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Home Warranty Insurance on New Homes

According to the Homeowner Protection Act and regulations, new homes built in B.C. by licensed residential builders must be covered by mandatory, third-party home warranty insurance.

It’s the strongest construction defect insurance in Canada.

This applies to all new homes constructed under building permits applied for on or after July 1, 1999 (or where construction started on or after July 1, 1999, in areas not requiring building permits), unless they are specifically excluded by the Homeowner Protection Act or regulations.

Minimum coverage

At a minimum, home warranty insurance coverage includes:

  • 2 years on labour and materials (some limits apply)
  • 5 years on the building envelope, including water penetration
  • 10 years on the structure of the home
The two-year labour and materials coverage covers any defect in labour and materials for:
  • 12 months on detached homes and on non-common property in strata units (including fee simple homes)
  • 15 months on the common property of strata buildings
  • 24 months on all new buildings for defects when related to delivery and distribution systems, such as air conditioning, electrical, heating ventilation, plumbing, etc.

The cost of the home warranty insurance is set by the providers.

There are some new homes with home warranty insurance coverage that exceeds the minimum requirement. The warranty is attached to the home, not to the owner of the home, and remains in effect upon the re-sale of the home until the coverage expires.

Strata-titled homes have two policies of home warranty insurance: one on the home and the other on the common property. Sometimes when the coverage of a new strata-titled home starts, the coverage on the related common property has already started — or expired. Coverage on the common property of strata-titled buildings starts when the first unit in the building is occupied or sold.

Owner builder exemptions

The most common exemption from the licensing and home warranty insurance requirements is a new home built under an Owner Builder Authorization.

Unless home warranty insurance is provided, owner-built homes are subject to the 10-year Statutory Protection provisions of the Act. These provisions hold the owner builder personally responsible to subsequent purchasers for any defects in labour, materials or design for 10 years after first occupancy.

If you buy such a home and find defects, you must contact the owner builder directly. Any action to remedy defects by a purchaser must be started within the 10-year period.

Further exemptions

The Act and Regulation also exempt the following classes of new homes from the requirements for home warranty insurance, registration fees, reconstruction fees and builder licensing:

  1. Manufactured homes, including mobile homes (CSA-Z240) and factory-built homes (CAN/CSA-A277)
  2. Hotels and motels
  3. Dormitories
  4. Care facilities
  5. Floating homes

However, if any of the above (excepting manufactured homes) are strata-titled, they are deemed to be new homes and require home warranty insurance, registration fees and reconstruction fees (where geographically applicable).

The Act and Regulation exempt the following classes of “new homes” from the requirement for licensing, home warranty insurance, registration fees and reconstruction fees:

  • Multi-unit buildings owned under a single title and constructed for rental purposes
  • Multi-unit buildings that are strata-titled, but held under single ownership and constructed for rental purposes
  • Three or more dwelling units built for rental purposes and owned under a single legal title

In these cases, the owner must provide a restrictive covenant that is registered on the title restricting the sale of any dwelling unit for a 10-year period.

Commencement dates

Commencement dates on home warranty insurance are:

Fee simple (primarily detached dwelling units)

  • Custom homes: date of occupancy or date of first occupancy permit, whichever occurs earliest
  • Spec. (speculative) homes: date of first occupancy or date of transfer of legal title, whichever occurs earliest

Strata homes

  • Strata unit: date of first occupancy or date of transfer of legal title to first owner, whichever occurs earliest
  • Common property: date of first-unit occupancy or date of transfer of legal title, whichever occurs earliest

Exclusions

The Act and regulations say what the home warranty insurance companies can exclude from their policies.

General exclusions can include:

  • Landscaping
  • Non-residential detached structures (parking structures, recreational and amenity facilities in multi-unit buildings are covered)
  • Commercial use areas
  • Roads, curbs and lanes (driveways are covered)
  • Site grading and surface drainage
  • The operation of municipal services
  • Septic tanks and fields
  • Water quality and quantity

Defect related exclusions can include:

  • Normal wear and tear
  • Normal shrinkage of materials from construction
  • Use of new home for non-residential purposes
  • Labour, materials and design supplied by the owner
  • Damage caused by anyone other than the residential builder
  • Damage caused by insects or rodents
  • Failure of an owner to prevent or minimize damage
  • Acts of nature

Coverage limits

Coverage on claims works as follows:

Fee simple (primarily detached dwelling units):

  • The lesser of the first owner’s purchase price or $200,000

Strata homes:

  • Strata unit: lesser of the first owner’s purchase price or $100,000
  • Common property: the lesser $100,000 times the number of dwelling units in the building or $2.5 million per building

More resources

We have lots of extra help for owners and prospective homebuyers looking for more detailed information on home warranty insurance in B.C.

Our Guide to Home Warranty Insurance in British Columbia describes in greater depth how the home warranty insurance system works, what it covers, how to get the most out of it and what to do if you find a possible defect.

The Home Warranty Insurance in British Columbia: What You Need to Know to Protect Your Investment handbook has tips to help new home buyers and owners of new homes understand the basics of home warranty insurance as well as their rights and responsibilities.

Our Residential Construction Performance Guide can help you identify if a possible defect in design, labour or materials in your new home is covered by home warranty insurance.

The Homeowner Protection Act and Regulations detail all information about home warranty insurance, including: