The New Home Warranty Program of Manitoba is modeled after a home warranty plan which has been in existence in the United Kingdom since the mid 1930's.
Prior to the early 1970's new home warranty did not exist at all in Canada. The federal government began taking an interest in new home consumer protection, and began researching the possibility of a regulated new home warranty regime. In 1973 the Housing and Urban Development Association of Canada (HUDAC) conducted a study of the home warranty plan in place in the United Kingdom. At the time of the study, discussions were already underway between the Housing and Urban Development Association of Canada (HUDAC), Central Mortgage & Housing Corporation, now known as Canada Mortgage & Housing Corporation, and the federal government agency responsible for consumer affairs, concerning voluntary implementation of a home buyer protection scheme as an alternative to government imposed regulations on the home building industry or government mandated and operated new home buyer protection schemes.
Delegates reached the conscionable decision not to proceed with a national home warranty scheme as a National New Home Warranty plan was not practical due to Federal and Provincial policies. HUDAC recommended to its provincial councils that they give due consideration to the implementation of a regional new home warranty program.
The Alberta Council of HUDAC created a task force, charged with the responsibility of studying proposals for an industry, sponsored, operated, and funded New Home Warranty Plan. The Plan would regulate its members, and comply with any governing laws and regulations in the Provinces. The structuring of the Program, all contracts and documents and an official logo was licensed to all other provinces for their use. By 1976, there were seven New Home Warranty Programs incorporated; the result of thousands of hours expended by industry builders, lawyers and others with expertise in areas of housing and consumer matters, all without pay. VOLUNTEERS WITH A VISION!
Alberta, Saskatchewan, Manitoba, Ontario and Quebec incorporated mono-provincial warranty programs while British Columbia included the Yukon, and in the Atlantic area the provinces of Nova Scotia, New Brunswick, Newfoundland and Prince Edward Island chose to incorporate under one New Home Warranty Program.
Admittance into the industry sponsored warranty plans was opened to all qualified residential builders and not just to those builders having membership in the Canadian Home Builders' Association. This universality provided the means to ensure that Canada's new home buying public could benefit from New Home Warranty protection.
By the end of 1976, every region in Canada except the North West Territories had a New Home Warranty Program. To ensure that the mandate of the warranty schemes were met, positions on boards of directors or special advisory boards were created to ensure all parties having an interest in the fulfillment of the warranty obligation had their expectations met. Parties represented include the Federal Government (Canada Mortgage & Housing Corporation), provincial government, mortgage insurers, mortgage lenders, consumers, builders, lawyers and realtors. In this manner the New Home Warranty Programs were able to ensure "corporate distancing" from its creators, and to dispel allegations of conflict and bias in favour of builders. It was then and still is important to New Home Warranty that its business operations, practices and policies be vetted continuously, thereby ensuring New Home Warranty Programs perform as expected.
To protect the interests of the new home buying public, the warranty programs, with assistance provided by actuarial consultants devised a complementary blend of surety and warranty coverage guarantees to reflect ever changing conditions in the marketplace. Such guarantees have been modified from time to time to reflect the ever-changing market conditions, and construction risk. These products included coverage on the loss of a purchaser's deposit and a 5-year Warranty on Defects in Workmanship and Materials. The 5-year Warranty coverage is two fold in nature:
1) WORKMANSHIP & MATERIALS
In most cases this coverage is limited to one year, and in the coverage period New Home Warranty ensures builder performance to correct qualified defects which become manifest in the workmanship and materials of the home constructed by the builders, his or her employees, and sub-trades under contract to the builder. To qualify defects alleged to occur in this warranty period, New Home Warranty provides a quasi-judicial dispute handling process referred to as conciliation. The findings and decisions contained in the conciliation are binding on both the builder and the consumer. The dispute handling processes are intended to resolve issues quickly, effectively and without imposing any heavy financial burden which otherwise may be experienced with litigation. Where the builder defaults, that is for whatever reason he is unable or unwilling to carry out the directions as referenced in "the award" published by the Conciliator, the responsibility to do so then rests with New Home Warranty. In the event that the builder ceases business, the responsibility to perform the warranty obligations rests with the New Home Warranty.
2) MAJOR STRUCTURAL WARRANTY
In this warranty period, coverage is limited to the correction of defects, which qualify as Major Structural Defects. That is a defect which is having an adverse effect on the structural components, or the load-bearing systems, or where a situation exists which, if left unattended, could result in a failure in the load-bearing systems of the structure.
The capacity of New Home Warranty to provide the guarantees to protect the new home buyer is contained in a contract entered into by the New Home Warranty with the builder, commonly referred to as "The Agreement with Builder"
In the contract, the builder assigns to New Home Warranty the right to administer the terms of warranty; that is to monitor the builders' construction practices, to resolve disputes that arise between the builder and his purchaser, to enforce compliance to dispute resolution process findings, to carry out the terms of warranty should the builder default or fail to carry out the terms of the warranty, and within the limits of the warranty the builder undertakes to reimburse the Warranty Program for any costs incurred to settle bona fide warranty claims. The Warranty Programs have developed processes to measure the technical skills of a builder applicant, in addition to measuring a builder's financial capacity; that is to finance the initial construction and to ensure that the builder has sufficient funds available to service the home throughout the warranty period. As such, the New Home Warranty Programs have taken on the responsibility and have been recognized as the sole means of builder vetting.
Once qualified and registered, a builder is required to provide the benefit of warranty to all residential construction eligible for warranty coverage. Further, Registered Builders are monitored on an on-going basis, and are subject to annual renewal requirements
Housing eligible for warranty coverage varies widely from one warranty program to another, from the singular eligibility which is limited to housing built "for sale", to eligibility of all housing including built-for-sale, rental occupancies, and housing built by public/social agencies (commonly referred to as non-market housing).
OBJECTIVES OF NEW HOME WARRANTY
The objectives of New Home Warranty are to ensure:
- That housing is built to established building code standards and with good building practice.
- Warranty commitments given by the builder, pursuant to the signed agreement with New Home Warranty; are guaranteed by New Home Warranty.
- That consumer deposits taken by a builder are protected to the limits established by the individual Programs.
- That consumer complaints are handled quickly and equitably.
- That positive industry action and consumer protection guaranteed by New Home Warranty may result in greater confidence in the residential construction industry, and a lessening in the need by government to introduce legislation to regulate the residential construction industry.
- That industry specific education and training courses are available for technical and business skill improvement, and in this regard the New Home Warranty Programs have become the principal sponsors of education and training programs delivered to industry.
- That the philosophy and the terms of warranty will be discharged by New Home Warranty without bias in terms of its relationship with builders and consumers.
SUCCESS OF NEW HOME WARRANTY
- Recognition by the Canadian judicial system that the quasi-judicial conciliation dispute handling processes is just and equitable.
- The primary success of New Home Warranty arises from the settling disputes that arise each year between builders and their buyers, where through the warranty dispute resolution processes the vast majority of these issues are resolved without a claim against the New Home Warranty.
- The success of New Home Warranty to be highlighted here must be referred to as "the safety net" where for whatever reason the builder cannot or will not honour his warranty commitments and is deemed by New Home Warranty to be in default, the New Home Warranty acts to ensure the complaint/claim is handled quickly and effectively.
- Recognition by government, businesses involved in mortgage and finance, real estate sales, law firms, etcetera, that New Home Warranty has proven an acceptable alternative to consumer protection legislation while simultaneously ensuring industry self regulation.
THE CANADIAN HOME WARRANTY COUNCIL
The business of new home warranty is recognized as being provincial or in some cases regional in jurisdiction, and within that framework new home warranty carries on its day to day business dealing with matters arising from within its jurisdiction, be they matters involving the interests of the new home buying public, industry or government. There are however, issues which go beyond the scope of any new home warranty jurisdiction; issues which might be of national interest or international interest. To ensure the new home warranty community has the facilities in place to deal with these sorts of issues, the The Canadian Home Warranty Council took form in 1977. Operating on consensus, the Council began as a federation of Canada's six new home warranty Programs. Participation in Council matters has been provided to the Canadian Bankers' Association the Canadian Home Builders' Association, Manufacturer's Council, Canada Mortgage and Housing Corporation, and others, all to encourage discussion and consensus on matters of national interest. The Canadian Home Warranty Council also functions as a means whereby the representatives of the warranty programs can meet with representatives of the provincial governments and industry leaders in an effective forum for discussion and action. The Council has changed shape over the years, and today there are 12 Members that Underwrite, Broker or Regulate Home Warranty for 90% of new homes built in Canada.
The landscape of new home warranty has evolved immensely over the years. New home warranty is no longer a limited product of not-for-profit warranty providers. Instead, many provinces have several warranty providers, thus providing builders and consumers a choice in a variety of products and services centered around new home warranty coverage. Many of the original not-for-profit New Home Warranty Programs, as discussed above, have modified their program coverage and services that they offer. Further, some provinces, such as BC, AB, ON and QC now have some form of government regulation.