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Compliance Case Studies

Ensuring compliance with the Homeowner Protection Act and regulations is a key part of our work to protect B.C. homebuyers.

The following case studies are real-life stories about people who have (knowingly or unknowingly) contravened the Act in some way, as well as the compliance actions that we took against them. While some names and details have been changed to protect the privacy of those involved, the essential facts and compliance actions are real.

We encourage consumers, owner builders, real estate professionals, legal professionals, residential builders, renovators, developers and others who want to remain in compliance with the Act to use these studies as a learning tool.

Overview

John and Jill Lee were excited about building a home in Vancouver. But when they sold their new home within a few months of completion, they found themselves dealing with the compliance team at BC Housing.

In this case study, we learn what offence the Lees committed under the Homeowner Protection Act and its Regulations and what they did to address their non-compliance.


Background

The Lees applied for an Owner Builder Authorization and received a New Home Registration Form for their new home from BC Housing.

Anyone building their own home for personal use in British Columbia must apply for an Owner Builder Authorization if they do not wish to use a licensed residential builder or obtain home warranty insurance for the home.

Some of the requirements for owner builders include: living in the home for at least one year from first occupancy before selling it, and giving any prospective purchaser a BC Housing-issued disclosure notice stating whether or not the home is covered by home warranty insurance.

On the strength of the New Home Registration Form, the Lees obtained a building permit from the City of Vancouver and constructed their new home. They moved in on New Year’s Day, and within two weeks—before they had obtained final building permit approval and their occupancy permit from the city — they listed their home for sale with a real estate professional from a well-known Vancouver firm.

The home was on the market for about two months before it sold. BC Housing learned about the sale when Form A Transfer papers were filed at the British Columbia Land Title Office, and within two days, a BC Housing compliance investigator was on the phone with John Lee.

The compliance investigator met with Lee and explained that the Lees had contravened the Act for two reasons:

  • They had sold a home that wasn’t covered by home warranty insurance.
  • They had offered for sale, and sold, an owner-built home within 12 months of completion.

Lee had also not provided the required disclosure notice to the buyer of his home.

Anyone building their own home for personal use in British Columbia must apply for and be issued an Owner Builder Authorization if they do not wish to use a licensed residential builder or obtain home warranty insurance for the home.


Results

The compliance investigator told Lee that in order to rectify the non-compliance he must become a BC Housing licensed residential builder and obtain new home warranty insurance for the home. Lee indicated he would have to wait until after he returned from a two-week trip, for which he was leaving the next day.

Starting about a week after Lee’s scheduled return, BC Housing took the following steps:

  • Sent a letter regarding the illegal sale of the new home to Lee’s real estate professional and the managing broker at the real estate firm
  • Cancelled the original Owner Builder Authorization issued for the new home
  • Sent a letter to the new owner, informing him how the non-compliance would affect his ability to legally offer the new home for sale or sell it in future
  • Issued a compliance order directing Lee to become a licensed residential builder and obtain home warranty insurance for the new home by a set date

Although the deadline was not met, ultimately Lee cooperated with BC Housing and rectified the non-compliance. He was approved as an licensed residential builder for the sole purpose of registering the new home for home warranty coverage, and enrolled the new home with a policy of home warranty insurance by early fall.


Lessons learned

Although Lee was ultimately responsible for complying with the Act, this problem could have been avoided if the real estate professional involved had confirmed if the home complied with the Act. This should be one of a real estate professional’s first actions after being asked to list a new home.

Search the New Homes Registry or call BC Housing to find out if a property complies with the Homeowner Protection Act. The website is also a good source of information about owner builders and the Act.


Relevant legislation

The following sections of the Act apply to this case:

Section 20.1 of the Act states:

(1) Subject to subsection (2), an owner builder must not sell or offer to sell a new home

a) while the new home is being constructed, or

b) within the prescribed period of time after the new home has been built, unless the registrar permits the sale or offer under subsection (2).

(2) On application to the registrar, an owner builder may be permitted to sell or offer for sale a new home despite the requirements of subsection (1) if

a) the registrar is satisfied that the person would suffer undue hardship if the permission is not granted, and

b) the person pays the prescribed fee.

(3) The registrar may impose conditions on a permission granted under subsection (2).

  • Section 4.1 (4) of the Regulations states “The period of time prescribed for the purposes of Section 20.1 (1) (b) is 12 months.”

Section 21 of the Act states:

(1) In this section, “purchase period” means

a) the period during which home warranty insurance for a new home is in effect, or

b) if home warranty insurance for a new home has not been obtained, the period during

which home warranty insurance would have been in effect had it been obtained.

(2) An owner builder, and any subsequent purchaser of a new home built by an owner builder, before selling his or her new home during the purchase period, must provide to a prospective purchaser of the new home

a) a disclosure notice in a form satisfactory to the registrar stating whether or not the home is covered by home warranty insurance, and

b) if required by the Regulations, another form of security instead of home warranty insurance.

Overview

Home renovations are always a challenge, but Paul and Mary Roberts found out first-hand how refusing to comply with the law can add significantly to the costs and headaches.

This case study looks at a home reconstruction project that the Roberts misclassified as a home renovation — and ultimately paid far more in penalties than it would have cost to comply with the Homeowner Protection Act and its Regulations.


Background

When the Roberts applied for a building permit, they told their municipality that more than 25 per cent of the original structure above the foundation would remain, and that no more than 75 per cent of the overall structure (including the foundation) would be new.

Anything beyond this qualifies as substantial reconstruction, which triggers certain requirements under the Act.

For example, anyone building their own home for personal use in British Columbia must apply for an Owner Builder Authorization from BC Housing if they do not wish to use a licensed residential builder or obtain home warranty insurance for the home.

About a month after the building permit was issued in late September, the city informed BC Housing that more than 75 per cent of the home’s original structure had been removed.

A BC Housing compliance investigator visited the property the next day and learned that a new foundation had been added, only some of the pre-existing framing remained at or below the main floor level, and the project included the replacement of all services, including plumbing, electrical and heating, and possibly structural reinforcement. He determined the home was being substantially reconstructed.

The compliance investigator met with Paul Roberts at the property the following day to inform him of the Act’s requirements. When Roberts indicated he had arranged for or managed almost all of the construction, and that the home was intended for personal use, Roberts was told that he may apply for an Owner Builder Authorization and submit his application online.


Results

After no action by the Roberts for several weeks, BC Housing issued written notice requesting that they either provide proof of home warranty insurance or obtain an Owner Builder Authorization if they intended to complete the work as an owner builder. The compliance investigator delivered the notice to the property, now at the roofing stage.

More than a month later, the Roberts applied online for an Owner Builder Authorization but did not submit the $425 fee, so the application stalled. The compliance investigator visited the property several times, emailed and left voicemails. In one instance, Roberts promised to comply, but never did, and construction continued on the home.

The Roberts moved back in the home when it was nearing completion. Roberts told the compliance investigator by phone that the project had gone over budget and they would not be submitting the Owner Builder Authorization payment or complying with the Act. He demanded that the compliance investigator not call again.

BC Housing immediately issued a compliance order, directing the Roberts to either become a licensed residential builder and enrol the new home with home warranty insurance, or provide proof of home warranty insurance, or obtain an Owner Builder Authorization. A four-week deadline was set. Upon the Roberts’ request, the Registrar reviewed the compliance order but found no grounds to cancel it.

BC Housing issued an amended compliance order following the Registrar’s decision upholding the compliance order, giving the Roberts a new compliance date. The Roberts failed to comply with the amended compliance order by the requested compliance date. As a result, BC Housing issued a monetary penalty notice with a penalty of $240 for each day the Roberts did not comply. The daily monetary penalty was suspended after four days, accumulating $960 in penalties, after Roberts submitted the $425 fee and completed his Owner Builder Authorization application.

Roberts was approved for an Owner Builder Authorization and obtained a New Home Registration Form for his new home, and paid the penalty the following month.


