Start thinking about Manitoba’s New Home Warranty Act

The Manitoba provincial government has proclaimed its (new) New Home Warranty Act and Regulation thereunder to come into force as of January 1, 2017. Although those to be affected will thus have the rest of this year to familiarize themselves with the new rules and requirements, it's not too early for those in the home building business (including both constructors and their financiers) to start making, or at least preparing for, what will be required of them under the legislation.

The following is an overview of the regulatory scheme:

1. In most cases, a builder is prohibited from building a new home unless:
   1. the builder is registered as a builder under the legislation; and
   2. a warranty provider has committed to providing a home warranty for the home in accordance with, and containing the undertakings required by the legislation.
2. In most cases, a warranty provider will be an insurer licensed to carry on business as an insurer under the Insurance Act.
3. All warranty providers – even insurance companies which are already licensed under The Insurance Act -- must additionally register as warranty providers under the Act.
4. If a builder constructs a new home and sells it to an owner without the builder arranging for the provision of a warranty to the owner, then the builder itself is deemed to have provided the required warranty to the owner.
5. Provision is made for aggrieved owners to make claims under their warranties and for the mediation of disputes.
6. Builders who fail to fulfil their obligations under the legislation are liable to prosecution with the maximum penalties being a fine of up to $300,000.00, imprisonment for a term of not more than three years, or both.
7. Additionally, the legislation provides for the imposition of administrative penalties on those breaching the legislation's requirements.
8. There are detailed specifications regarding what a new home warranty is to cover, set forth in both the Act and its Regulation.
9. Local governments are generally prohibited from issuing building permits for new homes unless and until the builder provides the permit issuer with proof that the builder has been registered under the Act and that a warranty provider has committed to issuing a warranty for the home.
10. The rights originally given to the first buyer from a builder continue to be enforceable against the warranty provider and/or builder by the first buyer's successors in title, subject to the coverage time limitations specified in or for the original warranty.
11. In addition to new self-contained detached or semi-detached homes, the legislation also applies to:
    1. residential condominium units and the common elements of a residential condominium regime;
    2. a manufactured home; and
    3. a multi-unit project;

however, hotels, motels, dormitories, residential camps, and, personal care homes are exempt. Also, builders of apartment buildings may apply for authorization to construct a rental apartment building without having to arrange for warranty protection.

The foregoing is a bare-bones summary, and persons interested in this matter would be well advised to study the Act and its Regulation in detail.

Builders will find it difficult to attempt to deflect the application of the new rules from their operations. In particular, note:

1. The Act makes it clear that builders, home owners and warranty providers are not entitled to contract out of the legislation's requirements, in whole, and generally speaking, even in part only; and
2. The Ontario Superior Court case of Tarion Warranty v 1518162 Ontario Inc. et al. (judgment released October 27, 2015) is instructive. Here, a builder refused to provide or honour a new home warranty and claimed that by its simply not registering as a builder under the Ontario legislation, the legislation should not apply to it. The court held that the builder was required to comply with the legislation, even though it had not registered. Additionally, the court held that the builder's sole shareholder, director and officer, being the "guiding mind" of the builder, was liable. In fact, the court stated that while both the builder and its sole shareholder "concede … that the alleged breaches of the Act occurred (and) they acknowledge that they violated the statute, they deny any legal responsibility for its consequences".

Given that the Act and its Regulation are obviously consumer protection legislation, it is unlikely that the government will change its mind and do away with the new rules. Some legislative "tinkering" and/or a delay beyond Jan. 1, 2017 as the effective commencement date may occur, but in all probability we will have the existing legislative regime - or something fairly close to it - in effect sooner or later. As initially stated, affected parties should prepare for this.

Edward D. (Ned) Brown is a partner with Pitblado LLP in Winnipeg.