Licence Appeal Tribunal File Number: 15729/ONHWPA

In the matter of an appeal from a decision of Tarion Warranty Corporation under s. 14 of the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 (the “Act”).

Between:

John E. Pugsley

Appellant

and

Tarion Warranty Corporation

Respondent

and

Somerset Gables Inc.

Added Party

DECISION

ADJUDICATOR:

Bruce Stanton

APPEARANCES:

For the Appellant:

John E. Pugsley (self-represented)

For the Respondent:

Marrissa Singh, Warranty Services Analyst

Catherine Longo, Counsel

For the Added Party:

Eonna Caslangen, VP Finance

Mark Klaiman, Counsel

Heard by videoconference:

July 12, 2024

OVERVIEW

1John Pugsley (the “appellant”) appeals from a decision letter issued by Tarion Warranty Corporation (the “Tarion”) dated February 13, 2024, denying his claim for delayed occupancy compensation under section 8 of O. Reg. 165/08 (the “Regulation”) under the Act.

2Somerset Gables Inc. (the “builder”) was added as a party to this proceeding at the case conference in this matter on April 30, 2024.

ISSUES

3The issues in dispute are:

i. Did the builder meet the requirements of s. 5 of the Regulation, the Unavoidable Delay provisions of the Addendum to Agreement of Purchase and Sale (“APS”), in unilaterally setting the Firm Occupancy Date?

ii. Is the appellant entitled to compensation from the guarantee fund for delayed occupancy?

RESULT

4The builder met the requirements of s. 5 of the Regulation in setting the Firm Occupancy Date. The appellant is not entitled to compensation for delayed occupancy.

ANALYSIS

The delayed occupancy warranty and the COVID-19 pandemic

5Tarion is a private, not-for-profit corporation designated by the Lieutenant Governor-in-Council to administer the Act and manage its warranty scheme. Each new home constructed in Ontario for sale or built by a builder who contracts to carry out all of the construction on the home on behalf of the owners must be enrolled with Tarion with an enrolment fee paid prior to the commencement of construction.

6Tarion does not operate as an insurance company. Instead, its role is to ensure that builders comply with the statutory warranties set out in the Act and its regulations. The warranties are those of the builder, not Tarion.

7This matter concerns the appellant’s claim for compensation due to the delayed occupancy of his new home. Under s. 13(1)(c) of the Act, every vendor or builder warrants to the owner (purchaser) such warranties as are prescribed by the regulations. Paragraph (a) of subsection 14(5.0.3) of the Act provides that, subject to the regulations, a person who entered into an APS to purchase a home from a vendor is entitled to receive payment out of the guarantee fund for a delay in occupancy.

8The Regulation requires that the elements of the delayed occupancy warranty be a part of the APS in the form of an addendum.

9Section 7 of the addendum states that “the Vendor (builder) warrants to the Purchaser (homeowner) that, if occupancy is delayed beyond the Firm Occupancy Date (other than by mutual agreement or as a result of Unavoidable Delay as permitted under sections 4 or 5), the Vendor shall compensate the Purchaser up to a total of $7,500.00 which includes up to $150/day living expenses for each day of delay until the occupancy date.

10Section 12 of the addendum defines an Unavoidable Delay as an event which delays occupancy (including a pandemic) plus any period of delay directly caused by the event which is beyond the reasonable control of the builder and that are not caused or contributed to by the fault of the builder. This definition sets up a two-part formula for calculating the number of days in the Unavoidable Delay Period (“UDP”).

11The respondent describes, in its guidelines to builders, the UDP as consisting of a “First Period”, being the number of days the Unavoidable Delay (the pandemic in this case) directly caused delays in construction, plus a “Remobilization Period”, the number of days in which the after-effects of the pandemic delay the progress of construction.

12A homeowner may claim compensation for delayed occupancy by filing with Tarion, and copy to the builder, up to one year after taking possession of the home.

13After a claim is made, the builder has 30 days to respond. If the builder does not pay the claim for compensation, the homeowner may seek conciliation from Tarion. Tarion then investigates the claim and issues a Conciliation Assessment Report (“CAR”). If the homeowner is not satisfied with the CAR, they can request a decision letter from Tarion.

14As noted above, the decision letter in this matter was issued by Tarion pursuant to s. 14(13) of the Act on February 13, 2024 and the appellant filed his appeal of the decision letter on March 11, 2024.

Issue 1: Did the builder meet the requirements of section 5 of the Addendum in unilaterally extending the Firm Occupancy Date?

15I find that the builder met the requirements of section 5 of the Addendum in unilaterally setting a new Firm Occupancy Date of February 22, 2021.

16The parties to the APS (appellant and builder) signed a Condominium Home Addendum (Tentative Occupancy Date) pursuant to section 8 of the Regulation on October 14, 2017 (“Addendum”) and later signed an amended APS, including a New Statement of Critical Dates (“NSCD”), on October 10, 2019. The NSCD forms part of the Addendum and declared a first Tentative Occupancy Date of April 30, 2020 and an outside occupancy date of October 31, 2020.

17The appellant testified that he received a notice from the builder dated January 31, 2020 advising that the previous Tentative Occupancy Date of April 30, 2020 was being extended to August 31, 2020 due to construction delays. The appellant testified that he does not take issue with the extension to August 31, 2020.

18This matter concerns section 5 of the Addendum titled Extending Dates – Due to Unavoidable Delay because the builder extended the Critical Dates without the consent of the appellant due to the COVID-19 pandemic (“pandemic”). Under section 5, the builder can unilaterally extend the Critical Dates associated with the Addendum provided it meets the requirements of section 5.

19The requirements are set out in subsections 5(b) and (c) of the Addendum:

i. Subsection 5(a) stipulates that the Vendor may extend Critical Dates by no more than the length of the UDP;

ii. Subsection 5(b) obliges the builder to provide written notice of the Unavoidable Delay, including a brief description of the reasons, and an estimate of the duration of the delay, within 20 days after the builder knows or ought reasonably to know that an Unavoidable Delay has commenced; and

iii. Subsection 5(c) stipulates that the builder provide notice to the purchaser setting out a brief description of the Unavoidable Delay, identifying the date of its conclusion, and setting new Critical Dates for occupancy, no later than 20 days after it knows or ought reasonably to know that the Unavoidable Delay has concluded.

20A pivotal issue in the appellant’s appeal is the builder’s calculation of the UDP.

Calculating the UDP is described in Tarion’s “Q&A on COVID-19 Pandemic: Unavoidable Delay & Critical Dates” information sheet issued to builders on March 17, 2020.

21As noted above, the UDP is the sum of the number of days in the First Period and the number of days in the Remobilization Period. Once a builder advises a purchaser of their Firm Occupancy Date pursuant to subsection 5(c), the Unavoidable Delay provisions of the Addendum allow no further extension of the Critical Dates. For this reason, Tarion advises builders to give careful consideration to calculating the UDP, including taking at least 30 days after the direct impacts (First Period) have concluded to determine a reasonable additional time for the pandemic after-effects (Remobilization Period).

22In the same information sheet, Tarion gives examples of pandemic impacts that could delay construction including shortages of supplies and materials, shortages and/or coordination of the workforce and labour, delays in regulatory inspections or approvals, and public health restrictions.

23Tarion’s instructions to builders regarding Unavoidable Delays were the basis for much of the builder’s instructions and communications to its purchasers, including the appellant.

24The appellant testified that after the pandemic was declared on or around March 11, 2020 he received several communications from the builder through to September 18, 2020 advising of construction delays due to the pandemic.

