Licence Appeal Tribunal File Number: 14598/ONHWPA

An appeal from a Decision of Tario Warranty Corporation under the Ontario New Homes Warranties Plan Act, 1990, c. O.31 to disallow a claim for warranty coverage

Between:

Diana Shligold

Appellant

and

Tarion Warranty Corporation

Respondent

DECISION

ADJUDICATOR: Kevin Lundy

APPEARANCES:

For the Appellant:

Diana Shligold, Appellant Mark Birdsell, Counsel

For the Respondent: Court Reporter:

Ian Bulloch, Representative Michael Owsiany, Counsel Charlotte St. Croix

HEARD: By Videoconference

August 22-23, 2023

OVERVIEW

1Diana Shligold (the ‘appellant’) appeals a Decision Letter dated January 16, 2023 (amended April 10, 2023), issued by Tarion Warranty Corporation (the ‘respondent’) which disallowed a claim for warranty coverage on her home under the Ontario New Home Warranties Plan Act (the ‘Act’). On October 28, 2021, the appellant purchased the home at 207 McAllister Road in North York from Favian Sciosica (‘F.S.’) and Holly Starke (‘H.S.’). On February 10, 2023, the appellant appealed the Decision Letter to the Licence Appeal Tribunal (the ‘Tribunal’).

2The respondent takes the position that the home is not eligible for warranty coverage because it is not “new.” Specifically, the home was constructed as a significant renovation or addition to an existing home that was originally constructed in the 1950s. Portions of the original foundation and exterior wall substructure were retained when the home was renovated into its current state. Similarly, the home contains portions of the pre-existing foundation and exterior wall substructure from the prior dwelling that was “previously occupied” prior to its purchase and renovation by F.S. and H.S. Since warranty eligibility requires a “new” and “not previously occupied” home, the respondent determined that the home is not eligible for coverage.

3The appellant relies upon guidelines published by the respondent that bar statutory warranty coverage if the pre-existing portion of the foundation exceeds 40% of the new structure’s foundation footprint (the ‘40% Rule’). The appellant takes the position that by disregarding the lesser percentage of remaining pre-existing foundation and the comparatively insignificant portion of pre-existing elements overall, the respondent arbitrarily refused to follow its own guidelines and the consumer protection purpose of the Act by denying coverage. The respondent submits that the 40% Rule is simply a guideline and not determinative of eligibility but is instead one of many relevant factors, the cumulative total of which militate against coverage.

ISSUES

4The primary issue in dispute in this appeal is ultimately whether the appellant’s home is eligible for warranty coverage under the Act. The determination of that issue depends on the answers to the following questions::

1. Was the home previously occupied?

2. Is the home a new home?

3. Has the definition of vendor under the Act been met?

4. Was the Act generally intended to cover the appellant’s situation?

RESULT

5In light of the substantial demolition and removal of the prior dwelling, the present home was not previously occupied.

6The home is a new home.

7F.S. represented a vendor within the meaning of the Act.

8In light of its remedial and consumer protection purpose, the Act is generally intended to cover the appellant’s situation.

9The home is therefore entitled to warranty coverage.

PROCEDURAL ISSUES

10At the hearing, the appellant was represented by Mark Birdsell (‘M.B’), her spouse, who is also a current owner of the home.

11Prior to the case conference on March 22, 2023, the respondent advised the Tribunal in writing of its intention to request that F.S. and H.S. be added as parties. Notice of this intention was served on the appellant and the proposed added parties. However, after F.S. and H.S. declined to participate in the case conference, the respondent withdrew this request.

ANALYSIS

Is the appellant entitled to warranty coverage?

12For the reasons that follow, I find that the appellant’s home is entitled to warranty coverage.

13The Act is consumer protection legislation intended to protect purchasers of new homes through screening vendors and builders for financial responsibility, integrity and technical competence. Tarion is the administrator of the province’s new home warranty program with a duty to protect consumers when builders fail to fulfil their warranty obligations.

14Pursuant to section 14 of the Act, a person who has entered into a contract to purchase a home from a vendor is entitled to receive payment out of the guarantee fund in various circumstances including where the vendor/builder has breached a warranty under section 13 of the Act.

15The purchaser’s entitlement to payment out of the guarantee fund is not dependent on whether or not the home was enrolled with Tarion or not. If Tarion investigates a home that was not enrolled, or was built by an unlicensed builder, but determines that a home is eligible for coverage, the home is subsequently treated as if it had been enrolled by the builder and the warranty applies.

16Therefore, if the home purchased by the appellant is eligible for coverage, the appellant would be entitled to payment from the guarantee fund under section 14 of the Act for breaches of warranties set out in section 13.

17In order to determine eligibility for coverage, and therefore entitlement to claim payment from the guarantee fund, the Tribunal in this appeal is asked to determine the issues identified above:

Was the home previously occupied?

18In light of the substantial renovations and comparatively nominal elements remaining from the prior structure, I find that the home was not previously occupied. A contextual analysis of the evidence submitted including the building permit for the renovation compared to the results of the engineering investigation also reveal a substantially new building that had not been previously occupied.

Background

19F.S. is the president of Anlif Group Ltd. also known as Anlif Fine Homes (‘Anlif’), a company advertised as in the business of building homes for sale. When he purchased 207 McAllister Road in North York on October 29, 2018, the house located on the lot was a 900 square foot bungalow. He applied for and was granted a building permit from the City of Toronto (the ‘City’) on September 12, 2019 to substantially increase the footprint of the house, add a second floor, raise the basement and first floor and add a substantial extension to the rear of the house. The total square footage of the new home is 4,296 square feet, almost five times the size of the bungalow. Although the bungalow was substantially demolished to build the new home, portions of the original home’s foundation and exterior walls were retained. F.S. and H.S. never occupied the home at any point and neither they nor Anlif were licensed vendors or builders. They did not register as builders or vendors with Tarion or enrol the home in the statutory warranty program.

The Sale of the House

20On October 28, 2021, F.S. and H.S. entered a purchase agreement to sell the house to the appellant and M.B. with a conditional closing date of December 15, 2021. Although the appellant is a lawyer, she has no special expertise or experience in the subject matter of the hearing as a result of her profession. Consequently, she was unaware of the statutory protections under the Act or Tarion’s involvement with warranty coverage and eligibility, though she was vaguely aware of the 40% Rule. While she noted that there had been some discussion of a one year contractual warranty, this was not something that F.S. was prepared to offer.

21Both the MLS listing and the realtor’s video tour of the house described it as a new home. The appellant viewed the home on October 30, 2021 and December 15, 2021 and took several photographs of the interior. She observed no furniture or personal items in the home and described its fixtures as “all shiny and new.” She also recalled a pronounced echo and the smell of fresh paint inside the house. As construction was not fully completed as of December 15, 2021, some elements had not yet been installed. For instance, there was a hand drawn illustration affixed to the front of the fireplace in the family room to show potential buyers how the finished item would look. She testified that she had no reason to believe that the house was anything but new.

The Appellant’s Investigation

22The appellant discovered another house with an apparently identical design and layout on De Quincy Boulevard in North York, also previously owned by F.S. As with the appellant’s house, the lot on De Quincy Boulevard had previously been occupied by an older bungalow. She had no idea whether that home was deemed eligible for warranty coverage.

23The appellant was approved for the New Housing Rebate from the Canada Revenue Agency (the ‘CRA’). Homeowners are eligible for this rebate in the case of “substantial renovations” in which at least 90% of the pre-existing structure has been removed.

24In response to a heating issue in the house and the home’s unenrolled status, the appellant’s real estate lawyer referred her to Tarion January 6, 2022 and Tarion completed a questionnaire with respect to the home the following day. After reviewing various materials online, including advisories from the Home Construction Regulatory Authority (‘HCRA’), the appellant contacted Tarion’s enrollment team. While HCRA investigates illegal construction, Tarion investigates statutory warranty issues.

25The appellant initially advised Tarion that she preferred to hold off on an investigation as they were still attempting to negotiate with F.S. These negotiations were apparently unsuccessful. As a result, on March 31, 2022, the appellant contacted V.N., the initial investigator on the file, to request clarification of the 40% Rule, specifically whether the rule “means that the current home is still 40% old foundation or simply that 40% of the old foundation of the home was kept?” In response, on April 18, 2022, Tarion sent her an investigation package with a Warranty Eligibility Information Form, the latter returnable by May 9, 2022.

26Tarion’s letter enclosed with the investigation package advised the appellant that although the home was not enrolled in the statutory warranty program, Tarion was investigating whether it was eligible for coverage. The letter also noted that because eligibility investigations are complex and may take several months to complete, Tarion could not guarantee a date by which the investigation would be completed. The letter also advised the following possible outcomes of the investigation:

If, after its investigation, Tarion determines that your home is eligible for warranty coverage and you have submitted a warranty claim form(s) on time, Tarion will then process your warranty claims. If you have not submitted a warranty claim form(s) on time, or if Tarion determines your home is not eligible for warranty coverage, Tarion will not be able to assist you. [Emphasis in original]

27The appellant completed and returned the enclosed Homeowner Warranty Eligibility Form and attached various requested documents required by Tarion to commence its assessment, including the building permit for the renovation.

28On April 1, 2022, V.N. advised the appellant of the following explanation for the home’s lack of enrollment:

When a home is built, if part of the foundation of the home is pre-existing and the pre-existing portion exceeds 40% of the footings as determined by linear measurement (footprint), there is no statutory warranty for the owner. As such, enrolment with Tarion is not required.

29In response, the appellant reviewed the plans for the house and concluded that the pre-existing portion accounted for less than 40% of the footings. She asked the respondent to obtain its own measurements.

30Her architect father-in-law, W.B., also agreed with her assessment. In his letter to Tarion, dated September 29, 2022 and provided to Tarion, W.B. stated that he had completed a second review of the house focussing on the original portions of the front and right side main floor walls. He stated that most of the exterior of the original bungalow would have been removed to accommodate the substantially larger footprint and second storey for the new house according to the plans, resulting in essentially new construction.

31As W.B. did not testify at the hearing, his written statement was hearsay. The essential defining features of hearsay are an out‑of‑court statement adduced to prove the truth of its contents in the absence of a contemporaneous opportunity to cross‑examine the declarant. I find that to assign this hearsay statement the same evidentiary value as direct testimony without allowing the respondent any means of cross examining the declarant on the basis of his statement or his qualifications to provide it would be unduly prejudicial under the circumstances. While subsection 15(1) of the Statutory Powers Procedure Act (the ‘SPPA’) permits admission of unsworn hearsay statements and allows the Tribunal to assign it the appropriate probative weight, for the evidentiary concerns I have outlined above, I would assign this evidence reduced probative weight.

32However, the appellant also submitted a report by architect Ahmed Lmohamad, dated June 30, 2023. In his report, Mr. Lmohamad listed several measurements from the present house contrasted with the remaining elements from the bungalow. He concluded by noting that:

All of the exterior brick work completed on the exterior walls presents as new construction. All exterior doors, windows, floors, roof, basement slab, interior walls, doors, trim and millwork are new. The plumbing system and drains are all new. The furnace and air conditioning system is new…

33Unlike the letter from W.B., the respondent consented to the admission of this evidence and did not dispute its contents with the exception of a concluding sentence in which the author offered an opinion on one of the disputed issues before the Tribunal.

Tarion’s Investigation

34Ian Bulloch (‘I.B.’) has been employed with Tarion for twelve years and has occupied his present position as a Manager for Eligibility since October 2022. During those twelve years, he also briefly worked for the HCRA for six months as a senior investigator. The eligibility team at Tarion that he manages reviews and conducts eligibility investigations for both contract homes and agreement of purchase and sale homes to determine if these dwellings are eligible for statutory warranty coverage. If Tarion investigates a home that was not enrolled, or was built by an unlicensed builder but determines that a home is eligible for coverage, the home is subsequently treated as if it had been enrolled by the builder and the warranty applies.

35I.B. testified that to make a decision on eligibility, the team generally relies upon a number of factors, including information provided by the individuals involved in the construction, sale and purchase of the home, as well as neighbours and others. They also heavily rely upon the four key HCRA definitions in the advisories for “home”, “builder,” “vendor” and “owner.”

36The HCRA advisory for “home” states the following:

The title of the ONHWPA has the word “new” in it. The ONHWPA deals with “new” homes. To be a “new” home, the dwelling that is being built must be more than just a renovation to an existing building. A particular construction may incorporate some pre-existing elements into the construction and might still be considered a new home for licensing and warranty purposes.

37The same advisory defines foundations, including a pre-existing foundation as follows:

A foundation is defined as an arrangement of various “foundation units” through which the loads from a building are transferred to supporting soil or rock. A “foundation unit” refers to any one of the structural parts of a permanent foundation, such as footings, foundation walls, block, piers and pier type foundations constructed of cement, concrete block or constructed of wood or any other approved material.

A foundation does not include non-load bearing partition walls, weeping tiles, damp proofing, waterproofing, and parging and does not encompass load bearing structures that form part of the above ground construction such as columns, beams, posts and above ground load bearing walls.

Special considerations apply if a dwelling is being constructed on all or part of a pre-existing foundation. Decisions on whether licensing is required and whether warranty coverage is available to the dwelling will depend on the circumstances.

38I.B. stated that the “special considerations” referenced above relate to guidelines that Tarion considers and applies. The so-called 40% Rule is one such guideline that I.B. believed to have been in existence since the 1990s, well before he was employed by either Tarion or the HCRA.

39To that end, the appellant relied upon a page from an older version of the Tarion website that included information similar to the three paragraphs listed above regarding the eligibility criteria related to homes built on pre-existing foundations. This older webpage also included the following information regarding the 40% Rule:

As a possible guide or consideration, if for example, a newly constructed dwelling in an existing neighbourhood is built upon a pre-existing foundation from a previously occupied structure and the pre-existing portion exceeds 40% of the footings as determined by linear measurement (footprint), the home may not have statutory warranty coverage. Ultimately, however, the question will be whether the pre-existing foundation elements are so significant as to indicate the whole home or project is not entitled to coverage.

40I.B. explained that this document would have been available on Tarion’s website between 2012 and February 2021. Moreover, he reiterated Tarion’s position that the 40% Rule was not a binding regulation but simply one of many factors to be considered in the total analysis of eligibility. After February 2021, Tarion has focussed more on the four definitions from the HCRA Advisories. As a result, although Tarion still considers the 40% Rule, it is no longer referenced on Tarion’s website.

41The appellant also relied upon the inclusion of the 40% Rule in Tarion’s Construction Performance Guidelines with respect to warranty coverage. The first edition of this document, dated April 1, 2003, was not submitted as evidence and I.B. could not state whether the 40% Rule was mentioned within its text. The second edition, issued December 1, 2003, indicated a broad exclusion that “warranty is also not applicable to…homes built on pre-existing footings or foundations.” However, the third edition, published on January 1, 2013, stated that “warranty is also not applicable to…homes built on pre-existing footings and/or foundations where the existing part exceeds 40% of the footings as determined by linear measurement (footprint)” and included a hypertext reference for further information. This passage was also included in the subsequent January 1, 2019 edition. The 2019 edition would have been in effect when the City granted the building permit to F.S. while the HCRA Guidelines would not be enacted until 2021. Although I.B. testified that it was his understanding that the 40% Rule had been in existence since the 1990s, he could not point to any document containing this provision prior to its inclusion in the 2013 Construction Performance Guidelines. The submitted editions would tend to suggest an evolution from absolute prohibition to a more contextual guideline, which on the respondent’s own evidence, permits for situations in which some minor pre-existing elements may not bar warranty coverage.