Lessons learned

The Roberts could have avoided the extra stress and costs by complying with the Act when first approached by BC Housing. You can learn more about the Act on our Homeowner Protection Act and Regulations page.


Relevant legislation

The following sections of the Act apply to this case.

Under Section 1 of the Act:

…“new home” means a building, or portion of a building, that is newly constructed or being

constructed and is intended for residential occupancy, and includes:

a) a self-contained dwelling unit that is

i. detached or

ii. attached to one or more other self-contained dwelling units

b) a building having two or more self-contained dwelling units under one ownership

c) common property, common facilities and other assets of a strata corporation

d) any building or portion of a building of a class prescribed by the Regulations as a new home to which this Act applies

e) a home that is or is being substantially reconstructed (emphasis added), but does not include a manufactured home unless otherwise prescribed

Section 14(1) of the Act states: “A person must not carry on the business of a residential builder unless licensed under this Part.”

Section 22(1) of the Act states: “A person must not build a new home unless the new home is registered for coverage by home warranty insurance provided by a warranty provider.”

Section 22(1.1) of the Act states that subject to section 22 (1.2), a person must not sell or offer to sell a new home

a) while the new home is being constructed, or

b) within 10 years from

i. the date an occupancy permit was first issued with respect to the new home, or

ii. if no occupancy permit has been issued with respect to the new home, the date on which the registrar is satisfied the new home was first ready for occupancy, unless

c) the new home is covered by home warranty insurance provided by a warranty provider, or

d) the new home or the person is exempt by regulation from the requirement of this subsection

Section 20(1) of the Act states:

1) On application to the registrar, a person who intends to build, for personal use, a new home

of a prescribed type may be issued an authorization if the person

i. meets the criteria prescribed for owner builders, and

ii. pays the prescribed fee.

2) The registrar may issue an authorization under subsection (1) to a person who does not meet the criteria referred to in subsection (1) (a) if the registrar is satisfied that special circumstances justify doing so.

3) An owner builder, with respect to the new home for which the owner builder’s authorization is issued, is not required

a. to obtain home warranty insurance, or

b. to be licensed under this Act.

Contravention of Sections 14 and 22 made the Roberts subject to a monetary penalty pursuant to section 28.3(1)(a) of the Act, and sections 20.1(2)(b) and 20.1(2)(f) of the Regulations.


More resources

Consult our regulatory bulletin, Substantially Reconstructed Homes and the Homeowner Protection Act

Overview

A homeowner’s involvement in the construction of their new home doesn’t eliminate a builder’s obligation to provide home warranty insurance.

This case study looks at how Todd Brown, a residential builder, attempted to avoid this obligation through a false Owner Builder Authorization. BC Housing ultimately issued a compliance order and Brown faced the possibility of a hefty fine.


Background

Brown is the co-owner of a company that applied for and was approved as a BC Housing licensed residential builder.

In the same month, property owner Leanne Carter obtained an Owner Builder Authorization from BC Housing for the construction of a new home. In her application, she stated she was not hiring a builder or construction manager and would arrange for and manage most of the construction herself. Obtaining the Owner Builder Authorization meant home warranty insurance would not be mandatory for the home.

 

Carter went on to obtain a New Home Registration Form from BC Housing and a building permit from her city, and the new home was constructed.

Later that year, Carter contacted a BC Housing compliance investigator and said Brown had advised her to obtain an Owner Builder Authorization, but had in fact been hired as the construction manager and was responsible for building all or substantially all of her new home. Brown managed and scheduled all the trades, and arranged and managed the inspection process from start to finish, Carter said.

Carter provided BC Housing with a copy of a construction contract listing Brown’s company as a licensed residential builder and Brown as the construction manager. She also supplied a copy of the $10,000 cheque payable to Brown as first payment for the construction, and a list of the trades involved in the project.


Results

The compliance investigator contacted Brown to inquire about his involvement in the construction of the home. Brown said he had been a consultant rather than a construction manager. He explained that although he had hired some of the trades, Carter was responsible for paying them. Brown also stated the construction contract was only in place to allow Carter to receive financing from her lender. He said he would provide proof that he did not manage the construction.

The compliance investigator never received any proof, and later confirmed with several key trades that they understood that Brown had been hired by Carter to be the construction manager and that he had overseen their work from start to finish.

Carter also provided BC Housing with records of payments for Brown’s management fees, and copies of emails sent between her and Brown during the construction that suggested Brown was in fact the construction manager.

Based on the collected evidence, BC Housing cancelled Carter’s Owner Builder Authorization and later issued a compliance order ordering Brown’s company to obtain home warranty insurance for Carter’s home.

Three months after the compliance order was issued, Brown submitted a Registrar Review Request Form asking for the order to be set aside and for Carter to be required to provide the home warranty insurance, on the basis that Brown was never a residential builder or general contractor for Carter’s home.

The Registrar upheld the compliance order based on the evidence. Brown then appealed to the British Columbia Safety Standards Appeal Board, but was unsuccessful there as well.

As a result, Brown was required to obtain home warranty insurance for Carter’s home and faced a monetary penalty if he didn’t comply. Continued non-compliance with the Homeowner Protection Act and its Regulations can lead to a monetary penalty of up to $25,000 or imprisonment for a term of not more than one year, or both.


Lessons learned

Brown expended considerable time, effort and legal fees to deal with BC Housing’s Licensing & Consumer Services team and to appeal the compliance order, but was ultimately unsuccessful.

This could have been avoided if he had complied with the requirements of the Act.

Construction professionals can have different roles, responsibilities and types of involvement in an owner-builder project. Our regulatory bulletin, What Builders Need to Know About Owner-Builder Projects , outlines these in full.


Relevant legislation

The following sections of the Homeowner Protection Act apply to this case:

  • Section 1 of the Act, states that a “residential builder” is, “…a person who engages in, arranges for or manages all or substantially all of the construction of a new home or agrees to do any of those things, and includes a developer and a general contractor.”
  • Section 22(1) of the Act states, “A person must not build a new home unless the new home is registered for coverage by home warranty insurance provided by a warranty provider.”

Overview

When a home goes into receivership, the courts may grant the lender a Conduct of Sale permitting the sale of the property.

However, as this case study shows, A court order does not supersede the Homeowner Protection Act requirement for new homes to have home warranty insurance in order to be sold or offered for sale. One B.C. mortgage company paid a significant monetary penalty while learning this lesson.


Background

In January 2010, a home builder obtained home warranty insurance for a home he was constructing on Vancouver Island. The home was substantially completed but never occupied, and when the home builder’s company ran into financial troubles, the property went into receivership. In August 2011, the Supreme Court of British Columbia granted ABC Mortgage Corp. a Conduct of Sale to allow it to sell the property.

A month later, the warranty insurance provider de-enrolled the home because the builder failed to meet the program’s requirements: the builder was bankrupted and the commencement date for home warranty insurance coverage had not been triggered.

Despite being bankrupted, the builder had a legal obligation to arrange home warranty insurance for the home as the builder had substantially completed construction on the home. With that said, under the Act, it was not legally permissible for ABC Mortgage Corp. to offer for sale or sell the home without home warranty insurance, despite having been granted a Conduct of Sale.

The matter came to the attention of BC Housing in late 2012 after the property was listed for sale. At that time, a BC Housing compliance investigator informed both the real estate professional and ABC Mortgage Corp. representative Don Smith that the home could not legally be sold or offered for sale because it was not covered by home warranty insurance.

However, Smith was also informed that he could apply to the BC Housing Registrar for permission to sell.

In the months that followed, the house remained on the market and no application was made to the Registrar. The compliance investigator reiterated the apparent contraventions and the Act requirements to Smith and also sent an information letter to both the real estate professional and his managing broker.

BC Housing and the Real Estate Council of British Columbia (RECBC) signed an Information Sharing Agreement, effective as of June 6, 2013, that allows both organizations to share pertinent information to their respective licensees. Information letters may be copied to the RECBC under this agreement, and there may be consequences with the RECBC for real estate professionals contravening the Act.


