WHEREAS the Government of Alberta passed the New Home Buyers Protection Act on November 20, 2012; and

WHEREAS the rules and regulations pertaining to the New Home Buyers Protection Act came into effect February 1, 2014; and

WHEREAS the costs associated with the New Home Buyers Protection Act are drastically higher than initial estimates prior to the implementation of the Act; and

WHEREAS the Government of Alberta’s lack of preparedness to implement the program has inflicted stress, anxiety and anger on Albertans, with little to no benefit for ordinary Albertans; and

WHEREAS mandating all new houses to carry a warranty presents an unnecessary financial burden on, and a subversion of free enterprise principles espoused by Alberta residents;

THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties opposes the mandatory nature of the New Home Buyers Protection Act and its associated rules and regulations, and urges the Government of Alberta to amend the legislation to allow consumers to decide if they wish their new homes to be covered by warranty;

FURTHER BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties urge the Government of Alberta to respect the individual freedoms of all Albertans to sell and purchase their homes on terms amenable to both parties, recognizing that the terms of the transaction between two free individuals do not require regulation by government.

The rules and regulations of the New Home Buyers Protection Act came into force February 1, 2014. This legislation makes purchasing a warranty on various components of new home construction mandatory.

Whereas the option to purchase new home warranties has been available on new homes prior to this government action, the government is now forcing all home builders to purchase an insurance product regardless of individual circumstances.

The increased costs for this warranty program will accrue to both those seeking to build a new home, and municipalities tasked with ensuring compliance with the new program. While the cost of purchasing the insurance product has been discussed in the media, fees for registering a new home with the registrar, for searching the registry, for authorizations for filing appeals, etc. are all costs that have yet to be disclosed.[1]

Now that the program has been operating for several months it is apparent that the increased costs are higher than the Government of Alberta indicated prior to the program implementation. Initial estimates for warranty coverage were approximately $1700, whereas the known costs today are $3400. Furthermore, before program implementation the program was to include the ability to be exempt from the program if the homeowner built the house, now we know there is a $750 non-refundable application fee, and there are no guidelines to what will or will not be accepted on a self-build exemption application.

The Government of Alberta was not prepared for the program to commence, causing extreme wait times to speak to representatives to have simple questions answered, and is still causing problems as people try to get their warranties onto the government registry. The Government of Alberta’s lack of preparation has caused more unnecessary anger, mistrust, and anxiety than the program was designed to alleviate.

While new home buyers may initially feel comforted with the idea of having a warranty on their new home, the warranty insurance provider may exclude policy coverage for “negligent or improper maintenance, or improper operations of the new home”. Further, warranties may be voided where a homeowner undertakes renovations and does not hire the original builder to make the changes.[2]

While there may be instances where shoddy construction or dishonest practices of a few contractors who do not do a good job[3] have created financial burdens on those who may have purchased a home of sub-standard quality, the ability of a purchaser to select a new home with a warranty or research the reputation of a contractor were in place prior to mandatory warranty practices being put in place by the Government of Alberta.

Home builders already experience significant costs in obtaining safety and building code permits. These permits are supposed to ensure the home is built to provincial standards. Reputable contractors follow the rules, take pride in the quality of their work, and provide Albertans with safe homes. Mandating a warranty concurrently with requiring safety code permits leads one to conclude that the standards are either inadequate or not being enforced as well as homeowners expect.

Finally, mandating the purchase of an insurance product that will increase the cost of home ownership, and which may be voided by any one of twenty different stipulations[4], will not provide the comfort or protection new home buyers expect.

Mandating the purchase of an insurance product violates an individual’s free agency, and the principles of free enterprise.

[1] Part 6, Section 25; New Home Buyer Protection Act. Province of Alberta, November 20, 2012

[2] Section 7; Insurance Act –Home Warranty Insurance Regulation. Alberta Regulation 225/2013

[3] Minister Griffiths; New legislation to give new home buyers in Alberta more protection. CTV Edmonton. October 25, 2012

[4] Section 7; Insurance Act –Home Warranty Insurance Regulation. Alberta Regulation 225/2013

The AAMDC has no active resolutions directly related to this issue.