Home Warranty Insurance on New Homes

According to the Homeowner Protection Act and regulations, new homes built in B.C. by licensed residential builders must be covered by mandatory, third-party home warranty insurance. 

It’s one of the strongest construction defect insurance coverages in Canada.

The below summaries are for convenience only. They do not replace or supersede the Homeowner Protection Act and Regulation. You should consult the Act and Regulation for specific guidance regarding home warranty insurance and residential builder licensing.

This applies to all new homes constructed under building permits applied for on or after July 1, 1999 (or where construction started on or after July 1, 1999, in areas not requiring building permits), unless they are specifically excluded by the Homeowner Protection Act or Regulations.

Minimum coverage

At a minimum, home warranty insurance coverage includes:

• 2 years on labour and materials (some limits apply)

• 5 years on the building envelope, including water penetration

• 10 years on the structure of the home

The two-year labour and materials coverage covers any defect in labour and materials for:

• 12 months on detached homes and on non-common property in strata units (including fee simple homes)

• 15 months on the common property of strata buildings

• 24 months on all new buildings for defects when related to delivery and distribution systems; defects related to the exterior cladding, caulking, windows or doors that may lead to detachment or material damage to the new home; coverage for violations of the Building Code that constitute a health or safety risk or is likely to result in damage to the new home; and defects which render the home unfit to live in.

Minimum coverage for third-party home warranty insurance is set by legislation. As a minimum, homes built by Licensed Residential Builders must have 2-5-10 Year Home Warranty Insurance. Some new homes have warranty insurance coverage that exceeds the minimum requirement. You should carefully review your home warranty insurance policy documents which will provide specific details on the home warranty insurance coverage on your home.

The warranty is attached to the home, not to the owner of the home, and remains in effect upon the re-sale of the home until the coverage expires.

Strata-titled homes have two home warranty insurance policies: one for the home and the other for the common property. Sometimes when the coverage of a new strata-titled home starts, the coverage on the related common property has already started — or expired. Coverage on the common property of strata-titled buildings starts when the first unit in the building is occupied or sold.

Owner builder exemptions

The most common exemption from the licensing and home warranty insurance requirements is a new home built under an Owner Builder Authorization.

Unless home warranty insurance is provided, owner-built homes are subject to the 10-year Statutory Protection provisions of the Act. These provisions hold the owner builder personally responsible to subsequent purchasers for any defects in labour, materials or design for 10 years after first occupancy.

If you buy such a home and find defects, you must contact the owner builder directly. Any action to remedy defects by a purchaser must be started within the 10-year period.

Further exemptions

The Act and Regulation also exempt the following classes of new homes from the requirements for home warranty insurance, registration fees, reconstruction fees and builder licensing:

1. Manufactured homes, including mobile homes (CSA-Z240) and factory-built homes (CAN/CSA-A277)

2. Hotels and motels

3. Dormitories

4. Care facilities

5. Floating homes

However, if any of the above (excepting manufactured homes) are strata-titled, they are deemed to be new homes and require home warranty insurance, registration fees and reconstruction fees (where geographically applicable).

The Act and Regulation exempt the following classes of “new homes” from the requirement for licensing, home warranty insurance, registration fees and reconstruction fees:

• Multi-unit buildings owned under a single title and constructed for rental purposes

• Multi-unit buildings that are strata-titled, but held under single ownership and constructed for rental purposes

• Three or more dwelling units built for rental purposes and owned under a single legal title

In these cases, the owner must provide a restrictive covenant that is registered on the title restricting the sale of any dwelling unit for a 10-year period. More information can be found in the Rental Exemption section of our website.

New homes on First Nations lands

Homes built on First Nations reserve lands are also excluded from the requirements of the Homeowner Protection Act and are not required to be built by a Licensed Residential Builder and have 2-5-10 year home warranty insurance coverage. It's important to note that homes built on Treaty First Nations lands are not exempt from these requirements and do require licensing and home warranty insurance coverage. While licensing and home warranty insurance are not required for homes built on reserve lands, builders constructing homes on reserve lands may voluntarily become licensed or offer home warranty insurance for the homes they build. If a new home is voluntarily enrolled in home warranty insurance coverage, the coverage provided must meet the minimum requirements of the Act and Regulations; it is the same coverage as the mandatory 2-5-10 year home warranty insurance coverage.

Commencement dates

Commencement dates on home warranty insurance are:

Fee simple (primarily detached dwelling units)

• Custom homes: date of occupancy or date of first occupancy permit, whichever occurs earliest

• Spec. (speculative) homes: date of first occupancy or date of transfer of legal title, whichever occurs earliest

Strata homes

• Strata unit: date of first occupancy or date of transfer of legal title to the first owner, whichever occurs earliest

• Common property: date of first-unit occupancy or date of transfer of legal title, whichever occurs earliest

Exclusions

The Act and Regulations say what the home warranty insurance companies can exclude from their policies.

General exclusions can include:

• Landscaping

• 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

Coverage limits

Coverage on claims works as follows:

Fee simple (primarily detached dwelling units):

• The lesser of the first owner’s purchase price or $200,000

Strata homes:

• Strata unit: lesser of the first owner’s purchase price or $100,000

• Common property: the lesser $100,000 times the number of dwelling units in the building or $2.5 million per building

Source: BC Housing