42The stated purpose of the Construction Performance Guidelines is for use by Tarion when determining whether or not a condition is covered by the statutory warranty and to decide disputes between homeowners and builders about defects in work or materials. I.B. explained that the eligibility team presently relies more on the HCRA Guidelines. Even before the HCRA Guidelines came into effect in February 2021, the eligibility team more often consulted the definitions in the Act and did “not often” consult the Construction Performance Guidelines, which were more often relied upon by warranty services. Nonetheless, since the HCRA Guidelines were not yet in place when F.S. renovated the property at 207 McAllister Road, they could not have represented the guiding benchmark for eligibility in situations where some pre-existing elements were retained.

43I.B. also emphasized that although both Tarion and the HCRA both utilize common definitions and guidelines, these standards do not necessarily provide guidance for absolutely every scenario since each eligibility situation is different. As a result, Tarion approaches each investigation on a case-by-case basis, using the definitions not as “hard and fast rules,” but more as guidelines.

44Tarion was only marginally more successful than the appellant in its efforts to obtain useful information from F.S. After several telephone calls and a number of text message reminders, Tarion was able to obtain only five photographs taken of the property at unknown points during the renovation process. Although none are dated, these images show that the bungalow roof had been completely removed and the formings for the new footings had been excavated and were ready for concrete to be poured. Framing for the added foyer was also being built in front of the original brick at the front of the house and footing for the extension at the back of the house were being installed. A section of the original foundation, likely in the basement, was also photographed. I.B. acknowledged that he did not know if F.S. later demolished this section of the foundation or at what point in the framing process this image was created. Although on September 9, 2022, F.S. offered to provide more documents and photographs of the back of the house, none were ultimately ever provided.

45I.B. also believed that he recalled the gist of a telephone conversation with F.S. in which F.S. explained that he had not enrolled the home because he had originally built it for himself but his plans had changed. The details of that call were never reduced to writing and I.B. was uncertain when or even if the conversation actually occurred. As a result, the probative value of this statement for the truth of its contents is rather low. There was also no evidence submitted whether a similar “change of plans” applied to the duplicate house on De Quincy Boulevard or who ultimately owned that home. As the parties substantially agreed that Anlif represents itself as being in the business of selling homes, it is more likely than not that F.S. purchased 207 McAllister for the purpose of resale.

46In any event, the information from F.S. was insufficient for a determination on eligibility. However, although I.B. described the eligibility determination as a contextual analysis, inclusive of many pieces of the puzzle, he stated that the three most significant factors relied upon in this case were the pre-existing foundation, the exterior walls and the building permit for renovation.

47Consequently, Tarion rejected a number of other potential sources of information. For instance, the eligibility team opted not to interview the real estate agent, the contractors or any neighbours to the property with respect to how much of the pre-existing structure F.S. actually retained. Despite his initial testimony that any of these sources would represent relevant “pieces of the puzzle,” under cross-examination, I.B. dismissed the notion that realtors, neighbours or contractors could have offered any useful information and conceded that Tarion does not generally interview any of these groups, at least not with respect to warranty eligibility. Although the appellant stated that the real estate agent had advised her that the home was new, I.B. cautioned that the context of this information is important. Rather than serving as a significant factor regarding eligibility, the inclusion of this question in a standardized Tarion witness statement is intended to assess whether the home had been occupied prior to purchase, a factor not contested in the present case.

48Similarly, the realtor’s marketing language that described the home as “brand new” was irrelevant to Tarion’s analysis, as was the CRA’s determination that the home qualified for the HST rebate since the CRA relies on an entirely different assessment.

49While I agree that neighbours may not have been able to provide more than unqualified anecdotal observations on the renovation and realtors may lack specific knowledge of the construction, the same does not necessarily apply to the contractors who actually worked on the project. Given that the five undated photographs provided by F.S. did not clarify the timeline or details of the construction, the direct evidence of contractors who carried out the renovations would seem potentially relevant since the later engineering investigation determined that most of the pre-existing portions of the bungalow had been sealed behind finished walls by the time the City concluded its inspection process.

50On January 16, 2023, the respondent issued its original Decision Letter, denying warranty coverage on the following grounds:

The home is not eligible for warranty coverage because it is not “new”. Specifically, the home was constructed as a renovation or addition to an existing home originally constructed in or around the 1950s. Significant portions of the original foundation and first-floor exterior walls were kept when the home was renovated into its current state. Similarly, the home contains pre-existing foundation and wall elements of a structure that were “previously occupied”. As warranty eligibility requires a “new” and “not previously occupied” home, the subject home is not eligible for coverage.

The Building Permit

51Given I.B.’s evidence that the three most significant factors relied upon in this case were the pre-existing foundation, the exterior walls and the building permit for renovation, it is worth considering the evidence for each in more detail.

52With respect to the building permit, Tarion was selective with respect to the information upon which it relied. I.B. noted that Tarion does not consider whether or not the checkbox on the building permit application indicating whether the statutory warranty applies has been checked in its eligibility analysis and added that this question is often left blank on building permit applications. As some municipalities include this query while most do not, I.B. testified that this is not a factor considered in Tarion’s eligibility analysis. Although he was unfamiliar with the municipality’s assessment criteria, he agreed he would not have characterized the work carried out at 207 McAllister Road as a “small renovation” as it was coded on the building permit application.

53The building permit application described the project as a “small residential project” involving a “proposed second storey addition, rear and side two storey addition with integral garage, deck and basement walkout on the existing one storey single family dwelling.” The application also included a code selected to indicate a “small renovation” rather than a new home construction. As with other documents and information received, I.B. described these descriptions as “a piece of the puzzle” rather than determinative of eligibility.

