Star investigation: Homebuyers not getting full picture from protector Tarion
The corporation created by the province to protect buyers of new homes is keeping secret records of poor or incomplete work by builders, a Star investigation has found.
Tarion Warranty Corp. has recovered nearly $30 million from developers in the past five years for deficiences in new homes but won’t say who those builders are or what the problems were.
That means consumers looking to buy a new home can’t find out from Tarion which builders were on the hook when the warranty program — following one of its key mandates — stepped in to complete work or fix problems after homeowners complained.
In a series of responses to questions from the Star, Tarion said it does not have to reveal the records because it already publishes a lot of information online, including a database of licensed builders, a list of developers who have had their licences revoked, and names of those prosecuted for illegal building.
“Whether or not we’ve recovered money from a builder can be affected by so many factors that it’s not a useful information tool for consumers,” said Karen Mortfield, Tarion’s vice-president of stakeholder relations.
Here are three cases the Star found where buyers had deficiencies in their new homes, yet consumers looking up the builders’ records on Tarion’s online database would have no way of learning what the problems were:
- North Toronto luxury homebuilder JRC Developments Ltd. is the subject of a $42,000 lawsuit launched by Tarion to recover money it says it spent to correct construction deficiencies in a home. JRC denies responsibility and is countersuing Tarion for $51,000 in damages.
- Builder Georgian Homes installed faulty heating, ventilation and air-conditioning systems in a downtown Toronto townhouse complex and paid more than $50,000 in compensation to homeowners. Georgian says it did not intentionally install faulty systems.
- Homebuilder Picture Homes Millenium installed an uneven garage floor in Port Perry that became cracked, allowing water to seep in and form puddles when it rained or snowed. The builder maintained, in an interview with the Star, that the floor was built in accordance to Tarion guidelines but nonetheless repaired the problem. An independent engineering firm later recommended the floor be repaired again, so Tarion offered the homeowners a cash settlement.
Tarion does not receive government funding, so it is not subject to freedom-of-information laws or oversight by the Ontario ombudsman. Likewise, the salaries of its CEO, chief operating officer, eight vice-presidents, 17 directors (such as director of warranty services, director of builder relations) and 30 managers are not made public. The corporation reported that it paid out nearly $24 million in salaries and benefits last year.
The majority of Tarion’s revenue of $60 million in 2012 came from home warranty enrolment fees — between $385 and $1,500 depending on the price of the home — that builders sometimes pass on to purchasers.
New-homeowner advocate Karen Somerville says Tarion should be more transparent because the purchase of a home is the largest investment most people make.
“Consumers need reliable and complete information about a builder’s track record in order to make an informed purchase,” said Somerville, president of Canadians for Properly Built Homes, a national non-profit consumer-protection organization.
Somerville started the organization in 2004 after she and her husband say they found more than 140 construction defects — including more than 50 Ontario Building Code violations — in their new Ottawa-area home.
For several years, the group has been lobbying the provincial government to make Tarion more transparent and update the 37-year-old legislation it administers.
“With today’s technology and the information Tarion has accumulated about the builders’ performance, we do not understand why this problem continues,” Somerville said.
When a builder does not finish a job or fix a problem covered by warranty, Tarion will step in and complete the work or offer a settlement to the homeowner. Tarion will then invoice the builder to recover the cost of fixing the problem. Since 2008, Tarion has recovered nearly $30 million from builders, according to its latest annual report.
But Tarion does not make the names of these builders public or disclose how many are involved. Tarion’s mandate, in part, as stated on its website, is to “protect consumers when builders fail to fulfill their warranty obligations.”
Tarion does maintain an online database of licensed builders, which includes the number of times its inspectors found incomplete work and any compensation paid to homeowners, but it does not include specific information about the problems.
As a result, consumers have no way of knowing whether a problem was cosmetic, such as a poor paint job, or more serious, such as a faulty furnace.
In addition, the database lists only new homes by location going back three years, meaning consumers can’t get a full picture of where a developer has built homes in the past.
The corporation acknowledges its public builder profiles do not provide a complete picture of customer-service records.
“Our records, I think, are an indication. They’re not a perfect indication,” Tarion’s president and CEO, Howard Bogach, said in an interview with the Star. “We’re advocating that you do a lot more research in terms of picking your builder, doing references, talking to other people who have bought homes from those people.”
Bogach said posting more information on Tarion’s website was “something we can do a little more research with and talk about.”
Alex and Sharon Patinios had always wanted to build their own home and saved for more than 10 years to do so.
In 2007, they hired JRC Developments to build their home on a lot they purchased in North Toronto. Construction went seemingly according to plan and, in April 2008, the Patinioses and their three children moved in.
Tarion’s statutory warranty process allows new homeowners to submit within the first 30 days of possession a list of deficiencies they believe should be covered by the warranty. Similar lists can also be submitted on the first and second anniversaries of possession.
For their 30-day warranty claim, the Patinioses noted more than 200 items they regarded as deficiencies, including a crack in a front window, incomplete painting throughout the house and a missing exhaust fan in a bathroom.
