Canadas Housing Construction System: Systems To Protect Consumers

Building projects are complex on-site manufacturing and assembly operations

, which usually face both time and budget constraints. It is usual to have minor defects that require repair or replacement. However, the limited scope of codes (safety, health, accessibility and building protection) means that they have little if any application to what is traditionally thought of as consumer protection. Industry has, therefore, developed a number of ways to respond to problems, and some have been made mandatory by governments.

Company Warranties

The standard warranty is one year from the date of substantial performance of the work. Longer periods may be specified in the contract documents for certain products and portions of the work, and longer manufacturers warranties are to be issued to the owner. Guarantees from product and equipment manufacturers vary, depending on the expected life of the product.

Insured Warranties (Voluntary)

Insured or third party warranty programs are used in the housing industry. They are required by law in some provinces, and are available on a voluntary basis in the rest of the country.

Under these programs, a third party corporation agrees to fulfill the home builders warranty to the homebuyer if the builder does not. The terms differ across the country, but normally include a one- or two-year full labour and materials warranty, plus coverage for major structural defects until at least the end of the fifth year. Some programs have additional coverage; some offer options, available for an additional premium.

Government-Required Warranties

In British Columbia and Quebec since 1999, and in Ontario since 1976, the provincial governments have legislation requiring some or all new homes to be covered by third party warranties or insurers. The Acts in these three provinces establish coverage, application, enforcement, penalties and appeals, plus criteria and provincial review of providers. They are quite different in their application, approach and definitions.

Bonds

A bond is a three-way agreement between the principal (usually the contractor), the obligee (usually the owner) and the surety company. In a performance bond, if the contractor doesnt perform the contract properly, the surety must remedy the default. Before issuing a bond, surety companies usually review a companys financial resources, staff, management performance and past experience. It can be very difficult for new or smaller contractors to obtain bonds.

Property Insurance

Normal property insurance is not intended to cover defects in construction. However, it does provide protection to the owner from the loss of property in cases of fire or other disasters.

Advice

Consumers who face problems and are unsure of their rights and obligations can consult legal specialists familiar with the construction system. Useful general information, advice and support is also available from organizations such as the Consumers Association of Canada. The Homeowner Protection Office in British Columbia has also published a guide for new homebuyers.

by: knock-knock

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