54Tarion obtained a copy of the inspection history of the house from the City, which indicated that interior and exterior inspections were completed on October 5, 2021. An occupancy permit was granted shortly thereafter. I.B. recalled making several telephone calls to the building inspector and his supervisor as part of Tarion’s investigation but was unsuccessful in contacting either of them; he did not specify the dates or number of these calls. There was no indication that he or anyone else at Tarion made any other attempts to contact the inspectors or through another method of communication such as email. It is worth noting that the building inspector, J.B., was apparently not completely elusive since W.B. was able to discuss the renovations with him according to his letter.

55As a “piece of the puzzle,” I find that the building permit and application represent unreliable evidence as the builder deviated substantially from the planned “renovations” as set out in the application. F.S. represented the changes to the house as a small renovation involving comparatively minor additions to the existing house. But the house as built is what matters, not what F.S. planned or represented to the City in order to secure the permit. The 4,296 square foot house sold to the appellant in 2019 was certainly neither a mere addition to the original intact structure nor the “Bungalow of Theseus” with most if not all of its parts updated with newer materials. Rather, the home that was ultimately constructed on the lot at 207 McAllister Road represented a substantially new building that involved the near complete demolition of the previous structure. The percentages of retained foundation and exterior walls ultimately represented largely token elements and have been almost fully subsumed by the new construction.

56As a result, while I agree that the building permit and application represent relevant pieces of the puzzle, they should be accorded little evidentiary weight given that these documents offer a misleading portrait of the actual work completed and minimize the extent to which the original bungalow was replaced by a substantively different building.

The Engineering Report

57Tarion retained UL Business Solutions (‘U.L.’) to complete a review of the documentation provided and conduct a site visit to confirm the percentage of pre-existing foundation walls compared to the current footprint. The company was not retained to determine warranty eligibility as this remained Tarion’s responsibility.

58Talina Tajerian (‘T.T.’) is a senior engineer employed by UL with extensive experience investigating building envelopes and construction of various types of buildings, residential and otherwise. She was qualified as an expert engineer at the hearing.

59On December 2, 2022, T.T. attended at the house and conducted a visual inspection of the site during which she referred to the plans and took numerous measurements. While the appellant and W.B were present for T.T.’s inspection, no one from Tarion attended. I.B. explained that since the objective of the review was to obtain an impartial expert opinion, there was no need to send someone from Tarion to oversee the inspection. In drafting her report, T.T. referred the 2016 architectural designs, the building permit, revisions for the front foyer wall and front bay window and the December 19, 2019 zoning approval from the City. She reasoned that the original bungalow had been built in the 1950s based on its architectural style, which was typical of the dwellings in the area.

60In the completed house, only a small section of the original brick wall was retained at the front of the house, visible on either side of an added bay window. In addition, T.T. was able to observe some portions of the original brickwork in the basement and a small section at the side of the house, the latter not included in the photographs in her report. However, the majority of the pre-existing elements were no longer observable and may or may not have been retained as indicated by the drawings. The architectural drawings for the finished home were marked as “not as-built and may not represent the final completed construction.” In her report, T.T. highlighted several deviations from the plans in red. There is no existing interior wall in the basement and the drawings referred to separate structural drawings that were not provided to T.T. As well, an area in the basement designed to accommodate the furnace and its ducting was observed to be larger than that described by the drawings. T.T. deducted this difference from the total existing remaining foundation walls. Similarly, she could not verify the structural contents of a proposed storage area, a cold cellar and closets in the basement as this part of the house as built deviated significantly from the drawings.

61T.T. acknowledged that because the exterior and interior walls were fully finished within the first floor level and the cladding was fully replaced, no existing exterior walls were viewable. As a result, she could not verify if any of the other marked existing foundation walls on the drawing now enclosed behind the finished walls remained. I.B. noted that it would have been unreasonable for the company to tear out any of the finished walls to confirm whether or much of the pre-existing foundation walls had been retained.

62Ultimately, T.T. provided the following calculations with respect to the percentage of pre-existing foundation in her report:

The original house footprint makes up 38.41% (<40%) of the new footprint.

The remaining original foundation wall lengths make up 69.13% of the original house foundation wall lengths.

The remaining original foundation wall lengths make up 36.28% (<40%) of the completed new foundation wall lengths. [Emphasis in original]

63She also determined that the substructure of the original bungalow’s exterior walls that were maintained represent 8.27% of the home’s exterior walls.

64T.T. acknowledged in her report that during construction, some of the existing walls may have been deemed unsafe and removed based on the onsite structural engineer’s recommendations. This may or may not have been recorded since part of the as-built set of drawings were not provided to her. As a result, the true percentage of pre-existing foundation in the present structure may be lower than the numbers listed above. She acknowledged that the above percentages are premised on unverified assumptions that portions of the pre-existing foundation wall were retained as stated in the drawings. Despite the numerous deviations between the plans and the house as built, T.T. testified that there was no reason to doubt that the pre-existing elements were not present behind the finished walls. The appellant did not specifically contest T.T.’s calculations or submit any calculations of her own.

65Although T.T. denied that the 40% Rule had any bearing on her analysis, she acknowledged an awareness of this guideline and offered no other explanation for her reference to the first and third percentages at paragraph 54 above as being less than 40%. Although she testified that the inclusion of “<40%” was included simply to note the nearest round number above the calculations, significantly, she opted not to mention that 69.13% is less than 70%, a number with no significance to Tarion’s eligibility analysis. Despite her apparent reluctance to associate her calculations to a possible threshold that Tarion may consider with respect to warranty eligibility, I find on the balance of probabilities that these references are intended to highlight the two percentages in relation to the corresponding upper limit for eligibility.

