New Home Warranty in Canada is modeled after a home warranty plan
which has been in existence in the United Kingdom since the mid
1930's. In 1973 the Housing and Urban Development Association of
Canada (HUDAC) conducted a study of the home warranty plan in place
in the United Kingdom.
At the time of the study, discussions were already underway between
the Housing and Urban Development Association of Canada (HUDAC),
Central Mortgage & Housing Corporation, now known as Canada
Mortgage & Housing Corporation, and the federal government agency
responsible for consumer affairs, concerning voluntary implementation
of a home buyer protection scheme as an alternative to government
imposed regulations on the home building industry or government
mandated and operated new home buyer protection schemes.
Delegates reached the conscionable decision not to proceed with
a national home warranty scheme as a National New Home Warranty
plan was not practical due to Federal and Provincial policies. HUDAC
recommended to its provincial councils that they give due consideration
to the implementation of a regional new home warranty program.
The Alberta Council of HUDAC created a task force, charged with
the responsibility of studying proposals for an industry, sponsored,
operated, and funded New Home Warranty Plan. The Plan would regulate
its members, and comply with any governing laws and regulations
in the Provinces. The structuring of the Program, all contracts
and documents and an official logo was licensed to all other provinces
for their use. By 1976, there were seven New Home Warranty Programs
incorporated; the result of thousands of hours expended by industry
builders, lawyers and others with expertise in areas of housing
and consumer matters, all without pay. VOLUNTEERS WITH A VISION!
Alberta, Saskatchewan, Manitoba, Ontario and Quebec incorporated
mono-provincial warranty programs while British Columbia included
the Yukon, and in the Atlantic area the provinces of Nova Scotia,
New Brunswick, Newfoundland and Prince Edward Island chose to incorporate
under one New Home Warranty Program.
Admittance into the industry sponsored warranty plans was opened
to all qualified residential builders and not just to those builders
having membership in the Canadian Home Builders' Association. This
universality provided the means to ensure that Canada's new home
buying public could benefit from New Home Warranty protection.
By the end of 1976, every region in Canada except the North West
Territories had a New Home Warranty Program. To ensure that the
mandate of the warranty schemes were met, positions on boards of
directors or special advisory boards were created to ensure all
parties having an interest in the fulfillment of the warranty obligation
had their expectations met. Parties represented include the Federal
Government (Canada Mortgage & Housing Corporation), provincial
government, mortgage insurers, mortgage lenders, consumers, builders,
lawyers and realtors. In this manner the New Home Warranty Programs
were able to ensure "corporate distancing" from its creators,
and to dispel allegations of conflict and bias in favour of builders.
It was then and still is important to New Home Warranty that its
business operations, practices and policies be vetted continuously,
thereby ensuring New Home Warranty Programs perform as expected.
To protect the interests of the new home buying public,
the warranty programs, with assistance provided by actuarial consultants
devised a complementary blend of (a) surety and (b) structural
warranty guarantees to reflect ever changing conditions in the
marketplace. Such guarantees have been modified from time to time
to reflect the ever-changing market conditions, and construction
(a) Surety coverage include:
- purchaser deposit coverage
- completion of deficiencies recorded at closing
(b) Structural warranty coverage:
the warranty period is five years which commences on date of possession
of the home and this date normally coincides with the date of occupancy
Structural warranty coverages are two fold in nature.
1) WORKMANSHIP & MATERIALS
In most cases this coverage is limited to one year, and in the
coverage period New Home Warranty ensures builder performance to
correct qualified defects which become manifest in the workmanship
and materials incorporated into the structure by the builders, his
employees, and sub-trades under contract to the builder. To qualify
defects alleged to occur in this warranty period, New Home Warranty
provides a quasi-judicial dispute handling process referred to as
conciliation. The findings and decisions contained in the conciliation
are binding on both the builder and the consumer. The dispute handling
processes are intended to resolve issues quickly, effectively and
without imposing any heavy financial burden which otherwise may
be experienced with litigation. Where the builder defaults, that
is for whatever reason he is unable or unwilling to carry out the
directions as referenced in "the award" published by the Conciliator,
the responsibility to do so then rests with New Home Warranty. In
the event that the builder ceases business, the responsibility to
perform the warranty obligations rests with the New Home Warranty.
2) MAJOR STRUCTURAL WARRANTY
In this warranty period, coverage is limited to the correction
of defects, which qualify as Major Structural Defects. That is a
defect which is having an adverse effect on the structural components,
or the load-bearing systems, or where a situation exists which,
if left unattended, could result in a failure in the load-bearing
systems of the structure.
