Homeowner Protection Office Homeowner Protection Office

Presentation by
Shayne Ramsay
Chief Executive Officer
Homeowner Protection Office

 to the

Barrett Commission of Inquiry into the Quality of Condominium Construction

 Friday, September 17, 1999
Vancouver, B.C.

 Opening Remarks:

I would like to thank the Commission for inviting me to make a presentation at your second set of hearings. This is an opportunity to report on the activities of the office since it opened on October 1 of last year.

 History of the HPO:

As a response to many of the recommendations in the original Barrett Report, the Homeowner Protection Act was passed on July 28, 1998. The Act provided for the creation of the Homeowner Protection Office that was established on October 1, 1998.

 The HPO program areas include:

  • Assistance to owners of leaky homes who are not able to pay for the repairs to their homes by offering no-interest repair loans
  • Delivery of the PST Relief Grant program
  • Administration of the residential builder licensing and mandatory third-party warranty system, and
  • A Research and Education function to assist and inform condominium owners and buyers and the residential construction industry.

 Program Areas of the HPO:

I will now provide some details about these program areas and the HPO activities to date.

 1.  Reconstruction Program:

Homeowner’s Reconstruction Loan Program:

The first priority of the office was to establish a no-interest loan program for homeowners who are not able to pay for or finance the repairs to their buildings which are suffering from premature building envelope failures.

This is not a general compensation program, but an initiative to ensure that owners do not lose their homes due to the financial burden of repair costs.

Loan amounts are based on the owner’s share of the cost to repair the building envelope plus any related legal costs to register the repair mortgage. Every bank, credit union and trust company with the exception of the Laurentien Bank and the National Bank have agreed to participate in the loan program. The HPO has entered into an agreement with each of the participating lenders. A master agreement developed through negotiations with the Canadian Bankers Association and Credit Union Central is used.

The financial institution that holds the first mortgage provides the repair mortgage. Homeowners make monthly, principal-only payments to the lending institutions at an affordable level. The amount of the monthly payment is based on the owner’s ability to pay and is arrived at through discussions with the HPO loans officer. The HPO pays the interest portion of the loan directly to the lending institution on behalf of the homeowner. For those lenders not participating, the HPO provides the loan directly to the homeowner.

CMHC provides mortgage loan insurance for the repair loan based on an indemnity from the HPO that requires the HPO to pay for any claims that may be made under the CMHC insurance. Since CMHC has no risk, this insurance is provided at no cost to the homeowner.

Loans are typically provided for a five-year term. The homeowner agrees to consolidate the repair mortgage into their first mortgage at the time of renewal. If the owner does not qualify for conventional financing at that time, the loan can be renewed for a further five-year term.

Homeowners who fit the following criteria can be eligible for a no-interest loan:

  • The applicant must own a home which is suffering from premature building envelope failure
  • The homeowner does not have adequate equity in their home to qualify for a standard loan, or
  • The homeowner can not afford the monthly payments of a standard loan to pay for repairs (which is usually seniors and others on fixed incomes ).

Homeowners do not have to cash in their RRSPs, pension assets or the first $10,000 in liquid assets. Owners are not expected to sell vehicles or other personal items such as jewelry to pay for the repairs. For seniors, up to $250,000 in cash assets that are used to supplement income is also exempt.

In most cases, no more than ten percent of the homeowners in a building qualify for a no-interest repair loan. However, in some buildings this number has been as high as fifty percent.

To date, the HPO has sent out 6,650 requested applications and has received back over 1,450 applications. We have approved more than 1,000 no-interest loans in 200 buildings totaling $17.6 million. There are about 300 loans applications currently in process. About 75 applications have been withdrawn by the applicants and 100 applications were not approved because the applicants did not meet the eligibility criteria. The average loan amount is $17,500.

The number of loan applications the HPO receives each day has increased dramatically over the past few months. Recently it is not uncommon to receive twenty or more applications per day.

Since the loan program was introduced last October, the HPO has expanded the loan program on two occasions.

In April, the program was expanded to include non-profit housing cooperatives. This component of the program was developed in consultation with the Co-operative Housing Federation of B.C.

Since members of a non-profit housing co-operative do not hold tittle to the individual units, the no-interest loan is provided to the co-operative as a whole. To date, we have met with 14 housing co-operatives regarding the financial assistance available through the HPO. Five co-operatives have received loan approvals representing 400 homes for a total repair cost of nearly $15 million or an average of $3 million per co-operative.

The total approved loan amount under both components of the reconstruction program is $32.5 million.

