Legally Speaking - May 2014 (470)
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Legally Speaking (470, May 2014)

 

Number 470, May 2014

THE HOMEOWNER PROTECTION ACT: PROTECT YOUR CLIENTS AND YOURSELF!

Jennifer CleeLicensees who list, offer for sale or sell a home contrary to the provisions of the Homeowner Protection Act1 (the Act) face penalties up to $25,000 per offence ($100,000 for corporations) and/or up to one year imprisonment per offence. Licensees violating the Act also face negligence claims from clients and/or disciplinary action by the Real Estate Council of British Columbia.

The purpose of the Act is to regulate residential construction in BC to increase consumer protection and to improve home construction quality.2 The Act applies to all homes built after July 1, 1999, with or without a building permit. With the exception of new homes built under an “owner builder” exemption,3 the Act requires that all new homes must be built by a licensed residential builder who cannot build, offer for sale or sell a new home unless it is covered by new home warranty insurance by a qualified home warranty provider.

Owner builders need not provide new home warranty coverage from a third party warranty provider but are deemed, under the Act, to provide 2-5-10 warranty coverage. An owner builder cannot offer for sale or sell an owner built home within the first ten years after occupancy without first providing to any prospective buyer either an Owner Builder Declaration and Disclosure Notice (OBDDN) in the case of owner built homes built before November 19, 2007, or an Owner Builder Disclosure Notice (OBDN) in the case of homes built after November 19, 2007. The Homeowner Protection Office (HPO)4 will not issue the OBDN until satisfied that the owner builder has resided in the home for at least 12 months following the issuance of the occupancy permit.5

For the ten year period following the date of occupancy of an owner built home, all subsequent owners must similarly provide the OBDDN or OBDN to potential buyers prior to selling the home.

The type of warranty coverage and the warranty commencement date may well be material to buyers, as the protection afforded by the owner builder statutory warranty is dependant upon the owner builder remaining in the area and being willing and financially capable of honouring the warranty.

Licensees have been recently disciplined for:

  • Listing an owner built home for sale prior to expiration of the 12 month residency period.
  • Failing to ascertain whether the home was built by a licensed residential builder or an owner builder and failing to include the appropriate term, condition or acknowledgement of receipt in the Contract of Purchase and Sale.
  • Listing a new home not covered by new home warranty coverage.

To avoid risks associated with contravening the Act, prior to listing a home for sale or writing an offer for a home less than ten years old, licensees should:

  1. Determine whether the home was built by a licensed residential builder, or by an authorized owner builder and is capable of being sold, by searching the New Homes Registry or contacting the HPO;
  2. Confirm that a residential builder’s licence is in good standing and that there is valid warranty coverage for the home by searching the Public Registry of Licensed Builders, the New Homes Registry and/or by contacting the HPO;
  3. Verify that the owner builder has an OBDDN or OBDN and obtain a copy from the owner builder or HPO;
  4. Provide copies of all applicable new home policies6 or, in the case of an owner builder, a copy of the OBDDN or OBDN, to prospective buyers; and/or
  5. Ensure that any offer includes a condition or term requiring production of the new home warranty policy or, in the case of an owner built home, an acknowledgment of receipt of the OBDN, as recommended by the Professional Standards Manual.7

Jennifer Clee
B.A., LL.B.

  1. S.B.C. 1998, c. 38.
  2. The Bulletin (www.bcrea.bc.ca/docs/the-bulletin---2012/november-2012.pdf ), November 2012, p. 5.
  3. To obtain an Owner Builder Authorization, the applicants must personally own the land, be building the home for personal use, not have built a home in the previous 18 months and build the home directly or act as the general contractor. Since the 2007 amendments, owner builders must also own and occupy the new home for 12 months after obtaining a final occupancy permit.
  4. www.hpo.bc.ca.
  5. Unless the owner builder has sought and obtained an exemption from the Homeowner Protection Office.
  6. Strata titled homes have two policies of home warranty insurance that should be provided to prospective buyers: one for the common property and one for the home. Section 18 of the Act requires residential builders of strata properties to also disclose whether the home warranty coverage on the common property is already in effect and to identify both policies' expiry dates.
  7. Real Estate Council of British Columbia, Professional Standards Manual, www.recbc.ca/psm_hierarchy/subsection/?sub=homeowner-protection-act-matters.
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