There are a number of protein-rich diets currently in vogue to keep us toned, svelte, and bloat-less – gluten-free, paleo, and low-carb among them. Health professionals are quick to point out, though, that in order to stay healthy, it's also important to build muscle. Tarion has been reproached by its critics for relying too heavily on a protein-rich diet and foregoing the gym, resulting in a thin scheme that doesn’t extend strong enough protection to condo purchasers. In its recent revisions to Builder Bulletin 24, Tarion seems to have decided to bulk up its muscle with ballooning definitions of builders' accountability and Major Structural Defects ("MSD"). Depending on your perspective, this may be a welcome change or leave you longing for Tarion to step away from the weights and back to a plate of steak and eggs.

These revisions apply to condominium projects – both to units and corresponding common elements - where the first arm’s length purchase agreement for a home in the project was signed on or after July 1, 2012. Where the first arms' length purchase agreement was signed prior to July 1, 2012, the old rules continue to apply.

Changes to the Definition of MSD

There are now three separate tests for determining whether a MSD claim is valid:

  1. Failure Test – defects in work or materials that result in the “failure of a structural load-bearing element of the building”. This is a stringent test and will be met only where there is actual structural failure.
  2. Function Test – a defect in work or materials of a structural load bearing element that “materially and adversely affects the ability of a structural load-bearing element of the building to carry, bear and resist applicable structural loads for the usual and ordinary service life of the element”.
  3. Use Test – a defect in work or materials that “materially and adversely affects the use of a significant portion of the building for usual and ordinary purposes of a residential dwelling and having regard to any specific use provisions set out in the purchase agreement for the home”.

Even if a claim meets one of the above three tests, warranty exclusions may apply to exclude the claim from warranty protection. For example, the MSD Warranty does not cover defects in work or materials with respect to certain devices such as elevating devices, furnaces, air conditioners, damage caused by normal wear and tear, or damage caused by dampness or condensation due to failure by the owner to maintain adequate ventilation.

Changes to the Claims Process

As before, builders continue to carry full accountability for the first two years from the MSD Warranty start date. The claims process for MSD in years three to seven has been overhauled. The most significant change is that a builder must now elect to either take full responsibility for the resolution of a claim or reimburse Tarion for resolving the claim by way of a “co-share payment”. Calculation of the co-share payment will vary, depending on whether the MSD relates to condominium units or common elements.

If a builder elects to go the "co-share" route (or if a builder, after choosing to assume full responsibility, fails to resolve the claim), the details of the claim will be disclosed on Tarion's website. Furthermore, all MSD Warranty claims that are not fully resolved by a builder can impact Tarion's licensing decisions, license revocation, and licensing terms and conditions.

Another significant change in the new MSD rules is that the Tarion Board of Directors, on a rare case-by-case basis, may consider MSD Warranty claims which appear to be both (i) beyond the builder’s control and (ii) an industry wide issue. In such a case, the claim could be covered by Tarion.

As with any new exercise regimen, getting accustomed to the new Tarion provision will take time. For those condominiums covered by the new Tarion rules, we recommend a steady diet of Builder Bulletin 24 to gain familiarity with the new process.

Newsletter tip

When was the last time you reviewed your condominium corporation’s pre-authorized payment form? An outdated or inadequate pre-authorized payment form may restrict the condominium corporation’s ability to recover outstanding debts.