Provincial AG slams Tarion for builder bias, close ties to OHBA and excessive executive bonuses

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Ontario Construction News staff writer

Ontario’s Auditor General (AG) says Tarrion Warranty Corp., which enforces warranties on new homes, has favoured the interests of builders over homeowners.

Bonnie Lysyk released a report last Thursday that says Tarion requires half of its board of directors to be nominated by the Ontario Home Builders’ Association (OHBA) and it consults with the association before changing any regulations.

She said in her report Tarion’s processes are often too difficult and time consuming for homeowners to navigate when they want to complain about builders, but builders with poor warranty records continued to get licences.

Lysyk also found that senior management was rewarded for increasing profits and minimizing payouts to homeowners, which she says is contrary to a consumer-protection mandate of a not-for-profit corporation.

Earlier this year, the government announced it was transforming Tarion, including taking away the responsibility for providing oversight of new homebuilders and establishing a separate regulator to for that function.

Lysyk says Tarion co-operated with her audit and has agreed to implement her recommendations.

OHBA CEO Joe Vaccaro told the Globe and Mail that he agrees his organization has tight ties with Tarion. “I can appreciate the word ‘imbalance’ because we are so active in the advocacy space.” The newspaper says Vaccaro acknowledged that the imbalance may have cost consumers. “Yes, it probably has happened when the system has failed to resolve legitimate home buyer issues and left them out of pocket.”

Among close ties with the OHBA, the Tarion is required to give the builders’ group advance knowledge of any new regulations. Tarion also paid $185,000 over five years to sponsor a leadership dinner at the OHBA’s annual conference.

One contention the AG raised in her report is that Tarion imposes arbitrary and strict deadlines for contacting the agency; the first within 30 days after taking possession of a new home, and then a second 30-day window one year later.

“Between 2014 and 2018, Tarion refused assistance on about 9,700 requests because the homeowners had missed the 30-day deadlines,” the AG asserted. “About 1,300 of these requests had missed the deadline by a single day.” Lysyk says in her report that a sampling of the rejected claims included major issues including cracked foundations, building code violations and a lack of proper insulation.

While Tarion can be strict with home purchasers, the report says the organization often was extremely lenient with builders, noting that builders’ deposits are often assessed at below market value, while payouts to home buyers are based on current values. “As a result, (Tarion) paid out about $127 million more form the Guarantee Fund over then last 10 years, and recovered form builders only about 30 per cent of the pay-outs.”

In many cases, builders who failed to honour warranties were able to renew their new home building licenses. “Tarion told us that it would be unfair to use it licensing power to force collection payments from builders.”

Tarion’s online Builder Directory also is missing many examples of data buyers might find interesting, the AG asserted. “It convicted 666 individuals of illegal building, but these convictions were never recorded in the builder directory,” the Globe and Mail reported.

“The Builder Directory should be administered by government, not by industry-dominated or secretive agencies like Tarion. There needs to be transparency on builder track records to properly inform the public,” consumer advocate and Tarion critic Barbara Captijn told the newspaper. “Consumers have been muzzled for over a decade for saying this is a rogue corporation with no credible oversight, or accountability to the public.

The AG report also raised concerns about bonuses and salaries for Tarion’s executives, noting that five of 11 performance indicators for bonuses relate to maximizing profits and keeping expenses low. “These incentives might be better suited to a profit-making insurance company than a not-for-profit delegated authority with the mandate to help new home buyers,” the report says.

Lysyk says Tarion paid out $2 million in bonuses, with senior leadership sometimes collecting 30 to 60 per cent of their annual salary in bonuses.

Tarion paid its president and CEOHoward Bogach $681,616 in salary and bonuses in 2018, and together its 11 senior leaders collected $4.04 million in total compensation. This information was the first time Tarion had revealed its salaries and bonuses in 41 years.

“We thank the Auditor-General for her recommendations and look forward to acting on them with the best interests of homeowners in mind,” Bogach said in a written statement.



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