We get a lot of questions on newly built homes but one of the most asked questions is about the Warranty and how it works. This blog will break down common questions we get about new construction.
In British Columbia, the mandatory minimum “2-5-10” warranty was implemented on July 1, 1999. Since then, all new homes constructed by residential builders who are licensed with BC Housing are covered by a policy of home warranty insurance. This mandatory warranty was implemented in response to the 1990s leaky condo crisis in Metro Vancouver when existing insurance and builder liability failed to protect most homeowners. As a result, BC mandated that all new constructed homes in BC would have the minimum insurance coverage of this particular warranty unless the home had an owner builder or another exemption applied.
What does the 2 5 10 warranty cover?
As the warranty name suggests, there are different types of defects covered under each period of the warranty. In general, the 2-5-10 warranty provides coverage as follows:
Within 2 years:
12 month coverage on detached homes and non-common property of strata homes(including fee simple/freehold strata) for defects in materials or labor and violations of the building code;
15 month coverage for common property on strata units;
24 month 2 year coverage on:
(i) defects in the electrical, plumbing and HVAC delivery and distribution systems
(ii) defects in the exterior cladding, caulking, windows, and doors that may lead to detachment or material damage
(iii) defects which render the home unfit to live in
(iv) violations of the building code;
Five Years: Coverage for defects in the building envelope (or the exterior of the building).
Ten Years: Coverage for any structural defects.
IMPORTANT: Your policy and coverage will vary. Home insurance policies may meet or exceed the minimum required by the 2 5 10 warranty. Please review your specific policy for details.
When does the 2 5 10 warranty coverage start?
Single Detached Homes (non-strata)
› Custom homes: date of first occupancy,date of first occupancy permit, or date the home was completed and ready for occupancy, whichever comes first.**
› Speculative homes (pre-built for general market built on land owned by developer or builder): date of first occupancy or date of transfer of legal title to first owner, whichever comes first.**
**Note the difference is that for custom homes, the coverage can begin once the building is completed for occupancy and that could occur before you take occupancy.
› Strata unit: earliest of date of first occupancy or date of transfer of legal title to first owner.
› Common property: earliest of date of first-unit occupancy in strata building or date of transfer of legal title to first owner in building, whichever comes first.
How do I find out who my new warranty provider is?
You need to know who your warranty provider is. To find out which company covers your home:
• if you are about to purchase the home, ask your builder or real estate salesperson
• if you already bought the home and don’t know, see if there is a sticker on your main electrical switch box
• check your policy documents or your home maintenance manual if you
• check BC Housing’s online New Homes Registry for homes built after
November 19, 2007
• contact the BC Housing’s Licensing and Consumer Services branch for homes
built between July 1, 1999 and November 19, 2007
What homes are exempt from the warranty requirement?
Some residential buildings may be exempt from the requirement for home warranty insurance, including:
• homes built by owner builders (a separate section of this guide describes
provisions for owner-built homes),
• manufactured homes (mobile homes and factory-built units) that have not been
significantly modified and/or added onto on site,
• non-stratified hotels, floating homes, motels, dormitories and care facilities,
• multi-unit rental buildings where the sale of any individual unit is restricted by
a 10-year covenant registered against the title, and
• social housing
How do I know whether my defect is covered?
It is important to know that the specifications of BC’s home warranty is a minimum guideline and that your policy and coverage will vary for each home. Home insurance policies may meet or exceed the minimum required by the 2 5 10 warranty. Please review with your policy holder on details.
For those of you looking for some detailed coverage examples as defined by BC Housing, check out the Residential Construction Performance Guide | For New Homes Covered by Home Warranty Insurance in British Columbia.
A good piece of advice for any homeowner with attached or identical row homes: Take pictures of the visible defects that were not present at the time of your purchase and check with your neighbor. It’s possible that they may have already claimed warranty for a similar defect.
A second piece of advice for those who just purchased or about to purchase a new home is to take good pictures and notes at the Deficiency Walkthrough. The reason the deficiency walkthrough report is important is that defects are often compared against this initial report for condition and quality of the work.
What can be excluded from warranty coverage?
According to Homeowner Protection Act (“HPA”) and HPA regulation, the following can be excluded from the policies:
General Exclusions include:
* Non-residential detached structures (parking structures, recreational and amenity facilities in multi-unit buildings are covered)
* Commercial use areas
* Roads, curbs and lanes (driveways are covered)
* Site grading and surface drainage
* The operation of municipal services
* Septic tanks and fields
* Water quality and quantity
Defect related exclusions can include:
* Normal wear and tear
* Normal shrinkage of materials from construction
* Use of new home for non-residential purposes
* Labour, materials and design supplied by the owner
* Damage caused by anyone other than the residential builder
* Damage caused by insects or rodents
* Failure of an owner to prevent or minimize damage
* Acts of nature
To determine what is covered by your new home warranty and what items are excluded, we strongly recommend that you review your policy for specific details and consult with a professional with a construction background.
Does my new home warranty expire or terminate when I sell my home?
The warranty is attached to your home, and not to the owner of the home, and remains in effect upon the re-sale of the home until the coverage expires. For instance, let’s say you own and lived in a townhome for 7 years and you decide that it’s time to sell, the new homeowner would enjoy the benefit of claiming any structural defects since there would still be 3 years remaining in the warranty.
How can I find and report defects on time?
Most homeowners are not construction experts. While many people can identify visible defects, there is a possibility that we can miss hidden ones. For those that want to mitigate this risk, we suggest that you hire an inspector at important times during your warranty. For those “Do it yourself” homeowners, the Residential Construction Performance Guide provides some examples that can help. The key times to do inspections should be put on a calendar at the key warranty time expirations at: 12 months, 2 years, 5 years, 10 years. The most important inspections at 5 and 10 years should be done by an expert as these require technical construction expertise. You always have the options to plan ahead by budgeting some money to hire an inspector at the key periods where you want to hire an inspector.
If you have anymore questions about home owners warranty and newly built homes contact us at 604-341-9937 or [email protected], we are always here to help!