In June 1999, the following changes were made to the eligibility criteria of the homeowner component of the loan program:

  • The first $10,000 in liquid assets is exempt from the eligibility calculation – an increase from the previous exemption of $5,000.
  • Up to $250,000 in non-pension savings for seniors is exempt. Previously there was no exemption for non-pension assets; and,
  • Individuals who own more than one leaky unit may qualify for additional assistance.

The Homeowner Protection Office works with the homeowner to set affordable monthly, principal-only payments. The monthly payments can be as low as $50.

In some cases deferred payment loans are approved for owners who cannot afford the minimum monthly payment. Deferred payment loans do not require any payment of principal for as long as the homeowner lives in the home. When the home is sold in the future, the original loan amount is to be repaid from the net sales proceeds.

Typically, deferred payment loan recipients are seniors or other owners on fixed incomes. In the case of deferred payment amount loans, the Homeowner Protection Office provides the principal to the homeowner, not a lending institution. Deferred payment loans represent 16% of the loans approved, totaling $2.8 million.

Some homeowners who received no-interest repair loans when their buildings were in the initial stages of repair have returned for a second loan when additional assessments to their homes were required once the full extent of the damage to the building was discovered. Others applied for second loans after the collapse of the New Home Warranty program.

PST Relief Grant:

In June the Province announced a PST Relief Grant for repairs to leaking homes. This tax relief program will provide an estimated $25 million in financial assistance to homeowners over the next 5 to 7 years. The HPO administers this program on behalf of the provincial government.

All repairs completed on or after July 28, 1998, which is the day the Homeowner Protection Act was passed, are eligible. Owners of strata units, single-family homes and cooperative housing members are able to receive the grant. Unlike the no-interest repair loans, however, it is the strata corporation or cooperative housing board that applies on behalf of the residents of the building.

The grant amount is based on the following formula, and is applied for when repairs are completed:

Total repair cost x 40% x 7%

About 40% of the total repair bill is subject to PST.

The Homeowner Protection Office is receiving and processing its first PST Relief Grant applications at this time. Currently we have received 200 requests for applications and have received 9 applications back. To date we have approved 4 applications totaling about $57,000 in tax relief. The HPO has provided no-interest loans to homeowners in about 200 buildings. Once those repairs are completed, we will process grant applications for those buildings.

A lot of questions are always raised about the scope of the problem. In the last year, the HPO has been involved directly with 295 buildings either through our loans program or through our information sessions for strata councils. These buildings represent about 20,000 units. Given an average repair cost of $17,500, the total repair bill for these units will be about $350 million. The original Barrett estimate of up to $1 billion in repair costs seems reasonable at this point.

Licensing and Warranty:

Two other program areas of the office are residential builder licensing and the establishment of a mandatory third-party warranty system for all new homes constructed in BC.

The development of the licensing and warranty regulations involved an extensive consultation process with stakeholders including homeowner groups, builders, developers, local government, labour, warranty providers, realtors and others.

After the regulations on licensing and warranty were passed, the HPO implemented an awareness strategy to inform the stakeholders about the new requirements and their resulting future responsibilities. These efforts included 16 information sessions around the province which were attended by 1,500 builders, building officials, lawyers and realtors. Other efforts to increase awareness of the regulations included numerous speaking engagements, advertising, posters at building permit counters as well as other print materials, trade show exhibits, direct mail campaigns, web site postings as well as providing assistance through our toll-free information line.

Approximately one month before the licensing and warranty regulations were to be implemented on April 30, New Home Warranty announced their intention to file a proposal to its creditors. This meant that the 1,600 builders registered with New Home Warranty would not have adequate time to get registered with an alternate warranty provider in order to meet the new licensing and warranty requirements. As a result, the provincial government delayed the implementation of the regulations by two months to begin on July 1, 1999. This allowed the registered builders of New Home Warranty an opportunity to register with an alternate warranty provider.

Without this delay, the residential construction industry would have been virtually shut down as of April 30. This would have had a disastrous impact, particularly in the north and the interior which have much shorter building seasons.

As of July 1, 1999 residential builders must be licensed and provide home warranty insurance on new building permit applications. Standard HPO documentation that verifies builder licensing and that the homes to be constructed are enrolled in a policy of home warranty insurance is required prior to building permit issuance.

Home warranty insurance can only be provided by insurance companies that are authorized by the Financial Institutions Commission and meet the requirements set out in the Homeowner Protection Act.

The licensing and warranty provisions of the Act are designed to work in tandem to strengthen consumer protection. The two systems will ensure that builders meet minimum standards, and if a construction defect occurs, consumers will be protected by a strong mandatory warranty.

