The Impact of COVID-19 on Homebuilders

In response to the developing state of the COVID-19 pandemic, Ontario Premier Doug Ford announced changes to the list of essential services in a press conference held on April 3, 2020. Those changes, which took effect as of 11:59 p.m. on April 4, 2020, included new restrictions on residential construction projects.

According to the revised list of essential services, residential construction projects may only continue where,

  • a footing permit has been granted for single-family, semi-detached, and townhomes;
  • an above-grade structural permit has been granted for condominiums, mixed-use, and other buildings; or
  • the project involves renovations to residential properties and construction work was started before April 4, 2020.

In addition, construction and maintenance activities necessary to temporarily close construction sites that have paused or are not active and to ensure ongoing public safety are permitted.

For those construction projects allowed to continue, Premier Ford warned that 60 new Ministry of Labour inspectors have been hired and “those few sites that will remain open will be placed under the highest level of scrutiny possible”.

What Does This Mean for Closing Dates and Warranties?

Considering that no new residential construction projects are allowed to start, the need for contractors who are involved in projects that are permitted to continue to be conscious of the health and safety risks posed by COVID-19, and the prospect for delays by supplier and trades, questions arise as to how homebuilders will meet closings and provide warranty services to their customers during the pandemic.

Tarion, the body which administers the statutorily mandated Ontario New Home Warranties Plan, has addressed some of these concerns on its website.

Builders seeking to extend “Critical Dates”, such as the “Closing Date”, must do so in accordance with the relevant Tarion addendum that is required to be attached to each agreement of purchase and sale for a new home. The addendum allows builders to unilaterally extend Critical Dates where an “Unavoidable Delay” (a term whose definition includes a pandemic) occurs.

While homebuilders are required to conduct a pre-delivery inspection (“PDI”) with their customers before closing, if the builder and the customer cannot agree on a manner to carry out the PDI, Tarion has recommended that:

  • the builder conduct and document the PDI on its customer’s behalf; and
  • the customer conduct his or her own “delivery” inspection and document the state of the home as soon as reasonably possible after closing.

All warranty periods remain in place, but all claim submission deadlines have been suspended for the duration of the emergency period. In turn, all builder repair periods have been suspended for the duration of the state of emergency (unless the repair relates to an emergency or health and safety issue). Homeowners are entitled to deny builders and trades access into their homes—as are homebuilders entitled to decline entering occupied homes—to carry out after-sales service during the emergency period.

These changes illustrate that residential construction will not be ‘business as usual’ during the COVID-19 pandemic. The team of construction lawyers at Duncan, Linton LLP are available to discuss the impact of COVID-19 on your construction project and the delay provisions in your contracts. Contact us online or call 519-886-3340 to speak with one of our lawyers remotely.