De-enrolling Homes from Home Warranty Insurance and the Homeowner Protectoin Act

1 | Regulatory

No 10 | De-enrolling Homes from Home Warranty

Insurance and the Homeowner Protection Act

De-enrolling Homes from

Home Warranty Insurance and the

Homeowner Protection Act

Overview

A home or a multi-unit building must be registered with BC Housing and enrolled in home

warranty insurance before a building permit is obtained and construction begins. Continued

enrollment of a new home with home warranty insurance is essential throughout its construction

and sale. If a new home is de-enrolled from home warranty insurance for any reason, construction

cannot continue. Furthermore, the new home cannot be oered for sale or sold without being

re-enrolled with home warranty insurance. Continued de-enrollment of a new home may

contravene the Homeowner Protection Act (the “Act”) and the Insurance Act and can result in

penalties for the builder, developer and/or owner.

Legal requirements under the Act

Under section 22 of the Homeowner Protection Act, a person must not build, sell, or oer to sell a

new home unless it is registered for coverage by home warranty insurance provided by a warranty

provider. See Regulatory Bulletin No. 8: Registering and Enrolling New Homes for Home Warranty

Insurance Coverage for more information.

What is a de-enrollment?

A de-enrollment occurs when the commitment for home warranty insurance on a home or multi-

unit project is cancelled. BC Housing does not initiate de-enrollments. De-enrollments occur

when a builder or developer request it from the warranty provider. The warranty provider can also

de-enrol a new home. The de-enrollment creates both legal and practical issues. Legally, the new

home is required to be covered by home warranty insurance. The practical solution will depend on

the circumstances of the project and the de-enrollment. Some common reasons for de-enrollment

include:

›

Cancellation of the project before construction begins

›

Cancellation of contract between general contractor and developer

›

Cancellation of a contract between Licensed Residential Builder and custom home owner

›

Failure of Licensed Residential Builder to meet terms and conditions of warranty provider

›

Sale of the new home or multi-unit project during construction

›

Foreclosure on project during construction

Regulatory Bulletin

This bulletin and the website

are for convenience only and

do not constitute legal advice.

For complete details consult

the Act and its regulations, and

obtain independent legal advice.

For more information contact:

Licensing and Consumer

Services | Branch of BC Housing

Phone: 604-646-7050

Toll-free: 1-800-407-7757

Fax: 604-646-7051

E: licensinginf[email protected]

W: www.bchousing.org

@RegistrarBCH

Regulatory Bulletins are a

series of publications

developed by BC Housing to

provide information on the

Homeowner Protection Act.

All Regulatory Bulletins can be

viewed at www.bchousing.org.

No 10 | October 2021

2 | Regulatory

No 10 | De-enrolling Homes from Home Warranty

Insurance and the Homeowner Protection Act

What happens when de-enrollment occurs?

In each case, de-enrollment puts the owner and Licensed

Residential Builder in the position of no longer satisfying the

requirements of section 22 of the Act. This situation must be

remedied before continuing with construction, oering for

sale, and/or selling of the new home. The party that originally

enrolled the new home with coverage may be obligated to

re-enroll the home, depending on the circumstances.

1. Cancellation of project before construction begins

In general, de-enrollments that occur earlier in the

construction process are easier to manage. When a project

is cancelled, and de-enrollment occurs before construction

begins (e.g. excavation stage or earlier), the owner, builder

or developer are in the same position as if enrollment never

occurred. If the project is revived, the current owner, builder

or developer must ensure the home is registered with home

warranty insurance coverage before obtaining a building

permit and starting construction.

2. Cancellation of contract between general contractor

and developer

›

If a licensed developer originally enrolled the project, the

enrollment can continue even if the general contractor

changes at any stage of construction as the change will not

aect warranty registration. A general contractor needs

to be a Licensed Residential Builder in order to construct

homes under Part 9 of the BC Building Code

›

If the licensed general contractor enrolled the Part 9 project

and is no longer on the job, a licensed developer may:

(i) Enroll the project at any stage of construction.

However, the developer must also be licensed as a

general contractor or hire a licensed general contractor

to complete the home; or

(ii) Wish to have the new general contractor enroll the

project. However, the warranty provider must agree to

this arrangement prior to re-enrollment. The party who

enrolls the home assumes responsibility under a policy

of home warranty insurance for the work completed by

the previous builder; or

(iii) Seek legal remedies to compel the original contractor to

re-enroll the new home.

3. Cancellation of a contract between builder and

custom home owner

For custom home contracts, the options available when an

owner and Licensed Residential Builder part ways depend on

the stage of construction:

›

If the home is in the early stages of construction, the owner

has three options:

(i) Hire a new Licensed Residential Builder who registers

the new home and ensures it is enrolled in home

warranty insurance; or

(ii) Become licensed as a licensed general contractor and

enroll the home with home warranty insurance; or

(iii) Successfully apply and be approved for an Owner Builder

Authorization from BC Housing’s Licensing and Consumer

Services, and complete the home, acting as their own

general contractor. This requires that the owner manage

all or substantially all of the construction and therefore is

not an option if construction has progressed too far.

