Number 489, October 2016
OWNER-BUILDERS LIABLE FOR POOR CONSTRUCTION
Since the last Legally Speaking on this topic,1 the Supreme Court of British Columbia has awarded significant damages against two owner-builders for poor construction. The provincial government has also raised the threshold for the owner-builder exemption.
Since July 1, 1999, unless an exemption applies, every new home in British Columbia must be built by a licensed residential builder, registered with the Homeowner Protection Office (HPO) and enrolled for home warranty insurance. The owner-builder exemption permits an individual to build his or her own home, or to act as their own general contractor, if they meet certain requirements. An owner-builder may provide home warranty insurance, if they wish. Many do not.
If an owner-builder does not supply home warranty insurance, the Homeowner Protection Act (HPA) imposes a statutory warranty.2 The owner-builder is deemed to promise to subsequent owners that the home is, in effect, properly built. From the date of the occupancy permit,3 this ten-year statutory warranty covers materials and labour for two years, building envelope for five years, and structure for ten years. This warranty cannot be waived by agreement.
In Chapman v. Stacey, the buyers relied on their statutory warranty to sue the owner-builders who built the buyers' home.4 This appears to be the first case of its kind. Contrary to the building code and the architect's plans, the owner-builders improperly built a deck, causing significant drainage problems. The court awarded judgment against the owner builders for $96,900 and GST, being the cost to remediate the deck, plus interest.
Recently, the government added a significant new owner-builder requirement. Effective July 4, 2016, every owner-builder applicant must pass an examination on home construction fundamentals.5 An applicant gets one chance to pass the exam per application; 70 per cent is necessary to pass.
When listing a home within approximately ten years of the date of the occupancy permit, the date of first occupancy, or readiness for occupancy, whichever came first:
- A REALTOR® must inquire whether an owner-builder built the home. If the building permit was issued before November 19, 2007, contact the HPO directly. If issued on or after that date, check the HPO's online New Homes Registry.
- If an owner-builder built the home:
- Before November 19, 2007, AND there is no home warranty insurance, the HPO will have issued an Owner Builder Declaration and Disclosure Notice to the owner builder. So long as the ten-year statutory warranty is running, that notice MUST be given to the buyer before entering any agreement to buy the home;
- On or after November 19, 2007, if it is permissible to sell the home, the HPO will have issued a Disclosure Notice to the owner builder. That notice will say whether there is home warranty insurance or not. So long as the insurance applies or the statutory warranty runs, the buyer MUST be given the Disclosure Notice before entering any agreement.
According to the Real Estate Council, if the home fails to meet the HPA's requirements, a REALTOR® must not list it.
If a REALTOR® commits professional misconduct or conduct unbecoming a licensee, the Real Estate Council of BC may now order the licensee to pay a very large penalty,6 plus an additional penalty equal to the licensee's remuneration in the deal.7 The HPO's Registrar may impose a penalty up to $25,000, and the province may prosecute the licensee. There could also be a lawsuit.
If there is any doubt whether a home meets the HPO's requirements, do not assume anything. Check with the HPO.
| ||1. ||Clee, Jennifer, "The Homeowner Protection Act: Protect Your Clients and Yourself!", Legally Speaking, No.470 (May 2014), online: www.bcrea.bc.ca/news-and-publications/publications/legally-speaking/legally-speaking---may-2014-(470). |
| ||2. ||Homeowner Protection Act (HPA), SBC 1998, c. 31, s. 23. |
| ||3. ||If no occupancy permit has been issued, the warranty runs from the date the new home was first occupied: HPA, s. 23. |
| ||4. ||Chapman v. Stacey, 2016 BCSC 118. |
| ||5. ||Order in Court 97/2015 (3 March 2015), Appendix 3. |
| ||6. ||The maximum penalty for an individual is now $250,000: Real Estate Services Act (RESA), SBC 2004, c. 42, s. 43(2)(i). |
| ||7. ||RESA, s. 43(2)(j). |
|Back issues of Legally Speaking are available on BCREA's website. |
|Legally Speaking is published eight times a year by email and quarterly in print by the British Columbia Real Estate Association. Real estate boards, real estate associations and REALTORS® may reprint this content, provided that credit is given to BCREA by including the following statement: "Copyright British Columbia Real Estate Association. Reprinted with permission." BCREA makes no guarantees as to the accuracy or completeness of this information or the currency of legal information. |
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