Residential Home Builder Licensing is Introduced to Alberta

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The Government of Alberta has declared into force amendments (Amendments) to the New Home Buyer Protection Act (NHBPA) that will, as of December 1, 2017, introduce a new licensing and public registry regime for all builders or new or reconstructed homes in Alberta.

The Amendments’ intent is to help protect consumers from “fly-by-night” builders and individuals with a history of involvement with financial, warranty, Safety Code or other compliance issues.

The Amendments are a legislative expansion of a builder information program that was introduced in July 2016 for residential builders in the Regional Municipality of Wood Buffalo, in response to concerns that consumers may be harmed by unqualified or unscrupulous builders in the wake of the extensive demand for new home construction and re-construction following the 2016 Fort McMurray fire.

As of December 1, 2017:

  • Builders of new or reconstructed residential homes anywhere in Alberta will be required to hold a valid builder’s licence to obtain a building permit. A licence may be refused if a builder, or any of its directors or officers, has a poor financial, compliance or quality track record.
  • Consumers will have access to a public registry of all licensed builders including detailed information on licensed builders such as fraud convictions, potential bankruptcy, history of dissolved companies and safety standard complaints to assist owners and prospective buyers of new, reconstructed, or resale homes under warranty to make better informed decisions.

The Amendments also include provision for a future requirement for directors, officers and/or employees of licensed builders to complete substantive courses and examinations to obtain or renew a licence; however, this will not be initially required to obtain a builder’s licence at this time.

Background

The NHBPA was brought into force February 1, 2014. It introduced a requirement that all new homes in Alberta be covered by a home warranty insurance contract with a minimum coverage of:

  • 10 years for structural defects,
  • 5 years for defects in the building envelope,
  • 2 years for defects in materials and labour related to delivery and distribution systems and
  • 1 year for defects in other materials and labour, unless an exemption is granted.[1] Builders are also required to advise home buyers of the option of purchasing additional coverage.

The NHBPA applies to construction of new homes, including newly constructed detached, semi-detached, multi-unit, condominium buildings, manufactured homes and recreational properties intended for residential occupancy. Additions, reconstructions or substantial renovations to a residential home may be captured by the NHBPA if they result in > 75% of an existing home’s above-ground square footage being new.

Owner builders may build their own home with warranty coverage, or apply for an exemption from warranty coverage known as an Owner Builder Authorization.

The NHBPA also prohibits any person selling or offering to sell a new home while it is being constructed or during the minimum coverage period. Owner builders who build pursuant to an exemption from warranty coverage, or any builder who is de-enrolled from warranty coverage during the coverage period, can face substantial difficulties obtaining replacement warranty coverage, obtaining or renewing financing, or selling the property within 10 years from the applicable commencement date. Realtors, lenders and subsequent purchasers and vendors should ensure that proper warranty coverage is in place, or an appropriate exemption has been issued, in respect of any new or recently built or reconstructed home.

On June 30, 2016, the Government of Alberta enacted the New Home Buyer Protection (Regional Municipality of Wood Buffalo) Regulation (RMWB Regulation), which required all residential builders of new homes in the Regional Municipality of Wood Buffalo to file a Residential Builder Declaration (RBD) before they are able to obtain a building permit or warranty coverage. The RBDs are available in full on a public Registry of RMWB Builders, along with Registrar’s Notes where applicable. The RMWB Regulation does not prohibit a builder from building in the region; rather, it is a disclosure-based system that permits homeowners to review the information contained in a builder’s RBD when selecting a builder.

The Government of Alberta engaged in a public consultation in February to March, 2017 with builders, renovators, owner builders and homeowners regarding a potential residential builder licensing regime, and released its Engagement Summary Report in May 2017.

The 2017 Amendments

The Government of Alberta introduced Bill 12 – New Home Buyer Protection Amendment Act, 2017 (Bill 12) on May 4, 2017.  Bill 12 was passed through third reading on May 18, 2017 and has since been awaiting proclamation into force. On October 31, 2017, it was proclaimed by Order in Council to come into force as of December 1, 2017.

As of December 1, 2017, building a new or reconstructed home to which the NHBPA applies will be prohibited unless the builder holds a valid licence or has received an exemption or owner builder authorization. Building permits applied for after the Amendments have come into force will not be issued to any builder of a new or reconstructed home without satisfactory evidence of compliance with the licence and warranty coverage requirements of the NHBPA.

Renovations of a home’s surfaces, fixtures or decorations, or that do not otherwise meet the criteria for reconstructions, will continue to be exempt from the NHBPA, both in respect of warranty coverage and builder licensing.

Currently, owner builders are only required to apply for an Owner Builder Authorization if they sought a warranty exemption, and are required to provide evidence either of warranty coverage or an exemption to obtain a building permit.  After December 1, 2017, all individuals planning to build their own home, whether with or without warranty coverage, must obtain an Owner Builder Authorization in order to obtain a building permit applied for after December 1, 2017. A $750 application fee and questionnaire and affidavit from each registered owner will be required.

