New Home? Don’t Worry, You’re Covered

Aside from obvious things like visuals, there is a clear difference between buying an older home and a brand new one—a difference well beyond the wear and tear normally associated with older dwellings.

Unlike buyers of an older home, though, people buying a new one need not worry about significant construc­tion and latent defects, not because they may not exist but rather that a warranty accompanies the purchase of a new home. In British Columbia, most people know this as the 2-5-10 Home Warranty.

B.C.’s Homeowner Protection Act outlines the specific details of this Warranty, which is mandatory and cannot be waived. Exemptions from the home warranty requirements do apply to some new homes, including manufactured homes, hotels and motels, dormitories, care facili­ties and floating homes. There are also other exempted parties, which include owner-builders who are personally liable for up to 10 years for any defects in labour, materials or design.

The reality, though, is that despite a home being newly constructed, problems can still arise. These can range from minor defects in the finishing to serious struc­tural issues. While B.C.’s 2-5-10 Home Warranty is considered Canada’s strongest construction defect insurance, home­owners are often surprised to learn that not all property defects will be captured by it. They can be equally surprised to discover that previous coverage for defects no longer exists.

The Warranty provides coverage for specific defects for specific periods of time. Coverage on all defects begins concur­rently following construction.

Knowing what the problem is and the dates when each of the respective por­tions of the 2-5-10 Home Warranty expire are important for making a claim under the Homeowner Protection Act. The fol­lowing points outline what the Warranty actually is, what is protected, and the time frame the protection applies. For most properties, the Warranty coverage begins on the earlier of:

a. the date the property was initially occupied; and

b. the date a permit of occupancy is issued.

Two-year Warranty

The Warranty includes coverage for any defect in materials and labour for up to one year. The two-year coverage specific­ally pertains to defects in material and labour supplied for certain areas such as electrical, plumbing, heating, ventila­tion, air conditioning, etc. A defect in this category includes any design or con­struction that is contrary to the building code, or requires repair or replacement. Non-compliance with the building code is considered a defect only if the non-compli­ance or violation constitutes an unreason­able health or safety risk, or has resulted in material damage to the property.

Five-year Warranty

The 2-5-10 Home Warranty also provides coverage for up to five years for any defects in the building envelope of a new home. The building envelope includes all components that separate conditioned space from unconditioned space, the exterior air or the ground; or that separ­ate individual conditioned spaces. The five-year building envelope warranty also includes defects that allow unintended water penetration such that it causes material damage to the home.

Ten-year Warranty

Finally, the Warranty provides coverage for up to ten years for any defects in material and labour regarding the structure of the new home. The longest coverage available under the Warranty, this category includes damage that results in the failure of a load-bearing part of the new home as well as any defects that cause material struc­tural damage.

Exclusions

The Homeowner Protection Act allows for home warranty insurance companies to exclude certain items from their policies. These exclusions can include, but are not limited to:

• Normal wear and tear
• Normal shrinkage of materials from construction
• Use of the new home for non-residential purposes
• Labour, materials and design which are supplied by the owner
• Insect or rodent damage
• Acts of nature.

It is also important to note that an owner’s failure to prevent or minimize damage can constitute an exclusion under a policy. Accordingly, if a defect is observed a homeowner should make efforts to prevent or minimize the damage.

For more information on warranties and other legal aspects of the construction industry, please contact Harpret.

For more information, please contact: