Buying an Owner-Built Home: What It Means and How To Deal With It
Your Guide to Purchasing an Owner Built Home
Written By: Mariko Baerg, REALTOR of Bridgewell Real Estate Group
If you’re looking for a realtor to help you purchase a property, call me today!
What is an owner built home?
An owner built home is as the name describes, a home that is built by the owner. The owner must build and/or directly manage the construction of their new home, as well as occupy it for a minimum of 1 year after obtaining an occupancy permit. The home would have to be built entirely by the owner him or herself, as if the owner-builder were to engage another builder, construction manager, project manager, or any other third party to assist, they would be committing an offence under the Homeowner Protection Act.
Unlike homes constructed by a licensed residential builder, an owner building doesn’t typically have a home warranty insurance in place to rely on in the case that construction defects occur. As a result of this, the subsequent purchaser(s) would not have this warranty either. Thus, for the first 10 years of construction, the owner-builder is responsible for the home’s overall construction for the first 10 years, as per the 2-5-10 warranty.
What is the difference between an owner builder and a licensed builder?
A professional contractor must be licensed by the Homeowner Protection Office branch of the BC Housing, also known as HPO. Another important note is that a licensed builder is required to obtain third-party home warranty insurance which covers 2 years against defects in material and labour, 5 years against defects in the building envelope, and 10 years against structural defects.
An owner builder, on the other hand, is not required to be licensed under the Act or obtain third-party home warranty insurance. An owner builder may, of course, choose to obtain third-party home warranty insurance on their own. Assuming that an issue arises after the buyer becomes the registered owner of the owner built home was not insured by third-party home warranty insurance by the owner builder, the buyer of an owner built home may have a claim against the owner builder personally. This is a potential risk of purchasing an owner builder home.
What is the 2-5-10 Warranty?
The 2-5-10 warranty is a warranty that is required by all licensed builders as per Section 23 of the Act, in which homeowners are protected. This is a warranty that covers the first 10 years after the initial occupancy. The licensed builder will have an insurance company (example: Travellers) that would handle defects that fall within the 2-5-10 warranty.
Warranty that covers the following:
- First 12 months – Coverage for any defect in materials and labour for a single family home
- First 15 months – Coverage for any defects in materials and labour in the common property of a multi-unit building
- 2 years for labour and materials: first 24 months – Coverage for any defect in materials and labour supplied for the electrical, plumbing, heating, ventilation and air-conditioning delivery and distribution systems. In addition, coverage for any defect in materials and labour supplied for the exterior cladding, caulking, windows and doors that may lead to detachment or material damage to the new home
- 5 years for defects in the building envelope – Coverage for the building envelope for up to five years for defects in the building envelope of a new home, including a defect which permits unintended water penetration such that it causes, or is likely to cause, material damage to the new home.
- 10 years for structural defects – Any defect in materials and labour that results in the failure of a load-bearing part of the new home. A defect that causes structural damage that materially and adversely affects the use of the new home for residential occupancy.
It is important to note that owner builders are not required to obtain third-party home warranty insurance, and thus take over the responsibility that would be covered by an insurance company. All claims regarding defects must be taken up with the owner builder directly.
How do I know if the home I am purchasing is an owner-built home?
The best way to figure out is to go to www.hpo.bc.ca and/or https://lims.hpo.bc.ca/prs/NewHomes/. You can find out:
- Whether the home has policy insurance, if it is built by a licensed builder or an owner builder, who covers the insurance if any along with their contact information, if a disclosure notice for an owner built home is available, and the builder’s warranty number.
- You can search any homes registered with BC Housing on or after November 19, 2007. If you are searching for a home registered between July 1, 1999 and November 18, 2007, or you can’t find a property on the Registry, call 604-646-7050 or 1-800-407-7757 (toll free), or email [email protected].
- Check to see if the seller has disclosed that it is an owner built home on the property disclosure statement.
- Owner builders are required to provide an Owner-Builder Disclosure Notice, obtained through the BC Housing, to all potential buyers. Note: for 10 years after the occupancy permit is issued, all subsequent owners must also provide the Owner-Builder Disclosure Notice to potential buyers before they enter into an Agreement of Purchase and Sale. This Notice informs buyers whether the home was built under an Owner Builder Authorization, when the 10-year period started and if there is a voluntary policy of home warranty insurance in place.
- If owner builders built their homes before November 19, 2007, they must give any prospective buyers the old-form Owner Builder Declaration and Disclosure Notice within the first 10 years after occupancy.
Are there restrictions when an owner-builder can sell their home?
- Yes, an owner builder cannot sell or rent their home within a one-year period. They must occupy their new home themselves for at least one year after obtaining an occupancy permit. The only exception to this is if the owner builder applies to the HPO on the basis of undue hardship for permissions to sell during construction or earlier than 12 months after occupancy.
Do subsequent owners of an owner built home still need to disclose that it was built by an owner-builder?
- If you are purchasing an owner built home, the seller will be required to disclose it on the property disclosure statement. While the PDS is required to be filled out to the best of their ability, it is important to keep in mind that the items are usually to the best of their knowledge. To be safe, still check out the HPO website. Any subsequent owners must also provide the Owner Builder Disclosure Notice if they sell the home to another buyer within the 10-year period.
What is a substantially reconstructed home? Is it considered new?
- Keep in mind that the definition of a new home in the HPA not only includes “a building, or portion of a building, that is newly constructed or being constructed and is intended for residential occupancy,” but also “a home that is or is being substantially reconstructed.” If, after renovations, 25% or less of a home’s original structure above the foundation is remaining, the Homeowner Protection Office (HPO) considers that home substantially reconstructed and thus a new home for the purposes of the HPA. Not all homes have to be built within the last 10 years to be considered ‘new.’
What should I do before purchasing an owner built home?
- The best thing to do is to check the new homes registry to see if the home has been registered and when the occupancy began, so that you can confirm how long the warranty will exist, if any. The New Home Registry will help you to confirm whether or not the home is owner built. Do not rely on the property disclosure statement! All homes registered with the HPO on or after November 19, 2007 are searchable on the New Homes Registry at https://lims.hpo.bc.ca/prs/NewHomes/. If you are searching for a home registered after July 1, 1999 and before November 19, 2007, or you cannot find a property on the registry, contact the HPO directly.
- Obtain a professional home inspection, preferably someone that specializes in new build homes or possibly has some building experience.
- Request and review a disclosure notice in the prescribed form to determine whether or not the home is covered by home warranty insurance.
- Review the property disclosure statement to see if it’s an owner built home.
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Dealing with an owner-built home, regardless of whether you’re purchasing or selling it, requires a bit more skill than the typical transaction. If you’re looking for a realtor to represent you on purchasing an owner-built home then reach out to our team of realtors today at 604-319-0200 or email us at [email protected] today!
