In the first part of this three-part article on owner built homes we introduced the owner builder scheme in the Homeowner Protection Act of British Columbia (the “Act”) and the Homeowner Protection Act Regulation of British Columbia (the “Regulation”) and discussed the implications of owner built homes on sellers. In this second part we will switch gears and discuss the implications of owner built home on buyers. In the third and final part we will switch gears again and discuss the implications of owner built homes on listing and selling agents.

Buying an Owner Built Home:

Professional contractors must be licenced by the Homeowner Protection Office branch of BC Housing (the “HPO”). Further, professional contractors are required to obtain third-party home warranty insurance. At minimum, a professional contractor is required to obtain third-party home warranty insurance which covers the items contained in Section 23 of the Act. This insurance becomes effective on the date of first occupancy of the home and is enforceable for 2 years against defects in material and labour, 5 years against defects in the building envelope (Ex. heat and water systems), and 10 years against structural defects.

An owner builder, on the other hand, is not required to be licensed under the Act or obtain third-party home warranty insurance.  An owner builder may, of course, choose to obtain third-party home warranty insurance on their own initiative.  Assuming that an issue arises after the buyer becomes the registered owner of the owner built home was not insured by third-party home warranty insurance by the owner builder, the buyer of an owner built home may have a claim against the owner builder personally.

(a)    Statutory liability of the owner builder – Under Section 23 of the Act, an owner builder assumes personal liability for the minimum third-party home warranty insurance that a professional contractor is required to obtain (see above). However, this statutory personal liability is subject to a number of exclusions found in sections 10 and 11 of the Regulation relating to general items and defects, respectively. Examples of general exclusions include landscaping, non-residential detached structures (ie. sheds, detached garages, etc.), septic tanks, and quality/quantity of water.  Examples of defect exclusions include weathering, loss from primarily non-residential use (ie. home business) and subsidence apart from under footings or driveways.

(b)   Common law liability of an owner builder – An owner builder may be held personally liable for misrepresentation, breach of contract or negligence. For example, a buyer may have a claim against the owner developer on the grounds that there are “dangerous defects”. A “dangerous defect” is a defect which causes real and substantial (but not necessarily imminent) danger to the occupants of the home.  A buyer cannot bring a claim for negligent supply of shoddy goods or structures if the defects were known to the buyer, especially if such defects were reflected in the purchase price. There is also a legal principle (“caveat emptor” meaning “buyer beware”) which generally means that buyers buy property at their own risk. Accordingly, it is important for buyers to be especially diligent in their inspection of owner built homes.

From a practical standpoint, the benefit to a buyer of the personal liability of an owner builder (whether statutory or common law) is limited by the owner builder’s ability to pay and/or rectify the defects of the home. In assessing whether or not a buyer is likely to be successful in making a claim against the owner builder personally, he or she should consider factors such as the owner builder’s financial stability, the health/expected life span of the owner builder and the likelihood of the owner builder moving out of the city, province or country.

Before making an offer to purchase a home, a buyer should take the following steps:

(a)           confirm whether or not the home is an owner built home. Do not rely on the property disclosure statement! The easiest way to confirm whether or not the home is an owner built home is to conduct a free search with the HPO. All homes registered with the HPO on or after November 19, 2007 are searchable on the New Homes Registry at https://lims.hpo.bc.ca/prs/NewHomes/. If you are searching for a home registered after July 1, 1999 and before November 19, 2007, or you cannot find a property on the registry, contact the HPO directly;

(b)          obtain a professional home inspection; and

(c)           request and review a disclosure notice in the prescribed form to determine whether or not the home is covered by home warranty insurance.

If you are considering building, selling, listing or buying an owner built home or to learn more about owner built homes in general, please do not hesitate to contact our office at 250-448-2637.

Author: Danielle (Dani) Brito

This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your legal needs, please contact our office at (250)448-2637 or any of our lawyers practicing in the area of real estate law at the following: