By Rachel Puma
A new Code of Ethics has come into effect for licensees (builders and vendors) under the New Home Construction Licensing Act (NHCLA).
The Code is intended to give licensees a similar ethical framework as other skilled professionals. In that vein, the Code sets out a number of the typical ethical conduct obligations you would expect to see in a code of ethics, including treating others fairly, honestly, with integrity, and free from discrimination or intimidation, and providing professional and competent service which would not likely bring the sector into disrepute.
The ability of Home Construction Regulatory Authority (HCRA) to discipline builders for a breach of a code of ethics was something that Tarion lacked and which was the source of significant consumer dissatisfaction. A consumer’s only recourse was to write to the Tarion ombudsman when there was an issue with builders that they felt Tarion was not dealing with. And Tarion’s options were very limited when dealing with non-warranty issues and disciplining builders. They could only refuse to renew a builder’s license or bring an application to revoke it. This ability is now within the purview of the HCRA.
The focus of the Code of Ethics is consumer protection in the new home industry and this is where the meat and potatoes of the Code really shine through. The Code obligates licensees to not misrepresent information (including in advertisements), and to be “clear and truthful in describing the features, benefits, prices… products, services, (and) programs connected with new homes.” These obligations are expected to have the biggest impact on licensees’ practices.
Marketing material must clearly and accurately reflect the approximate size and layouts of units and must not misrepresent other information such as the “features, benefits, prices… products, services, (and) programs” connected with the units. It would be absurd to expect marketing material to perfectly reflect the final product, and in fact, the Home Construction Regulatory Authority (HCRA) requires that any materials that specify an area measurement (such as floorplans) contain a disclaimer that “actual usable floor space may vary from the stated floor area,” but a greater level of care and accuracy will be expected from licensees than previously required.
In addition, purchase and sale agreements typically include language in which the purchaser acknowledges that the vendor is not obligated to comply with any representations outside of the agreement, including those made in marketing materials. This clause will still likely hold weight for what the vendor is required to deliver at the end of the day, but a misrepresentation in the marketing materials would be a violation of the Code which may result in penalties.
Purchase and sale agreements
We will also likely see a tightening up of the language in purchase and sale agreements which describe features and finishes in particularly vague terms and permit a variety of changes to those specified in the agreements.
Where a licensee violates the Code of Ethics, the consumer may lodge a complaint with the HCRA, who in turn may escalate the complaint to the newly-created discipline committee. Depending on the severity of the complaint, licensees may: be required to pay for and/or attend training and educational courses, receive a fine of up to $25,000, or be required to pay costs to the HCRA. If a licensee disagrees with a discipline committee decision, it can be appealed to a newly-created appeals committee.
Many in the development and legal sectors are echoing that this is a significant advance for consumer protection in the sector; and while it is certainly a step in the right direction, the increased protection may be overstated.
For example, some have suggested that the Code will discourage licensees from scrapping their projects with the intention of later resurfacing with higher sale prices. If that was the legislature’s intention, a penalty of a maximum of $25,000 for violating the Code may not steep enough to deter licensees from relaunching their projects at higher price points; nor from violating other aspects of the Code. The NHCLA even carves out violations of the Code of Ethics in that non-compliance will not result in the licensee being guilty of an offence (whereas licensees are guilty of an offence for noncompliance of all other parts of the NHCLA and Regulations). However, the most significant mechanism of deterrent is the HCRA’s ability to refuse to license an applicant or to renew the licence of a licensee if the HCRA determines the licensee is not complying with the NHCLA or Regulations (including the Code). At the end of the day, this is the biggest hammer that HCRA has to enforce the Code compliance.
Rachel Puma is an Associate at Robins Appleby