Pre-sale home warranties. What you need to know

Just as each homebuyer should have a thorough understanding of their mortgage and home insurance, so too should they know how the warranty for their pre-sale home purchase functions. In British Columbia, any new home built by a licensed residential builder must be covered by third-party home warranty insurance. Those purchasing homes in B.C. should feel protected, as this province is home to one of the strongest construction defect insurance coverages in Canada.

Despite its name, warranty insurance is not the same as home insurance. Where home insurance is purchased by the homeowner to protect against issues such as theft and fire, warranty insurance is purchased by the builder to protect the homebuyers from any construction issues. Home warranty insurance is mandatory and provides consumer protection for new homebuyers. It can only be provided by insurance companies that are approved to meet the requirements of the Homeowner Protection Act. Standards of coverage, commencement dates and exclusions are all set by the government under the same Act. In B.C. the warranty is often referred to as the 2-5-10 Warranty.

How pre-sale homebuyers are protected

Every pre-sale home sold in B.C. is protected by the 2-5-10 warranty and supports the homebuyer in reducing costs and concerns around their new home. Structure, appliances and craftmanship are covered should any repairs be required. This is unique to pre-sale and new homes, as a re-sale home purchase would not benefit from the same mandated warranties. For strata buildings, coverage on both individual units and common property begins at the earlier dates of either first unit occupancy or the date of the legal title to the first owner.

The 2-5-10 structure

The 2-5-10 name comes from the warranty’s mandated minimum timeframe breakdown for different protected components:

• 2 years: the warranty period for labour- and materials-related defects or issues
• 5 years: the warranty coverage for the building envelope, including water penetration
• 10 years: the warranty period for the general structure of the building

The two-year labour and materials coverage protects against any issues in labour and materials for 15 months on the common strata property and 24 months for defects. This includes components such as delivery and distribution systems; exterior cladding, caulking, windows or doors that may lead to detachment or material damage to the new home; violations of the Building Code that constitute a health or safety risk; and defects that render the home unfit to live in. In this case, the building envelope refers to the outside or skin of the building, where as the structure of the building refers to the ‘bones ‘ of a building or the functional structural components.

Understanding the warranty insurance on your pre-sale home

If you’re looking to learn a little bit more about the protection that the home warranty insurance offers, visit the presentation centre of your pre-sale home and ask the sales representatives to take you through the specifics for your development. While the minimum requirements are set, some new homes have coverage that goes beyond the minimum ,for extra peace of mind. In order to be completely comfortable, it is always helpful to ask your realtor to double check the information with which you were provided so that you can fully understand the opportunities provided by the warranty.

When purchasing pre-sale, it’s good to know that any applicable costs incurred in the mandated timeframes will not come out of our own pocket. This helps to budget for the first 10 years of home ownership and provides the peace of mind that comes with financial protection.