New Home Warranties and the Role of the Strata Manager
Are you doing everything you should to make sure that your strata management clients are aware of their responsibilities under the terms of their new home warranty insurance policy?
With construction of new strata properties happening at an ever-increasing pace, this is a question that you need to be asking yourself as a licensed strata manager. And don’t just ask the question – take steps to ensure that your clients have the information they need to meet their responsibilities.
In BC, new homes must be covered by home warranty insurance to protect against construction, building envelope and structural defects. Coverage includes two years on labour and materials, five years on the building envelope and 10 years on the structure of the home. Strata-titled properties have two policies – one policy for common property and another for the individual strata unit – and each policy may have its own expiry date.
You should make sure that your strata management clients are familiar with
- the home warranty insurance coverage for their strata property, and
- the expiry dates for coverage on common property and non-common property.
Having common property inspected well in advance of the warranty’s expiration is the best way to ensure that there is sufficient time to file a written claim in case a deficiency is discovered, so make sure your strata management clients are aware of approaching expiry dates. A successful claim may result in an extension of the warranty deadline.
For more information on warranty insurance, contact the Licensing & Consumer Services branch (formerly the Homeowner Protection Office) of BC Housing.
Key Facts for Strata Councils
Strata Corporation Responsibilities: It is the strata corporation’s responsibility to ensure that the terms of the warranty insurance policy are met.
Two types of new home warranty insurance coverage. Strata-titled homes have coverage for each individual unit and coverage for common property. It is important for strata corporations to understand the differences between these policies and their respective expiration dates. Defects in materials and labour or violation of the Building Code are covered for:
- 12 months for all new homes, other than the common property of a strata corporation,
- 15 months for the common property of strata corporations.
There are limits. For strata homes, the limits to new home warranty coverage are:
- 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
Coverage may not run concurrently. The coverage on common property starts when coverage on the first unit starts. However, coverage on remaining individual units begins on the earlier of when title has been legally transferred to the owners of those units or when the units are occupied.
Knowing the starting dates of coverage is critical. Calculate the date on which the coverage expires by counting from the starting date. The precise starting date of coverage for strata homes will be:
- Strata units: date of first occupancy or date of transfer of legal title to first owner, whichever comes first.
- Common property: date of first unit occupancy in strata building or date of transfer of legal title to first owner in building, whichever comes first.
Inspect ahead of the expiry dates. Shortly before each expiry date, the building should be inspected to identify anything that is covered by the warranty. If the strata corporation needs to make a claim and it is not done in writing to the builder and the warranty provider by the expiry date, the corporation will not be covered, even if the damage occurred before the expiry date.
Keep an insurance coverage checklist to ensure responsibilities are met. A checklist of tasks could include:
keep warranty insurance documents and records secure
have common property inspected before each part of the warranty insurance expires (at 2, 5 and 10 years)
notify the warranty provider and builder of a possible defect as soon as possible and before the expiry of the applicable home warranty insurance coverage
monitor repairs carried out by the warranty provider or builder as part of a claim, and
regular maintenance to keep the building in good order and to maintain any warranties.
Tips for Strata Managers
Put it on the agenda. Add discussion of new home warranties to the agenda for strata council meetings, to ensure strata council members are aware of any approaching expiry dates.
Provide key documents. Provide copies of the new home warranty coverage to strata council members.
Resources to Share with Strata Councils
Guide to Home Warranty Insurance in British Columbia, BC Housing Licensing and Consumer Services