Executive Summary: Key Legal and Evidentiary Issues

• Tarion's finding that 14 construction issues breached statutory warranties was challenged as unreasonable but upheld by the court.

• The sufficiency of Adi’s Sikacrete injections to repair underground garage roof slab leaks was central to the dispute.

• Tarion’s reliance on CE-CP Guidelines, CSA S413, and the Building Code to assess warranty breaches was found reasonable.

• Conciliation was deemed chargeable to Adi due to the absence of exceptions applying to all 14 warranted items.

• Adi’s pre-inspection cash offers of $10,000 and $25,000 failed to meet the criteria for the Settlement Offer Chargeability Exception.

• The judicial review application was dismissed, and Adi was ordered to pay Tarion $25,000 in costs.

Facts and outcome of the case

Background and parties involved

Adi Developments (Masonry The West) Inc. (“Adi”) is the builder and vendor of a residential condominium complex known as Masonry The West, located in Burlington, Ontario. The common elements of the complex are owned by Halton Standard Condominium Corporation No. 729 (“HSCC 729”). The development is subject to statutory warranties under the Ontario New Home Warranties Plan Act (“ONHWPA”), administered by Tarion Warranty Corporation (“Tarion”).

Adi entered into a Builder Agreement with Tarion on August 2, 2016, and became a registered builder under the ONHWPA. The statutory warranties for the complex’s common elements commenced on March 11, 2021, upon registration of HSCC 729’s declaration and description. The warranties at issue were the one-year warranty (for construction in a workmanlike manner, free of defects, and Building Code compliance) and the two-year warranty (for water penetration and cladding deterioration).

The dispute and conciliation process

HSCC 729 retained engineer Bill Dang to perform the first- and second-year performance audits in 2022 and 2023. Issues identified included water leakage in the underground garage. Adi attempted repairs, including injecting Sikacrete-321 FS into cracks from the underside of the garage roof slab. Disputes arose regarding the sufficiency of these repairs.

In February 2024, HSCC 729 replaced Mr. Dang with Ben Ankenmann of Edison Engineers Inc., who disagreed with Dang’s earlier assessments. Mr. Ankenmann maintained that effective repair required excavation and remediation from the topside of the slab. Adi and HSCC 729 were unable to resolve the issues, and a conciliation inspection was requested.

Tarion scheduled the inspection for July 25–26, 2024. On July 23, 2024, Adi made a settlement offer of $10,000 to address “miscellaneous items” missed during audit repairs. While the inspection was ongoing, Adi increased the offer to $25,000. HSCC 729 did not accept either offer.

Tarion’s Conciliation Report, dated November 15, 2024, found 14 items were warranted and that the conciliation was chargeable to Adi.

Policy terms and warranty provisions at issue

The applicable warranty obligations under the ONHWPA and its regulations included:

• One-Year Warranty: Workmanship, materials, fitness for habitation, and Building Code compliance (ONHWPA, s. 13(1)(a)).

• Two-Year Warranty: Protection from water penetration and deterioration of cladding (Reg. 892, s. 15(2)).

• Chargeability Rules: A conciliation is chargeable if one or more items are warranted and no exception applies (Bulletin No. 4, p. 9).

• Settlement Offer Chargeability Exception: Applies if Tarion considers the offer “reasonable in the circumstances” and made in time (Bulletin No. 4, p. 11).

• New Issue Chargeability Exception: Applies where the issue was new and the builder was unaware but agrees to resolve it (Bulletin No. 4, pp. 12–13).

Tarion's findings

Tarion found seven warranty breaches related to garage roof leakage. It concluded that Adi’s injections from the underside were insufficient because they failed to protect against chloride penetration from de-icing salts. Tarion relied on CE-CP Guidelines (s. 1.1), CSA S413, and the Building Code, which require protection against both water and chlorides.

Five “miscellaneous” issues were also found to be warranted. Adi did not dispute these but argued they fell under the Settlement Offer Chargeability Exception. Tarion found the offers lacked clarity on which items were covered, were not made with sufficient notice, and were inadequate in amount.

Other warranted items included:

• Item 105: Exposed and unfinished exterior detailing near the roof terrace access ramp was deemed a breach of the two-year cladding warranty.

• Item 121: Tenting of the waterproof membrane on a roof terrace, where the membrane had debonded, was found to breach the one-year workmanship and materials warranty.

Court’s decision

On December 16, 2024, Adi filed a Notice of Application for Judicial Review. The Ontario Divisional Court applied the Vavilov reasonableness standard and dismissed the application.

The Court held that:

• Tarion’s use of CE-CP Guidelines and the Building Code was appropriate.

• There was sufficient evidence for finding the garage roof slab items warranted.

• The tenting issue (Item 121) was not merely cosmetic and was properly assessed under the one-year warranty.

• The chargeability decision was reasonable because no exceptions applied to all 14 warranted items.

• Adi’s offers did not meet the terms, timing, or clarity required under Bulletin No. 4 to trigger the Settlement Offer Chargeability Exception.

• The “new issue” exception did not apply to Item 105, which was found to be an incomplete repair, not a new defect.

Outcome

The judicial review application was dismissed. The Court ordered Adi to pay Tarion $25,000 in costs and upheld the chargeable conciliation designation, which remains on Adi’s Ontario Builder Directory record for 10 years. Adi is also required to pay the $3,000 conciliation fee under Regulation 892, s. 5.8(2.2).