WHEREAS the New Home Buyer Protection Act came into effect on February 1, 2014; and
WHEREAS the New Home Buyer Protection Act requires that all new homes and major renovations must be covered by home warranty insurance or be exempted from this requirement by payment of a $750 fee upon authorization from the New Home Buyer Protection Office; and
WHEREAS the intent of the New Home Buyer Protection Act is to protect the interests of home buyers, builders, and new home warranty providers and to improve builder accountability; and
WHEREAS the result of this legislation has not achieved its intent; and
WHEREAS for the home buyer, it has resulted in paying significantly more than what was predicted before the Act while experiencing many of the same issues;
THEREFORE, BE IT RESOLVED that the Rural Municipalities of Alberta request that the Government of Alberta open the New Home Buyer Protection Act for review with appropriate consultation from rural stakeholders and small builders;
FURTHER BE IT RESOLVED that the Government of Alberta remove the mandatory nature of the new home warranty.
The New Home Buyer Protection Act came into effect February 1, 2014 and made new home warranty mandatory. Prior to the creation of the New Home Buyer Protection Act, there was the option to purchase new home warranties; however, now there is no choice. The mandatory nature of this Act does not guarantee protection for homeowners because, historically, the main issue facing new homeowners involved a lack of enforcement of building codes. Code violations or trade and industry standards violations are the primary cause of warranty issues. There have been many cases of poor workmanship resulting in black mold, rotten walls, and leaking buildings. These are very costly repairs and very aggravating to homeowners when they show up typically two to four years later. However, in many cases these costs were put through regular home insurance claims as the result of a weather event rather than utilizing the new home warranty as weather events are not covered under new home warranty. Aside from regular home insurance, there are also manufacturer warranties on almost every aspect of a new home. Therefore, in many ways the new home warranty is a triple layer of insurance. Rural homeowners are hit again when they do make claims against their new home warranty because they are charged more by the warranty provider to conduct an inspection in a remote location.
For rural communities it is still unclear what the full affect the New Home Buyers Protection Act has had. It was expected that the average cost of a home (valued at $342,000) would increase by $2,500; however, in practice this is not the case. When required to provide a long-term warranty, builders must increase cost as their risk increases. This is particularly true in remote areas that have high travel costs to bring in specialized trades. Therefore, these additional costs disproportionally affect rural communities that rely on the small builders since they do not have access to the 100+ home builders.
These limited options combined with the additional red tape for small builders create additional challenges for development in rural areas.
The additional costs associated with new home warranty requirements related to the Act has resulted in some contractors facing a 10% increase in construction which are absorbed by the homeowner. As an example, a $342,000 home will now cost $376,200, which is an increase of $34,200 as opposed to the expected $2,500. This is not including material increases that also go up every year.
Finally, mandating the purchase of new home warranty that will increase the cost of home ownership, and may be voided by any one of twenty different conditions [1], will not provide the comfort or protection new home buyers expect.
[1] Section 7; Insurance Act – Home Warranty Insurance Regulation. Alberta Regulation 225/2013
Previous RMA resolutions related to this topic:
RMA has no active resolutions directly related to this issue.