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Manitoba New Home Warranty Act – Will you be Ready for it?

The Manitoba provincial government has proclaimed the New Home Warranty Act and Regulation to come into force as of January 1, 2018. As a new home buyer, a builder or a lender, you should start to familiarize yourselves with the new rules and requirements, so that you are not caught off guard.  The following is a basic overview of the new regulatory scheme:

  1. In most cases, builders are prohibited from building a new home (being a single family home, town home, condominium, recreational home, ready to move home, or modular home) unless:
    1. The builder is registered as a builder under the legislation; and
    2. A ‘warranty provider’ (such as National or Manitoba New Home Warranty, Blanket New Home Warranty or Progressive New Home Warranty) has committed to provide a home warranty for the home in accordance with, and containing the undertakings required by the legislation.
  2. All warranty providers – even insurance companies which already hold licenses under The Insurance Act – must additionally register as warranty providers under the Act.
  3. If a builder constructs a new home and sells it to an owner without the building arranging for the provision of a warranty to the owner, then the builder is ‘deemed’ to have provided the required warranty to the owner.
  4. Provision is made for aggrieved owners to make claims under their warranties and for the mediation of disputes.
  5. Builders who fail to fulfill their obligations under the legislation are liable to prosecution with the maximum penalties being a fine of up to $300,000.00, imprisonment for a term of not more than 3 years, or both. The legislation further provides for the imposition of ‘administrative penalties’ on those breaching the requirements.
  6. There are detailed specifications regarding what a new home warranty is to cover, set forth in the Act and its Regulation (see summary below).
  7. Local governments are generally prohibited from issuing building permits for new homes unless and until the builder provides the permit issuer with proof that the builder has been registered under the Act and that a warranty providers has committed to issue a warranty for the home.
  8. The rights originally given to the first buyer from a builder continue to be enforceable against the warranty provider and/or the builder by the first buyer’s successors in title (ie. Warranty rights will be transferred to the new owner), subject to the coverage time limitations specified in or for the original warranty, and is to be transferred without a fee.
  9. In addition to new self-contained detached or semi-detached homes, the legislation also applies to:
    1. Residential condominium units and the common elements of a residential condominium regime;
    2. A manufactured (RTM) home; and
    3. A multi-unit project
    4. However, builders of an apartment building may apply for authorization to construct a rental apartment building without having to arrange for warranty protection.

General Coverage Requirements:

Under the legislation, homes built by registered builders must be covered by a home warranty from a third-party provider. The minimum required coverage is:

  1. 15 months for defects in labour, materials and design in houses and condominium units;
  2. 12 months for defects in labour, materials and design in condominium common elements;
  3. Two years for:
    1. defects in the plumbing, heating and electrical systems for;
    2. building code violations that constitute an unreasonable health or safety risk or are likely to result in material damage to the home;
    3. defects that render the home unfit to live in;
    4. defects in the building envelope, including water penetration; and
  4. Seven years for structural defects.

The Act further defines ‘new home’ as a single family home or condominium, and also includes ‘a portion of a building…newly built or being built’. This suggests that it may apply to additions or substantial renovations.

It is important to note that he Act does allow a warranty provider to set upper limits on claims under the warranty, which cannot be less than $100,000 for each dwelling and for common elements of a condominium the lesser of $100,000 for each unit in the building and $2,500,000.00. These limits may be rather low given the possible defects that a new home warranty is intended to cover.  These coverage limits are to be reviewed every five years under the provisions of the Act, so the limits are likely to rise

Builders:

With the exception of authorized or exempted owner-builders, only home builders registered in accordance with the Act may build and sell new homes. Builders will find it difficult to attempt to deflect the application of the new rules from their operations.  In particular, note:

  1. The Act makes it clear that builders, home owners and warranty providers cannot contract out of the legislation’s requirements, in whole, and generally speaking, even in part only; and
  2. In certain cases in other jurisdictions, courts have held that the ‘guiding mind’ of the builder was personally liable for non-compliance with similar acts.

Owner Build:

An individual who wishes to build a home for his or her own use may apply for an exemption from the warranty requirements as an owner-builder. However, an owner-builder may not sell a new home until the period that the warranty would have been in effect has expired (ie. 7 years from completion). A notice will be placed on the title indicating the home was owner-built and the restriction period. However, the registrar appointed under the Act may grant permission to sell a new home before the expiry to the warranty period if the owner or some third party would suffer undue hardship.

HOW WE CAN HELP:

We understand that these issues are very complex. Please feel free to contact one of our lawyers for more information on the New Home Warranty Act and its application to you.

Notice: The articles on our website are provided for general information purposes only and should not be relied upon as legal advice or opinion. They reflect the current state of the law as at the date of posting on the website, and are subject to change without notice. If you require legal advice or opinion, we would be pleased to provide you with our assistance on any of the issues raised in these articles.

 
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