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CONSTRUCTION LAW UPDATE: The Meaning of Builder Under the Ontario New Home Warranty Plan Act

In Ontario, Tarion Warranty Corporation (“Tarion”) is responsible for administering the Ontario New Home Warranties Plan Act R.S.O. 1990, CHAPTER 0.31 (the “Act”) and is remedial, consumer protection legislation that primarily seeks to protect new home buyers from construction deficiencies and delayed closings.  To paraphrase from the Tarion website, ONHWP describes the mandatory responsibilities of those who build and sell new homes in Ontario and outlines the warranty coverage that builders and vendors are required to provide to new house and condominium purchasers.   However, the definition of “Builder” and “Vendor” can become skewed. Tarion Warranty Corporation v. Boros, 2011 ONCA 374 (CanLII) (“Boros”) is a recent case from the Ontario Court of Appeal that examines whether a person who undertakes to build a home for themselves but decides to sell it instead of moving into it, is required to be a registrant under Tarion.

In Boros, the Defendant built a house that he and his wife were intending to live in. Circumstances had changed and the Defendant could not sell his old house and therefore decided to sell the newly constructed home they built instead. His wife had entered into the agreement of purchase and sale and acquired the property under her name alone while it was her husband who was the person involved in constructing the house.   The wife also was the one who sold the newly constructed house.

Tarion charged the Defendant Husband under the following legislative offences:  Section 6: “no person shall act as a Vendor or a Builder unless the person is registered by the Registrar under this Act.”; Section 12: “A Builder shall not commence to construct a home until the Builder has notified the Corporation (Tarion) of the fact, has provided the Corporation with such particulars as the Corporation requires and has paid the prescribed fee to the Corporation.”  Under these offences the Court had to examine the language and definitions of Builder, Vendor and Owner, contained in the Act. “A “Builder” means 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; “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; and “Owner” means a person who first acquires a home from its vendor for occupancy, and the person’s successors in title.  The Defendant was neither a Vendor or Owner, so therefore the Court was left to determine whether he was a Builder under the Act and therefore subject to registration.  It is important to note that the penalties for the above offences carry very stiff penalties including up to $25,000.00 and up to one year in jail.

The Court found that the Defendant Husband was not a Builder as defined in the Act because in their view the test to determine if someone is a builder under the Act a person has to: (1) undertake the performance of all the work; and (2) supply all the material necessary to construct a completed home for the purpose of (1) sale by the Builder; (2) under a contract with Vendor; or (3) under a contract with an Owner.  In this case, while the Defendant Husband met the criteria of the first two parts, but he did not sell the home or was under any contract with a Vendor or Owner.  Under the Act, a Builder is someone who has to have the intention of selling to others either directly or through a contract.

In obiter, the Court sends a message to Tarion that it should change the definition of Builder under the Act if it intends on regulating all Builders regardless of what their intentions are.  In this case the couple was either lucky or shrewd enough to ensure that the Wife was the one who acquired and sold the home under her name alone while the Husband was the only one involved in the construction.  Whether or not they truly intended on living in the newly constructed home is unknown and a little suspicious because although the couple did provide evidence that they listed their old home, the listing expired one month after the acquisition of the new property and was never renewed at any material time.  Therefore it is clear that the couple was not actively selling their old home even though they claimed that their intentions changed when they could not sell their old home.  The Court was not concerned as to when the intention had changed but to the fact that they were able to establish that their intentions had changed at some point.