In each case, the individual who takes over the project will be

required to assume liability for the home from the beginning

of construction to its completion. Whoever enrolls the new

home assumes responsibility under a policy of home warranty

insurance for all work arranged by the previous builder, as well

as all work required to complete the home. Similarly, an owner

builder takes on full statutory warranty liability for all previous

work, plus all work required to complete the home.

3 | Regulatory

No 10 | De-enrolling Homes from Home Warranty

Insurance and the Homeowner Protection Act

Taking over an unnished new home?

“Residential builder” is dened in the Homeowner Protection Act as a person who engages in, arranges for or

manages all or substantially all of the construction of a new home or agrees to do any of those things, and includes a

developer and a general contractor;

Owner builders do not need to be licensed or arrange for home warranty insurance. In order for a person to qualify as

an “owner builder” and be approved for an Owner Builder Authorization, they must intend to engage in, arrange for or

manage all or substantially all of the construction of the new home. Only one person can manage “all or substantially

all” of the construction of a new home.

Whether the person taking over construction is required to be licensed and ensure coverage with home warranty insurance

will depend on whether the new home is suiciently early in its construction. Subject to a few exemptions (including

owner builders), a person who builds a new home must ensure that it remains covered with home warranty insurance.

If the home is further along in construction when the contract

ceases, there are fewer options as only one person can be

responsible for managing all or substantially all of the

construction of the new home:

›

General contractors are still legally obligated to stand behind

their work as a residential builder. If they de-enroll the home

at this stage, they might be contravening section 22 of the

Act and could then be required to re-enroll the home.

›

Licensed Residential Builders should be aware that, in

addition to facing possible penalties imposed by BC Housing,

re-enrolling a home bears additional costs imposed by the

warranty provider. This includes re-inspections,

administrative fees and possible higher enrollment fees.

Exclusions: Builders and owners in this situation should note

that the policy of home warranty insurance may exclude

any design, labour or materials provided by the owner. If the

builder leaves the project aer managing all or substantially

all of the construction, and the owner completes the home

themself (or by hiring another builder or sub-trades), the

original builder is not responsible for providing warranty

coverage for work completed by the owner or the owner’s

trades. It’s important that both the builder and owner

communicate with the warranty provider to establish what

items were done before and aer the contract terminated.

4. Failure of builder to meet terms and conditions of

warranty provider

When Licensed Residential Builders enroll a new home in

home warranty insurance, they contract and sign terms and

conditions with their warranty provider. If the builder breaches

those terms and conditions, including being unable or

unwilling to correct construction deciencies during

construction, warranty providers may de-enroll the project

in order to manage their risk.

The consequences for the general contractor, developer and/

or owner is the same as for any other cause of de-enrollment.

Continued construction, oering to sell, or sale of the new

home cannot take place without re-enrollment in home

warranty insurance coverage. When a warranty provider

de-enrolls a custom home that is far along in its construction,

BC Housing may enforce re-enrollment. Builders and owners

are advised to work cooperatively with their warranty provider

to avoid mistakes that may lead to de-enrollment and costly

re-enrollment.

4 | Regulatory

No 10 | De-enrolling Homes from Home Warranty

Insurance and the Homeowner Protection Act

5. Sale of project during construction

A new home or multi-unit project may be sold during

construction, provided that coverage for home warranty

insurance remains in place. For example, if the general

contractor stayed on the job or managed all or substantially

all of construction but the owner or developer wants to sell

the property. If the project is de-enrolled during construction

and the owner wishes to sell, there are two options. The

project must either be re-enrolled by a Licensed Residential

Builder prior to oering the property for sale, or the owner

must obtain permission to sell from the Registrar of

BC Housing as per section 22 of the Act.

6. Foreclosure on project during construction

In most cases, depending on the court order, the entity

having conduct of sale for the property in foreclosure will be

responsible for ensuring home warranty insurance is in place

before oering the home for sale. In this situation, the Act still

requires home warranty insurance coverage prior to continuing

construction, oering for sale and/or being sold. There are no

special exemptions or provisions for mortgage-holders or

receivers under these circumstances. If the project is

de-enrolled, the mortgage-holder or receiver is responsible

for ensuring that the home is enrolled with home warranty

insurance before continuing construction or oering home for

sale. This requirement applies regardless of whether the

original builder is available to assist with either the security

or remedying defects that may arise.

7. Insurance Act requirements

Note: The Insurance Act does not permit a policy of home

warranty insurance to be waived or invalidated.

Therefore, once a policy of home warranty insurance

has commenced it may not be cancelled, including by

de-enrollment.

Details about commencement can be found in Schedule 3

of the Homeowner Protection Act Regulation.

New Homes Registry

The New Homes Registry is an important tool for prospective

home buyers, real estate licensees and legal professionals.

Available on the BC Housing website, this online resource

helps to make informed purchasing decisions and can assist

in completing real estate transactions related to new homes.

All new homes registered with Licensing and Consumer

Services on or aer November 19, 2007 are included in the

registry as well as details of any de-enrollments associated

with those homes.

Licensing and Consumer Services can provide further details

about the new home and the de-enrollment as well as

information about all new homes registered prior to

November 19, 2007. Contact licensinginf[email protected].

If you need help to determine whether you are

responsible for maintaining home warranty insurance

coverage before you de-enroll a home, please contact

the Compliance Department at 604-646-7050 (select

Option 4) to speak with one of our team members or

email complianc[email protected]