Regulation British Columbia’s Experience

1. Regulation British Columbia’s Experience Bob Maling – Homeowner Protection Office Tony Gioventu – Condominium Homeowners’ Association Pro Spec 2004 Halifax, Nova Scotia

2. Today’s Presentation • The background - beautiful BC’s nightmare • The response - tablets of stone • The lessons - never again • Managing risk – yours, mine, or theirs?

3. Background • Beautiful BC & desirable Vancouver • In the beginning • Leaky Condos - BC’s “Nightmare”

4. Beautiful British Columbia

7. Vancouver - One of The Best

8. In the BeginningHome Warranty Before 1998 • Voluntary – buyer beware • Marketing tool or consumer protection?

9. New Home Warranty 1976 - 1995 • New Home Warranty of British Columbia Incorporated

10. Home Warranty 1995 - 1998 • 2 competitors • fund vs. insurance

11. BC’s Nightmare

12. BC’s Nightmare • What is a “leaky condo”? • Wood frame, low-rise, multi • Structural rot of envelope • Why did it happen? • Systemic failure • Call me • What are the costs? • $1.5 billion (can) • $25,000 per unit • Human suffering • BCNHWP collapsed

13. BC’s Nightmare • Before the leaky crisis

14. BC’s Nightmare • Before the leaky crisis • development at $ 7 Billion

15. BC’s Nightmare • Before the leaky crisis • development at $ 7 Billion/yr • Apex of crisis drop to $1 billion/yr

16. BC’s Nightmare • Before the leaky crisis • development at $ 7 Billion/yr • Apex of crisis drop to $1 billion/yr • 2004 Project industry recovery

17. Consumer Costs

18. Consumer Costs • 51 bankruptcies/foreclosures weekly • Peak Failure Remediation

19. Consumer Costs • 3 year cycle caused over 7,000 bankruptcies or financial failures

20. Consumer Costs • 3 year cycle caused over 7,000 bankruptcies or financial failures • cost paid by creditors and securities • individual assessments as high as $175,000.00

21. Consumer Costs • 3 year cycle caused over 7,000 bankruptcies or financial failures • cost paid by creditors and securities • individual assessments as high as $175,000.00

22. Consumer Costs • New Westminster High Rise

23. Consumer Costs • New Westminster High Rise • 1 bedroom unit • 8th floor • 22 floor highrise

24. Consumer Costs • New Westminster High Rise • 1 bedroom unit • 8th floor • 22 floor highrise • purchased in 1992 • $129,000

25. Consumer Costs • New Westminster High Rise • 2002 pre failure assessment $145,000

26. Consumer Costs • New Westminster High Rise • 2002 pre failure assessment $145,000 • 2003/2004 post failure assessment

27. Consumer Costs • New Westminster High Rise • 2002 pre failure assessment $145,000 • 2003/2004 post failure assessment • $85,000

28. Consumer Costs • New Westminster High Rise • 2002 pre failure assessment $145,000 • 2003/2004 post failure assessment • $85,000 • assessment for repairs $47,500

29. Consumer Costs • New Westminster High Rise • 2002 pre failure assessment $145,000 • 2003/2004 post failure assessment • $85,000 • assessment for repairs $47,500 • Current mortgage $110,000

30. Consumer Costs • New Westminster High Rise • assessment for repairs $47,500 • Current mortgage $110,000 • Projected assessment value after remediation and 2/10&10 Warranty

31. Consumer Costs • New Westminster High Rise • assessment for repairs $47,500 • Current mortgage $110,000 • Projected assessment value after remediation and 2/10&10 Warranty • $155,000

32. Consumer Costs • New Westminster High Rise • assessment for repairs $47,500 • Current mortgage $110,000 • Projected assessment value after remediation and 2/10&10 Warranty • $155,000 • Mortgage including assessment $ 157,500

33. BC New Home Warranty • > $12 million paid out in 12 months • + 50 to $130 million in new claims • Only $18 million reserve fund • = Bankruptcy

34. The Response • Homeowner Protection Act 1998 • Builder regulation & warranty standards • Research and education • Consumer life-line

35. Homeowner Protection Act • Consumer protection • Improve quality • Research and education • Financial assistance • Homeowner Protection Office

36. Builder Regulation Warranty Standards • Government licensing 3,500+ active • Private sector insurance 4 insurance companies 75,000+ homes covered • 2-5-10 yrs min. coverage

37. Research & Education • $750,00 leveraged to $2.5 million • Partnerships • Informed consumers • Better science

38. Loans As A Lifeline • Interest free loans • 9,500 loans approved • 655 buildings • $260 million • $27,440 average • $9.7 million PST • half-way there

39. The Lessons • Expect the unexpected • Beware the boom • Regulate the reserves • Research & Education • Avoid loopholes

40. Risk • Whose risk is it? • A collective risk, that can be managed.

41. Winter Storm Damage in Vancouver