THE RENEWAL OF TRUST IN
RESIDENTIAL CONSTRUCTION
Commission of Inquiry into the Quality of
Condominium Construction in British Columbia
Submitted to the Lieutenant-Governor in Council
Government of British Columbia
by Dave Barrett, Commissioner
June 1998


Chapter Three: Plan for Action Continued

III. Recommendations

  Recommendation #1: That the definition of "leaky condo" be expanded to include: A leaky building is any residential building within British Columbia, for which construction was completed in 1983 through 1998, and which experienced building envelope failures, requiring repairs in excess of $2,000 per unit, for multi-family construction, and $10,000 for single-family units or duplexes.

  Recommendation #2: That the provincial government introduce, as quickly as possible, legislation to establish the Homeowner Protection Act and create the Homeowner Protection Office to:
(i) strengthen consumer protection through implementing mandatory, private sector home warranty and statutory implied warranty for residential construction;
(ii) improve the quality of residential construction by regulating and licensing the residential construction industry;
(iii) undertake research and disseminate information;
(iv) provide access to dispute resolution for issues concerning residential construction; and
(v) establish a reconstruction fund as a source of support for residential homeowners hardest hit by problems with construction quality.

  Recommendation #3: That the role and responsibility of, what was formerly the Building Standards Branch, be reinstated under the proposed Homeowner Protection Office, as part of the Education and Research function of this new body, and that it provide guidance and direction on both the interpretation and enforcement of the building code.

  Recommendation #4: That the administration and interpretation of the Building Code be enhanced through the creation of provincial inspectors capable of undertaking onsite inspections.

  Recommendation #5: That the mandate of the Education and Research function of the Homeowner Protection Office include the dissemination of information to the building industry.

  Recommendation #6: That the provincial government allocate sufficient resources for training and apprenticeship programs, in association with business and labour in the residential construction industry, through the Industry Trade Apprenticeship Commission (ITAC).

  Recommendation #7: All Part 5 (Wind, Water, and Vapour) requirements of the BC Building Code be applied to all multi-unit, residential buildings, greater than two stories in building height, or larger than 600 square metres in building area (regardless of fire walls).

  Recommendation #8: All multi-family buildings facing renovations to the building envelope be renovated under the provisions of Part 5 of the BC Building Code.

  Recommendation #9: That the Vancouver by-law be reviewed with respect to applying Part 5 requirements to buildings, and to renovations for building envelope failures, to all multi-family residential buildings greater than two stories in building height or larger than 600 square metres in building area (regardless of fire walls).

  Recommendation #10: That all municipalities review their zoning by-laws, and the calculation of FSR, with a view to promoting sound building envelope design practices. In particular the following revisions should be reviewed:
(i) FSR calculations to be taken only to the inside face of the principle structural elements of the exterior walls necessary to support the building and the walls;
(ii) exclude from FSR, walkways and top floor balconies protected by roofs; and
(iii) ways and means for promoting overhangs which does not conflict with other municipal planning objectives.

  Recommendation #11: That the Education and Research initiative be charged with the responsibility for:
(i) research and development of best building practices and techniques;
(ii) ensuring that the advances in building science technology are clearly identified, agreed to, and disseminated to all parties responsible for design and construction of residential buildings;
(iii) the approval of the designation requirements for Building Envelope Specialists prior to the endorsement of this specialty;
(iv) the review, interpretation and recommendations regarding the building code; and
(v) assist in the development of key issues related to the residential construction market.

  Recommendation #12: That a Provincial Advisory Council be established, through the authority of the Home Protection Office's Research and Education initiative, and with the assistance of representatives from the development industry, the Architectural Institute of British Columbia (AIBC), the Association of Professional Engineers and Geoscientist Institute of British Columbia (APEGBC, the City of Vancouver, representative from other municipalities, Canada Mortgage and Housing Corporation (CMHC) and the provincial government.

  Recommendation #13: That Part 5 of the BC Building Code, through the Provincial Advisory Council, be reviewed prior to release, and that the City of Vancouver revisit its by-law, particularly Part 5, to ensure consistency with the eventual Part 5 of the BC Building Code.

  Recommendation #14: That training provided through educational institutions, and continuing education, offered by professional associations, clearly identify the special requirements for multi-family building envelopes in British Columbia.

  Recommendation #15: Any architect or engineer involved in Letters of Assurance and the field review process must have the qualifications, or sub-contract, the building envelope design and review to a qualified Building Envelope Specialist, to be defined by AIBC and APEGBC in consultation with the Provincial Advisory Council.

  Recommendation #16: That the AIBC and APEGBC, revise current letters of assurance and field review process to include a more detailed checklist of building envelope components and submit to the Provincial Advisory Council for endorsation.

  Recommendation #17: That municipalities should be explicit and give a written statement to all homeowners who inquire, to ensure their exact function and responsibilities of their building officials are understood.

  Recommendation #18: That the Municipal Act be modified to remove the joint and several liability of a municipality while retaining proportionate liability.

  Recommendation #19: That the Vancouver Charter be amended to be compatible with the proportionate liability held by other municipalities.

  Recommendation #20: That municipal councils review their building permit process with a view to enhancing the inspection of work, related to an effective building envelope, and that inspectors become more conversant with the role and effectiveness of building science issues related to the building envelope. The Union of BC Municipalities and the Homeowners Protection Office to provide directives in this regard.

  Recommendation #21: That municipalities waive building and permit fees on repairs related to building envelope.

  Recommendation #22: That the residential construction industry be regulated under public authority through a Regulatory and Licensing arm of the Homeowner Protection Office.

  Recommendation #23: That all renovation contractors performing building envelope reconstruction greater than $2,000 per unit or $10,000 for single-family and duplexes, be licensed and regulated by the Homeowner Protection Office.

  Recommendation #24: That developers and builders pay a special levy of $1,000 per unit to be built in the coastal climate region of BC. This levy to help finance the Reconstruction Fund available to homeowners facing repairs and most in need as a result of poor quality construction.

  Recommendation #25: That the AIBC impress upon its members the need for fulfilling their long-standing obligation to the public through an active identification of the issues involved, and a full scale approach to improving Architect's standards of practice.

  Recommendation #26: That the requirement for appropriate professional services on residential buildings, as constituted in the Architect's Act, be enforced.

  Recommendation #27: That the AIBC increase its efforts to work with APEGBC and other industry representatives to develop a common understanding and an agreed to strategy for ensuring quality building envelope design and review of construction through the Homeowner Protection Office's Research and Education initiative.

  Recommendation #28: That standard forms of contract become compulsory between the architect and developer in multi-residential design.

  Recommendation #29: General contractors or builders improve their communication with architects (or coordinating engineers) and the city inspectors, by informing each party as to the stage of construction.

  Recommendation #30: Architects (and coordinating engineers) should be encouraged to use third-party inspection services and manufacturers' inspection services to augment their field reviews.

  Recommendation #31: That the Architects Act be amended to require, and the Homeowner Protection Act be structured to receive, as part of the funding for the proposed Education and Research function of the Homeowner Protection Office, an annual fee from each AIBC member of $1,000.

  Recommendation #32: That the APEGBC and AIBC, along with other members of the Advisory Council to the Homeowner Protection Office develop a strategy for identifying building envelopes at risk, develop a set of sound practices for remediation, and distribute the information for use by the industry, strata councils, and homeowners.

  Recommendation #33: That the APEGBC work to establish recognition of Building Envelope Science as an important technical discipline and encourage members who practice in residential construction to upgrade their abilities accordingly.

  Recommendation #34: Immediate and definite steps be taken to ensure that all compulsory trades required by law to be on site in a residential project, be enforced.

  Recommendation #35: That the Homeowner Protection Legislation include the authority for the Homeowner Protection Office to recommend compulsory trade certification related to multi-family residential construction.

  Recommendation #36: That any developer, builder, general contractor, or sub-trade, who employ compulsory trades to work on a residential construction site, must file a report listing the names and trade qualifications of all certified and apprentice trades on the job, and that this list form part of the necessary documentation to be provided to future strata councils and homeowners.

  Recommendation #37: That a system of inspection be designed whereby municipal inspectors and provincial inspectors, through the newly formed Homeowner Protection Office, enforce the employment of qualified building trades on site, and that a system of discipline be developed for employers violating the requirements for qualified trades on residential construction sites.

  Recommendation #38: Under the authority of the Homeowner Protection Act, immediate, mandatory warranty for all residential housing built, as well as units under going renovations for structural or building envelope purposes. All units to be enrolled prior to the start of construction or renovations to receive the benefit of inspections.

  Recommendation #39: Warranty providers to be regulated by the Homeowner Protection Office.

  Recommendation #40: Warranty providers be required to obtain a minimum amount of bonding and comprehensive general liability coverage for the developer, general contractor and sub-trades.

