Tarion Warranty Corp., like other organizations designated by statute to administer consumer protection, has the authority to operate with oversight but also with a measure of independence that benefits the delivery of services. The government conceptualized and implemented this decision on a proven model and created the delegated administrative authority model to provide for the effective delivery of services while removing the risk to taxpayers.
Organizations such as Tarion independently finance risk and coverage while developing expertise, efficiency, and organization without using tax dollars. The organization is not a government agency and is neither staffed with public servants nor paid from tax dollars. It is a private, not-for-profit, non-share capital corporation with a mandate to administer the Ontario New Home Warranties Plan Act.
Over the years, the government and outside experts have reviewed this model, and all reports recommended continuation or expansion of it. They concluded that the independent delegated administrative authority model reduces costs for the government, improves regulatory outcomes and efficiencies, and increases industry engagement.
Over the last 10 years while I have been a member of the board, I have seen how the model allows for forward movement. Independence allows Tarion to act quickly on issues. This year, after receiving feedback at our last annual public meeting, Tarion’s chief executive officer and I met with the Licence Appeal Tribunal to explore ways to improve the appeal process. We subsequently initiated an internal dispute resolution review to look at how Tarion could improve service delivery to homeowners. This year, we were also able to build consensus among stakeholders and developed a model to curb illegal and fraudulent building.
Tarion’s board of directors has changed its own composition to reflect balanced stakeholder representation and created a consumer advisory council to provide a consumer perspective on issues. This council includes new homeowners, condominium association presidents, real estate professionals, and industry standards regulators.
Tarion introduced a public consultation process five years ago that recognized the need to engage stakeholders during our policy development process. We continue to look for better ways to solicit input, and the addition of roundtable discussions with industry leaders, consumers, and employees has increased input on all of our policy proposals. Tarion also created an ombudsperson for homeowners who feel it has treated them unfairly. In addition, Tarion has implemented many of the ombudsperson’s recommendations such as improving the handling of mould and special seasonal warranty claims and ensuring informed consent when conciliations are cancelled. Tarion’s most recent public consultation began with the recommendation from the ombudsperson to clarify the rules on chargeability.
By being able to implement change quickly and effectively, Tarion is now a leader in aggregate warranty coverage in Canada. Over the last 10 years, Tarion has invested in online systems that make it easier for new homebuyers to interact with it; doubled warranty coverage to $300,000 from $150,000; expanded protection for consumers whose closing has been delayed (Ontario is the only province providing such coverage); increased licensing requirements for high-rise condominiums requiring builders to hire outside consultants to review and report at major stages of construction; strengthened the warranty and builder accountability for major structural defects; introduced warranty protection related to radon; made amendments to purchase agreements to expand disclosure of closing adjustment costs; and expanded details about a builder’s record in the Ontario builder directory.
Independence has allowed Tarion to efficiently manage its financial affairs at no risk to Ontario’s taxpayers. Over the last 10 years, Tarion paid out more than $100 million in claims and maintains a strong and stable reserve fund to protect new homebuyers’ deposits and their warranty in the event of a catastrophic event, something that has happened in other provinces. Tarion has done this without unduly increasing costs to homeowners.
Even though it is not a public listed entity, Tarion follows best practices in its accounting, reporting, and actuarial standards in accordance with international financial reporting standards. An external appointed actuary reviews Tarion’s warranty liabilities in accordance with accepted actuarial practice in Canada and a public accounting firm audits our financial statements. We do all of this to ensure we are more transparent and accountable to the public.
This model also provides the Ministry of Government and Consumer Services with oversight of Tarion through its accountability agreement. The government contributes to board composition and the nomination process and requires quarterly reports to the ministry, annual reports, audited financial statements, annual business plans, yearly regulatory plans, and annual public meetings.
Since 2007, Tarion, along with other delegated administrative authorities, has had to conduct annual consumer surveys. Conducted by Harris Decima, the most recent survey shows a consumer satisfaction rate of 83 per cent. With more than 90 per cent of warranty issues resolved without Tarion having to step in and more than 99 per cent of claims resolved when it does intervene, it is fairly clear that the model works.
I am proud of the work that Tarion has done over the last decade while I have been on its board. While there is always room for improvement, changing a proven model could adversely affect Ontario’s taxpayers. We need to always look at resetting the table rather than kicking the legs out from under it. Looking forward, I believe Tarion will continue to make advancements as it has over the last decade and will create fairness and confidence in the new home buying experience with engagement and co-operation.
Chris Spiteri is chairman of the board for Tarion Warranty Corp. and a lawyer practising in the areas of corporate commercial law and real estate.