How the New Regulation will Affect Buying or Selling Homes
Changes to the Act and Regulation enhance protection for homebuyers. Prospective purchasers, vendors and realtors should be aware of the following improvements:
- An owner builder must occupy the new home themselves for at least one year after obtaining an occupancy permit and are not permitted to sell or rent the new home during that one-year period. The owner builder is also not permitted sell a new home during construction “as is” without permission from the HPO.
- An owner-built home does not have the backing of a home warranty insurance company, unless the owner builder has voluntarily purchased a 2-5-10 home warranty insurance from a warranty provider. Owner builders will still be required to provide a disclosure notice, obtained from the HPO, to prospective purchasers within the first 10 years after occupancy. Subsequent purchasers are also obligated to provide a disclosure notice if they sell the home within the 10-year period. The disclosure notice will state that the home was built by an owner builder and whether or not there is a policy of home warranty insurance in place for the home.
- Owner builders who sell their home within the first 10 years are obligated to subsequent purchasers for defects in the new home during that 10-year period. The new legislation clarifies that an owner builder’s obligations under the statutory warranty are similar to the obligations of a Licensed Residential Builder under a policy of home warranty insurance. That is, two (2) years for material and labour, five (5) years for defects in the building envelope and 10 years for structural defects.
The statutory warranty enables subsequent purchasers to take legal action against the owner builder to correct defects as set out on the statutory warranty. There are some reasonable exceptions to the statutory warranty (for example, defects caused by someone other than the builder, natural disasters) and these are set out in detail in the Regulation.
New Homes Under Construction
- Under the new legislation, new homes that are under construction but not complete may not be sold (or offered for sale) unless the home is covered by home warranty insurance or exempt. This affects new homes that originally had home warranty insurance coverage but are de-enrolled for a variety of reasons including: cancellation of a builder’s contract, owner bankruptcy or cancellation of a builder’s acceptance by a warranty provider. Such homes may no longer be offered for sale or sold “as is”. Owners must contact the HPO for the Registrar’s permission, which may be subject to conditions, such as: that the home is sold to a Licensed Residential Builder to enroll with home warranty insurance. This ensures that a partially complete new home is not inadvertently sold without the protection of the legislation in place for a new homebuyer. The prohibition applies to new homes at all stages of construction.
Registry of New Homes
- There will be a searchable registry of new homes available to prospective purchasers on the HPO website. When a home built after November 19, 2007, is identified on the registry, a purchaser will be able to see whether that home is owner-built, exempt as a purpose-built rental or if it was built by a Licensed Residential Builder with a policy of home warranty insurance in place. Provided free of charge, the registry of new homes will be a valuable tool for the public and realtors, and will give homebuyers the confidence they need.
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