66However, T.T.’s apparent awareness of the purpose to which Tarion would likely put her findings does in and of itself not equate to evidence that she was influenced by Tarion’s position that the home was not eligible for coverage, particularly as two of her three calculations are below the 40% threshold.

67T.T. submitted her report on December 22, 2022. Although the email that accompanied its submission was labelled a “draft,” T.T. denied any subsequent additions or deletions to the report as submitted. She denied being asked by anyone to change any part of the report.

68The calculations in T.T.’s report would appear to support the appellant’s position that the original house footprint and foundation wall lengths accounted for less than 40% of the new house and the home would therefore not be barred from warranty coverage pursuant to the 40% Rule. However, Tarion relied upon other factors, including the definitions of “owner,” “vendor” and “builder” as the basis of its position that the house is not substantially new and therefore not eligibly for warranty coverage.

Is the home a new home?

69In light of all of the evidence, I find that the home is a new home.

70Despite its title, the Act does not define a “new home.” Section 1 does however define “home” as follows:

“home” means,

(a) a self-contained one-family dwelling, detached or attached to one or more other by [a] common wall;

(b) a building composed of more than one and not more than two self-contained, one-family dwellings under one ownership;

(c) a condominium dwelling unit, including the common elements, or

(d) any other dwelling of a class prescribed by the regulations as a home to which this Act applies,

and includes any structure or appurtenance used in connection therewith, but does not include a dwelling built and sold for occupancy for temporary periods or for seasonal purposes; (“logement”)

71In February 2021, the HCRA assumed responsibility for licensing and regulating home builders and vendors of new homes under the New Home Construction Licensing Act, 2017, S.O. 2017, c. 33, Sched. 1. 21 (the ‘NHCLA’). Section 1 of the NHCLA provides a definition of “new home”:

“new home” has the same meaning as “home” as defined in section 1 of the Ontario New Home Warranties Plan Act

72The HCRA advisory states that the Act deals with “new” homes. To be a “new” home, the dwelling that is being built must be more than just a renovation to an existing building. However, a particular construction may incorporate some pre-existing elements into the construction and may still be considered a new home for licensing and warranty purposes.

73The other definitions in the Act relevant to this appeal are those for “builder,” “owner” and “vendor”:

“builder” means,

(a) except in relation to a residential condominium conversion project, a person who undertakes the performance of all the work and supply of all the materials necessary to construct a completed home, whether for the purpose of sale by the person or under a contract with a vendor or owner, or

(b) in relation to a residential condominium conversion project, a person who undertakes the performance of all the work and supply of all the materials necessary to construct a completed home in the project, whether for the purpose of sale by the person or under a contract with a vendor or owner; (“constructeur”)

“owner” means a person who first acquires a home from its vendor for occupancy, and the person’s successors in title; (“propriétaire”)

“vendor” means,

(a) except in relation to a residential condominium conversion project, a person who, on the person’s own behalf, sells a home not previously occupied to an owner and includes a builder, as defined in clause (a) of the definition of “builder”, who acts as such under a contract with the owner, or

(b) in relation to a residential condominium conversion project, a person who, on the person’s own behalf, sells a home in the project to an owner and includes a builder, as defined in clause (b) of the definition of “builder”, who acts as such under a contract with the owner; (“vendeur”)

74These definitions were reproduced in the HCRA’s definitions for each term with interpretive guidelines for consumers and the public.

75It is also worth remembering that the 40% Rule only addresses the maximum percentage of foundations retained and the parties agreed that some small amount of the exterior wall substructure was also recycled from the prior bungalow, as confirmed in T.T.’s report. As a result, the analysis of whether the home may still be deemed “new” must consider of all of the retained components.

76In Tarion Warranty Corporation v. Kozy, 2011 ONCA 795 (‘Kozy’), the Ontario Court of Appeal considered the definition of the word “builder,” which is much more expansive than the definition of the word “vendor” and applied a contextual reading of the definition with other provisions of the Act, in keeping with the spirit of its consumer protection purpose. In Kozy, the respondent was retained to construct a new home on the owners’ property. He performed most of the construction work, but the owners added fireplaces and were responsible for installing the well and septic system. Mr. Kozy did not register as a builder under the Act. The Court held that the Act requires that a broad and liberal approach be taken to interpreting the meaning of the term “builder” in order to reflect the remedial purpose of the Act.

77By contrast, in the present case, the appellant did not conduct any part of the construction and the pre-existing elements were obtained by F.S. when he purchased the lot in 2018 along with the rest of the bungalow that was removed during the construction project. As a result, this is not a situation of an owner-built home as contemplated by such cases as Kozy, JRC Developments Ltd. v. Tarion Warranty Corp., 2010 ONSC 6205, [2010] O.J. No 5089 (‘JRC’) or R. v. Segal, 2006 ONCJ 80, [2006] O.J. No. 1034 (‘Segal’).

