The Ontario Construction Report – November 2009 – PAGE OCR 3
Tarion President speaks to GOHBA:
MSD Indenification change under review after builders expresss concern
open. No news is good tion of poor builders by In his presentation, Bo-
STAFF WRITER
– The OCR Construction Report
news.” good builders.” gach indicated that Tarion’s
In a letter to Tarion’s Bogach said that from finances are holding up de-
Ontario home builders board, OHBA president January 2004to December spite the recession. He said
are awaiting a decision from Frank Giannone says that if 2008, MSD claims totalling the Warranty program proj-
Tarion’s board of directors Tarion does not change its $27 million were filed for ects approximately 35,000
about whether the home MSD plans, “it will lead to 232 builders. The largest enrolments for 2009, a sig-
warranty program will im- less selection and competi- majority (202) involved nificant decline from the
plement a planned indemni- tion which will further lead claims of less than 61,000 in 2008.
fication requirement for to higher prices and may in- $100,000, with an average The number of “unwill-
Major Structural Defects crease the frequency of ille- cost of $21,000. However, ing/unable” builders has in-
claims beginning in January gal building.”
Tarion CEO and President
just seven builders were re- creased by 50 per cent from
2010. In his presentation to the
Howard Bogach addresses the
sponsible for $20 million in 2008.
The new rules in part are GOHBA, Tarion’s Bogach
October GOHBA dinner meeting
claims. Tarion is keeping a close
a reaction to problems at an showed images of an Ot- The biggest problems eye on its budgets with on-
Ottawa building site, where tawa-area neighbourhood of dollars in tax increases, per home and the consensus were condo common ele- going expense controls,
one builder is accepting re- subject to major MSD development charge in- was that this special fee ments, involving 14 more successful manage-
sponsibility for major MSD claims. creases, material and labour would be one that would not builders, at a cost of $13.5 ment of significant claims,
claims, but another has left He said two builders are increases that have to be ab- be recovered by the builder million. Freehold homes in- and better-than-expected in-
the entire problem to Tarion, involved in the problem, sorbed by the very same pur- as an adjustment on clos- volved 168 builders and a vestment returns, he said.
Tarion CEO and President each with different attitudes chaser. ing.” total claim of $12.5 million. Overall, he said, Tarion is
Howard Bogach indicated in to the file. In one, the “An alternative to this Under current rules, In his speaking notes, projecting a loss of $4.9 mil-
a speech to the Greater Ot- builder is working with Tar- option would be to ‘sur- builders do not have to repay Bogach said that the “MSD lion this year, though the
tawa Home Builders’ ion and the homeowners to Asso- charge’ each new home en- Tarion for MSD claims – volume is not high, but corporation had budgeted
ciation in October. resolve the problems, and is rolment with a special and this means a builder can es- claims are problematic.” for a larger, $8.7 million
The change, if imple- accepting responsibility. In dedicated MSD fee which cape all responsibility, leav- “Some involve builders loss. Tarion expects to col-
mented, could cause major the other, the builder is di- would be used to finance a ing the costs to the Tarion with considerable resources, lect $27.7 in home enrol-
problems especially for recting homeowners to file Tarion owned and controlled Guarantee Fund. yet Tarion manages the work ment fees in 2009, close to
smaller builders who may the claim against Tarion. Insurance captive for the In powerpoint notes for and foots the bill,” he said. its original budget.
have difficulty maintaining Bogach declined to iden- purpose of covering MSD his speech, Bogach notes “Construction management Tarion is preparing for
enough cash or arranging in- tify the builders involved in claims for years 3 to 7,” the that changes are needed to is not our strength – the tough times ahead, project-
surance coverage to offset the problem. OHBA’s Dave OHBA letter says. “The “encourage builders to be builder is not usually in- ing lower enrolments, higher
their increased liability. Henderson says he under- Committee discussed fees in accountable for their work” volved in resolving the claims levels and deficit
The Ontario Home stands both companies in- the range of $150 to $200 and to “limit the subsidiza- issue.” budgets.
Builders’ Association volved are members of the
(OHBA) has expressed con- OHBA. “Some members
cern about the planned have stated quite openly that
change, which will require it is a shame that the builder
builders to indemnify the took this position (of leaving
RECOGNIZING
warranty program for up to the problem to Tarion), but
$300,000 for as long as they can understand and re-
seven years. At present, late to what may have hap-
EXCELLENCE
builders are only required to pened,” Henderson said. in Ontario’s construction industry
indemnify Tarion for the “(The builder) may have
The
first two years. been in business a very long
Bogach told the GOHBA time. They’ve always paid
READERS’
dinner meeting that Tarion’s into the program, now ‘I’ve
board is considering the run into a problem, and in-
CHOICE
CATEGORIES ARE:
OHBA proposals, which surance is there to pick it
would either involve an in- up.’”
AWARDS
1. Outstanding Customer
Service Award
Sponsor: Caswell Corporate Coaching Company
crease in fees to cover the Conversely, Tarion says 2. Outstanding Construction Supplier Award
cost of indemnification, it has never considered itself
NOMINATIONS INVITED
some sort of reinsurance to be an insurance program;
3. Best Equipment Rental Provider
coverage, or amendments to its role is more like a surety
for the 2009/10
4. Outstanding Architect
,
the rules to reduce the stress where claims are paid as a
Ontario Construction Report
5. Best All-Around General Contractor
that the extension of indem- last resort, but the builder
Readers’ Choice Awards
Sponsor: OGCA
6. Best Residential Contractor
nification to seven years truly is responsible for the
In our community, some businesses get it right. These com-
7. Most Effective Construction Labour Agency
would cause many builders, costs in the first place.
panies know how to provide value, service, and quality. Some
8. Outstanding Subtrade
especially smaller compa- The problem with this at-
seek out and receive recognition through business achieve-
nies and larger builders in- titude, the OHBA notes in its ment awards; others market through advertising and promo-
9. Green Project of the Year
volved in joint ventures letter, is that many smaller tion, and still others quietly do their work, well and effectively,
10. Outstanding Commitment to
designed to wrap up in two builders have trouble raising
and thrive on word-of-mouth support. Sustainable Development
years. enough funds to cover the
We seek your assistance in recognizing a select group of
Dave Henderson, the necessary surety as currently
local construction-related businesses; your favorites. The com-
11. Best All Around Construction Project of the Year
Sponsor: Enbridge Gas Distribution
OHBA
panies can be big or small, widely recognized or not, any-
’s director of industry required for the two years
12. Best Landscape Architect or Landscape Designer
relations, says the indemnification, and the ad-
where in Ontario.. You can nominate your own business or
Sponsor: Geo W. Drummond Ltd.
SITE DEVELOPMENT CONTRACTORS
OHBA/Tarion liaison com- ditional cost will make it
those that you think are worthy of special recognition.
13. Outstanding Provider of Professional Services to
the Construction Industry
Sponsor: Target Metal Products
mittee has been discussing much harder for the builders There is no charge to participate.
14. Most Innovative Green Product of the Year
the issue and has recom- to stay in business.
Sponsorships: For information about how you can sponsor
mended options for the Tar
a readers choice award, please call 888-432-3555 ext 211.
15. Owner or Developer of the Year
- The OHBA says in its
ion Board of Directors. letter that “a mild increase in
For more information and to nominate candidates,
“They are considering the enrolment fees is miniscule
visit https://constructionnrhroup.wufoo.com/forms/readers-choice-nominations/
issue,” he said. “The door is in comparison to thousands
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