From Foundation to Finish - Understanding the Nuances of Owner-Built Homes for REALTORS® #570

Buyers may be unaware of the differences between purchasing a newly built home from:

• a developer, subject to the provisions of the Real Estate Development Marketing Act;
• a residential builder licensed with the Homeowner Protection Office; or
• an owner-builder under an Owner Builder Disclosure Notice.

There are different benefits and pitfalls for buyers and for REALTORS^® in dealing with each of these three categories of sellers. Additionally, there are different considerations for REALTORS^® when dealing with each of these categories of builder or homeowner.

This article will focus on considerations for REALTORS^® acting for buyers or sellers of homes built and sold by owner-builders. A good starting point for all REALTORS^® is reading the provisions of the Homeowner Protection Act and Regulation, and the Regulatory Bulletin on Buying or Selling an Owner-Built Home.¹

To sell an owner-built home, the owner-builder must obtain an occupancy permit and then occupy the house for at least one year. The owner-builder cannot list, sell, or rent the new home during that one-year period unless they have obtained BC Housing’s permission to do so on account of hardship.

If less than ten years have elapsed since the date of the occupancy permit, the owner-builder must give any prospective buyer an Owner Builder Disclosure Notice before entering into an agreement for the sale of the home. BC Housing will not release the Owner Builder Disclosure Notice if less than a year has passed since the occupancy permit.

Note that anyone who buys an owner-built home, but then re-sells it within the ten-year period, is still required to provide the Owner Builder Disclosure Notice.

The Land Title Office notifies BC Housing any time the title to an owner-built home is transferred. BC Housing can take enforcement action against the seller if the sale happens without following the letter of the law. Such enforcement action can include compliance orders, monetary penalties, convictions under the Homeowner Protection Act, etc.

When listing a home within ten years of the date of the occupancy permit, a REALTOR^® will want to inquire whether an owner-builder originally built the house and if at least one year has passed since the date of the occupancy permit. If so, the Owner Builder Disclosure Notice must be given to any prospective buyers before entering into any agreement to sell the home. Listing the home for sale prior to the expiry of the one-year period or failing to provide the Owner Builder Disclosure Notice, can have significant BC Financial Services Authority disciplinary consequences for the seller’s agent² and can give rise to potential civil liability to the buyer and/or seller.

If the home was built by a licensed residential builder, a REALTOR^® may wish to confirm with BC Housing that the builder’s licence is still active and that there is valid warranty coverage for the home.

Similarly, when representing buyers interested in purchasing a relatively newly built home, REALTORS^® should request documents related to the identity of the builder of the home, and any warranty policy that might apply.

Interested buyers can check the status of a new home in the New Homes Registry at bchousing.org. The registry provides information for homes built on or after November 19, 2007, such as whether a licensed residential builder built the home and has a policy of home warranty insurance; or whether it was built without warranty insurance under an exemption such as an Owner Builder Authorization.

An owner-builder’s obligations to a subsequent buyer are similar to those of a licensed residential builder under a 2-5-10 home warranty insurance policy.³ However, a licensed residential builder’s warranty insurance policy is underwritten by an insurance company. Unless the owner-builder has specifically purchased such coverage with an insurance company, an owner-builder is liable personally and directly to subsequent buyers of the owner-built home for defects that a 2-5-10 home warranty insurance policy would have covered. Such personal liability might be difficult to enforce if the owner-builder no longer resides in BC, has no assets to cover any judgment made against them, or has died.

When purchasing a home built by a licensed residential builder, a buyer will likely want to know whether the builder’s licence is still active, and the expiry dates and terms of the warranty coverage. A buyer may also wish to know if any outstanding warranty claims made by the seller have not yet been resolved. REALTORS^® will want to discuss these issues with buyers early on in the process to allow adequate opportunity to investigate and/or negotiate suitable terms.

Don’t forget homes built in the last ten years or so can raise additional issues for consideration before listing and/or entering into a Contract for Purchase and Sale. The ten-year deadline usually starts from the date of the occupancy permit, which can sometimes be years after the home was substantially built. BC Housing is a good start for any inquiries. Licensees may also wish to take the Real Estate Board of Greater Vancouver’s course on the Homeowner Protection Act and to review  BC Financial Services Authority’s Knowledge Base article on this topic.

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	1.	BC Housing Regulatory Bulletin, Buying or Selling an Owner-Built Home.
	2.	Please refer to the following cases and Legally Speaking issues: https://www.canlii.org/en/bc/bcrec/doc/2017/2017canlii92500/2017canlii92500.html /legally-speaking/owner-builders-liable-for-poor-construction-489/ https://www.canlii.org/en/bc/bcrec/doc/2018/2018canlii98908/2018canlii98908.html https://www.canlii.org/en/bc/bcrec/doc/2018/2018canlii126969/2018canlii126969.html https://www.canlii.org/en/bc/bcrec/doc/2019/2019canlii37495/2019canlii37495.html
	3.	https://www.bchousing.org/sites/default/files/media/documents/Regulatory-Bulletin-03-2-5-10-Year-Home-Warranty-Insurance.pdf

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