Detailed criteria for receiving an Owner Builder Authorization are expected in pending Regulations. In the interim, the existing criteria for obtaining an Owner Builder Authorization for purposes of obtaining an exemption from warranty coverage are informative – to qualify for a warranty exemption under a current Owner Builder Authorization, an individual must:

  • intend to reside in the new home for 10 years;
  • be the registered owner of the property;
  • intend to personally engage in, arrange for or manage all or substantially all of the new home’s constructions;
  • not have contravened the NHBPA;
  • not have received an owner builder authorization in the past three years; and
  • not have been ordinarily resident in a new home for which another individual was issued an authorization in the past 3 years.

Builder Licensing Regime

There will be two categories of license issued to residential builders, other than owner builders:

  • General Contractor
    • Issued to an individual or organization involved in constructing large or complex residential buildings that are more than four (4) units, and three-storeys or greater in height
    • May build, arrange for, or manage the construction of a complex residential building requiring a coordinating registered professional (per Alberta Building Code requirements)
  • Developer
    • Issued to an individual or organization involved in constructing residential buildings that are 1-4 units, and less than three-storeys in height
    • For projects on which the Alberta Building Code does not require involvement of a coordinating registered professional
    • Can be hired by a Licensed Developer to construct complex residential buildings

The initial application fee is $600 ($500 for annual renewal).

The Registrar will be issuing provisional licences to experienced residential builders.  Provisional licences to builders who have built at least two new homes in the last two years and, presumably, have acceptable compliance records; however, the issuance provisional licences remains discretionary.  Builders expecting to receive a Certificate of Provisional Licence should ensure their Builder Profile and corporate registry records (including annual returns) are up to date.

Builders who do not qualify for or receive a Certificate of Provisional Licence will be required to apply for a full builder licence in order to obtain a building permit applied for after December 1, 2017.  A Certificate of Provisional Licence is valid only from its date of issuance until April 30, 2018.

The Builder Licence application will be available via the New Home Buyer Protection System Builder Portal as of December 1, 2017.  While the precise form of application has not yet been released publicly, the Government of Alberta has indicated that builders will be required to provide the following:

  • Contact information
  • Associated companies
  • Proof of acceptance by a warranty provider
  • History of fraud in the past 10 years
  • Compliance record with safety and consumer protection legislation
  • Financial / bankruptcy claims
  • Any building-related court proceedings.

Builders are encouraged to submit their application for a full licence before March 31, 2018.

The Registrar will be required to maintain a registry of this information received from builders.  The public registry must, at minimum, make available information regarding license applications, renewals, suspensions and reinstatements. Assuming the new public registry follows the RMWB registry of RBDs, it can be expected to include full, unredacted copies of builder’s declarations of the following in respect of the builder and its directors and officers:

  • Mandatory Disclosure:
    • prior convictions, offences, fines, penalties, compliance or other enforcement orders, or decisions, orders or notices under any of the NHBA, Safety Codes Act, Fair Trading Act, Municipal Government Act or similar legislation;
    • unpaid court judgements;
    • current or previous bankruptcy proceedings;
    • prior CCAA proceedings in respect of the builder or any previous builder of which the directors or officers were a director or shareholder;
    • residential construction businesses in which directors or officers have had whole or partial ownership within the past 3 year;
    • residency in Alberta;
    • warranty provider;
  • Optional Disclosure:
    • Training programs completed by staff
    • # of homes built in Alberta since February 1, 2014;
    • Pre-paid contracting business licence;
    • Extra provincial licence, permit or authorizations;
    • List of employees and subcontractors

Failure to comply with the amended NHBPA could result in conviction, with penalties of up to $100,000 per dwelling unit for a first offence and $500,000 per dwelling unit for subsequent offences, and/or imposition of administrative penalties against a builder, or any of its directors, officers, or other persons who authorized, permitted or acquiesced in a contravention of the NHBPA, of up to $100,000 per dwelling unit.

Courses and Examinations

The Amendments also introduce into the NHBPA the ability for the Registry to require an application for a builder’s licence to require its directors, officers or employees to complete courses and examinations in order to obtain or renew a builder’s licence.  A mandatory regime of courses and examinations has not been proposed as a matter of course, though such regimes have been introduced into other Canadian provinces.

In British Columbia, the new home building licensing regime requires proof of of 24 months’ experience managing or supervising residential construction within the last 5 years (for General Contractor applicants), and demonstrated competency in the following competency areas:

  • Building Code – Single Family Swelling
  • Project Management & Site Supervision
  • Building Science for New Homes
  • Service & Warranty
  • Financial Management
  • Construction Law
  • Business Planning & Management

These require completion of online quizzes, an assignment, one-day in-class session and a final exam.  Licence renewal requires completion of approved Continuing Professional Development courses

The Amendments allow the Registrar to introduce a similar regime if and when it is determined to be appropriate.

 

[1] Exemptions are available for purpose-built rental buildings, conversion of multi-unit rental buildings to condominiums and conversion of heritage properties from commercial to residential use. Owner builders may also obtain an Owner Builder Authorization permitting them to build their own purpose; however, that does warranty coverage would still be required if the owner builder intends to sell or, in most cases re-finance, the property within 10 years.

 

Matt Anderson

 

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