The Head of Tarion Has Some Wise Words for People Thinking About Buying into the Condo Lifestyle
Howard Bogach is a passionate man, especially when it comes to protecting the rights of new homebuyers and making sure their dreams are realized. He also has a great deal of respect for the developers and builders of those new homes.
The relationship between builder and purchaser is like a marriage, says Bogach, the president and CEO of the Tarion Warranty Corporation, during a conversation with George Carras, of RealNet Canada, and Melissa Yollick, senior manager, corporate communications at Tarion.
“And we’re like marriage counsellors,” he says. “If we’re contacted early we can help put things right before it all goes south. Homes are often a consumer’s biggest purchase and when the stakes go up, the angst goes up.
“By the time we get involved, the relationship is often broken. But the sooner we can get involved, the better we can help manage the expectations of both sides.
“Actually, we’re in the Relationship Repair Business.” Tarion is a private not-for-profit corporation that was established in 1976 to protect the rights of new homebuyers and regulate new homebuilders.
Tarion administers the Ontario New Home Warranties Plan Act for the government. It receives no government funding and is financed by fees collected for builder registration and renewal and new home enrolments.
Bogach, who has a talent for mimicry — his imitation of Kermit is extraordinary — joined Tarion in 2008, having previously served as president and CEO of Credit Union Central of Ontario, president and CEO of Metro Credit Union, as well as various positions at The Bay, Touche Ross, Credit Union Deposit Guarantee Corporation and Capital City Savings.
GEORGE CARRAS: Explain what Tarion is and what it does for homebuyers.
HOWARD BOGACH: Tarion administers the province’s warranty program. Each and every home and condo that is sold by a registered builder is protected by the Tarion warranty, and each homebuyer also has deposit protection.
Each condo buyer receives a oneyear warranty on workmanship, a two-year warranty on mechanical and systems and a seven-year warranty on major structural issues. There is a separate warranty for the common elements.
One thing to note is that the warranty stays with the unit, not purchaser, so that even if the unit is sold or assigned, the warranty remains in place.
One thing we have noticed is that, as builders get better at constructing condo buildings, the problems have diminished.
GC: How would a buyer know if a builder is enrolled in the program and what their status is?
HB: The Tarion website has a link to the Ontario Builder Directory on the home page. The directory has a 10-year history on all the registered builders and shows any of their chargeable conciliations. (A chargeable conciliation occurs when Tarion determines that one or more items reported by the homeowner is warranted and the builder has failed to repair or resolve the items, and no exceptions to chargeability as set out in Builder Bulletin 20 apply). Consumers should make sure that the builder is registered with Tarion, check the builder’s record and also educate themselves on the warranty program.
GC: What risk should purchasers of condo units be most aware of?
HB: There are a couple of risks when buying condos. The first is buying a unit in a retrofit — conversions of former churches or hotels or office buildings. The warranty program does not cover conversions or the retrofitting of non-residential buildings to residential use. The government is currently working on amending the Condominium Act, and this issue should be addressed in the new act.
The other risk I would warn against is to be careful when buying in a mixed-use commercial/ residential development. Purchasers need to be aware of the structure of the corporation and should ask if it is warranted.
GC: When does the warranty begin? Upon occupancy?
HB: The common elements warranty kicks in the day the condominium is registered as a corporation. The unit warranty begins the date you take occupancy.
GC: Explain a little bit more about deposit protection.
HB: For a purchaser of a freehold unit, their deposit is protected up to $40,000, and for a condo unit there is $20,000 in protection. The condo deposit is also protected by the trust provisions in the Condominium Act.
The difference is because lowrise builders use the deposit as working capital, but the condo developer must hold the deposits in trust with a designated trustee (often a lawyer) and it’s not used as working capital.
Last year was the first time we had a problem with a developer and condo deposits, when the developer’s lawyer released the trust funds early.
GC: What should investors and end users be aware of when they are ready to purchase a unit?
