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We're the wild west of home warranties

Buying a home is the biggest purchase most of us will ever make. You would expect the builder to offer certain guarantees about the home’s integrity for a reasonable period of time.

Buying a home is the biggest purchase most of us will ever make. And, just as you would expect a warranty on new vehicles, appliances and electronics, when buying a new home from a developer, you would expect the builder to offer certain guarantees about the home’s integrity for a reasonable period of time.

The cost of a new home tends to dwarf all the other purchases we make combined, after all, so you would expect some level of protection. Unfortunately, when things go wrong with our homes they often go really wrong and cost huge amounts of money to remedy.

Yet the Yukon lacks any sort of mandatory home warranty for purchasers of new houses. This laissez faire approach to home warranties stands in stark contrast to what we see elsewhere in the country.

Here, home warranties are a matter of contract. This means that if you don’t ask for one at the time you sign your purchase contract, the builder is under no obligation to give you one. What’s more, if you don’t actually specify what will go into the home warranty at the time you sign your purchase contract, the developer can arguably include whatever exceptions to coverage that it wants and can severely limit the time period that the warranty applies for.

The problem with leaving home warranties to contractual negotiation is that there is an asymmetry of information that does not tend to work out well for Jane and Joe First-Time-Home-Buyer. Purchasers of new homes are often new to the process while the builder is (presumably) experienced and knowledgeable.

Unfortunately, many purchasers simply assume that they are protected and the idea of a warranty is an afterthought. By the time they realize it is something they should ask for, it is often too late.

The result in the Yukon has been a patchwork of home warranties with each developer offering its own terms (if any). Some builders provide somewhat decent coverage and will cover most defects for a year, and the structure of the building for up to five years. But other builders only provide a one-year structural warranty, and one builder even inserts a clause stating that the builder can decide “in his absolute discretion” if a particular defect is covered or not.

In the provinces, governments have taken a consumer protection approach to the issue and have mandated that all builders provide a new home warranty to buyers. The governments in those provinces also specify what the warranty must cover, the length of time that the coverage is provided for and what exclusions can be included.

For example, British Columbia mandates a “2-5-10 year” warranty. Buyers receive nearly blanket coverage for the first year and broad coverage for the first two years. The “building envelope” is covered for five years and major structural defects are covered for a full 10 years.

British Columbia also protects new home buyers by requiring that the warranty coverage be provided by a third party (in case the builder goes belly up and its principals hide behind the limited liability of a corporation) and that the cost of the warranty be included in the purchase price. The coverage also “applies to the home and not the owner” so if the house is sold the buyer will obtain the benefit of the warranty.

Most provinces impose similar new home warranty requirements on builders. These programs are not without their critics and new buyers still find themselves getting burned by exclusions and expiration dates. But shortcomings aside, the provincial home warranty programs are much better than the “wild west” that prevails in the Yukon.

Until the Yukon legislature decides to act, consumers will need to protect themselves. Before you even put your signature on a purchase agreement to buy a new home, ask about what warranty the builder provides and insist that appropriate terms be built into your contract. But it would be ideal if the legislature would step forward and introduce legislation to protect new home buyers.

Kyle Carruthers is born and raised Yukoner who lives and practises law in Whitehorse.