The Homeowner Protection Act of British Columbia (the “Act”) and the Homeowner Protection Act Regulation of British Columbia (the “Regulation”) are aimed at strengthening consumer protections for buyers of new homes, improving the quality of residential construction and supporting research and education respecting residential construction in British Columbia.

The Act and Regulation include a special regime specific to “owner builders” which has important implications on parties to the purchase and sale of an owner built home.  In this three-part article we will discuss the implications of owner built homes on realtors, sellers and buyers of owner built homes.

Background:

Generally speaking, an owner builder is a person (ie. not company) who:

(a)           intends to build a new home;

(b)          for their personal use (ie. he or she intends to live in the new home as his or her primary residence for at least one year);

(c)           intends to act as the general contractor of the build; and

(d)          obtains authorization from the registrar (the Homeowner Protection Office branch of BC Housing (the “HPO”)).

An owner builder is not required to be licensed under the Act or obtain third-party home warranty insurance.

For the purpose of this three-part article, we will assume that the seller is an owner builder and that construction of the owner built home has been completed.

Selling an Owner Built Home:

An owner builder is prohibited from renting, selling or offering to sell an owner built home while the home is being constructed or within 12 months from the date of first occupancy without the prior written consent from the HPO. An owner builder may apply to the HPO to request permission to sell prior to the expiry of the 12 month period on the grounds of undue hardship.

An owner builder (or subsequent purchaser of an owner built home) who intends to sell the owner built home within 10 years of first occupancy must provide the prospective purchaser with a disclosure notice stating whether the home is covered by home warranty insurance in the form approved by the HPO.  A “prospective purchaser” means a person who expresses serious interest in purchasing the owner built home. The owner builder must deliver the disclosure notice to the prospective purchaser before the owner builder signs the contract of purchase and sale.

If an owner builder contravenes the Act or Regulations, he or she may be subject of a monetary penalty up to $25,000.00 for each contravention.

A subsequent purchaser of an owner built home may have a claim against the owner builder for defects in the owner built home. Under the Act, an owner built home is personally liable for the minimum requirements under a third-party new home warranty.  Under section 23 of the Act, an owner builder is required to assume personal liability 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. This statutory 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. Please note that an owner builder cannot contract out of this statutory liability. Further, this statutory liability does not extend to subsequent purchasers of the owner built home.

In addition to the statutory liability discussed above, an owner builder may also be liable for losses incurred by a subsequent purchaser under the common law. For example, a subsequent purchaser may have a claim against an owner builder if such owner builder makes a misrepresentation on the property disclosure statement. Further, an owner builder may be liable to a subsequent purchaser for “dangerous defects”. A “dangerous defect” is a defect which causes real and substantial (but not necessarily imminent) danger to the occupants of the home.

Before selling an owner built home, an owner builder should take the following steps:

(a)           rectify any defects;

(b)          ensure either the 12 month prohibition period has expired or obtain  permission from the HPO. The application for special permission from the HPO may be found at https://hpo.bc.ca/files/download/Forms/OwnerBuilder_Permission_to_Sell_Application.pdf;

(c)           inform your realtor that the home is an owner built home; and

(d)          provide the prospective purchaser(s) with a disclosure notice in the prescribed form prior to signing a contract of purchase and sale.

 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: