Tarion Warranty Corporation has warned Ontario’s builders and real-estate agents they can be charged and fined if involved in the sale of an unregistered and illegally built home.
In a recent blog on its website, Tarion cautioned it is illegal in the province to build and sell a new home for resale without being registered with Tarion and enrolling the home in the warranty program.
In 2015, Tarion was involved in 241 illegal building investigations, which resulted in 105 convictions, more than $330,000 in fines and two jail sentences.
Over the years, eight unregistered builders have been sentenced to jail. The longest term was a six-month sentence against a North Bay builder back in 2005.
Now Tarion’s enforcement arm is set to target real-estate agents who are involved in selling unregistered homes. Charges can be laid under Tarion’s governing legislation for being a party to the offence of illegal building or for aiding and abetting an illegal builder.
Real-estate agents selling new homes have a duty to know that the law requires Tarion enrolment, and to protect their purchaser clients from illegal building activities. A conviction for selling an unregistered home could affect his or her licence and registration with the Real Estate Council of Ontario, the industry regulator for real-estate representatives.
In my practice, I have seen too many clients duped into buying brand-new and unoccupied homes on the pretext that the homes were merely renovations — which they were not — or built for personal use by the builder, who then “changed his mind” and decided not to move in.
If an owner-built home is sold without first being legitimately occupied, the owner-builder must register it with Tarion or be subject to prosecution, fines and/or imprisonment.
Recently I acted for a purchaser of a brand new $1-million-plus home where the builder claimed it was a renovation for his own personal use. A copy of the building permit revealed it was for demolition and construction, but the builder refused to enrol the house with Tarion.
I told my client that every home is warrantable even if it is illegally built by an unregistered builder.
Following my client’s complaint after closing, Tarion investigated his house and decided that the builder should have been registered and should have enrolled the property. Since the warranty is based on the eligibility of the home and not the builder, Tarion granted my client the full seven-year warranty protection.
Tarion is now pursuing the builder for illegal building — not only for my client’s house, but for a half dozen of his previous projects.
Canada Revenue Agency may also be interested in the hundreds of thousands of dollars in HST which was not charged or paid on the homes by the renegade builder.
Laurie Stephens, Tarion’s communications manager, emailed me this week to say, “If you or a homeowner suspects a builder is/was building illegally, you should call our anonymous tip line: 1-800-786-6497.”
Complaints against agents involved in selling unregistered new homes can be filed through the RECO website at reco.on.ca.
Bob Aaron is Toronto real estate lawyer. His Title Page column appears on this blog, Move Smartly, and in The Toronto Star. You can follow Bob on Twitter @bobaaron2 and at his website aaron.ca Email Bob