Owner-Built Homes and the Homeowner Protection Act

Saturday, August 17th, 2013


Two recent disciplinary decisions, not yet published, involve listings of new homes under the Homeowner Protection Act (HPA). The following information, which appears in the Professional Standards Manual (www.recbc.ca/psm/owner-built-homes-changes-to-the-homeowner-protection-act/), is published as a reminder to licensees about the requirements related to the sale of owner-built homes.

No person may build, sell or even offer to sell a new home except in compliance with the HPA. Under that Act, a new home is defined to include a home that is “substantially reconstructed”. Sections 20.1 and 22(1.1) prohibit the offer or sale of an owner-built home and new home respectively unless specified conditions are met. A licensee may not accept a listing of a new home unless and until the owner has complied with the requirements of the HPA.

When the HPA regulations came into effect on July 1, 1999, owner-builders were permitted to be exempt from licensing and home warranty insurance requirements provided that they built a detached, self-contained dwelling for their own personal use not more than once every 18 months. Owner-builders who sold their home within 10 years of completion were required to provide prospective purchasers with an Owner-Builder Declaration and Disclosure Notice identifying that the builder was not licensed and was not providing a policy of home warranty insurance; however a 10-year statutory warranty would apply, giving the purchaser some rights against the owner-builder should defects occur during the 10-year period.

There was a sizeable abuse of this owner-builder exemption, involving either an owner who was not actually Owner-builders must occupy the new home themselves for at least a year after obtaining an occupancy permit before renting or selling. Building or managing the construction of the home himself or herself or an unlicensed builder who was trying to avoid meeting the requirements of licensing and the cost to provide 2-5-10- year home warranty insurance for the home buyer.

As of November 19, 2007, changes to the HPA and Regulation regarding owner-built homes enhanced protection for homebuyers, including the following changes:

  • Individuals planning to build a new home for their personal use are required to meet stricter eligibility requirements, pay a fee, and obtain an Owner- Builder Authorization from the HPO prior to commencing construction of the home.
  • Owner-builders must occupy the new home themselves for at least one year after obtaining an occupancy permit and are not permitted to sell or rent the new home during that one-year period. The owner-builder is also not permitted to sell a new home during construction “as is” without permission from the HPO.
  • Owner-builders who sell their home within the first 10 years after obtaining an occupancy permit are obligated to subsequent purchasers for defects in the new home during that 10-year period. The new legislation clarifies that an owner-builder’s obligations under the statutory warranty are similar to obligations of licensed residential builders under a policy of home warranty insurance. That is, 2 years for material and labour, 5 years for defects in the building envelope and 10 years for structural defects. The statutory warranty enables subsequent purchasers to sue the owner-builder for defects as set out on the statutory warranty. There are some reasonable exceptions to the statutory warranty (for example, defects caused by someone other than the builder, natural disasters) and these are set out in detail in the Regulation.

Licensees acting for either an owner-builder or a potential purchaser can check the HPO’s New Homes Registry (lims.hpo.bc.ca/prs/NewHomes/) to determine whether a new home built under an Owner-Builder Authorization can be legally sold as having met the occupancy requirement.

Buyers should be aware that the statutory warranty from an owner-builder is only as good as the owner-builder’s ability to pay and/or their ability to rectify the defects of the home. Factors such as ongoing financial stability, continued local presence and an owner-builder’s willingness to fulfill his or her obligations, may affect the buyer’s ability to seek recourse for these defects. Licensees acting for buyers of such homes should advise buyers to consider these issues in making their purchase decision.

Owner-Builder Disclosure Notice

Owner-builders who built their home prior to November 19, 2007 must continue to provide prospective purchasers with the old-form Owner-Builder Declaration and Disclosure Notice within the first 10 years after occupancy.

Owner-builders building under an Owner-Builder Authorization (after November 19, 2007) are required to provide an Owner-Builder Disclosure Notice, obtained from the HPO, to prospective purchasers within the first 10 years after occupancy. The owner-builder must advise the HPO of the occupancy date and the HPO does not release the Disclosure Notice until the one-year occupancy requirement has been verified. Subsequent purchasers are also required to provide the Disclosure Notice if they sell the home within the 10-year period. The Disclosure Notice will state that the home was built under an Owner-Builder Authorization, when the 10-year period started, and whether or not there is a voluntary policy of home warranty insurance in place for the home.

NOTE: A survey of owner-builders conducted in 2007 found that the majority of purchasers of owner-built homes did not receive a disclosure notice and did not know whether or not their home had home warranty insurance. Not providing a disclosure notice is an offence under the legislation and, thanks to stronger compliance tools now available to the HPO, the requirement to provide the disclosure notice will receive increased attention.

When a licensee represents a seller who is an owner-builder, or who is a subsequent owner within the first 10 years as required by the HPA Regulations, the licensee should insert a clause in the Contract of Purchase and Sale confirming delivery of the Owner-Builder Disclosure Notice as follows:

Receipt of Owner-Builder Disclosure Notice Clause

The Buyer acknowledges having received a copy of the Owner-Builder Disclosure Notice dated (date), prior to making this offer, in accordance with the Homeowner Protection Act and Regulations.

Permission To Sell

Despite the occupancy requirement for owner-builders, the HPA does allow an owner-builder to apply to the HPO on the basis of undue hardship for permission to sell during construction or earlier than 12 months after occupancy. For homes built under an Owner-Builder Authorization, applicants can download an application form from the HPO website and mail in the completed form along with any required supporting documentation and the applicable processing fee. Such approvals are not given lightly and conditions may be imposed on any approval given. An owner-built home may not be offered for sale or sold either during construction or earlier than the 12 months from obtaining an occupancy permit without approval.

Illegal Sales under the HPA

Licensees acting for either owner-builders or buyers can avoid becoming a party to an offence under the HPA by remembering the following:

  • Owner-built homes may not be offered for sale or sold without providing the Owner-Builder Disclosure Notice to all potential buyers.
  • For owner-built homes since November 19, 2007, Owner-Builder Disclosure Notices must be obtained from the HPO and will not be released until the one-year occupancy requirement has been verified.
  • The HPO is advised by the Land Title Office whenever the title of an owner-built home is transferred and pursues enforcement action if the sale is illegal (which may include compliance orders, monetary penalties, court injunctions, or convictions under the HPA).

Licensees can assist owner-builder clients by advising that occupancy permit information should be filed early with the HPO (owner-builders can file using their online account) so the HPO will have time to verify the information and provide an Owner-Builder Disclosure Notice well in advance of any offers for sale.

Further information about the requirements of the HPA is available in the Professional Standards Manual (www.recbc.ca/licensee/psm.html) and on the Homeowner Protection Office website (www.hpo.bc.ca).

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