Blog PostJuly 22, 2021 - Educational
Condominium Warranty Coverage: Uncovered
Your Condominium has registered, and the builder or developer has “turned-over” the common elements to the newly formed Condominium Corporation. Common elements of a Condominium may consist of recreational facilities (pools, gym, party rooms, courtyards, or terraces), parking garage, roof, exterior cladding, building superstructure and substructure, exterior windows, and doors. The unit owners of the Condominium Corporation now jointly own these common elements and have formed a Board of Directors to deal with various matters on behalf of the Condominium Corporation.
As new owners of the common elements, what do you do if there are deficiencies in the common elements?
TARION (under the Ontario New Home Warranties Plan Act) provides warranty coverage for your common elements (CE). The process is outlined by TARION Builder Bulletin 49.
First Year CE covers:
- Defects in material and workmanship.
- Unauthorized substitutions.
- Ontario Building Code violations.
- Home must be fit for habitation.
Second Year CE covers:
- Water penetration at substructure and building envelope.
- Defects in work or materials for plumbing, electrical and mechanical distribution systems.
- Exterior cladding deficiencies.
- Ontario Building Code Health and Safety violations.
Seven Year CE covers:
- Major structural defects as defined by TARION.
It is at this transitional point in the development of a condominium project that it is important for the newly-formed Corporation to determine if the project is in reasonable compliance with the original construction documents, municipal approvals and construction industry standards. This process is completed through a Performance Audit.
What is a Performance Audit?
A performance audit is a mandatory post-construction assessment of the building consisting of a building inspection walkthrough, information collected through Unit Owner Surveys, and turn-over document review.
Performance Audits can only be completed by a Professional Engineer holding a Certificate of Authorization or an Architect holding a Certificate of Practice.
The first year, second year, and seventh year Performance Audits must be completed and submitted before their respective anniversaries of the registration of the Condominium to be eligible for the warranty. It is very important to keep track of these important dates, if you miss a deadline, TARION will not warrant the claim.
After your selected Professional Engineer has completed the Performance Audit for your building, they will compile all deficiencies noted into a Deficiency List. This Deficiency List must be in the required TARION format called the Performance Audit Tracking Summary (PATS). TARION has created an online platform to manage the PATS. The Condominium Corporation will select a “designate” who is responsible for managing the warranty claim, in particular, the PATS.
Managing the Deficiency List (PATS)
The designate for the Performance Audit can be a Board Director, Property Manager, or Engineer. Depending on the number of deficiencies or complexity of the deficiencies, this process may become a large undertaking in terms of time and effort.
It is typical for a Property Manager to be selected as the designate since they are usually on-site and perform periodic walkthroughs of your building. Keep in mind that if the Property Manager is selected to manage the PATS, it may take away their time to fulfill management duties.
Depending on the complexity of the deficiency, the engineering consultant may need to provide input for the quality and adequacy of the repair. More technical items such as mechanical or electrical systems, water penetration and structural deficiencies should be signed-off by the Professional Engineer.
TARION requires periodic updates to the PATS, usually every 90 days from both the builder and Condominium Corporation. The two parties work from the same PATS list; however, their respective fields are locked and cannot be changed by the other party. As repairs are completed, the builder is able to upload their comments to be verified by the Condominium Corporation and signed-off. The Condominium Corporation can also input their comments. We recommend date stamping each comment and signing-off for record keeping.
For the Board of Directors, a summary of these sign-offs should be presented in a Board Meeting and documented in the minutes for approval.
As mentioned before, there are several important dates with the Performance Audit process:
Timelines and Important Dates
Once the First Year Claims are submitted (before the first year anniversary), the builder has 18 months to complete the required repairs.
Once the Second Year Claims are submitted (before the second year anniversary), the builder has 6 months to complete the required repairs. The second year list is typically fewer in number due to the more restrictive coverage.
It is important to note that the first and second year deadline for the Builder Repair Period ends on the same date (18 months after registration).
At this point, if there are any warranted items left unresolved, the Condominium Corporation may make a Request for Conciliation. A Request for Conciliation must be filed within 60 days following the end of the Builder Repair Period. A deposit must be submitted with this claim and the conciliation PATS list. The builder has a 90 day repair period to resolve the deficiencies outlined in the claim.
If the outstanding deficiencies are not resolved between the two parties, TARION will perform a conciliation inspection and issue a Warranty Assessment Report.
The TARION representative will determine whether a deficiency claim is warranted or not warranted. TARION’s Construction Performance Guideline is a tool which provides guidance and criteria on warranted items.
If any deficiencies are deemed warranted, the builder will have a final 90 days to resolve all warranted items.
Should the builder be unable or unwilling to perform such repairs, TARION will settle the claim directly with the Condominium Corporation.
Communication is important for the Performance Audit process to be successful. Meetings should be held between the parties to enable a smooth process and manage expectations. Stay informed. Protect your real estate assets. Work with your professional to make a successful Performance Audit process!
Henry J. Jansen, P.Eng., ACCI