HB: Condo purchases are more complicated than buying a freehold home. And unlike the purchase of a house, there is a cooling off period following the purchase of a condo. During that period it is vitally important for the purchaser to get legal advice and have the Agreement of Purchase and Sale (APS) explained, get a sense of when occupancy will occur, find out about the warranties, and learn about how the Condominium Act works and how a condo corporation operates.
I encourage buyers to do a lot of research. Walk the neighbourhood. Talk to other owners. Make sure you know what you’re buying, and what’s in the APS.
I have one big caution about buying in large developments. Some developers are building two or three condo towers with shared amenity space. Each tower will be its own corporation and the amenity space, parking, etc., may be registered as a separate condominium corporation. If that is the case, these amenities may not be covered under the common element warranty.
Lots of consumers don’t know this. Make sure you have a good understanding from your lawyer and your realtor.
GC: Do you have any advice for condo investors when it comes time to reporting the unit’s deficiencies and filling out the Tarion forms?
HB: If you are uncomfortable with the forms, then a home inspector with knowledge of the warranty program and condominium units is essential. I would suggest an inspection 30 days after occupancy, and another before the one-year mark.
From our perspective, there is often a disconnect between the tenant and owner. The investor needs to communicate with their renter to find issues that could be covered by warranty. If you don’t make a report within the one-year time frame then your warranty has run out. The onus is on owners to protect themselves.
We also encourage people to take their time — and pictures — during the pre-delivery inspection so that the builder and Tarion will know if it’s a deficiency or wear and tear caused by the occupant.
The common elements, however, belong to the corporation not to individual owners. If there are issues with the common elements, they need to be reported to the board of directors, who then manage the common elements warranty process.
I would also add that condo buildings often aren’t finished when people move in. The delivery of the “lifestyle” is often delayed until the building is finished. But a good builder manages their buyers’ expectations.
We advocate for more educational help for new condo boards about the warranty details. When you understand the journey, it is a much better journey.
GC: What are the key things that realtors need to be aware of regarding the warranty program when selling a condo unit?
HB: They need to know the nuances of the building they are selling, whether they are selling from plans or selling resale. They should know how the corporation works, if the common elements are registered as a separate corporation, when the amenities should be ready. They should also be familiar with the warranty forms, how to register with Tarion, and if the buyer is an investor, then how to deal with renters.
They should also stress to each and every buyer that they should fill out their Tarion survey. We have a much lower return rate on condo surveys than freehold. The surveys are the basis for the annual Tarion Awards of Excellence. As well, we send the builders reports on how they fared on those surveys and show them where they can improve.
We also offer realtor seminars on the warranty program, which they can use towards their continuing education credits. Our website also offers additional resources for realtors to use (tarion.com/resalehomes).
GC: What is the big picture going forward?
HB: The revised Condominium Act has involved extensive consultation by the province and should address a number of issues that the current act doesn’t. All of the partners in this industry are learning more as we go along.
Also, the number of people moving into condos has grown because of land scarcity and the high price of single-detached homes. About 40 per cent of our enrolment is now in condos.
Innovation in design is also essential. We’re seeing more effective use of space and economies of scale. The engineering is phenomenal and it has to be as buildings get higher.
GC: What is the responsiveness of the organization? How do consumers get help when the relationship goes bad?
HB: Buyers have put their money and time up front and they want to understand the process. If they contact us early, we can put things straight before it all goes south. When we get involved the relationship between the builder and homeowner is often broken, but the sooner we can get involved the better we can manage the expectations of both sides.
Purchasers do have to understand that no home is ever going to be delivered perfect. That is impossible for any builder.
GC: What do you do for fun?
HB: I love this industry. When I joined Tarion in 2008, I didn’t know a hammer from a screwdriver, but I’ve learned and I love it. Builders are delivering dreams, not just houses. How is that not exciting?
License new home builders and vendors.
Ensure builders/vendors abide by the Ontario New Home Warranties Plan Act.
Help educate new homebuyers about their warranty rights.
Protect consumers when builders fail to fulfil their warranty obligations.
Resolve disputes about warranty coverage.
Investigate illegal building practices.
Promote high standards of new home construction.