the colour range to be acceptable. The respondent agreed that although the chips were noticeable on close inspection, they did not detract from the overall appearance when viewed from 6 meters away per the Construction Performance Guidelines (the “Guideline”). I accept the evidence of the respondent that the chips in the masonry were not visible from 6 metres away. In the absence of any expert report or other suggested guideline or industry standard, I find the Guideline persuasive and accept that it is reasonable. I understand that the appellants find the colour variation in the stone masonry to be unattractive; however, as noted above, the standard is not one of perfection. The appellant has not provided evidence that the variation in colour in the masonry falls outside industry standard or rises to the level of a defect in materials or faulty workmanship. This claim is denied.

49Item 131 had to do with key stones located at the front porch not being of equal lengths as shown in the marketing material. While C.H. testified that she found the key stones to be unattractive and may have reduced the overall value of the home, the appellants did not provide any details as to the amount of variation in length or how they varied from what was shown in the marketing material, which would have been useful. Some photographs were provided of the key stones; however, there was no evidence about reduced home value as a result of the variation in the key stones. There was no evidence led to suggest that the workmanship or materials were defective or that there had been a breach of the Ontario Building Code. Upon inspection, the respondent did agree that the lengths were not uniform but the differences were minor. In any event, the marketing materials clearly had disclaimers on them that indicated they were artist’s concepts and subject to change. The appellants bear the burden of proving these claims, which I find they have not done. I therefore deny these claims.

ELECTRICAL WORK (Items 10, 130)

50Item 10 was concerned with a missing 3-way light switch near the basement entry door. The appellants believed one should have been installed; however, it is not clear to me what the nature of the alleged breach is. The added party inspected and agreed there was no switch present; however, it was not required by the Building Code because it was an unfinished basement. Furthermore, an Electrical Safety Authority Inspection had been done and the building passed that inspection. This is satisfactory evidence that the 3-way switch was not required by the Building Code. As a courtesy, the added party offered to install one but the appellants declined. I can find no breach of warranty in these circumstances. The offer made by the added party, although not required, was reasonable, and the appellants should have accepted it. As the added party had no obligation to install the 3-way switch, I find that its absence is not a breach of warranty.

51Item 130 relates to a missing pair of front porch lights. The appellants saw these in the marketing materials and felt they should be included. The respondent inspected this area and observed only one light inside the front entry way and none on the exterior. The respondent determined that the exterior lights were drawn in as part of the artist’s concept and referenced the disclaimer on the bottom of the artist’s rendering. Furthermore, upon review of the Agreement, it did not specify that these lights would be included. The respondent denied these claims. Upon review of the Agreement, I find no reference to any requirement that the added party install a pair of front porch lights in the Agreement. The disclaimer on the artist’s rendering is sufficient. I find this claim is denied.

ROOF LINE (Item 135)

52The appellants are not happy with the roof shape. They expected a roof line that matched more closely to that shown in the marketing brochure. They feel that the overall look of the roof of the house as built is not as attractive or aesthetically appealing as the one shown in the brochure. The appellants did not make any argument about the structural integrity of the roof or the workmanship or the quality of the roofing materials used.

53The added party’s position is that there is nothing structurally wrong with the roof line and there are no complaints about workmanship or defective materials. The roof line depicted in the brochure was simply an “artist’s concept” and not indicative of the actual roof line that the home may have.

54Kirk Rowe testified that there were no Ontario Building Code violations or workmanship issues with the roof. Elevations depicted in marketing materials are subject to change and may be revised per the disclaimer on the materials. The claim was denied by the respondent accordingly.

55Aside from submitting photographs of the roof and C.H.’s very brief testimony about her dissatisfaction with the appearance of the roof, the appellants led no evidence to suggest that the Building Code had been violated or that there is any defect in workmanship or materials. I am satisfied that the disclaimer on the artist’s rendering is sufficient to allow for some variation in the roof angles; and further find no breach of warranty. Therefore this claim is denied.

CONCLUSION:

56I find the appellants failed to meet their burden with respect to all of the items claimed in the appeal.

ORDER:

57The appellants’ claims for warranty are denied.