They say their builder, JRC, was initially amenable to addressing the deficiencies and came to the house to make repairs over the course of several months.
But after 120 days, the time builders are given by Tarion to correct problems, Alex Patinios said it became clear to him JRC wasn’t going to finish everything.
The Patinioses requested an inspection, after which Tarion said 46 items were warranted.
The family challenged Tarion’s assessments at the Licence Appeal Tribunal, a provincial forum created to hear appeals of licensing decisions in government-regulated industries.
The Patinioses ended up making claims for what they believed were a further 200 deficiencies on their one-year and two-year anniversaries of possessions.
In the end, Tarion settled with the Patinioses for $35,520. Alex Patinios says he spent in excess of $50,000 in lawyer fees over the course of their ordeal.
“Many major deficient items were fixed or compensated only when we challenged Tarion at great cost to us in time and money,” said Patinios. “In all our experiences dealing with Tarion, it appears to us to be a system designed by builders for the protection of builders.”
Tarion says it is “puzzled by Mr. Patinios’s combative attitude toward Tarion.”
Mortfield said that all of the Patinioses’ warranty items were either fixed or paid out in a cash settlement.
“The vast majority of homeowners would be delighted by that outcome,” she said.
Tarion has filed a lawsuit against JRC in an effort to recover more than $42,000 for losses it incurred “in respect of the failure of the builder to perform certain obligations.”
The suit alleges that JRC “failed to ensure that reasonable skill and diligence was exercised in the construction of the home” and that JRC has not reimbursed Tarion.
JRC denies the allegations in its statement of defence and is countersuing Tarion for $51,000 in damages. JRC argues that because the Patinioses supplied much of the interior finishes and hired their own bricklayer, among other things, it did not build the entire home or supply all the materials, so is only responsible for portions that it worked on.
JRC owner Ross Cammalleri declined to comment when contacted numerous times by the Star.
Mortfield would not discuss the lawsuit and said that collection litigation “is a matter that should not be tried in the press or the Internet but rather should be permitted the due process of the courts.”
None of the allegations has been proven in court.
Despite the settlements paid to the Patinioses and the fact that Tarion is pursuing JRC for money it says it’s owed, there is nothing about the deficiencies on Tarion’s profile for JRC.
Tarion was created by the province in 1976 to administer the Ontario New Home Warranties Plan Act.
Buyers of new homes and condominiums in Ontario are entitled to Tarion’s warranty program that protects against loss of deposits, delays in occupancy, defects in work and material, and major structural problems, among other things. Tarion also regulates new homebuilders, sets construction performance guidelines and prosecutes illegal builders.
Critics of the warranty program have long called for Tarion to come under the jurisdiction of the Ontario ombudsman.
Former ombudsman Dr. Daniel Hill first suggested just that in 1986. The suggestion wasn’t taken up.
The current ombudsman, Andre Marin, used Tarion as an example last year while imploring MPPs not to let his office lose oversight of certain provincial agencies. Since 2007, his office has received 294 complaints about Tarion even though the corporation doesn’t fall under his jurisdiction.
“History has taught us that these organizations can be fraught with problems because their independence tells them that they’re really not governmental and they can act as if they’re not governmental,” Marin told the Standing Committee on Finance and Economic Affairs.
Critics also point out that Tarion’s board is dominated by the construction industry and argue that its composition should be changed to include more consumer advocates.
Tarion board chair Harry Herskowitz, a development lawyer, says there’s nothing unusual with the board’s makeup, given that boards of other regulatory organizations, such as the College of Physicians and Surgeons of Ontario and the Law Society of Upper Canada, also have a majority of members from their respective professions.
“The best people to govern or licence or regulate or oversee or manage how the industry is doing are builders themselves because they know what it’s like, they know what the higher standards should be,” said Herskowitz. “We have to balance consumer protection against commercial reality and we try to do that but always in the best interest of the homeowners, always.”
Former Tarion CEO Greg Gee says it was a challenge to get approvals from the board for consumer initiatives and funding during his tenure.
“If you’re a consumer organization, how can you have a 35-year history of a board that’s dominated by people that you’re licensed to administer and control? Well, that’s one of the conundrums that is at the root of Tarion,” said Gee, who was at the helm of the corporation between 2001 and 2008.
Consumer Services Minister Tracy MacCharles told the Star she has met with Tarion’s leadership and doesn’t see significant problems with the organization or the need for big changes.
“The system is operating relatively well — it is not perfect — but it is also not broken,” MacCharles said.
In December 2007, purchasers of a new townhome development, Watermark Lofts, on Toronto’s Gerrard Street, started moving in, only to encounter major problems with their heating, ventilation and air conditioning (HVAC) systems.
But consumers hoping to learn about the track record of the builder, Watermark Developments Ltd., won’t find it on Tarion’s online database. That’s because Tarion lists only builders that have current licences — Watermark’s licence expired in 2009.