25For example, on March 26 the builder advised that pandemic related delays are estimated to be approximately 60 days. On June 2, the builder’s letter advised that the pandemic was continuing to have a significant impact on the supply of labour, materials, as well as necessary government inspections and approvals. On July 30, the builder advised that the pandemic effects were still evolving and it was in the process of evaluating those impacts to determine a Firm Occupancy Date in accordance with Tarion’s requirements. The builder committed to providing a Firm Occupancy Date by Labour Day weekend.

26On September 3, the builder wrote to the appellant to advise that it would commit to a Firm Occupancy Date by the end of the following week. The builder provided the appellant the Firm Occupancy Date on September 18, 15 days later. The Firm Occupancy Date was subsequently set for February 22, 2021.

27The appellant testified that the optimism in the builder’s notices, together with his observations of progress on the site and team members’ absence of concern about delays, left him with confidence that the August 31 Tentative Occupancy Date would be met.

i. He was encouraged by the optimistic tone taken in the builder’s notices between March and July 2020. While he acknowledged that they described the potential for pandemic related delays, he took notice of their being proud of the progress that was being made. The June 2 and July 30 notices stated, “we are making excellent progress”.

ii. Through his observations and discussions with members of the onsite construction team in June and July 2020, the appellant concluded that the August 31, 2020 occupancy would be met. He surmised, based on progress of other homes in the subdivision that there were few impediments to construction progress and that there seemed to be no impediment to construction crews going to and from the site. The appellant testified that he had no information on delays and on the contrary, construction team members seemed doubtful there would be any delays.

28The appellant submits that the builder did not provide sufficient evidence of the negative impacts of the pandemic. He directs me to Tarion’s COVID-19 Pandemic Worksheet: Low Rise Construction Delay Rationale for Each Home, dated March 17, 2020. The worksheet begins by declaring that it is a tool to assist in noting the necessary facts and rationale for delays that may occur due to the COVID-19 pandemic. At section 6 on page 3, it advises builders to “make sure they have written evidence of facts and rationale, including: Statements/Releases from trusted industry sources (e.g. ORSA); written contemporaneous notes, emails from vendor staff, professionals, advisors.”

29The appellant submits that the builder failed to meet the evidentiary standard set out in Tarion’s worksheet. He testified that the builder presented no evidence to support the UDP and no evidence of supply shortages or permit delays.

30The appellant testified that the evidence the builder did provide in support of the Unavoidable Delay was unconvincing. He directs me to an email from Greg Liness, the builder’s VP – Construction, regarding documents to help provide evidence of an unavoidable delay, dated July 15, 2020. The appellant notes that Mr. Liness describes the Town of Midland’s closing of operations on March 18, which led to a 2-month delay in obtaining garage permits, but then adds that “Inspection were also delayed but not in a measurable way”.

31The appellant testified that the “brief description” of the reasons for any Unavoidable Delay required in subsections 5(b) and (c) is not sufficient, that the builder ought to have provided greater detail and evidence to unilaterally support imposing a new Critical Date. He submits the builder’s failure to support the extension of the Firm Occupancy Date with evidence entitles him to compensation due to delayed occupancy.

32The appellant filed his claim for delayed occupancy compensation on January 28, 2022, having taken possession of the home on February 22, 2021.

33The respondent submits that the builder complied with its obligations under subsections 5(b) and (c) to unilaterally extend the Firm Occupancy Date. Marrissa Singh, a warranty services analyst with Tarion, testified that she investigated the delayed occupancy claim of the appellant and found that the builder was compliant with the Addendum. Notices were sent in accordance with section 5. The results of her investigation informed Tarion’s denial of the appellant’s claim.

34The builder submits that it provided evidence of delays along with its COVID-19 Worksheet, including disruptions to the Town of Midland building department inspections, a two-month delay in service connections across Highway 12, a 1.5 week delay due to a Ministry of Labour shutdown of the site, and evidence of delays in deliveries of materials due to COVID-19 related shortages (e.g. faucets and thermostats). It submits that despite the evolving circumstances of the pandemic, it met its obligations in the Addendum, the UDP was reasonable and based on Tarion’s guidance, and the appellant was able to take possession of the home on the Firm Occupancy Date (February 22, 2021) set out in its notices to the appellant.

