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 BC 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 BC, the warranty is often colloquially referred to as the 2-5-10 Warranty.
How pre-sale homebuyers are protected
Every pre-sale home sold in BC is protected by the 2-5-10 warranty. The protection 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.
British Columbia’s 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 which render the home unfit to live in. When the warranty speaks of the building envelope, it is referring to the outside or skin of the building, where as the structure of the building refers to the ‘bones ‘ of a building or 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. As well, any Sales Team member at MLA Canada can walk you through the ins and outs of your warranty. In order to be completely comfortable, it is always helpful to ask your realtor to double check the information you were provided so that you can rest assured you fully understand the opportunities provided by the warranty.
When purchasing pre-sale, homebuyers can rest easier knowing that any applicable costs incurred in the mandated timeframes will not come out of their own pockets. This helps budget for the first 10 years of home ownership and provides the peace of mind that comes with financial protection.