78As the respondent acknowledges, in the case of an owner-built home the courts have recognized that an owner may supply some new construction to the home, without disqualifying the contractor as a “builder,” depending on the nature of control and essential elements supplied by the owner. The rationale for this compromise is reading: (i) the definition of “builder” that refers to “all the work and materials”; alongside (ii) the warranty exclusion under subsection 13(2)(a) for “defects in materials, design, and work supplied by the owner.” The courts concluded that an owner must be able to supply some degree of work and materials without disqualifying the “builder.” In each of Kozy, JRC, and Segal, the work and materials supplied by the owner were new. In such situations, subsection 13(2)(a) of the Act would preclude coverage if the owner, i.e. the homeowner, supplied the materials that contain a defect. However, the Kozy case is important for its confirmation of the liberal interpretation of the definitions in the Act and the contextual analysis of eligibility in accordance with the remedial purpose of the legislation.

Has the Definition of Vendor under the Act been Met?

79The respondent interprets the definition of “vendor” to preclude the supply of any work or materials from another structure that could have been occupied, in this case the remains of the bungalow. Since parts of the foundation and exterior wall components from the bungalow that remain in the home were previously occupied, the respondent submits that there is no “vendor.”

80In 5253 ONHWPA (Re), [2009] O.L.A.T.D. No. 176, the Tribunal dealt with an eligibility appeal regarding a home that suffered a major fire and was subsequently rebuilt. The fire consumed the entirety of the framing, but the original concrete foundation footings and slab were discovered to be sound and reusable. The home was reconstructed by a contractor and at least 90% of it was new construction. One of the owners was involved in a material portion of installing new electrical, plumbing, and heating work and materials. The Tribunal found that on the above facts, there was no “vendor” or “builder” and consequently the home was not eligible.

81Similarly, in Strassler (1993), O.C.R.A.T.D, Decision Order at page 485, the Ontario Commercial Registration Appeal Tribunal (a predecessor of this Tribunal) dealt with an eligibility appeal regarding a home that was constructed on foundation walls of an older building. The warranty program took the position that the home was not eligible for coverage under the Act because, among other reasons, the home included pre-existing foundation walls. Although that tribunal held that the home was ineligible for coverage as it included too many units under one ownership, it also considered the definition of “builder” and stated at pages 492 to 493:

I should also deal with the issue of the incorporation into the building of the old foundation walls from the previous building on the property…. While one may argue that the Legislature should have extended the coverage to all new buildings incorporating part of old ones on the basis that if a builder is to use part of an old building he must take the responsibility of warranting it sound for the purpose, this is not the question before the Tribunal. The question is not what the Legislature should have said, but rather what did it say? I have come to the conclusion that a plain reading of the words used restricts the definition of a “builder” for the purpose of this Act to one who builds the whole of a new home and does not include one who incorporates in it any significant part of some other building.

82As the appellant noted, this line of cases, including Stathokostas (Re), [1998] O.C.R.A.T.D. No. 28 and Buchanan (Re), [1994] O.C.R.A.T.D. No. 78, were decided during earlier more restrictive legislative landscape that predated the allowance of some portion of pre-existing materials in reconstructive projects.

83The respondent relies upon a strict reading of the definitions, which unlike the interpretive guidelines, are binding. However, a plain reading of the definition of a “builder” suggests that this the involvement of a person falling under this definition is not required for a home to be eligible, except for situations involving a contract home where the “builder” acting under a construction contract with an owner of land is deemed to be the “vendor.” Contract home situations are distinct from homes sold via an agreement of purchase and sale. The case at bar involves a home sold via the latter process.

84The restrictive wording in the definition of “vendor” limits its inclusion of the role of builder to one who contracts with the owner to build the home and excludes a builder who sells the home via an agreement of purchase and sale:

…a person who, on the person’s own behalf, sells a home not previously occupied to an owner and includes a builder, as defined in clause (a) of the definition of “builder”, who acts as such under a contract with the owner…

85While the meaning of “as such” is somewhat ambiguous in terms of whether this refers to the role of builder or vendor, some clarity regarding the Legislature’s intent may be found in earlier versions of this definition, such as the wording in use until October 31, 2017:

“vendor” means a person who sells on his, her or its own behalf a home not previously occupied to an owner and includes a builder who constructs a home under a contract with the owner;

86Although F.S. acted as a builder by engaging in the renovation project, he did not contract with the appellant “as such” to build the home. However, I do not find that this arrangement is fatal to the home’s eligibility or preclude his role as a vendor. If a home has not been previously occupied and is a new home, the role of the vendor in the sale of the home to the owner cannot be dependent upon the separate issue of whether the home contains pre-existing elements. Otherwise, the situation of a vendor who purchases an empty lot of land, builds a new home and sells it to an owner through an agreement of purchase and sale without any intervening occupancy would be excluded from warranty eligibility. This would lead to an absurd result, incompatible the consumer protection purpose of the legislation as it would exclude such common situations as the sale of new finished homes in planned subdivisions from warranty eligibility. The wording of the present definition is likely intended to exclude buyers who renovate houses for later sale for new home warranty. Although F.S. allegedly stated to I.B. that he purchased 207 McAllister Road for himself, as noted above, on the balance of probabilities, the evidence does not support this proposition as his company Anlif is in the business of building new homes for the purpose of sale and he has built at least one other home in precisely the same manner.

87Although the definition of vendor includes a builder who acts as such under contract with the owner, the only mandatory element of a vendor is that this person “sells a home not previously occupied to an owner.” Since at the time that F.S. entered into an agreement of purchase and sale with the appellant, the work on the home was substantially complete and the appellant was not obliged to carry out any further construction. As a result, in the present case, F.S. served solely as a vendor and not a builder. Consequently, the three mandatory elements of subsection 13(1) of the Act are all included.