Tarion told the Star Watermark is a division of Georgian Homes. The Star could not find records of the Watermark Lofts deficiencies under Georgian’s public profile on Tarion’s website.
Bev Craddock, one of the townhome owners at Watermark Lofts who experienced problems, wonders how consumers are supposed to know that her builder is a division of Georgian Homes if there is nothing on Tarion’s website to indicate that.
Just a day after taking possession of her new home, Craddock discovered she had no heat. A repair was made to her HVAC system but the lack of heat proved to be just the beginning of her problems.
During the winter, her upstairs bedroom would become sweltering while rooms on her lower floors would stay cold. She also had trouble heating her kitchen, living room and dining room to 22 C, as required by the Ontario Building Code.
“It was like living in multiple climate zones,” said Craddock, 54.
Despite numerous attempts to fix the problem by contractors for the builder, Craddock noted the issue on her one-year warranty form. A Tarion inspector — who had no training in HVAC systems — denied Craddock’s claim.
When Craddock appealed to the Licence Appeal Tribunal, Tarion conducted another inspection and found a temperature discrepancy of 14 degrees between the upper and lower floors, and agreed the complaint had merit.
Using her own money, Craddock hired an HVAC expert who suggested the system could be repaired for $60,000. Another expert hired by Tarion said the work could be completed for $20,000.
“The owner’s expert was recommending extremely invasive, extensive repairs that would have gone well beyond anything to do with the claim,” said Tarion’s Mortfield.
Tarion argued that because Craddock did not specifically mention problems with the air conditioning, any repairs should be limited to addressing heating issues.
The tribunal disagreed and said the system as a whole should be fixed. In the end, the tribunal awarded Craddock $40,000.
“In some cases we don’t get it right and we feel we let Bev Craddock down,” said Mortfield. “We should have been faster in finding a solution and we could have been more empathetic, understanding that she lived with a horrible situation for a very long time.”
Craddock’s next door neighbour, Cathy Pascuttini, experienced similar problems with her HVAC system and settled with Tarion for $35,500 last summer — more than four years after moving in.
“We strongly feel and believe Tarion is not there to protect the rights of homeowners,” Pascuttini said.
Georgian Homes president Anthony Maida said his company is “very cognizant that the purchasers had a problem and the equipment failed and we did our best to fix it.”
Maida stressed that builders rely on the expertise of contractors who install electric, heating and plumbing systems. He said Georgian Homes was told by Tarion to pay for half of Craddock’s award and all of Pascuttini’s settlement.
“The builder has the ultimate responsibility, but he has all these, I’ll use the word soldiers, that he hires and he’s relying on them, too.”
The company is now suing the HVAC system’s designer, manufacturer, distributor and installer for $2 million.
About a year after moving in to their new home in Port Perry, Ray and Sharon Smith noticed cracks in their garage floor that allowed water to pool when it rained or snowed. When the temperature dropped, the couple says the puddle would freeze, creating a slipping hazard.
They informed Tarion of the problem on their one-year warranty claim form and say they were told the problem was not warrantable but that they should work with their builder, Picture Homes Millenium, to rectify the issue.
The couple says two repair attempts by the builder failed, so they approached Tarion but were told that because they did not request an inspection after submitting their one-year warranty claim on the garage floor, their file was closed.
“It was intensely frustrating,” said Ray Smith, 54.
After the Smiths sent several complaint letters to Tarion, the corporation agreed to have an engineering firm inspect the garage floor. The firm concluded the floor was constructed on loose soil and recommended the concrete slab either be replaced or raised.
Finally, nearly three years after taking possession, the Smiths settled with Tarion for $7,000, which included compensation for scratches in their patio door glass. The Smiths then hired their own contractor using this money to fix their garage floor.
Lorne Stein, vice-president of sales and marketing at Picture Homes Millenium, told the Star that “minor unevenness in garage floors occurs occasionally.”
“In our view, there was no necessity for the homeowner to replace the garage floor. We met with two engineers retained by Tarion and a Tarion representative in the winter of 2008, at which time the engineers concluded the floor was acceptable and we did not hear anything further on this matter.”
Stein said his company has no record of being advised of any payment made to the homeowners by Tarion, nor any records of problems with the Smiths’ patio doors.
“We feel we handled the garage-floor issue properly and in a manner consistent with our advertising.”
Anyone looking up Picture Homes Millenium’s profile on the Tarion website would find a nearly flawless record. There is also no record of the builder having built homes in Port Perry, because Tarion only lists homes by location going back three years. (The development was finished in 2006).
Tarion says the settlement offered to the Smiths is not reflected on the builder’s profile because “the items were not warranted and the payment was a goodwill gesture made by Tarion.”
Smith says he thinks calling the payment a “goodwill gesture” masks any fault the builder may have.
“Whether or not the settlements Tarion pays are recoverable from the builder, a new homebuyer would still want to know a builder’s record as reflected by the number and costs of defects that had to be corrected.”
Kenyon Wallace can be reached at (416) 558-0645 or [email protected] .