35I find the builder met the requirements of section 5 of the Addendum in extending the Firm Occupancy Date to February 22, 2021.

36The Unavoidable Delay occasioned by the pandemic opened section 5 of the Addendum to the builder as a basis for unilaterally extending the Firm Occupancy Date.

37The builder sent notice pursuant to subsection 5(b) of the Addendum to the appellant on March 26, 2024, 15 days after the pandemic is said to have commenced, which included a brief description of the Unavoidable Delay and an estimate of the duration of the delay. The builder met this requirement.

38The builder sent notice to the appellant under subsection 5(c) of the Addendum on September 18, 2020. The builder met the requirement in subsection 5(c) because it wrote to the appellant on September 3, 2020 advising that it would have a Firm Occupancy Date in week ahead. The September 3, 2020 letter anchors the date by which the builder knew the Unavoidable Delay had concluded. The builder issued its calculations of the First Period and Remobilization Period in that September 18 notice within 20 days of knowing the Unavoidable Delay had ended, as subsection 5(c) of the Addendum requires.

39The September 18 notice specified the new critical dates as required. A brief description of the Unavoidable Delay had been provided in correspondence to the appellant on March 26, June 2, and July 30, attributing the delay to disruptions in the supply of labour and materials and availability of government services.

40The evidence before me, including delays due to a 1.5 week, Ministry of Labour shutdown of the worksite, a two-month delay in the provision of utility services under Highway 12, a two-month delay in garage inspections, and examples of supply chain shortages post-pandemic, provide an evidentiary basis to the brief descriptions provided by the builder.

41While I appreciate that the appellant was confident of the August 31, 2020 Tentative Occupancy Date being met, he agreed to the Addendum which sets out the framework allowing the builder to reset a Firm Occupancy Date in the event of an Unavoidable Delay.

42I find the appellant downplayed the reality of the pandemic effects in his evidence. The notices from the builder between March and July informed him of the likelihood of delays and the reasons for them, but his testimony suggests he gave more weight to his own observations of progress on the site, discussions with site workers, and the encouraging words in the builder’s notices. He cannot be faulted for remaining optimistic, but his optimism was not grounded by the circumstances that the builder and the building industry faced that were largely out of its control.

43A direct line of communication with the builder representative (rather than depending on the perspective of site team members) may have helped inform the appellant to have a full understanding of the circumstances of the Unavoidable Delay and how those circumstances would be impacting the delayed occupancy warranty.

44I find that the builder met its obligations and requirements to unilaterally extend the Firm Occupancy Date under section 5 of the Addendum.

Issue 2: Is the appellant entitled to compensation from the guarantee fund due to delayed occupancy?

45I find the appellant is not entitled to compensation from the guarantee fund due to delayed occupancy.

46As discussed above, Section 7 of the Addendum stipulates that if occupancy is delayed beyond the Firm Occupancy Date (other than by mutual agreement or as a result of Unavoidable Delay as permitted under sections 4 and 5), the builder must compensate a purchaser up to a total of $7,500.00 which includes up to $150/day living expenses for each day of delay until the occupancy date.

47Since I have found that the builder met the requirements of section 5 of the Addendum in setting the Firm Occupancy Date of February 22, 2021, and the appellant was able to take possession of the home on that day, the appellant is not entitled to delayed occupancy compensation.

48I find that the builder met its obligations under the delayed occupancy warranty, specifically section 5 of the Addendum in relation to an Unavoidable Delay, and therefore the appellant is not entitled to compensation for delayed occupancy.

CONCLUSIONS

49The appellant is not entitled to delayed occupancy compensation.

ORDER

50Pursuant to s. 14(19) of the Act, I order the following:

i. The respondent’s February 13, 2024 decision letter denying the appellant’s claim for delayed occupancy compensation is confirmed.

ii. The appellant’s appeal is dismissed.