Toronto Star: “Province Stripping Tarion of Builder-Regulator Role” (March 28, 2017):
The Globe and Mail: “Ontario to replace Tarion with new regulator for home builders” (March 28, 2017):
Ontario New Home Warranty Regulator Reviewed
Tarion was created in 1976 to protect new home purchasers by extending warranty coverage under the Ontario New Homes Warranties Plan Act. Tarion’s responsibilities include regulating homebuilders and vendors, administering new home warranties and setting warranty terms, investigation warranty claims, resolving disputes between homeowners and builders or vendors, and prosecuting illegal builders. Tarion also administers the Guarantee Fund, a financial reserve designed to protect consumers from potentially catastrophic building events.
The Honourable J. Douglas Cunningham, Q.C. recently completed a report on Tarion at the request of the Minister of Government and Consumer Services (MGCS). The report has now been released by government and is available at https://www.ontario.ca/document/final-report-review-ontario-new-home-warranties-plan-act-and-tarion-warranty-corporation.
In his report, which sets out 37 recommendations, Justice Cunningham flags several challenges for Tarion. For example:
- Tarion’s dispute resolution is not always as accessible or effective as it could be;
- consumer information and education is not as helpful or effective as it could be in explaining home maintenance, terms of warranty coverage, how to navigate the claims process and what can be expected with new construction;
- changes to warranty protection are developed by Tarion through processes that are ad hoc and not as transparent and consultative as they could be;
- builder and vendor regulation is not consistent with modern approaches to consumer protection regulation; and
- governance measures intended to provide accountability, transparency and oversight are not aligned with modern and current best practices.
A primary concern expressed in the report relates to Tarion’s overlapping and conflicting functions, including regulating builders and vendors, administering the warranty program, setting the terms of the warranties (rule-making), and adjudicating disputes. In his interim report, Justice Cunningham had considered Tarion’s stakeholder input, in which the regulator cited information sharing and other efficiencies as advantages to maintaining all of these functions within a single entity. He also noted that Tarion had developed a system of internal controls to mitigate conflict, but that the current controls did not adequately respond to the problem. He found that the multiplicity of roles would “….inevitably give rise to situations where financial objectives compete with other objectives such as consumer protection.” And finally: “I do not believe that this problem and the challenges I have identified can be adequately addressed in the current model without significant and structural changes to the new home warranty sector in Ontario.”
In light of Justice Cunningham’s report, current MGCS Minister Tracey MacCharles has announced plans to introduce legislation later this year to divide Tarion’s current functions between a separate, new regulator to oversee homebuilders, and government, which will set terms of warranties. According to The Globe and Mail, the Minister stated, “Tarion has been too far removed from government and lacking in sufficient oversight.”
Lessons for Regulators
Is there anything to be learned from the Tarion situation?
To start, the overarching lesson for other regulators is not to take for granted their continued, unaltered existence. Regulators are creatures of statute, which can be put under supervision by government, fundamentally changed, or even eradicated at the stroke of a legislative pen.
This holds true even for self-regulated bodies. In Ontario, for example, health regulatory organizations created under the Regulated Health Professions Act may be placed under supervision by the Minister of Health “where the Minister considers it appropriate or necessary”, in part based on “…the quality of the administration and management, including financial management” of the organization (subsections 5.0.1(1)-(2)).
Legislation is not a perfect process. The regulator is ideally placed to recognize and analyze problems with enabling legislation, such as fundamentally conflicting objectives that cannot be adequately mitigated through operational measures, and flag it for government via policy discussions and/or legislative review processes.
More generally, the upcoming dissolution of Tarion serves as a reminder to all regulators. A reminder:
- to ensure that they are aware of potential problems in the application of their empowering legislation, including conflicting objectives…
- to minimize such legislative problems operationally as much as possible, and consider means of addressing them with government if necessary…
- to avoid and minimize even the appearance of conflict of interest…
- to err on the side of transparency whenever possible…
- and finally, while paying heed to other legal obligations, never to forget to prioritize the public interest.
Regulatory Solutions for the 21st Century 