Rule-making and standards setting

Rule-making and standards setting

Decision-making

In Ontario and elsewhere in Canada, government is responsible for creating and reforming laws. The Legislature makes statutes. These statutes typically provide regulation making authority. The regulations set out the more detailed rules, based on what is in the statute. Those regulations are usually either a minister’s regulation or a regulation made by the Lieutenant Governor in Council, a Cabinet approved decision.

Under the Act, Tarion has the authority to make by-laws. These by-laws are deemed to be regulations. In practice, and by agreement, Tarion does not exercise this authority without engaging the ministry. While some of the core rules and standards about what is warranted and who needs to be registered are set out in the Act, many additional substantive provisions are established in the Tarion by-laws made under the Act^{footnote 1[1]}.

New home warranty legislation is fundamentally consumer protection legislation. It seeks to protect consumers by ensuring new homes are built by competent and financially sound builders and by ensuring that someone will step in if a builder fails to honour the warranty obligation. These are important rules of general application. They apply to purchasers, homeowners, builders and vendors of newly built homes and are more appropriately set out in legislation and regulations approved by government.

This approach is consistent with the approach taken by other sectors where program delivery is through the administrative authority structure. It is also consistent with other Canadian jurisdictions that have a mandatory new home warranty program. Government oversight, by way of approval, allows the government to review proposed rules to ensure the public interest is being met and that they achieve the intended outcomes of consumer protection and building quality. 

There are some matters that are more process oriented or administrative in nature that should remain at the discretion of the organizations responsible for implementation (e.g., the proper form to complete for a warranty claim or for registration as a builder). It is important to find an appropriate balance between giving a regulator and warranty providers the autonomy they need to operate and government’s obligation to protect the public interest. This balancing should include consideration of matters such as efficiency and expertise. 

Warranty rules and standards setting review process

Tarion’s current approach to developing and updating rules and standards is ad hoc. It initiates reviews as the need arises. It consults widely when it undertakes a review but does not follow a standardized approach consistently across all reviews. There is no published standard for undertaking reviews.

There should be a standardized and rigorous process of rule-making and standard setting that draws upon the knowledge and expertise of various parties to achieve evidence-based and balanced decision making. Government should explore, in collaboration with stakeholders, the best practices around rules and standards setting, including who should be involved, how often the rules and standards should be reviewed, and what the review process should look like. For example, the government could consider establishing an advisory council with a mandate to make recommendations to government on warranty coverage and duration. Participants would be drawn from across a variety of sectors involved in the home building process, including engineers, architects, building officials, builders, consumers/homeowners, the regulator and warranty providers. This would ensure that sufficient input is received from persons most affected by the proposed rules. A similar process could be considered for the setting of standards for builder and vendor registration.

There is a range of organizations with an interest in the matter of systemic problems including for example, Canadian Home Builders’ Association (CHBA), OHBA , Building Inspectors Advisory Committee (BIAC), Large Municipalities Chief Building Officials (LMCBO), and the Institute for Catastrophic Loss Reduction. The knowledge and expertise of these and similar organizations could be of great value to the rule-making process.

Warranty providers and the regulator will have extensive information on claims, defects and related matters. Other organizations such as municipalities will similarly have data dealing with construction matters and systemic problems. This information should be available and consideration should be given to how best to gather the data, analyze it and share the information across organizations with a view to protecting consumers and supporting quality home building.

Other jurisdictions, notably British Columbia, undertake research. British Columbia’s Licensing and Consumer Services (formerly the Homeowner Protection Office), a branch of BC Housing, has initiated research projects dealing with building envelope, airtightness and energy consumption.^{footnote 2[2]} While a rules council may not necessarily actively engage in direct research itself, it will have an interest in studies and other technical research relating to new home construction and can engage with researchers and research organizations as appropriate.

Having a more inclusive and transparent process could also help address the negative public perceptions that exist by more clearly highlighting to all parties the complexities and costs of changes to the scope and duration of the warranty. These complexities include balancing expanded warranty coverage with its impact on the cost of housing. There may be value in having an advisory council administered jointly by the regulator and the warranty providers given their shared interest in achieving consumer protection and high quality building.

Construction performance guidelines

The Construction Performance Guidelines (Guidelines) is a critical document that sets out the standards against which a defect is measured. If the standard is not met, a defect is warrantable. If the standard is met, the defect is not warranted. As the Guidelines states, it "provides measurable benchmarks to assist homeowners and builders with performance related issues arising from workmanship and material deficiencies in new residential construction"^{footnote 3[3]}. "The Guidelines are intended to complement the Ontario Building Code and are supplemented by any applicable guidelines or standards produced by industry associations. They do not replace manufacturer warranties."

Given the importance of the Guidelines to homeowners, builders and warranty providers, there should be a formal, transparent and inclusive process for keeping the Guidelines current and relevant, reflecting new construction practices and materials. Other jurisdictions (e.g., Alberta) are establishing a regular and inclusive review process for comparable documents.

The government should also consider whether the Guidelines should be incorporated into the regulations made under warranty legislation. This could be, for example, through a process of rolling incorporation (where updates are automatic) if an inclusive and structured rule-making process is established and a regular schedule of review and updating is in place.

The Guidelines are directly relevant to how the Building Code provisions of the warranty are applied. It is critical that the Guidelines remain aligned with the Building Code. The Ministry of Municipal Affairs and municipal staff, especially Building Code officials, can provide information and concrete examples about the Building Code provisions and how they are being interpreted and applied. Their knowledge and expertise should be part of any review of the content of the Guidelines and how the Guidelines are being used for warranty claims.