Breaking Ground — and the Law: Unlicensed Homebuilding

Jan 19th, 2024

In Ontario, anyone building or selling a new home is required to hold a valid licence with the Home Construction Regulatory Authority (HCRA). With some limited exceptions, after obtaining a valid licence from the HCRA, new home builders and vendors (also known as “sellers”) must apply for authorization from Tarion for approval to sell new homes and to enrol the homes in the province’s warranty program. It is illegal to build and sell new homes without meeting these requirements.

Builders and sellers who operate without a licence pose a risk and can cause significant hardships for home buyers, damage public confidence and trust in the industry, and create an unfair and unbalanced marketplace. The HCRA is determined to identify and take action against builders and sellers who try to bypass the rules and operate outside the law.

Home buyers should never work with unlicensed builders and sellers – and neither should licensees.

The HCRA recently issued Advisory #13 to remind licensees that working with illegal builders and vendors can result in serious consequences from the HCRA.

The HCRA issues advisories regularly to licensees to provide practical examples and expectations of good conduct. But advisories are not just for licensees. They are also a great resource for consumers to understand the professional standards the HCRA expects from anyone building or selling a new home in Ontario.

As noted in Advisory #13, licensees are prohibited from working or cooperating with illegal builders and sellers. Examples of this include working with an unlicensed seller to sell a new home, selling a home on behalf of an unlicensed builder, or partnering with an unlicensed company in any way.

To maintain their licence with the HCRA, builders and sellers are obligated to abide by the province’s Code of Ethics, which explicitly states that licensees are prohibited from working with others who are unlicensed.

Licensees also have a responsibility to do their due diligence and check the licensing status of other builders and sellers they may be working with. If not, they could put a home buyer’s safety and financial investments at risk and adversely impact consumer confidence and trust in the industry.

What does illegal building and selling look like?

Engaging with unlicensed builders and sellers is a consumer protection issue for a reason. In an earlier post, we discussed why it is harmful to consumers – but it is important to know exactly what is considered illegal building and vending.

Here are some examples:

  • Building new homes for consumers without a licence from the HCRA
  • An unlicensed company signing purchase agreements with consumers and collecting deposits (i.e., selling new homes), even if it has not built any homes
  • A licensed company building or selling new homes without obtaining the appropriate authorization from Tarion or failing to enrol the home in the warranty plan

Even if your builder or seller is licensed, anyone they are working with who meets the above criteria is still operating outside of the law!

Working with unlicensed builders comes with consequences

If a licensee is found to be cooperating with an unlicensed builder or seller, it is considered professional misconduct and is a serious violation of the New Home Construction Licensing Act, 2017, and the Code of Ethics – and the HCRA will take action.

The HCRA can take several actions if a licensee is found working with unlicensed builders or vendors, this includes:

  • Issuing financial penalties up to $50,000;
  • Referring a licensee to the Discipline Committee, and/or in the most severe circumstances;
  • Suspending or revoking their licence entirely.

The HCRA takes this issue very seriously. Just because a builder or seller has a valid licence does not mean that they can work with or enable others who are unlicensed and breaking the law.

How to avoid working with illegal builder or vendor

To protect yourself from the risks of illegal building and vending, always check the Ontario Builder Directory to confirm a builder or vendor’s licence status with the HCRA. If you find that that your builder and vendor is unlicensed, or engaging with a person or company who is unlicensed, report it directly to the HCRA by filling out an Illegal Building Complaint Form.

The Advisory also provides straightforward definitions and examples of who is considered a “builder” or a “vendor” which in turn, can help you identify if they require a licence or not.

Buying a new home is a big decision, and as a home buyer, you are well within your rights to know exactly who is involved with the sale and construction of your new home.