The capacity of New Home Warranty to provide the guarantees
to protect the new home buyer is contained in a contract entered
into by the New Home Warranty with the builder, commonly referred
to as "The Agreement with Builder"
In the contract, the builder assigns to New Home Warranty the right
to administer the terms of warranty; that is to monitor the builders'
construction practices, to resolve disputes that arise between the
builder and his purchaser, to enforce compliance to dispute resolution
process findings, to carry out the terms of warranty should the
builder default or fail to carry out the terms of the warranty,
and within the limits of the warranty the builder undertakes to
reimburse the Warranty Program for any costs incurred to settle
bona fide warranty claims. The Warranty Programs have developed
processes to measure the technical skills of a builder applicant,
in addition to measuring a builder's financial capacity; that is
to finance the initial construction and to ensure that the builder
has sufficient funds available to service the home throughout the
warranty period. As such, the New Home Warranty Programs have taken
on the responsibility and have been recognized as the sole means
of builder vetting.
Once qualified and registered, a builder is required to provide
the benefit of warranty to all residential construction eligible
for warranty coverage. Further, Registered Builders are monitored
on an on-going basis, and are subject to annual renewal requirements
Housing eligible for warranty coverage varies widely from
one Warranty Program to another, from the singular eligibility which
is limited to housing built "for sale", to eligibility
of all housing including built-for-sale, rental occupancies, and
housing built by public/social agencies (commonly referred to as
OBJECTIVES OF NEW HOME WARRANTY
The objectives of New Home Warranty are to ensure:
- That housing is built to established building code standards
and with good building practice.
- Warranty commitments given by the builder, pursuant to the signed
agreement with New Home Warranty; are guaranteed by New Home Warranty.
- That consumer deposits taken by a builder are protected to the
limits established by the individual Programs.
- That consumer complaints are handled quickly and equitably.
- That positive industry action and consumer protection guaranteed
by New Home Warranty may result in greater confidence in the residential
construction industry, and a lessening in the need by government
to introduce legislation to regulate the residential construction
- That industry specific education and training courses are available
for technical and business skill improvement, and in this regard
the New Home Warranty Programs have become the principal sponsors
of education and training programs delivered to industry.
- That the philosophy and the terms of warranty will be discharged
by New Home Warranty without bias in terms of its relationship
with builders and consumers.
SUCCESS OF NEW HOME WARRANTY
- Recognition by the Canadian judicial system that the quasi-judicial
conciliation dispute handling processes is just and equitable.
- The primary success of New Home Warranty arises from the settling
disputes that arise each year between builders and their buyers,
where through the warranty dispute resolution processes the vast
majority of these issues are resolved without a claim against
the New Home Warranty.
- The success of New Home Warranty to be highlighted here must
be referred to as "the safety net" where for whatever reason the
builder cannot or will not honour his warranty commitments and
is deemed by New Home Warranty to be in default, the New Home
Warranty acts to ensure the complaint/claim is handled quickly
- Recognition by government, businesses involved in mortgage and
finance, real estate sales, law firms, etcetera, that New Home
Warranty has proven an acceptable alternative to consumer protection
legislation while simultaneously ensuring industry self regulation.
NATIONAL WARRANTY COUNCIL The business of New Home Warranty
is recognized as being provincial or in some cases regional in jurisdiction,
and within that framework New Home Warranty carries on its day to
day business dealing with matters arising from within its jurisdiction,
be they matters involving the interests of the new home buying public,
industry or government.
There are however, issues which go beyond the scope of any New Home
Warranty jurisdiction; issues which might be of national interest
or international interest. To ensure the New Home Warranty community
has the facilities in place to deal with these sorts of issues,
the National Warranty Council took form in 1977. Operating on consensus,
the Council is a federation of Canada's six New Home Warranty Programs.
Participation in Council matters has been provided to the Canadian
Bankers' Association the Canadian Home Builders' Association, Manufacturer's
Council, Canada Mortgage and Housing Corporation, all to encourage
discussion and consensus on matters of national interest.
The National Warranty Council also functions as a means whereby
the representatives of the six Warranty Programs can meet with representatives
of the federal government and the national lenders in an effective
forum for discussion and action.
The business of New Home Warranty and its relationships with consumers,
industry, government and other support businesses is dynamic. It
behooves New Home Warranty to be sensitive to the concerns and expectations
that are generally held perceptions, and to ensure that its business
is conducted with these sensitivities in mind. Year after year the
New Home Warranty Programs continue to demonstrate their effectiveness
in providing the best possible new home buyer protection, ensuring
industry self-regulation through established warranty monitoring
practices, and participating in industry and government programs
intended to improve housing quality and durability.
"New Home Warranty is dedicated to excellence in consumer service,
excellence in housing construction, and the perpetuation of industry
order through self regulation"