Naomi Rozenberg, Associate
Phone: 604-685-3911
Email: nrr@lmlaw.ca
Owners often focus their attention on their “2-5-10” new home warranty policy. However, they often overlook warranties provided by contractors, trades, suppliers and manufacturers on their work or products.
Roofs, windows, doors, waterproof membranes, electrical and mechanical components are often covered by such “contractor warranties”.
Contractor warranties may provide a cost-effective remedy if enforced diligently. While some warranties have conditions that limit their value, others may provide broader coverage than a 2-5-10 policy.
There is no standard-form wording for contractor warranties. In addition, some contractor warranties contain specific, time-sensitive notice requirements.
For this reason, strata councils and homeowners should:
- locate and review contractor warranties shortly after completion of the condominium or home,
- diarize all warranty expiry dates and note any specific reporting requirements,
- obtain legal advice about preserving and protecting their rights under the contractor warranties, and
- decide at an early opportunity whether to make a warranty claim.
This article addresses frequently asked questions about contractor warranties:
- What is the difference between the 2-5-10 warranty and a contractor warranty?
- What are the advantages of making a contractor warranty claim?
- Should an owner rely on the developer to make a claim?
- Where would an owner find contractor warranty certificates?
- What steps can an owner take to preserve its rights under a contractor warranty?
What is the difference between the 2-5-10 policy and a contractor warranty?
Contractor warranties are separate and distinct from a 2-5-10 warranty policy.
2-5-10 policies are governed by the Homeowner Protection Act (the “HPA”). In contrast, contractor warranties are not issued pursuant to any specific legislation.
This distinction has many implications. For example:
- A contractor warranty is provided directly by the contractor or supplier, who is directly responsible for administering and honouring its warranty, whereas a 2-5-10 policy is provided by a third party warranty provider. 2-5-10 warranty providers have certain statutory obligations to evaluate and respond to warranty claims, and are overseen by an insurance regulator.
- Under the 2-5-10 warranty, a deficiency must meet the HPA definition of a “defect”. There is no standard definition of a “defect” in contractor warranties.
- All 2-5-10 claims must be reported to both the warranty provider and builder in accordance with the HPA, whereas each contractor warranty has its own unique reporting and notice requirements.
- Written notice of a 2-5-10 warranty claim must be provided “within a reasonable time after the discovery of a defect and before the expiry of the applicable home warranty insurance coverage”. In contrast, a contractor warranty may require an owner to provide notice of a claim within a certain number of days of discovering a defect.
Why make a contractor warranty claim?
In some instances, a contractor warranty might offer broader coverage for “defects” than a 2-5-10 warranty.
For example, a gap in coverage under a 2-5-10 policy may arise if:
- the item does not fall under the HPA definition of a “defect”;
- the item falls under a permitted exclusion found in the policy; or
- a warranty reporting deadline has been missed.
Further, if the issue cannot be resolved and the owner commences a lawsuit, in some instances a claim against a contractor for breach of warranty might be easier to prove than a claim in negligence. Some negligence claims requires the property owner to prove that the construction defect poses a “real and substantial” danger to persons or damage to property. A breach of warranty claim, on the other hand, does not require proof of a dangerous defect.
Why doesn’t the builder or developer pursue the contractor warranties?
The property owner is arguably in the best position to make a contractor warranty claim, since they have access to inspect and investigate the building and components post-occupancy.
Where a contractor warranty certificate is issued to the builder / developer, it is unclear if the owner or strata corporation has the ability or “standing” to make a claim. In such circumstances, the safest course of action is to deliver the claim and notify the builder.
A builder / developer might be motivated to make a claim under a contractor warranty if the owner or strata corporation has made a 2-5-10 warranty claim defects that may also be covered by the contractor warranty. In situations where the builder has provided a guarantee or indemnity to the warranty provider, it is in the builder’s interest to take advantage of potential coverage offered by a contractor warranty.
Where can an owner locate contractor warranties?
Contractor warranty certificates are often included in a homeowner or maintenance manual. For condominium owners, section 20 of the Strata Property Act requires developers to deliver copies of all warranties to a strata corporation at the first AGM.
What steps can an owner take to preserve its rights under a contractor warranty?
A contractor warranty can only provide coverage for a defect if the property owner delivers a claim in accordance with the terms of the warranty. By reviewing the contractor warranty certificates at an early stage, diarizing reporting deadlines, and giving notice a claim, the owner is preserving its ability to take advantage of the protections and assurances offered by the warranty. If a contractor fails to honour its warranty, the owner would have a potential claim for breach of contract against the contractor who provided the warranty.
Owners and strata councils should also consider obtaining legal advice about their contractor warranties, particularly if the warranty certificate contains complex terms, uncertain language, or strict notice requirements.
Lesperance Mendes regularly assists strata corporations to enforce their warranties. To schedule an appointment contact: John G. Mendes or Naomi R. Rozenberg.
THIS ARTICLE IS NOT LEGAL ADVICE: This article provides general information and should not be relied on upon without independent legal advice.