  Recommendation #41: Warranty coverage to be offered in a competitive market by private third-party warranty providers. Minimum levels of coverage, claims settling procedures, and dispute resolution approaches to be defined by the Act.

  Recommendation #42: Minimum coverage levels to include 2 years for workmanship and materials, 5 years for building envelope, including water ingress, and 10 years for structural faults.

  Recommendation #43: The BC Homebuilder's Association must immediately divest itself of its interest in New Home Warranty.

  Recommendation #44: No developer, builder, contractor, sub-contractor, or sub-trade can invest in a warranty provider. This is to ensure an arms-length relationship between the industry and the warranty providers.

  Recommendation #45: The warranty program should commence on the units, when purchased, but the time limit for minimum coverages not commence until the first meeting of the strata council.

  Recommendation #46: That financial institutions, or CMHC, provide to the borrower, a complete copy of any appraisal or inspection conducted in the process of obtaining mortgage loan approval.

  Recommendation #47: It is imperative that the federal government and CMHC provide a significant contribution toward homeowners who have been hurt by this crisis of quality, not only to alleviate the threat of bankruptcy for individual homeowners, but also to protect the solvency of CMHC, and the stability in the residential housing market of British Columbia.

  Recommendation #48: That CMHC and financial institutions recognize the impact of gross debt service (GDS) ratios on consumers with a view to providing lower cost, longer amortization solutions to consumer special levy needs.

  Recommendation #49: That financial institution clients who believe they are being coerced to obtain higher-interest loans for renovation and repair, submit their complaint to the federal office of the Superintendent of Financial Institutions, or the provincial office of FICOM, as appropriate, for investigation.

  Recommendation #50: That the Government of Canada be urged to proclaim the 1997 Amendment to the Bank Act on tied selling.

  Recommendation #51: Financial Institutions operating in BC be requested to contribute, on a pro rata basis, based on their residential mortgage portfolio, $10 million to the Reconstruction Fund.

  Recommendation #52: All property management firms for condominium buildings be registered immediately with the Homeowner Protection Office.

  Recommendation #53: All property management firms for condominium buildings be licensed by the Homeowner Protection Office, pending discussion with the industry on the most appropriate form of education, training, and qualification.

  Recommendation #54: All strata councils be trained in the responsibilities of property management, if they choose not to employ the services of a management company. A log book be maintained to ensure the maintenance responsibilities are fulfilled on a continuous basis.

  Recommendation #55: That amendments be made to the Condominium Act to ensure a complete set of records be transferred to the management company or strata council at its first meeting, to facilitate the effective maintenance of condominium structures. These records should include:
(i) any plans required to obtain a building permit;
(ii) all documents indicating actual location of pipes, wires, and other infrastructure;
(iii) the names and addresses of all major contractors and sub-contractors;
(iv) all warranties, service manuals, and manufacturers' documentation relating to the common property and common assets; and
(v) maintenance manual, renewal plans, and procedures specific to each multi-family building.

  Recommendation #56: That additional disclosure be provided to purchasers to assist in assessing the health of a strata complex including:
(i) any amount that the owner is obligated to pay in the future for a special levy;
(ii) any approved expenditures still to be withdrawn from the contingency reserve fund;
(iii) any outstanding notices or work orders against the strata corporation; and
(iv) a building history and construction problems, if any.

  Recommendation #57: That the Condominium Act be amended to clarify the strata corporation's responsibilities to make and keep records, and to make these documents available to owners in a timely fashion. Record keeping and access provisions should be moved from the by-laws to the body of the Act in order to reflect their importance. As well, all owners should be allowed to attend, as observers, all strata council meetings.

  Recommendation #58: That all property management companies, hired by developers, have an arms-length relationship with the development company, and operate as an agent for the strata council.

  Recommendation #59: That the owner/developer act in the best interests of the strata corporation including pursuing all warranty claims, and informing the strata corporation of its right to take legal action, if this duty is not met.

  Recommendation #60: That any contracts entered into by the owner/developer should terminate automatically at the time of the second annual general meeting.

  Recommendation #61: That the approach for establishing sufficient contingency reserves be reviewed with respect to the most appropriate method for ensuring adequate reserves.

  Recommendation #62: That owner/developers contribute a contingency reserve fund for the new strata corporation, with a minimum contribution of 5 percent of the estimated operating expenses, as set out in the interim budget.

  Recommendation #63: That the Condominium Act authorize and regulate the raising of money for special levies and clarify borrowing options.

  Recommendation #64: That the Condominium Act be amended to require 75 percent of the votes cast to make a change in the strata councils by-laws, and that votes be limited to one per owner.

  Recommendation #65: That the Condominium Act, as it pertains to property lines, be amended so as to facilitate the most appropriate building envelope renovation system.

  Recommendation #66: That legislation be amended to allow developers to use purchaser's deposit funds for cash flow purposes, when such funds are protected by warranty coverage.

  Recommendation #67: The Homeowner Protection Act include an implied warranty based on the following:
(i) a new home is fit for occupancy, constructed from quality materials, and designed and constructed with skill and care;
(ii) it is not possible for the purchaser to waive these rights;
(iii) the time limitation applicable for breach of contract is 10 years;
(iv) the implied warranty is of benefit to subsequent buyers, but does not impose liability on the original or intervening purchasers.

  Recommendation #68: That the time limitations under various legislation be reviewed and amended, as appropriate, to accommodate the reasonable needs of residential property owners, including the Municipal Act and the Real Estate Act be amended to reflect the circumstances of the failure to perform by the municipality and the developer. Limitations under the Insurance Act should also be reviewed.

  Recommendation #69: That the Homeowner Protection Act make available an alternate dispute resolution mechanism (ADR) for issues arising from the problems surrounding residential construction -- in particular, building envelope failures and that:
(i) the system be optional for consumers but compulsory for the developer, builder, contractor, sub-contractor, professional, and warranty provider; and
(ii) mediation be subject to private proceedings, while arbitration would be conducted under full disclosure rules.

  Recommendation #70: That a Reconstruction Fund for homeowners be established through the Homeowner Protection Office to provide financial resources to those most adversely affected by problem buildings.

  Recommendation #71: That if a homeowner has a CMHC-approved mortgage, and faces special assessments, as a result of a leaky condo, the homeowner automatically qualifies for review under the terms of a capitalized loan balance, at current mortgage rates with no additional fee payable by the homeowner.

  Recommendation #72: That if a homeowner does not have a CMHC-approved mortgage, and additional financing is required, CMHC should be approached for a high-ratio mortgage.

  Recommendation #73: CMHC, through the Canadian government, immediately double the amount of funding to BC's RRAP program and maintain funding levels for homeowners affected by building envelope failures, according to qualified demand.

  Recommendation #74: Candidates qualify, both prior to and subsequent to, repairs being undertaken, as long as the repairs are a function of special assessments, related to the leaky condo problem.

  Recommendation #75: The same rules as apply for use of RRSP funds for the down payment of a home apply for any homeowners, resident in BC, who wants to undertake repairs. This would mean that an individual and spouse could withdraw up to $20,000 each without penalty, to be repaid within 15 years on a schedule of at least 1/15 per year.

  Recommendation #76: The rules respecting the use of RRSP be applied retroactively for any taxpayer who has withdrawn RRSP funds to effect repairs under a special assessment. The taxpayer would apply for their income tax rebate in their 1998 tax return, which would be equivalent to the taxes they paid for withdrawals related to homeowner repairs or renovations in their taxable income.

  Recommendation #77: Since the treatment of homeowners, who rent their units, is different from homeowners who live in their units, it is imperative that the cost of all qualified repairs be deductible from income. The application of this exemption would be retroactive, and, as such, would provide a cost carry-back and carry forward for homeowners. The application of this recommendation requires federal and provincial government approval and, as such, is a cost-shared, tax expenditure.

  Recommendation #78: The exemption of repairs from income is a regressive benefit, in that it increasingly supports those with greater taxable income. Current property owners with high wage and salary income obtain a dollar-for-dollar benefit greater than property owners, who make less in wage and salary income. For this reason, the Commission recommends access to the Reconstruction Fund for both owner/occupiers and owner/landlords.

  Recommendation #79: For purposes of reconstruction, all GST and PST, payable on qualified repairs and renovations, be repealed. In this way, the owner/occupier is treated by taxation the same way as the owner/landlord.

  Recommendation #80: All GST and PST that has been paid on renovations should be refunded to homeowners.

  Recommendation #81: A procedure be established to use the permissive exemption clause of the Municipal Act and the Vancouver Charter, whereby exemption from taxes payable be provided to all homeowners undergoing repairs related to the leaky condo problem.

  Recommendation #82: That senior citizens be made aware of the opportunity to defer property tax as a means to alleviate some of the burden of costly repairs.

 

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Copyright © 1998: Government of the Province of British Columbia