88Tarion’s restrictive interpretation of the definitions above is also incompatible with its own evidence in three ways. First, the only guideline available from Tarion published at the time of both the construction and the purchase of the completed home was the revised Construction Performance Guidelines from 2013 through 2019 which set out Tarion’s revised approach to the use of pre-existing foundation components from the strict prohibition of December 2003 and earlier to the more permissive and contextual approach of 2013 and following. Although I.B. dismissed these guidelines as relevant only to disputes over workmanship, it cannot be overlooked that they represented the only written statement from Tarion to the consumer on warranty eligibility where a “new home” includes some portion of pre-existing elements.

89Second, none of the definitions including that for a vendor specifically exclude the situation before me. While much of the case law addresses situations in which an owner provides some lesser portion of the work and materials after purchase, none exclude a home with some elements of an earlier structure from falling under the coverage of a new home within the meaning of the Act and the NHCLA of a new home. The definition of builder, which is included in the definition of vendor, does not specify a single or specified source for the “materials necessary to construct a completed home.” This wording does not limit the source of such necessary materials wholly to new supplies though this may well be the most immediately intuitive example.

90As a result, I find no reason in the Act why a vendor cannot include a builder who supplies materials from a prior structure as part of the new home. This would be functionally no different from a builder who uses used or repurposed materials in the construction of a new home for conservation purposes. That the used parts are already in place should have no bearing on the fact that the builder purchased them and supplied them in the construction of the substantively new home.

91Third, to exclude the home from eligibility on the basis that the repurposed materials were used in a different structure would not be in keeping with the consumer protection and remedial purpose of the Act. Although most of the foundations and exterior substructure in the home purchased by the appellant were new, F.S. apparently found that some of the existing elements could be repurposed. It would seem both unreasonable and wasteful to expect him to demolish and replace these few reusable elements simply to render the end product into a fully “new” structure.

Was the Act generally intended to cover the appellant’s situation?

92The Act was generally intended to cover the appellant’s situation.

93The alternate question is whether the Act is generally intended to bar eligibility based upon the existence of pre-existing elements. No such prohibition is found anywhere in the Act. In the absence of such a prohibition, it is reasonable to conclude that the Act was intended to include such a situation. The respondent emphasized that the so-called 40% Rule is not a “hard and fast rule” but more of a guideline. I agree – despite its colloquial label, this is simply a metric intended to provide guidance in interpreting the legislation. Had the Legislature intended to outright exclude homes containing more than 40% of pre-existing elements or any other proportion from a statutory definition of a “new home,” it would have done so.

94Tarion takes the position that the 40% Rule, like all other factors, is simply a piece of the puzzle or one of many elements that should be considered in the overall eligibility analysis. This necessarily promotes a contextual approach to the question of whether a home that includes elements from an earlier dwelling in its completed structure. This also invites a case-by-case analysis as I.B. emphasized. However, such a contextual analysis requires consideration of all of the relevant factors, rather than selective emphasis on factors that may align with a preferred outcome. To that end, the absence of evidence that could have been assimilated into the analysis, such as information from contractors, the building inspector and even the neighbours and realtors is relevant and contributes additional pieces of the same puzzle with varying levels of probative weight.

95The guidelines referenced by both parties are simply that – interpretive tools to allow consumers and others to interpret the purpose and intent of the legislation. As a result, the evolution of the Tarion’s position in the Construction Performance Guidelines on pre-existing elements from a blanket exclusion to a more nuanced assessment of the substantial proportion of such elements in the finished structure signals a move to a contextual reading of the definitions that permits possible inclusion of such homes under warranty coverage on a case-by-case analysis.

96Although I.B. takes the position that the Construction Performance Guidelines are largely irrelevant to the eligibility analysis, this perspective is unreasonable as the text of these passages, as published by Tarion, directly address the issue of eligibility. In the landscape prior to the HCRA definitions, this was the only confirmed written guidance on this issue published by Tarion. It would be wholly unreasonable to conclude that the inclusion of this “rule” in the Guidelines after 2013 was either arbitrary or should be disregarded. Rather, I find that the appearance of this rule was intended to reflect the product of a changing perspective on this issue from Tarion and that the public should be permitted to rely upon this position. That this change represented a relaxed shift from the general prohibition in the second edition onward must be taken as significant and something Tarion purposefully intended to communicate to consumers.

97Lastly, the proportion of pre-existing elements in the house purchased by the appellant are very minor and may be even less than the percentages as calculated by T.T. Unlike many of the cases cited, including Kozy and Chopra, the retained elements comprised a very small percentage of the new home, unlike a full basement, an electrical system or a sewer line. As a result, I find on the balance of probabilities that the elements that were repurposed in the new house are comparatively minor and insufficient to render the resulting structure previously occupied and simply a renovation.

98In light of all of the circumstance, I find that the home purchased by the appellant is a new home and eligible for warranty coverage.

ORDER

99Pursuant to s. 14(19) of the Act, I substitute my opinion for that of Tarion and find that:

i. In light of the substantial demolition and removal of the prior dwelling, the present home was not previously occupied.

ii. The home is a new home.

iii. F.S. represented a vendor withing the meaning of the Act.

iv. In light of its remedial and consumer protection purpose, the Act is generally intended to cover the appellant’s situation.

v. The home is entitled to warranty coverage.