Results

Smith made some attempts to address the situation later that spring, first pointing out that the warranty insurance had been in effect when ABC Mortgage Corp. obtained the Conduct of Sale (BC Housing later confirmed the home had been de-enrolled for non-compliance), and then contacting the insurance provider to arrange for warranty insurance. However, he didn’t agree with the requirement that ABC Mortgage Corp. become a licensed residential builder, because he felt the builder had already paid the licensed residential builder’s fee.

Under Section 22(1.2) of the Act, on application to the Registrar, a person may be permitted to sell or offer for sale a new home, despite the requirement for home warranty insurance, if the Registrar is satisfied that the person would suffer undue hardship if the permission is not granted. In June 2013, Smith applied to BC Housing requesting permission to sell the home and property under Section 22(1.2) of the Act. As a result of ABC Mortgage Corp. not being able to prove undue hardship, the Registrar decided that the home could not be offered for sale or sold without home warranty insurance, and ABC Mortgage Corp. could either become a licensed residential builder to obtain the insurance, or hire an existing licensed residential builder to do so.

Smith requested that the Registrar review the decision in August 2013, indicating that no warranty company would provide insurance on a home that was already complete. In October 2013, the Registrar upheld the decision and informed Smith he had 30 days to appeal to the Safety Standard Appeal Board under Section 43 of the Safety Standards Act (Section 29.3 of the Act). It is important to note that the Act applies to foreclosed properties, and permission to sell is only granted if the applicant can prove undue hardship.

Smith did not file an appeal. Within three weeks of the Registrar’s decision, the home was sold to Ray and Susan Turner. In January 2014, the Turners confirmed to the compliance investigator that they had purchased the property from ABC Mortgage Corp. through a court foreclosure and had been told it was not covered by home warranty insurance.

BC Housing sent a letter to the Turners, telling them they could not legally offer for sale or sell the new home for 10 years after the date of first occupancy, unless it was either enrolled in warranty insurance or the Registrar granted permission.

In July 2014, BC Housing issued ABC Mortgage Corp. and its directors a daily monetary penalty of $260 for offering for sale and selling a new home that wasn’t covered by home warranty insurance, and for acting as a developer (for selling the home as new and never-occupied) without being a licensed residential builder.

The penalty was applied for each day the contravention continued and eventually reached the maximum of $7,800, which ABC Mortgage Corp. paid in full in October 2014.


Lesson learned
Over the course of three years, ABC Mortgage Corp. expended considerable time, effort and funds learning that the Act’s home warranty requirements apply to anyone selling new homes in British Columbia — including lenders awarded full receivership by the courts along with the right to sell the property.

The Turners also learned that buying a home that is in non-compliance with the Homeowner Protection Act severely limited their flexibility in selling the home.


Relevant legislation

The following sections of the Homeowner Protection Act apply to this case:

Section 14(1) states: “A person must not carry on the business of a residential builder unless licensed under this Part.”

Section 22(1.1) of the Act states that subject to section 22 (1.2), a person must not sell or offer to sell a new home

a) while the new home is being constructed, or

b) within 10 years from

i. the date an occupancy permit was first issued with respect to the new home, or

ii. if no occupancy permit has been issued with respect to the new home, the date on which the registrar is satisfied the new home was first ready for occupancy, unless

c) the new home is covered by home warranty insurance provided by a warranty provider, or

d) the new home or the person is exempt by regulation from the requirement of this subsection

Section 29.3 states: “A person who has received notice of a decision made by the registrar under Section 29.2 may, within 30 days after receiving the notice, appeal the decision to the appeal board.”

Contravention of Sections 14 and 22 made ABC Mortgage Corp. subject to a monetary penalty pursuant to:

  • Section 28.3(1)(a) of the Act (registrar may impose a monetary penalty)
  • Sections 20.1(2)(b) of the Regulations (carrying on business of a residential builder without a licence)
  • Section 20.1(2)(g) of the Regulations (sale of new home)