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Update on Tarion Warranty Claims

Do builders face double jeopardy on the Tarion Warranty? 


The Ontario New Home Warranties Plan Act  ("ONHWPA") is consumer protection legislation for new home buyers.  ONHWPA deems certain warranties with respect to the quality of materials and workmanship (the "Tarion Warranty") to be terms of any contract between a builder and a new home buyer.


Tarion is a non-profit corporation that is designated by the government to adjudicate claims by new home buyers regarding alleged breaches of the Tarion Warranty.  At the risk of oversimplifying, there are two stages to the Tarion claims process.  The first stage is the conciliation process.  If the parties cannot resolve their dispute amongst themselves, then the conciliation process ends when Tarion issues a ruling on the new home buyer's warranty claim.  The second stage of the Tarion claims process is the new home buyer's right of appeal to the Licence Appeal Tribunal.


Tarion does not have exclusive jurisdiction to enforce the Tarion Warranty.  The Tarion Warranty forms part of a contract between the builder and the new home buyer, and the Court system has concurrent jurisdiction to enforce the terms of a contract.  Therefore, a new home buyer can elect to make a claim to Tarion or it can start a lawsuit against the builder.  


Can a new home buyer do both?  Yes and no.     


Metropolitan Toronto Condominium Corporation No. 1352 v. Newport Beach Development Inc. is a 2012 decision of the Ontario Court of Appeal.  A condominium corporation made a claim to Tarion.  The condominium corporation lost at the conciliation stage, and it started an appeal before the Licence Appeal Tribunal.  Significantly, the condominium corporation abandoned its appeal to the Licence Appeal Tribunal before a ruling was made.  The condominium corporation then brought a lawsuit against the builder.  The builder brought a motion to have the condominium corporation's lawsuit struck out on the basis that the condominium corporation was bound by the outcome the Tarion claims process.  The Court of Appeal dismissed the builder's motion.  The Court of Appeal decided that a ruling by Tarion against a new home buyer at the conciliation stage did not bind the new home buyer or the Court in a lawsuit regarding a breach of the Tarion Warranty. 


Therefore, in the Metropolitan case the new home buyer was permitted to re-litigate a warranty claim that it had lost in the conciliation stage of the Tarion claims process.   


The outcome was different in the Gorscak case, summarized below.  


Gorscak v. 1138319 Ontario Inc. is a 2003 decision of the Ontario Superior Court of Justice.  The new home buyer made a Tarion claim regarding allegedly deficient brickwork.  The new home buyer lost at the conciliation stage and lost again on appeal to the License Appeal Tribunal. The new home buyer then brought a lawsuit against the builder seeking the replacement of all the brick.  The builder brought a motion for a stay of the lawsuit.  The Court granted the builder's motion and stayed the new home buyer's lawsuit.  The Court would not permit the new home buyer to re-litigate a warranty claim that had been already been ruled upon by the License Appeal Tribunal.  


The bottom line is that the Court of Appeal has permitted new home buyers two kicks at the can provided they abandon the Tarion claims process before the end of the second stage of the process.


The foregoing is for information purposes only and is not legal advice.  If you are interested in receiving more information, feel free to contact us.

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Edward Dreyer
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