Government introduces mandatory warranty protection for new home buyers

Bill 5, the New Home Buyer Protection Act, introduced in the legislature today, requires builders to provide home warranty coverage for all new homes built in the province starting in fall 2013.

“While most homes in Alberta are built to stand the test of time, if things do go wrong, homeowners will have stronger protection to get their homes repaired,” said Minister of Municipal Affairs, Doug Griffiths. "Albertans should be reassured that the single largest purchase their family makes will be protected by one of the strongest warranty programs in the country."

Under the proposed legislation, all new homes (detached homes and condominiums) would at minimum, include a warranty for:

• one year labour and materials;
• two years for defects in labour and materials related to delivery and distribution systems;
• five years building envelope protection, with a requirement for the warranty provider to offer the consumer the option to purchase additional years of coverage; and,
• 10 years coverage for major structural components.

It is expected that the new home warranty would cost about $1,700 to $2,000 for an average home, or less than one per cent of the cost of the average house.

Owner-builders will be exempt from the requirement to carry a new home warranty unless the property is sold within the warranty period. If the home is sold within the warranty period, the owner-builder must provide the buyer with warranty coverage for the remaining portion of the warranty period.

Insurance companies and their agents (including home warranty providers), are governed by the Insurance Act. A new dispute resolution process came into effect on July 1, 2012, under the Act that provides consumers with greater clarity and information about the process and their rights when submitting a claim for a home warranty insurance contract.

The program balances affordable consumer protection and builder accountability.

Backgrounder

Home warranty coverage - Questions and Answers

What types of homes would be subject to this legislation?

This proposed legislation is for single-family homes, condominiums, modular homes, mobile homes, and dwellings on recreational properties. It will not apply to dorms, work camps, hotels and rental apartments.

How much would mandatory coverage add to the cost of the average home?

It is estimated the cost of warranty for an average house would be $1,700 to $2,000. In January 2012, the average home cost $342,000. Mandatory home warranty will be less than one per cent of that and cost less than many of the upgrades often made to a home during construction.

Will the Government of Alberta be the new home warranty provider?

No. Private companies will continue to provide warranty coverage for new homes. With the New Home Buyer Protection Act, new home warranty will be mandatory and regulated. Government will ensure compliance with the legislation and track warranties on new homes.

What is a home’s building envelope?

Building envelope refers to the exterior shell of the home, including the roof and walls.

What would this proposed legislation mean for people who build their own homes?

Owner-builders would not be required to provide warranty coverage unless the home was sold before the warranty period ended. For example, if an owner-builder sold his/her home after three years, then he/she would have to provide seven years of major structural coverage and two years of building envelope coverage.

How will people know if a home has warranty on it?

The proposed online warranty tracking system will be available to home buyers, municipalities, realtors, lending institutions, etc. to help them make informed decisions. The system will track warranty only for those homes that fall under regulated mandatory new home warranty. It will not track homes that pre-date the effective date of the legislation.

How does Alberta’s proposed coverage terms compare with warranty programs in other provinces?

Currently British Columbia, Ontario and Quebec have mandatory home warranty. Quebec requires one year of coverage for faulty workmanship, three years for hidden defects and five years coverage on major building components.

Province	Labour and materials	Delivery Systems	Building Envelope	Major Structural components
Alberta	One year	Two years	Five years with the requirement additional years of coverage be offered to the home buyer to purchase	10 years
British Columbia	One year (single detached homes)	Two years	Five years	10 years
Ontario	One year	Two years	Two years	Seven years

About how many new homes in Alberta have warranty now?

It is estimated about 80 per cent of new homes currently have warranty. Currently, building envelope, fit and finish, and delivery and distribution systems are covered for one year. Major structural is covered for five years.

When will mandatory home warranties come into force?

Pending passage of the New Home Buyer Protection Act and completion of the supporting regulations, builders will be required to provide home warranty coverage for all new homes built in the province starting in fall 2013.

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Media inquiries may be directed to:
Heather Kaszuba
Communications
Alberta Municipal Affairs
780-427-8862
[email protected]

To call toll free within Alberta dial 310-0000.