The new mandatory home warranty insurance coverage includes:

  • 2 years on labour and materials
  • 5 years on the building envelope, including water penetration, and
  • 10 years on structure.

This coverage is the strongest in Canada and one of the strongest warranties in the world. It is an insurance product. B.C. is the only jurisdiction in Canada to treat home warranty as insurance.

The regulations are very explicit as to what can and can not be excluded from coverage. All warranty policies must be provided to the HPO 60 days before that policy is put into effect.

This is not default warranty coverage where the warranty provider remedies defects in the event that the builder does not undertake the repairs. Any claim by the owner is directed to the insurance company who is obliged to carry out repairs to eligible defects. The insurer may use a variety of means to carry out repairs including using the original builder.

On the builder licensing side, the HPO has received 800 applications for residential builder licences and has approved 680 licences to date. A registry of Licensed Residential Builders is available on our Web site.

The number of builders we have licensed during the first two and a half months of the new system is not unexpected. By delaying the implementation of the licensing and warranty regulations by two months to July 1, much of the 1999 building season was missed in some areas of the province. Builders constructing homes with building permits applied for before July 1 are not subject to the Homeowner Protection Act and regulations and, therefore, are not required to be licensed or provide home warranty insurance at this time.

We are currently in a transition period where some of the newly constructed homes on the market will have the ten-year mandatory warranty as required by the Act while other new homes on the market constructed with building permits applied for before July 1 will have a variety of different warranties – or even no home warranty at all. Earlier in September, the Homeowner Protection Office distributed about 3,000 bulletins titled "Understanding Home Warranties" to real estate boards, mortgage lenders, legal professionals, building officials and warranty insurance companies.

This bulletin explains the various warranties out there during this transition period and encourages the homebuyer to understand the full extent of any warranty that might be offered prior to making a purchase. "Understanding Home Warranties" is also available on our Web site or by calling our toll-free information line.

Owner-builders are exempt from the licensing and warranty requirements of the Homeowner Protection Act and regulations. The Act defines an owner-builder as an individual who builds a detached, self-contained dwelling for their own personal use not more than once every 18 months.

Owner-builders must sign a sworn Owner-Builder Declaration and Disclosure Notice which must be provided to the municipality at the time of the building permit application. All persons ordinarily resident in the same dwelling unit are deemed to be the same owner-builder; consequently, only one owner-builder exemption is allowed per household. They must also provide a list of sub-contractors they plan to hire on the Declaration. Legitimate owner-builders are those who build their home or directly manage the construction of the new home - otherwise they do not qualify for owner-builder status and must get a licensed residential builder to build the home who will provide the required warranty insurance.

While owner-built homes are not subject to the licensing and warranty requirements, they are subject to the ten-year statutory protection provisions of the Act.

Statutory protection requires that all new homes are:

  • reasonably fit for habitation;
  • have been built from materials of good quality; and,
  • have been designed and constructed with ordinary competence, skill and care.

Any action under this section of the legislation must be commenced within 10 years from the date of first occupancy. Unlike the mandatory third party warranty provided by insurance companies, original and subsequent purchasers of owner-built homes must seek redress through the legal system. If the owner-built home is sold within 10 years, a copy of the owner-builder declaration must be provided to the purchaser which informs them of the statutory protection provisions.

The Homeowner Protection Office is responsible for monitoring owner-builder activities. Land title checks for ownership, site visits and a review of sub-contractors employed are just some of the methods used to enforce the owner-builder requirements.

We have encountered several instances where owners are being encouraged or mislead by unlicensed builders to claim the owner-builder exemption and then to hire them to construct or manage the project for the owner. The problem is not with the intent of the legislation, but with those who view the exemption as a potential loophole to avoid licensing and warranty requirements. In these cases we discovered, the builder has been persuaded to go through the licensing process.

An information bulletin about the obligations of owner-builders and the rights of those purchasing owner-built homes is available through the HPO.


The next priority for the HPO is to put in place licensing and warranty requirements for renovations.

The regulatory work will be divided into two parts. The first part will be the establishment of a mandatory program covering building envelope repairs. The purpose of this program will be to put in place consumer protection for owners of leaky homes by ensuring that repairs are:

  • effective, long-term solutions
  • performed by qualified contractors, and
  • backed by a third-party warranty.

The HPO has distributed a discussion paper entitled the "Implementation of Mandatory Warranty and Certification for Building Envelope Repairs". It sets out some of the parameters and issues to be discussed with stakeholders. We are currently in a consultation phase and will provide our recommendations to government later this Fall. Our goal is to have the regulations for major wall repairs in place later this fall for implementation in January 2000.

Research and Education:

The fourth program area of the Homeowner Protection Office is its Research and Education function. The Research and Education section provides resources and information regarding building science issues, cost effective building techniques, best practices for retrofitting housing, building code changes and current consumer housing issues.

The Homeowner Protection Act provides for the formation of a Provincial Advisory Council on Homeowner Protection. The Council has been formed to make recommendations to the Homeowner Protection Office regarding residential construction in BC, research and education initiatives, and consumer information programs.

The 13 members of the Council include representatives from consumer groups, architects, engineers, builders and developers, labour and local government. It meets at least quarterly and has had two meetings to date.

The Homeowner Protection Office and the Architectural Institute of B.C. have signed a memorandum of understanding for an AIBC contribution of $250,000 to the research and education fund. The Provincial Advisory Council will provide recommendations on how these funds can best be used to achieve the goals of the Research and Education function of the office.

The HPO has developed a variety of materials to assist both the industry and consumers. Some of the information pieces include:

  • Land Use Planning and Weather Protected Buildings – this document serves as a best choices guide to encourage local governments to review their land use bylaws and other policies to determine how they impact the development of improved wall assemblies. It includes a discussion of related factors such as site coverage, height and setbacks, as well as design features such as balconies, covered walkways, wall details and overhangs.
  • Buying a New Home: A Consumer Protection Guide - was updated to provide information and guidance to consumers wishing to purchase a new home. Topics include inspection, understanding the full extent of home warranties, financial considerations and getting information about the builder or developer.
  • Managing Major Repairs is a 100-page guide which assists strata councils and owners through the process of repairing major wall assemblies. It was developed in conjunction with the Ministry of Municipal Affairs and CMHC. The HPO alone has distributed over 1,200 copies of this document to affected homeowners.
  • The HPO has also produced a related video called Managing Leaky Condo Repairs which is scheduled to air a second time on BCTV this Sunday at 3:00 p.m. A Cantonese version of the video will also air this Monday on Fairchild TV at 9:55 p.m. This video soon will be distributed to every public library in the coastal climate zone and is available through the HPO.
  • In consultation with the Condominium Home Owners Association (CHOA), the HPO developed an information piece for strata corporations and property managers affected by the financial collapse of the New Home Warranty program. This piece provided information on topics such as the responsibilities of strata corporations and financial assistance available. Two town hall meetings were also sponsored by the HPO and CHOA for affected strata councils and property managers.
  • The HPO has also produced information bulletins about current and emerging issues. "Understanding Home Warranties" and "Important Information for Owner-Builders" are two pieces that have been distributed extensively.

Since the office opened, the HPO has actively assisted stratas with the process of managing repairs to major wall assemblies. To date, we have held meetings with 125 stratas, assisting an estimated 8,500 homeowners. We are now planning a series of larger seminars throughout the coastal climate zone for stratas affected by envelope repairs. A panel of experts provide information on the process required for repairs, legal considerations, financial assistance available and technical information. Our first seminar is planned for Victoria next weekend.

Two of our most successful tools for providing information has been our toll-free information line and our Web site. Since the 1-800 line was initiated, we have assisted about 14,500 callers. Our Web site has also had nearly 14,000 hits since its inception last October. Currently there are an average 2,000 hits per month on the site.

Alternative Dispute Resolution:

Another area where the HPO has been active is in the development of alternative dispute resolution options for residential construction disputes.

For owners of homes which carry home warranty insurance mandated by the Homeowner Protection Act, a mandatory mediation process has been set up for disputes between owners and their home warranty insurance providers. Owners who have a dispute with their home warranty insurance provider can compel them to mediation. This is at the sole option of the owner.

Our office has worked with the Attorney General’s Alternative Dispute Resolution Office to develop the Notice to Mediate regulations for residential construction disputes. The regulations were introduced in May.

The new process is retroactive and allows any party involved in a residential construction dispute to compel the other parties to participate in a structured mediation session. The Notice to Mediate process provides parties to residential construction disputes with an effective and less costly dispute resolution process.

A guide on residential construction dispute options is being developed by the Homeowner Protection Office in conjunction with the Attorney General’s Dispute Resolution Office. This guide which provides information on negotiation, mediation, arbitration and litigation will be available to homeowners this Fall. The information contained within this dispute resolution guide is being incorporated in to our information sessions to strata councils and owners.


This concludes my presentation. I have prepared a package of materials, which were discussed in my presentation. I would be pleased to address any comments or questions you might have at this time.

Last Updated: January 17, 2005