The ongoing COVID-19 pandemic has raised new issues relating to insurance and the home building industry. Following a total project suspension, construction has slowly resumed in Ontario, albeit with reduced crews and strained supply chains. These constraints raise increasingly important questions of whether delays can support extensions for home builders, and what impact home builders will feel due to the changes to Tarion’s rules, particularly those related to delayed closings, inspections, and arbitrations.
Important Tarion Updates for Home Builders
In Ontario, O. Reg. 73/20 suspended timelines under the Ontario New Home Warranties Plan Act, from running as of March 16, 2020. This suspension expired on September 11, 2020, and Tarion has now fully reinstated the following:
- warranty submission timelines;
- requests for conciliation; and
- builder repair periods.[1]
Warranty claims and other deadlines were also previously suspended by virtue of O. Reg. 73/20.[2] However, as part of newer regulations made under the Reopening Ontario (A Flexible Response to COVID-19) Act, 2020, the limitation and other procedural time periods resumed on September 14, 2020.[3] Tarion has advised that it will exercise its discretion in reinstating timelines and restarting in-person inspections moving forward.[4] The builder repair periods resumed on August 27, 2020.
Unavoidable Delay Periods
Builders are entitled to unilaterally extend critical dates for homes currently in construction, but they must follow the Unavoidable Delay provisions of the Tarion Addendum. “Unavoidable Delay” is defined as the following:
an event which delays Occupancy which is a strike, fire, explosion, flood, act of God, civil insurrection, act of war, act of terrorism or pandemic, plus any period of delay directly caused by the event, which are beyond the reasonable control of the Vendor and are not caused or contributed to by the fault of the Vendor.
Thus, a pandemic event such as COVID-19 is expressly included as an “unavoidable delay,” potentially enabling a builder to extend critical dates. However, the builder must follow the rules set out in the Addendum to do so.[5] [6]
For long-term projects, coverage extensions should be addressed as soon as possible with carriers. Builders should document the current status of the project, the duration of delays, and any potential after-effects once work restarts.
Tarion Inspections
It is no longer necessary to conduct a pre-delivery inspection (PDI) prior to a closing in the presence of both the builder and the homeowner. However, in-person PDIs can occur if participants agree to the conditions under which the PDI would be carried out, and adhere to provincial guidelines. Tarion recommends that builders conduct the PDI on behalf of homeowners, using the PDI form and photos and/or videos which can serve as a record of the state of the home in the event of a subsequent dispute.[7]
Additionally, Tarion has suspended all in-person conciliations as of March 16, 2020. Instead, homeowners have the option of conducting conciliations via virtual inspection.[8]
Condominiums may also be affected by delays with Tarion Performance Audits. According to the Condominium Act, 1998, Performance Audits are conducted between six to ten months following registration of a condominium, and involve an inspection of common elements.[9] Tarion has advised that situations where Performance Audits cannot be completed on time will be reviewed on a case-by-case basis.[10]
Tarion Arbitrations
Effective March 17, 2020, hearings involving the Builder Arbitration Forum (BAF) have been suspended until further notice. Requests for new arbitrations will be deemed not to have commenced until the BAF processes resume,[11] and extensions will ensure that no party is prejudiced.[12]
Commentary
As Ontario continues to feel the protracted impacts of COVID-19, home builders can continue to expect extended delays. Tarion’s advisories issued since the outset of the pandemic suggest that it will continue to exercise discretion as Ontario slowly resumes business.
Underwriters should ensure that builders follow all protocols set out not only by the Province, but also under Tarion’s guidelines, to ensure they remain on the right side of their policies.
[1] Tarion, “COVID-19 Pandemic Response: Information For Builders, September 11, 2020 Update”, online: <https://www.tarion.com/builders/covid-19>.
[2] Tarion, “Advisory from Tarion to Homeowners and Builders on Provincial COVID-19 Pandemic Emergency Orders” (26 March 2020), online:<https://www.mondaq.com/canada/operational-impacts-and-strategy/923430/the-impact-of-covid-19-on-the-construction-industry-a-reference-guide-to-the-changed-landscape.>.
[3] Ontario Regulation 457/20, online: <https://www.ontario.ca/laws/regulation/r20457> ; Practical Law Canada Commercial Real Estate, “ COVID-19: Legislative Changes and Government Measures Impacting Real Estate Transactions, online: <https://content.next.westlaw.com/Document/I279cc7c6d25511eabea4f0dc9fb69570/View/FullText.html?originationContext=document&transitionType=DocumentItem&contextData=(sc.Default)&firstPage=true>.
[4] Tarion, “Advisory for Homeowners & Builders: Reinstatement of Timelines” (6 July 2020), online: <https://www.tarion.com/sites/default/files/2020-07/Covid-19%20Pandemic%20-%20Advisory%20for%20Homeowners%20%2B%20Builders%20-%20Reinstatement%20of%20Timelines%20-%20July%207.pdf>.
[5] Advisory from Tarion to Homeowners and Builders on COVID-19 Pandemic: Pre-Delivery Inspections and Delayed Closings, page 1.
[6] Vendor must send out a written First Notice to each affected purchaser, describing the event causing the unavoidable delay (e.g., COVID-19), and setting out an estimate of the duration of the total delay, if practicable. This First Notice must be provided by either: (1) the next critical date; or (2) ten or 20 days (depending on which Addendum applies) after the vendor knows or ought reasonably to know that COVID-19 will likely affect construction on time to closing of the home.
A Second Notice must be sent when the applicable impacts of COVID-19 end and the total delay period is known. It is advisable that vendors do not send this notice until they have clearly assessed the full affects, including after-effects, on timing.
[7] Advisory from Tarion to Homeowners and Builders on COVID-19 Pandemic: Pre-Delivery Inspections and Delayed Closings, page 1.
[8] Tarion, “Advisory on the Use of Virtual Inspections to Conduct Conciliations” (18 June 2020), online: <https://www.tarion.com/sites/default/files/2020-06/COVID-19%20Pandemic%20-%20Advisory%20for%20builders%20%2B%20homeowners%20-%20Virtual%20Inspections%20-%20June%2018%202020.pdf>.
[9] Section 44(2) of the Condominium Act, 1998, S.O. 1998, c. 19.
[10] Tarion, “Advisory from Tarion to Condo Corporations & Field Review Consultants on COVID-19 Pandemic: Performance Audits, CE Meetings and Repairs – March 16 to April 13” (19 March 2020), online: <https://www.tarion.com/sites/default/files/2020-03/Tarion_COVID19_Advisory_CondoBoards_FRC.pdf>.
[11] Tarion, “Notice Regarding COVID-19 Impact on the Builder Arbitration Forum” (17 March 2020), online: <https://www.tarion.com/sites/default/files/2020-03/Tarion_COVID19_BAF.pdf>.
[12] Ibid.
