(This article was originally published in the Winter 2007 issue of Ontario Home Builder Magazine.)

It’s the dirty little secret of the new home construction industry. It infuriates honest builders, it costs Tarion Warranty Corporation millions of dollars in unnecessary claims and burdens the provincial and federal governments with lost tax revenues and Workplace Safety and Insurance Board Claims.

The issue is illegal building and it is a problem that is escalating across the province. Tarion president and CEO Greg Gee estimates 10 per cent of claims paid by Tarion are to cover homes built by illegal builders.

“It’s unfortunate for the industry that some unscrupulous builders who don’t play by the rules can have such a negative impact on public perception of the residential building community. The vast majority of builders co-operate with us and they deserve to be protected. It’s the bad apples that we are after,” says Gee.

“Every consumer contemplating purchasing a new home should determine if their builder is registered with Tarion. This information is available to the public on the Tarion website.”

Brian Johnston, president of Monarch Homes and the President of the Ontario Home Builders’ Association, agrees. “I regularly urge our membership if they suspect a builder in their area is not registered with Tarion they have an obligation to report that builder for the benefit of our industry.”

Tarion provides an anonymous hotline to call in tips to their investigators if someone suspects there may be illegal building in their region. The hotline can be accessed 24 hours a day at 1-800-786-6497.

Tarion spends $1.5 million annually investigating illegal building with a staff of 10 former police officers and three in-house co-ordinators whose job it is to track down illegal building and charge and prosecute the offenders. Tarion’s enforcement officers investigate complaints from homeowners and other builders to make their case. They follow up on leads they get from building inspectors and contractors as well as suppliers.  Tarion has also invested in sophisticated software similar to systems used by the Ontario Provincial Police and the Royal Canadian Mounted Police to organize evidence and catalogue tips and information to assist in their efforts.

The Ontario New Home Warranties Plan Act calls for builders and vendors of new homes to be licensed by Tarion and to enrol each new home prior to construction. The penalties for not doing so can mean significant fines and even imprisonment for those who flout the law. Just ask David Sanderson of Lindsay, Ontario, who received a six-month jail sentence for failing to register with Tarion and enrol the homes he was building. Or, Roland Boissonneault of North Bay, who received a six-month jail sentence in addition to $20,000 in fines and surcharges against him and his company for failing to register and enrol with Tarion. He tried appealing his conviction but was denied a new trial and sent to jail.

In the last three years jail sentences have been given to three repeat offenders and fines have jumped more than 45 per cent from $575,000 in 2004 to more than $800,000 in 2006. Dave Roberts, Tarion’s Director of Enforcement, anticipates fines for 2006 will tip the scale at more than $1 million.

Recently a Kanata area builder was charged with 29 counts of failing to enrol a unit with Tarion and 29 counts of failing to register. He was fined a total of $184,375 plus an additional $3,125 for furnishing false information.

The problem is not just confined to rural areas. Last January, a Toronto area builder was fined $125,000 for failing to register and enrol with Tarion. Last April, another Toronto home builder was convicted of eight counts of illegal building and furnishing false information and was given a five-month jail sentence and fined $100,000. The builder, Dara Panthakee, owner of Zefacy Homes, is appealing his sentence.

The fines levied against illegal builders are not channeled back to Tarion, but rather are collected by the municipality where the offense takes place. However, through Tarion’s investigations, the corporation is able to collect funds on outstanding enrolments and registrations to the tune of close to $2 million so far this year.

Builders who do not register with Tarion and enrol new homes in Ontario’s mandatory warranty program typically do not inform purchasers of their right to statutory warranty coverage. Fortunately, all new homes in Ontario are covered by the warranty program regardless of whether the builder is registered and the home is enrolled. Many consumers are unaware this protection is available to them and the illegal builder that constructed their home may be long gone when problems begin to emerge.

Builders who are not registered or have homes that they have not enrolled with Tarion will not be charged if they come forward to Tarion’s Enforcement Department. Dave Roberts advises, “In general we try to work with an illegal builder to get them on board. If they are smart and think they may be under investigation it is better they come clean. If they have never registered with us, we will give them the opportunity to register and enrol any outstanding homes in question. A builder who has never registered has three weeks to get his or her act together. A registered builder who has let enrolments slide should know better and we will give them two weeks to set matters straight.”

However, Roberts says, “They have to go back and enroll every home they have built and we will check to make sure they do. In the long run if you want to stay out of jail and save yourself a lot of money and trouble, it’s best to co-operate with us.”

The bottom line is if you are in doubt as to whether you should be registered with Tarion or the home you may be working on is enrolled with Tarion, call Tarion at 1-877-9TARION and ask for the Enforcement Department or Licensing and Underwriting Department.

Once again, if you think you know of a home that is being constructed illegally, call Tarion’s anonymous tips line at 1-800-786-6497.