CHANGE IS THE FOUNDATION OF GROWTH - Tarion.com · 2018. 4. 6. · 2007 2009 2012 69% 72% 74% 76% EMPLOYEE ENGAGEMENT* * 2007–2011 results are based on a bi-annual employee opinion

CHANGE IS THE FOUNDATION OF GROWTHAnnual Report 2012

3

AT A GlANCE 4

AbOUT TARION 5Message from the Chair 6 Message from the President and CEO 7

STRATEGIC INITIATIvES 8Change is the Foundation of Growth 8

ACCOMPlISHMENTS 10Channel Strategy 10• IntroducingBuilderLink11• EnhancementstoMyHome11

Changes to the Warranty 12• ConstructionPerformanceGuidelines13• CreatingtheNewWarrantyServicesDepartment14

Engaging Stakeholders 15• UnderstandingHomeownerExperiences withTarion16

building Transparency 18• ReachingouttoHomeowners19

SERvICE & SUPPORT 20Warranty Program 20Homeowner Protection 21Customer Service 24Avenues of Appeal 25licensing & Underwriting 26Enforcement 27Tracking Complaint Trends 28

REWARDING ExCEllENCE IN CUSTOMER SERvICE 29

ON THE HORIzON 30

CORPORATE GOvERNANCE 31board of Directors 32Governance Policies 33Responsibilities of board Committees 34Directors’ Attendance 36

FINANCIAlS 372012 Financial Commentary 38Management’s Responsibility for Financial Reporting 39Independent Auditor’s Report 40 Appointed Actuary’s Report 41 Statement of Financial Position 42 Statement of Comprehensive Results of Operations 43Statement of Changes in Equity 44 Statement of Cash Flows 45 Notes to the Financial Statements 46

CONTACT TARION 77

TAblE OF CONTENTS

TAblE OF CONTENTS TARION Annual Report 2012

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AT A GlANCE

HOME OWNER SERVICE ORIENTATION INDEX********The Homeowner Service Orientation Index reflects the average of opinion scores for accessibility, ability to listen to and understand needs and how easy Tarion is to do business with.

2008 2009 2010 2011 2012

EMPLOYEE ENGAGEMENT************2007-2011 results are based on a bi-annual employee opinion survey conducted by the Hay Group, where the survey consisted of 66 questions. 2012 results are based on an employee opinion survey conducted by the Hay Group, consisting of 15 questions.

BUILDER SERVICE ORIENTATION INDEX**********The Builder Service Orientation Index reflects the average of opinion scores for accessibility and ability to listen to builder needs and concerns.

2009 2011

84

%

84

%

84

%

84

%

85

%

78

%

82

%

2007 2009 2011 2012

69

%

72

%

74

%

76

%

HOME OWNER SERVICE ORIENTATION INDEX** The Homeowner Service Orientation Index reflects the average of opinion scores for accessibility, ability to listen to and understand needs and how easy Tarion is to do business with.


2008 2009 2010 2011 2012



2009 2011

84

%

84

%

84

%

84

%

85

%

78

%

82

%

2007 2009 2011 2012

69

%

72

%

74

%

76

%

BUILDER SERVICE ORIENTATION INDEX** The Builder Service Orientation Index reflects the average of opinion scores for accessibility, ability to listen to buillder needs and concerns and how easy Tarion is to do business with.


2008 2009 2010 2011 2012



2009 2011

84

%

84

%

84

%

84

%

85

%

78

%

82

%

2007 2009 2011 2012

69

%

72

%

74

%

76

%

EMPLOYEE ENGAGEMENT** 2007–2011 results are based on a bi-annual employee opinion survey conducted by the Hay Group, where the survey consisted of 66 questions. 2012 results are based on an employee opinion survey conducted by the Hay Group, consisting of 15 questions.

TOTAL EQUITY (2012)*

$184.8 MILLION

93.8

117.5

153.5

163.2NET CLAIMS INCURRED (2012)

$0.2 MILLION

26.8

3.1

(18.3)

1.0

TOTAL CLAIMS PAID (2012)in $CAD Millions

7.014

20.9

17.6

8.4

RECOVERIES FROM BUILDERS ON A CASH BASIS (2012)*

$4.7 MILLION

5.0

7.4

8.0

4.2

HOMES WITHA CONCILIATIONINSPECTION (2012)

1,380

2008

2009

2010

2011

2008

2009

2010

2011

2008

2009

2010

2011

2008

2009

2010

2011

2008

2009

2010

2011

2008

2009

2010

2011

4,979

3,768

1,937

1,412

TOTAL HOMES UNDERWARRANTY (2012)*

381,181*Possessions and units under warranty are restated based on the latest available data.

*The equity of the corporation for 2009 and 2010 have been restated under the International reporting standards (”IFRS”) when it adopted IFRS in 2011.

*Previous numbers published under the accrued basis have been restated to a cash basis.

456,968

434,120

417,735

399,005

AT A GlANCE TARION Annual Report 2012

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Tarion Warranty Corporation was created in 1976 to serve as the regulator of the new home building industry and administer a new home warranty plan to protect home buyers in Ontario.

TarionadministerstheOntario New Home Warranties Plan Act(“theAct”),whichstatesthatallnewhomebuyersinOntarioareentitledtoalimitedwarrantythatcoversdefectsinworkmanship,waterpenetrationandmajorstructuraldefects,aswellasdelayedclosinganddepositprotection.

TarionadministerstheActby:

• Protectingnewhomebuyersfrombuilderfailures ordefaults(suchassubstandardconstruction,faultyworkmanshipandmaterials,incompleteconstructionandlossofdeposits)throughthedevelopment,promotionandadministrationofstatutorywarranties.

• Promotingbettercommunicationbetweenbuilders andbuyersofnewhomes.

• Providingnewhomebuyerswithaforum forcomplaintsaboutbuildersandhelping toresolveissues.

• Establishingandadministering aguaranteefundthatprovides compensation.

• Educatingnewhomebuyers andnewhomeownersabout thewarrantyprotection theyareentitledto.

• Informingandeducatingnew homebuildersandpromoting progressiveimprovementin thequalityofhousinginOntario.

Tarion strives to establish policies and business practices that balance the interests of its stakeholders: NEW HOMEOWNERS, HOME bUIlDERS AND THE GOvERNMENT OF ONTARIO.

AbOUT TARION

AbOUT TARION TARION Annual Report 2012

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newbuilderregistrantshavebasiclevelsofcompetencies.Newhomebuilderswouldberequiredtokeepthemselvescurrentinindustrybestpracticesthroughparticipationinannualprofessionaldevelopmentlinkedtotheregistrant’srenewalapplication.Furtherconsultationonhowthepolicyisimplementedwilltakeplacein2013.

AreviewoftheBuilderArbitrationForum(BAF)guidelineswascompletedin2012.Welistened tostakeholderswhotoldusthatBAFneeded tobeamorestreamlinedandcost-effectiveprocess.ChangestotheBAFprocesswill comeintoeffectin2013.

Aspartofourcommitmenttooperateinaccordancewithbestpracticesincorporategovernance,theBoardintroducedaguideline ofthreeconsecutiveone-yeartermsforChairs ofcommittees.ThesetermswillensurenewideasandperspectiveswillbeengagedbytheBoardandthatDirectorscontinuetodeveloptheirknowledgeofBoardcommittees.

Wealsofocusedonincreasingthecollective skillsandexpertiseoftheBoardbydevelopingaDirectorTrainingandDevelopment PolicyandDirectorOrientationPolicyandupdatingtheDirectorSkillMatrix.

Instrivingforcontinuousimprovementinourstandards,fivemembersofTarion’s BoardofDirectorsnowholdanICD.D(InstituteofCorporateDirectors)designation.

IwouldliketotakethisopportunitytothankoutgoingBoardMembersDickBrouwer andBobFinniganforthemanycontributionstheymadetotheBoardduringtheirtenures. IalsowelcometotheBoard,DanGabrieleandLeithMoore.

IwouldliketoexpressmygratitudetomyfellowBoardMembersfortheleadershipanddirectiontheyhaveshownthroughouttheyearandwouldalsoliketothankTarion’sPresident&CEOHowardBogach,hisCorporateLeadershipTeamandallTarionemployeesfortheirhardworkanddedicationtomakingTarionamoreeffectiveandefficientcompany.

IlookforwardtotheyearaheadandcontinuingtheexcellentworkwedoinregulatingOntario’sbuildingindustryandprovidinghomebuyerswiththemostcomprehensive newhomewarrantyprotectioninCanada.

MESSAGE FROM THE CHAIR OF THE bOARD

HARRy HERSkOWITzChairoftheBoard


Weentered2012withastronghousingmarket,butwithmuchuncertainty.Themarketplaceandmediaoutletswereconstantlyspeculatingaboutifandwhenthehousingbubblemightburst.NewmortgagerulespassedbythefederalgovernmentinJulydidcoolthemarketsomewhat,butenrolmentscontinuedtoclimbover2011levels,withthehighestgrowthincondominiumenrolments.Despitetheuncertaintyofthehousingmarketandtheeconomyingeneral,Tariondeliveredstrongfinancialresultsin2012stemmingfromstronginvestmentreturnsandstableclaimspayments.

WedidsowhileimplementingthefirstyearofastrategicplanrecognizingthattherewouldbemanyvariablesinthemarketplaceandknowingthatTarionwouldneedtoquicklyandefficientlyrespondtochangesintheeconomicenvironment.

ThegrowthinthecondominiummarketovertheyearswasthedrivingforcebehindtheBoard’screationoftheCondominiumTaskForce.In2012,theMinistryofConsumerServiceslaunchedareviewoftheCondominiumActtolookatwaystoimprovetheprotectionprovidedtocondominiumowners.Tarion’sprocessesprovideuswithuniqueopportunitiestointeractwithallofthekeyplayersinthecondominiumprocess;individualunitowners,builders,condominiumboardmembers,propertymanagersandperformanceauditors.ThroughtheCondominiumTaskForce,TarionprovidedfeedbacktotheconsultationanddiscussedwiththeMinistrytheimportanceofeducatingbothcondominiumownersandboardsontheirrightsandresponsibilities.

TheRegulatoryAffairsCommitteewasalsoveryactivein2012.Aftermorethanthreeyearsofresearchandconsultationwithstakeholders,significantchangesweremade totheexistingMajorStructuralDefect(MSD)warranty.Thesechanges,whichcame intoeffectinJuly2012,addedmoretransparencyandclaritytotheMSDwarrantyprocess,moreaccountabilityforbuildersandbetterriskmanagementforTarion.

Tarionlaunchedthreeformalpublicconsultationprocessesonpolicyproposals thatwillhaveasignificantimpactonthebuildingindustry,ultimatelyresulting inabettercustomerserviceexperiencefornewhomebuyers;aPerformance BasedPricingProposal,aBuilderCoreCompetencyProposalandaBuilder ArbitrationForumProposal.

ThePerformanceBasedPricingproposalseekstobasethepriceofenrollinghomesonbuilderperformanceandrisk,basedonthecriteriaoftenure,claims,andchargeableconciliations.TheTaskForcewillcontinueitsworkonthisinitiativeinthecomingyear,expectingthatinitialtrialscoreswillbedeliveredtobuildersinlate2013andupdatedscoreswillbemadepublicin2015.

TheBuilderEducationTaskForcewasalsoinvolvedinpublicconsultationin2012throughTarion’sBuilderCoreCompetencyProposal,aimedatenhancingTarion’sregistrationandrenewalrequirements.Theserequirementswouldensurethat

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Wemadechangesinternallyaswell,with theintroductionofthenewWarrantyServicesdepartment.CombiningtheformerClaimsDepartmentandContactCentreintoonedepartmentbringstogetherthestaffmembers whoworkdirectlywithhomeowners,whichprovidesmorestreamlined,effectiveservices.

WecontinuedtofindwaystoenhanceouroutreachthroughthecreationoftheStakeholderRelationsDepartment.Thenewdepartmentbringstogetherthevariousgroupswhoareprimarilyresponsibleforcommunicatingtoallofourstakeholdergroups.Weconductedthreeformalpublicconsultationsonproposedpolicychangesin2012,createdanewhomeownereducationvideo,participatedinspeakingtoursandincreasedourmediaactivities.Whetherwe’reaskingforrecommendationsonpolicychanges,speakingaboutthedangersofillegalbuildingorofferinghomebuyingtips,wecontinuetofindnewwaystoreachouttoourstakeholdersandfulfillourmandatetoprovidepubliceducation.

WhenI’montheroad,speakingatlocalassociationsortothemedia,IoftentalkaboutTarionbeinginthepeoplebusiness.Wearetheindustryregulatorandadministratorofthestatutorywarranty,buttheendproductweprovideispeaceofmind.Whenpurchasinganewhome,Ontariobuyersdosoknowingthereisaplacetoturntoforhelpiftheyneedit.IamproudtoworkwithaBoardofDirectorsandstaffwhorecognizetheimportanceofourroleandthateverysingleday ouractivitieshavetheabilitytoprofoundlyaffectsomeone’slife.

Lookingforwardto2013,wewillcontinuetoworkontheinitiativesthatformTarion’sthreeyearstrategicplantobalancestakeholderinterestswhileseekingoperationalefficiencies. ItwasdevelopedbyTariontomeetthechallengesofadynamicoperatingenvironment. WeknowthatthechangeswemaketodaywillcontinuetomakeTarionastrongerand moreefficientorganizationforallstakeholdersinthefuture.

MESSAGE FROM THE PRESIDENT AND CEO

Ontario’sbuildingindustryisconstantlychanging.InfulfillingourroleasindustryregulatorandadministratoroftheOntario New Home Warranties Plan Act,Tarion mustalsobeinastateofcontinualchange.Thatisreflectedinthethemeofthisyear’sreport:changeisthefoundationofgrowth.Itisalsoevidentinour2012-2014strategicplan,whichformedthebasisofmuchofTarion’saccomplishmentsin2012.Thepastyearmarkedthebeginningoftheplan,bringingsignificantoperationalandregulatorychangesdesignedtoensurethatTarionisabletocontinuetomeettheneedsofitsstakeholdersregardlessoftheupsanddownsinthenewhomemarketplace.

Forthepastfouryears,theuncertaintyofCanada’seconomicclimatehashadasignificantimpactonouroperationsandwillcontinuetobeafactorinhowTarionoperatesandsetsstrategicgoals.Lowinterestratescontinuedtohaveapositiveimpactontheindustryandin2012,newhomeenrolmentsmaintainedasteadyupwardtrend.Totalenrolmentsincreasedto60,932units;fivepercentaheadofexpectations.Wesawthegreatestincreaseinenrolmentsinthehighrisesector andoverthepastfouryearshaveseentheenrolmentmixshiftingfromfreehold tohighriseasaresultofGreenbeltpoliciesthatencouragebuildingup–notout.

OneofthemajordriversofourabilitytorespondtothemarketplaceisTarion’schannelstrategy.Wearecontinuallylookingforwaystocommunicatemoreeffectivelywithstakeholdersthroughthechannelstheyfindmostconvenienttoaccess.Undertheverybroadumbrellaofthechannelstrategy,we’resharingandcollectingmorekeyinformationonlineratherthaninhardcopy,makingsurehomeownersalwayshavethemostrelevantandup-to-dateinformation.Wemadeupgradestoallouronlineplatforms–Tarion.com,BuilderLinkandMyHomeandsawasubstantialgrowth inthenumberofformsthatweresubmittedthroughMyHome.We’vealsoseenaninterestingdevelopmentinourcustomerserviceresearchthatshowedhomeownerswhousedMyHomehavehigherlevelsofsatisfactionintheirexperiencewithTarionthanhomeownerswhodidn’tuseMyHometomanagetheirwarranty.Thisshows uswe’reontherighttrack.

Weintroducedanumberofchangestothewarrantyin2012thatbenefitOntario’s newhomebuyers.Changestowhat’scalledtheaddendumcreatedmoretransparencyandgreaterdisclosureforbuyers,allowingthemtoclearlyseeallcriticaldatesanddeadlinesinvolvedintheirhomepurchaseandthecompletelistingofadjustmentsandfeesthattheywillberesponsibleforuponclosing.ChangestotheMajorStructuralDefect(MSD)warrantymeanthatbuildershaveincreasedaccountabilityfortheseclaimsinyearsthreethroughseven.Wehavealsotakenstepstobetterclarifythedefinitionofmajorstructuraldefectwhichwillalsobenefitconsumers.Thesestepshavealsoledtoa$150reductioninenrolmentfeesforallhomeseffectiveJuly1,2012.

HOWARD bOGACH President and Chief Executive OfficerTarionWarrantyCorporationToronto


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STRATEGIC INITIATIvES

CHANGE IS THE FOUNDATION OF GROWTH

Tarion introduced a new three-year strategic plan in 2012 called Balancing Stakeholder Interests While Seeking Operational Efficiencies that is paving the way for new and improved services to better serve all our stakeholders. The plan ensures Tarion continues to move in the right direction; delivering warranty services and regulating builders in an efficient and effective way, while balancing the interests of all stakeholders, including new home buyers and builders, government and employees.

Thekeypillarsofthisplanaretomanagerisk,enhancefinancialperformanceandefficiency,andcontinuetobuildtrustandtransparency.OurultimategoalistoenhanceTarion’sperformanceasafinanciallystable,operationallyefficientorganizationthatdeliversvaluedwarrantyservicesandbuilderregulation.

STRATEGIC INITIATIvES TARION Annual Report 2012

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STRATEGIC INITIATIvES ACCOMPlISHED IN 2012 INClUDE:

• Ensuredsufficientcapitaltowithstandlarge claimsaccordingtostresstestscenarios

• Examinedreinsuranceinanoverallriskcapacityreviewtoaddresspossiblecatastrophiclosses

• ImplementedchangestoMajorStructuralDefect(MSD)PolicyFrameworktoincreasebuilderaccountabilityforMSDclaims,promotinghigherbuildingstandards

• ContinuedapublicconsultationprocessforPerformanceBasedPricing,whichwouldactas aperformanceincentivebyrewardinggoodbuilders withalowerenrolmentfeeandpenalizingpoor builderswithahigherenrolmentfee

• IntroducedtheChannelStrategy,amajorprojectthatcontinuestoupdateandimprovetheways wecommunicatewithhomeownersandbuilders

• Conductedathoroughreviewofhowwecollect,use,store,discloseanddestroydataandsubsequentlydevelopedadatamanagementpolicyexpectedtocomeintoforcein2013

• UpgradedCustomerRelationshipManagementsoftwaretoautomateanumberoftasksrelated tothecommonelementclaimsprocess,trackcomponentsrelatedtodesignandfieldreviewreportingrequirementsandstreamlinethe securityretentionandreleaseprocess

• Reviewedvendor/builderagreementswithaview tostreamlinetheadministrationofvendor/builderrightsandobligations

• Implementedaredesigneddatawarehousesystemthatcentralizesdataintoonelocationandeliminatestheneedtopullreportsfrommultiplesources.Thenewsystemensuresintegrity,consistency,qualityandaccuracyofdata

• Movedintothefinalstagesofreplacing LicensingandUnderwriting’sHomeWise2systemwithamoreflexibledataintakeandprocessingsystemthatwillallowTariontokeeppacewithchangingbusinessneeds.Thiswillenablemoreonlineandself-servicefunctionalityforvendors/builders,createmorestreamlinedprocessesandimproveouroveralloperationalperformance

• IntroducedthethirdeditionoftheConstructionPerformanceGuidelinesandthefirstConstructionPerformanceGuidelinesforCommonElementsofcondominiumbuildings,providinggreaterconsistencyandtransparencyintheclaimsprocess

• ImplementedamendmentstoDelayed Closing/DelayedOccupancyAddendathatprovidegreaterclarityinagreementstoextendoracceleratecriticaldatesanddisclosureofclosingcosts

• AdvisedthebuildingindustrythatTarionwould beginmovingaheadwithreviewsofBuilder Bulletins28,43and42,relatingtolicensingunderwritingissuesandsecurityrequirements

• Beganpublicconsultationonaproposaltoincreaseeducation-relatedrequirementsfornewapplicantsandimplementprofessionaldevelopment-relatedrenewalrequirementsforexistingregistrants

• ConcludedpublicconsultationonchangestotheBuilderArbitrationForum(BAF)processintendedtomakeitamoreefficient,constructiveandcost effectivewayforbuilderstochallengeawarranty andchargeabilityassessment

• Continuedtointegrateacultureofserviceexcellencebydevelopinganddeliveringtrainingfocused onunderstandingandlisteningtohomeowners

• Continuedtoworktowardcontinuous improvementsingovernanceprocesses

1 2 3MANAGING RISk

ENHANCING FINANCIAl PERFORMANCE AND EFFICIENCy

bUIlDING TRUST AND TRANSPARENCy

STRATEGIC INITIATIvES TARION Annual Report 2012

ACCOMPLISHMENTS TARION Annual Report 2012 10

THE CHANNEl STRATEGy

One of Tarion’s most significant projects undertaken in 2012 was updating and improving the channels we use to communicate with homeowners and builders. We have been moving from a primarily paper-based organization to adopting technology that best meets our needs, and the needs of our stakeholders. Tarion defines a channel as the way we reach out to people, and how they reach us.

SIGNIFICANT ACCOMPlISHMENTS IN 2012

Theoverallgoalofthisprojectistomatchtheebbsandflowsofthenewhomeindustryand,indoingso,beabletoacceptincreasesordecreasesinworkflowwithoutaffectingourabilitytodeliverexcellentservice.Improvingourchannelsprovidesourstakeholderswithmoreconvenience,speedandaccuracy.Thisinitiativewillspanfrom2012to2014. 2012 accomplishments include:

“ I really like the way things are going with the new builderlink – it helps make things easy to track and helps us stay up-to-date.”

- Thornridge Homes

THE NEW TARION.COMIn2012,guidedbystakeholderfeedback,welaunchedare-designedwebsite.ThenewTarion.comiseasiertonavigate,allowinghomeownerstoquicklylocatetheinformationtheyneedandalsofeaturesrefreshed,easytounderstandcontent.

GOING SOCIAlAssocialmediabecomesaneverincreasingwayforpeopletoconnect,Tarionlookedforwaystoincrease itsuseincommunicatingtoourstakeholders.InadditiontodevelopingacomprehensivepolicytoguideTarion’sentryintosocialmedia,welaunchedaWikipediapage in2012.TarionalsocreatedtheframeworkforaFacebookbusinesspage,YouTubechannelandsocialmediasharingcapabilitiesforthenewTarion.com. Theseinitiativeswilllaunchinearly2013.


INTRODUCING bUIlDERlINkTarion’sonlineportalthatprovidesbuilderswithdetailedinformationaboutthewarrantystatusoftheirhomeswasre-introducedin2012asBuilderLink.Inadditiontoacompletelynewlookandfeel,theportalnowdoesmoreanddoesitbetter.EnhancementsincludetheadditionofconciliationrelatedactivitiesforMajorStructuralDefectcases,areductioninthenumberofstepsneededtosubmitenrolmentsandanonlineprocessforsubmittingtheCertificateofCompletionandPossession.Thenewplatformalsolaidthefoundationforfuturecapabilities suchasonlinepaymentprocessing,newapplications forlicensingandrenewalsofregistration.

ENHANCEMENTS TO MyHOME MyHomeisTarion’sweb-basedservicethathelpshomeownersquicklyandeasilymanagetheirwarranty.Itallowshomeownerstosubmitwarrantyformsonline,keepstrackofcorrespondenceandsendsemailremindersofkeyduedatesforsubmittingforms andrequestinginspections.

Inthepastyear,Tarionmadeseveralenhancementsto MyHometoprovidefasterandmoreeffectiveservicetohomeowners.Inresponsetohomeownerfeedback,weupdatedthesiteforeaseofuseandaddedanapplicationsohomeownerscansubmitMajorStructuralDefectandDelayedClosing/Occupancyforms.

WarrantyServicesundertookanumberofinitiativesto helppromoteMyHomeincludingregisteringhomeownersoverthephonewhentheycalledTarion’sContactCentre andupdatingemailsignaturestoincludeinformationaboutthebenefitsofMyHome.Additionally,Tarionconducteda pilotprojectthatsawstaffautomaticallyregisterhomeownersuponreceivingtheirinformationfromthebuilder’sCertificateofCompletionandPossession.Homeownerswerethensent anoticeoftheirregistrationwithlogindetails.

Asaresult,thenumberofMyHomeusersjumpedfromjustover29,000in2011tomorethan50,000in2012.WealsosawariseinformssubmittedviaMyHome.Thirty-sevenpercentofallwarrantyformsweresubmittedonlinein2012, upfrom23percentin2011.

GOING PAPERlESS: THEONLINECCPANDHIPIn2012,TarionintroducedanonlineCertificateofCompletionandPossession(CCP)andbegantomovetowardanonlineHomeownerInformationPackage(HIP).

Previously,ahardcopyCCPwasprovidedtoeveryhomeownerwhentheytookpossessionoftheirhome. Thiscertificateincludedthedateofpossession,thenames ofthebuilderandownerandotheressentialinformation. Thenewprocessinvolvesbuildersloggingintothe

“ Everything was done online. I APPRECIATE THE E-MAIl REMINDERS FOR WHEN A FORM IS DUE.” - Homeowner

enhancedBuilderLink,wheretheyareabletogenerateaCCPformwhichtheythencomplete,printanddelivertohomeowners.Thenewprocessiseasiertomanageandensuresthatrecordsareup-to-dateandconsistent.

Tarion’sCustomerServiceStandardrequiresbuilderstoprovideallnewhomeownerswithaHomeownerInformationPackageduringthepre-deliveryinspection.Thisdocumentdescribeswarrantycoverageindetailandtheprocessformakingaclaim.ThenewelectronicHIPwillbeeasilyaccessibleonlineandcanbeeasilyupdatedbyTarion,ensuringthathomeownersareaccessingthe mostrecentversion.ThenewelectronicHIP willalsoreducetheadministrativecosts ofprinting,mailingandhandlingthe largepackageofinformation.

Aspartofthetransitiontothenewelectronic HIP,Tarioncreatedasmallbrochurefor builderstoprovidetohomeowners thatoffersabrief descriptionofthe warrantyand encourages homeownersto goonlinetoaccess thefullHIP.Anew electronicHIPwill beavailableonlinein2013.

TheChannelStrategywill continuetobeafocusin 2013and2014,withmany enhancementsexpected tocontinuallyimprove Tarion’sservices.

TARION Annual Report 2012


“ Tarion changes are GOOD FOR PURCHASERS.”- Bob Aaron

“ I acknowledge Tarion’s thorough work on its MSD Warranty Proposal, and have requested my Ministry’s staff to continue to dialogue with Tarion to keep abreast of new developments of significant importance to consumers. I would like to thank you for forming a Consumer Advisory Council (CAC) to consider the consumer perspective in this policy proposal and all such policy proposals going forward.”

- The Honourable Margarett Best, Minister of Consumer Services

CHANGES TO THE ADDENDUM Therevisedforms,whicheverybuildermustattachto everynewhomepurchaseagreement,outlinehowthebuilderandpurchasermay,atanytimeaftersigningthepurchaseagreement,agreeinwritingtoextendoraccelerateoneormorecriticaldates.Ifthisisdone,theamendmentmustincludearevisedStatementofCriticalDates.Thechangesprovideaclearandstraightforwardwayforhomeownerstoseeallcriticaldatesanddeadlinesthatareinvolvedinpurchasingahome.

Thesecondchangetotheaddendumwasadirectresult offeedbackwereceivedfromhomeowners.Itprovidesbetterdisclosureofclosingadjustmentsbyensuringall feesandchargesaddedtothepurchasepriceofahomeareitemizedinasingledocument,titled“ScheduleB.”Thisnewrequirementallowshomeownerstoviewallthecostsassociatedwithbuyingahouseorcondominium inoneplace.

INCREASING bUIlDER ACCOUNTAbIlITy FOR MAjOR STRUCTURAl DEFECTSAfterathoroughconsultationprocess,Tarion hasmadesignificantchangestotheexistingMajor StructuralDefect(MSD)warranty.Thisistheseven

CHANGES TO THE WARRANTy

In 2012, Tarion made significant updates to the Delayed Closing/Occupancy rules and changes to the Major Structural Defect warranty.

yearwarrantythatprotectsnewhomebuyers frommajordefectsintheirhome.

Previously,TarionwasresponsibleforMSDwarrantyclaimsinyearsthreethroughseven.ThechangesintroducedinJuly,2012,putmoreaccountabilityonbuilderssinceliabilityinyearsthreetosevenisnowplacedsolelyonthebuilderormaybesharedbetweenthebuilderandTarion.

UnderthenewMSDstructure,builderswhoareunwillingorunabletoacceptfullresponsibilityforadefectmayparticipateinaco-shareliabilitystructurewithTarion.


IfaMajorStructuralDefectclaimismadetoTarionandthebuilderdecidestooptfortheco-shareliabilitypayment,itisreportedonthebuilder’scustomerservicerecordthatisavailabletothepublic.Itmayalsohaveanimpactonlicensingrenewalandtermsandconditions,similartoclaimsmadeundertheoneandtwoyearwarranties.

BecausethebuilderhasincreasedliabilityfortheMSDwarranty,Tarionreducedtheassociatedhomeenrolmentfeeby$150.

ChangeswerealsomadetotheoriginalMajorStructuralDefectdefinition,whichwillleadtomoreconsistentandtransparentwarrantydecisions.Thenewdefinitionreferstothreeseparateteststhatcanapplytodetermine ifamajorstructuraldefecthasoccurred:

1. Thefailuretestdeterminesifdefectsinwork ormaterialswouldresultin“failureofastructural load-bearingelementofabuilding.”

2. Thefunctiontestexaminesastructuralload-bearingelementanditsfunction.Anydefectinworkormaterialsthatmateriallyandadverselyaffectstheabilityofeachstructuralload-bearingelementofthebuildingtocarry,bearandresistapplicablestructuralloadsfortheusualandordinaryservicelifeofsuchelementwillbeconsideredamajorstructuraldefect.

3. Theusetestrequiresthatadefectresultsin a“significantportionofthehome(orcommonelements)beingmateriallyoradverselyaffected.”Theusetestisanobjectivestandardwhichlooks attheusualandordinarypurposesofadwelling, orthecommonelementsofabuilding.

Overall,theupdatestothewarrantyprovidegreaterconsumerprotectionforhomebuyers,betterriskmanagementforTarion’sguaranteefund,andmoretransparencyandclarificationtothewarrantyassessmentprocess.

CONSTRUCTION PERFORMANCE GUIDElINESCOMMON ElEMENT CONSTRUCTION PERFORMANCE GUIDElINES FOR CONDOMINIUMSInthefallof2012,TarionintroducedthefirsteditionofthenewCommonElementConstructionPerformanceGuidelinesforcondominiums.Theguidelines,whichweredevelopedwiththeassistanceofseveralacknowledgedexpertsinengineeringandfieldreview,provideclarificationonthemostcommonandrecurringissuesencounteredduringthecommonelementsclaimsprocessandsetsrealisticexpectationsinperformancerequirementsfortheseissues.Ultimatelytheguidelineswillleadtoabetterunderstandingofhowtheseissuesshouldbeinterpretedandwhichdefectsarecoveredunderthewarranty.

UPDATING THE ExISTING CONSTRUCTION PERFORMANCE GUIDElINES TarionalsoupdatedtheexistingConstructionPerformanceGuidelinesin2012.ThethirdeditionoftheguidelinesappliestoconciliationsbeginningonJanuary1,2013.Sincetheguidelineswerelastrevisedin2003,TarionhascollectedinputbasedonthemostcommonissuesencounteredbyTarionstaff,consumers,buildersandbuilderservicerepresentativeswhoregularlyusethisreferencemanual.

“ The introduction of the Common Element Construction Performance Guidelines will provide a better experience for new condominiums and we thank you on behalf of our constituents.” - Mario Deo, Vice President, Canadian

Condominium Institute Toronto


Theextensivefeedbackwasusedtomakeanumberofchangestotheguidelines,includingninetythreerevisionstocurrentitems,theadditionofsixteennewitems,andthedeletionoffouritems.

BothConstructionPerformanceGuidelinesareimportanttoolsinimprovingtheconsistencyandtransparencyofthewarrantyprocessandhelpinghomeownersandbuildersbetterunderstandhowTariondetermineswhetheranitemiswarrantable.

CREATING THE NEW WARRANTy SERvICES DEPARTMENT

In2012,Tarionundertookaninternalrestructuring withthegoalofstreamliningourprocessesandprovidingmoreefficientandeffectiveservicestoourstakeholders.CombiningtheClaimsDepartmentandtheContactCentreintothenewWarrantyServicesDepartmentallowedTariontoavoidserviceduplicationsandprovidemoreprompt,personalservicetoourcustomers.

Existingstaffwerereorganizedintoteamsbyspecificgeographicalregions.Theteams,whichconsistofFieldClaimRepresentatives,ClaimServiceRepresentativesandaFieldClaimManager,worktogethertoprovidebuildersandhomeownerswithaconsistentTarioncontact,fromthetimeaconciliationinspectionisrequesteduntiltheclaimissettled.Theteamsarebetterequippedtounderstandissuesandtrendsintheirareaandwillbeabletogainmoreexperiencewithissuesaffectingmultiplehomesinasinglearea.

“ Thank you for your continued interest in the repairs of our condo. I kNOW THAT yOUR SkIll, CAlMNESS AND PROFESSIONAlISM MADE SURE THE TARION CONCIlIATION REMAINED POSITIvE AND PRODUCTIvE.” - Homeowner Email


ENGAGING STAkEHOlDERS

In 2012, the public consultation process continued to be an important tool for providing stakeholders with a voice during Tarion’s policy development process. This initiative was enhanced in 2010 as a way of making policy development more collaborative and transparent, and to ensure that stakeholders have an increased voice. Since that time, we’ve seen a number of important ideas incorporated in Tarion’s final proposals as a result of the sound feedback provided by our stakeholders. In 2012, three policies were the focus of our public consultation process:

PERFORMANCE-bASED PRICINGApublicconsultationprocesswaslaunchedinApril2012tointroduceaperformancebasedpricingmodelthatwouldbasethepriceofenrollinghomesonbuilderperformanceandrisk.PerformancebasedpricingwilllinkthecostofTarion’sservicedeliveryandclaimspaymentstothefeespaidbybuilders,rewardingbuilderswithgoodclaimsandservicerecordswithalowerfeestructureandpenalizingbuilderswithpoorserviceandclaimsrecordswithahigherfee.Itwillalsoactasamonetaryincentivetobuilderstohelpimprovethequalityofconstructionandaftersalesservice.Duringtheyear,thisinitiativemovedforwardintothedevelopmentphasewherebuilderswerescoredbasedontheirpastserviceandclaimsrecords.Initialtrialscoreswillbedeliveredtobuildersin2013.

bUIlDER CORE COMPETENCIESInFebruary2012Tarionconsultedonaproposaltoimproveregistrationrequirementsfornewapplicants andimplementprofessionaldevelopment-relatedrenewalrequirementsforexistingregistrants.Theproposedchangeswouldleadtoanenhancedevaluationofanewapplicant’scorecompetenciesandensureallbuildersstaycurrentintheirknowledgebyrequiringcontinuingprofessionaldevelopment.Asecondpublicconsultationonproposedpoliciesisexpectedin2013.

bUIlDER ARbITRATION FORUMPublicconsultationonproposedchangestotheBuilderArbitrationForum(BAF)processcontinuedthroughout2012.TheproposedchangesareintendedtostreamlinetheBAFprocess,makingitamoreefficient,constructiveandcosteffectivewayforbuilderstochallengeawarrantyandchargeabilityassessment.ChangestotheBAFprocessareexpectedtocomeintoforcein2013.

“ I experienced Tarion’s warranty process firsthand when I bought my new home. This process helped answer many of the questions I had as a new home buyer. I’m now happy to serve on Tarion’s Consumer Advisory Council: a group that gives Tarion feedback on a variety of issues from a consumer perspective. I hope the advice will help benefit and protect other new home buyers across Ontario.” - Nicole Lippa-Gasparro,

Member, Consumer Advisory Council


Overall results from the survey of homeowners in their first year of warranty coverage were consistent year over year with a few changes emerging based on builder size or type. For example, those who purchased from medium builders reported increased satisfaction in several areas and those who purchased from large “production” builders reported reduced satisfaction.

• Increasingbytwopercent,alargemajorityofhomeowners(87percent)intheirfirstyearofpossessionhaveafavourableimpressionofTarion.Resultsacrossindividualcategories(hi-rise,large,mediumandsmall)werestable.

• MosthomeownersviewTarionasaccessible(90percent),abletolistentotheirneedsandconcerns(82percent),easytodobusinesswith(83percent),abletohelpthemunderstandtheirwarrantyrightsandresponsibilities(85percent)andabletomakesurebuildersfulfilltheirwarrantyobligations(79percent).Beingseenas“easytodobusinesswith”istheonlyoneofthesemeasuresthatimprovedstatisticallyincomparisonwiththepreviousyear’sresults(allothersremainstable).

*HomeownerstookpossessionoftheirhomebetweenOctober1,2011andSeptember30,2012.Resultsareaccuratetowithin+/-1.2%19timesoutof20.

**HomeownerstookpossessionoftheirhomebetweenOctober1,2005andSeptember30,2011.Aggregateresultsareaccuratetowithin+/-3.1%,19timesin20.Marginsoferrorarehigherforindividualyearsofcoveragerangingbetween+/-6.7%and+/-10.1%.

UNDERSTANDING HOMEOWNER ExPERIENCES WITH TARION

Toward the end of 2012, Tarion commissioned its annual, third-party research to measure how we are viewed by homeowners. By seeking consistent feedback, we assess customer satisfaction and determine what we need to focus on in order to continually improve. Detailed results from our 2012 homeowner survey can be found on tarion.com.

Questionnaires were sent to more than 40,000 consumers in their first year of possession* as well as almost 11,200 additional consumers in their second through seventh year of possession.** A total of 7,814 responses were received. Most measures were tracked against similar surveys conducted during previous years.

8989

2011

TARION ISACCESSIBLE (%)

2010

2012

90

2009

89

812011

TARION LISTENSAND UNDERSTANDS (%)

2010

2012

8281

2009

80

812011

TARION IS EASY TODO BUSINESS WITH (%)

2010

2012

8381

2009

81

852011

TARION HELPS NEWHOMEOWNERS UNDERSTAND

THEIR WARRANTY RIGHTSAND OBLIGATIONS (%)

2010

2012

8584

2009

83

782011

TARION MAKES SURE NEWHOME BUILDERS FULFILL

THEIR WARRANTYOBLIGATIONS (%)

2010

2012

7978

2009

77

8989

2011


2010

2012

90

2009

89

812011


2010

2012

8281

2009

80

812011


2010

2012

8381

2009

81

852011



2010

2012

8584

2009

83

782011



2010

2012

7978

2009

77

8989

2011


2010

2012

90

2009

89

812011


2010

2012

8281

2009

80

812011


2010

2012

8381

2009

81

852011



2010

2012

8584

2009

83

782011



2010

2012

7978

2009

77

8989

2011


2010

2012

90

2009

89

812011


2010

2012

8281

2009

80

812011


2010

2012

8381

2009

81

852011



2010

2012

8584

2009

83

782011



2010

2012

7978

2009

77

8989

2011


2010

2012

90

2009

89

812011


2010

2012

8281

2009

80

812011


2010

2012

8381

2009

81

852011



2010

2012

8584

2009

83

782011



2010

2012

7978

2009

77

TARION IS ACCESSIblE (%)

TARION MAKES SURE NEW HOME BUILDERS FULFILL THEIR

WARRANTY OBLIGATIONS (%)

TARION IS EASY TO DO BUSINESS WITH (%)

TARION LISTENS AND UNDERSTANDS (%)

TARION HELPS HOMEOWNERS UNDERSTAND THEIR

WARRANTY RIGHTS AND OBLIGATIONS (%)


**HomeownerstookpossessionoftheirhomebetweenOctober1,2005andSeptember30,2011.Aggregateresultsareaccuratetowithin+/-3.1%,19timesin20.Marginsoferrorarehigherforindividualyearsofcoveragerangingbetween+/-6.7%and+/-10.1%.

• SatisfactionlevelscontinuetobesignificantlyhigheramongbuyerswhoregistertouseTarion’sMyHomewarrantyserviceportalcomparedtonon-usersofthisservice.Further,anincreasingnumberofhomebuyersregisteringtouseMyHomecontributetotheriseinoverallsatisfactionwheninteractingwithTarion.

• SatisfactionwithTarionremainedstableacrossallareasoftheconciliation/claimexperience.Thetrendoffewerhomeownershavingaconciliationorclaiminspectioncontinuedwithfourpercentreportinghavinghadonein2012and2011vs.fivepercentin2010,andsevenpercentin2009.

Results of the survey among homeowners in their second through seventh year of warranty coverage followed the same trends as the 2011 results. Overall, homeowners in their first or second year of coverage are most favourable toward Tarion.

• Eighty-fourpercentofhomeownersintheirsecondthroughseventhyear ofwarrantycoverageviewedusasaccessibleandwhenaskedifwewereeasy todobusinesswith,resultsrangedfrom93percentamongthoseinyeartwo ofthewarrantyto77percentamongthoseinyearsix.

• Longer-termtrendsareemergingamonghomeownersintheirsecondthroughseventhyearofwarrantycoverage,whichareshowingalong-termtrendofpositive,slow-and-steadyimprovementsonthesetraits.

FAVOURABLE IMPRESSION OF TARION

YEAR OF WARRANTY COVERAGE**

YEAR 1 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7YEAR 2

69%69% 70%

64%

87% 87%

77%

HIGHLY SATISFIED WITH TARION INTERACTIONS

MYHOME USERS

MYHOME NON-USERS

2009 2011 20122010

57% 55%52%55%




38%42% 44%

39%

60%65%

43%

66%66% 68% 65% MYHOME USERS

MYHOME NON-USERS

MYHOME – HIGHLY SATISFIED WITH TARION INTERACTIONS




69%69% 70%

64%

87% 87%

77%


MYHOME USERS

MYHOME NON-USERS

2009 2011 20122010

57% 55%52%55%




38%42% 44%

39%

60%65%

43%

66%66% 68% 65%



Satisfaction levels continue to be significantly higher among buyers who register to use TARION’S MyHOME WARRANTy SERvICE PORTAl compared to non-users.


bUIlDING TRANSPARENCy

CONNECTING WITH THE INDUSTRy TarionPresidentandCEOHowardBogachvisitedanumberofregionsthroughoutOntarioin2012toconnectwithhomeownersandbuilders.Theseeventspresentedvaluableopportunitiestolistentotheuniquechallengesthatoccurindifferentareasoftheprovince,andprovidethesecommunitieswithregularupdatesfromTarion.Eachcommunitysharedadifferentperspectiveonthenewhomebuildingindustry,whichhelpsTarionbetterunderstandhowwecanbestsupportbuildersandprotectconsumers.

HowardBogachfeaturedonThunderBayTelevisionNews,discussinglocalhomebuildingissues.

“ Collaborating with Tarion to visit local home building associations has been a very positive experience for OHbA. We were able to collectively provide updates and discuss important issues, like illegal building. We also had a chance to meet with local media members to talk about the building industry and our combined efforts to continually improve the new homebuyer experience.”- Doug Tarry, President,

Ontario Home Builders’ Association

Atmanyoftheseevents,HowardBogachworkedwithOntarioHomeBuilders’Association(OHBA)PresidentDougTarry,meetingmembersofthelocalmediatotalkaboutlocalhomebuildingissuesandhowTarionandtheOHBAareworkingtocombatillegalbuildingandimprovethehomebuyerexperience.

Tarion’sStakeholderRelationsteamsupportsbuildersbykeepingthemregularlyinformedofnewinitiativesintheindustry,providingguidanceonaftersalesserviceissues,andfacilitatingthesharingofbestpracticeswithinthenewhomebuildingindustry.Dedicatedbuilderrelationsrepresentativesrespondtoemails,phonecallsandvisitbuilderson-site,offeringtechnicalandadministrativeadvicetohelpbuildersunderstandtheirwarrantyrequirements.In2012,membersofTarion’sStakeholderRelationsteamattended116eventsat28localhomebuildingassociationsthroughouttheprovince.

bREAkING GROUNDTheBreakingGroundnewsletterisTarion’sbuilder-focusedpublicationforimportantindustryrelatedinformation.In2012,14editionsofBreakingGroundwereemailedtoalmost6,400membersofOntario’sbuildingindustry.Thenewslettersincludedregularlyschedulededitionsandalertsdesignedtoquickly bringbuildersup-to-dateonimportantissues.


REACHING OUT TO HOMEOWNERS

In 2012, Tarion expanded its education efforts to new homebuyers and owners. Since 2008, Tarion has published a regular column in the Toronto Sun under the byline of President and CEO Howard Bogach which highlights issues of relevance to new homebuyers and owners of homes under warranty. This past year, the column has also been regularly featured in the Ottawa Capital City News and the Collingwood Enterprise Bulletin.

ArticlesaboutTarion’sAwardsofExcellencewerefeaturedinmanycommunitiesthroughouttheprovince.JournalistsfromtheNationalPost,TorontoSun,andOttawaSunwrotepiecesencouraginghomeownerstofillouttheirTarionsurveyswithmanymoremediaoutletsreportingon awardrecipients.

Throughouttheyear,Tarionemployeesparticipatedininterviewswithmanyindustry-relatedpublicationssuchastheCondoVoice,CondoBusinessMagazine,CondominiumManagerMagazine,CanadianUnderwriterandtheLawTimes.Theseinterviewshelppromoteunderstanding ofTarion’smandateandnewinitiatives.

Whilevisitinglocalhomebuildingassociationsthroughouttheprovince,PresidentandCEOHowardBogachinvitedmembersofthelocalmediatodiscussissuesinOntario’shomebuildingindustrysuchaswarrantycoverageand thedangersofillegalbuilding.Interviewswerefeatured inlocalnewspaperarticlesaswellasonradioand televisionnewscasts.

ADvERTISINGTarionplacescorporateadvertisingintargetedsectionsofonlinepublications,newspapersandmagazines.Theadvertisingcampaignencouragesnewhomebuyerstovisittarion.comforinformationaboutthewarrantycoverage theyareentitledto.

ONlINE vIDEO lIbRARyWecontinuedtoexpandourcollection ofonlinevideosin2012withtheaddition ofMaintaining Your New Home.Thisvideo discussestheimportanceofhome maintenance,providesvaluabletips anddemonstratesvariousseasonal homemaintenancetasks.

Asmorehomeownersturntoouronline resourcestohelpthemmanagetheir warranty,short,relevantvideoswill playanincreasingroleinhowwe communicatethatinformation.

lOOkING AT HOW WE COMMUNICATEThe2011OmbudspersonReportrecommendedthatTarionreviewthewrittencorrespondencesenttostakeholdersinanefforttomakeitclearer,easiertounderstand,andmoretransparent.In2012,Tarionreviewedseveralcommunicationpiecestoseehowwecouldbestmeettherecommendation.NewWarrantyAssessmentReportsandDecisionLetterswerecreatedthatareeasiertoreadandunderstand.Tarion’sConsumerAdvisoryCouncilwillreviewthenewtemplatestoprovidefeedbackonthechangesbeforetheybegincirculationin2013.

18 NEWHOMES & CONDOS The Toronto Sun n FRIDAY, SeptembeR 7 & SUNDAY, SeptembeR 9, 2012

For some people, build-ing a custom home canbe a dream come true—

the opportunity to design theideal place that exactly suitstheir taste and needs. A cus-tom home, built by a builder,is usually considered a “con-tract home.” It’s a new housebuilt on land already ownedby the homeowner where abuilder is hired to perform allthe work and supply all thematerials necessary to con-struct a completed home.

The builder must providethe mandatory one year, twoyear and seven year warran-ties that the law requires forall new houses and condo-miniums in Ontario.The war-ranty also provides financialloss coverage of up to $40,000

if you and your builder havea falling out prior to substan-tial completion of the contractand the amount you paid yourbuilder exceeds the value ofthe work and materials sup-plied by the builder.

However, there are alwaysexceptions to the rule. Oftenwith contract homes, home-owners get involved in someof the aspects of the construc-tion, a move that may voidpart — or even all — of yournew home warranty. Thisis where it is essential thathomeowners make informeddecisions.Many homeownersdon’t realize that signing con-tracts with trades, and sup-plying or installing materialsthemselves may jeopardizetheir warranty rights.

A newhomewarranty is notan option

A contract home builder isrequired to provide the man-datory new home warrantyif the builder performs allthe work and supplies all thematerials necessary to con-struct a completed home. Ifthe homeowner takes respon-sibility for any of the essentialelements, the home may beconsidered “owner built,” andwill not be covered by the Tar-ion warranties.

Essential elements includethe footing/foundation, fram-ing, exterior cladding, build-ing envelope, and the elec-trical, plumbing and heatingsystems.

An owner built home is onewhere the landowner ownsthe lot, and either exercisessignificant control over theconstruction of a new home,and/or is responsible for con-tributing one or more essen-tial elements to it. This caneven include entering intocontracts directly with sub-

trades for those essential ele-ments.

Owner built homes arenot covered under warrantybecause owners would beproviding the warranty tothemselves.

Before signing a contractwith a builder, make surehe/she is a registered Tar-ion builder by checking thelicensed builder directory atwww.tarion.com. It is a crimi-nal offence inOntario to buildhomes without being regis-tered with Tarion.

If a contract home buildergives you the option of signingessential element contractsyourself, don’t do it! Insist thebuilder signs these contractsso your warranty rights areprotected.

Work supplied or installedby the homeowner can com-promise your warranty

We often receive calls fromcontract homeowners whofind out after the fact that theyhave voided part of their war-ranty by supplying or install-

ing some of the work them-selves.

Design and work suppliedor installed by the home-owner, as well as alterations,deletions or additions madeby the homeowner, are notcovered under warranty.

Although supplying somenon-essential elements suchas finishings will generallykeep your warranty intact, itcan have an impact on cer-tain aspects of your war-ranty. For example, supply-ing and installing a kitchensink will void your warrantyon that sink since it was notsupplied or installed by yourbuilder. You can also experi-ence a domino effect if any-thing you’ve supplied orinstalled damages somethingthe builder has supplied.For example, a leak from anowner-supplied kitchen sinkthat damages the builder-sup-plied floor could void thewar-ranty on the damaged floor-ing.

Whenpurchasing a contract

home, make sure you under-stand the warranty implica-tions of becoming involvedin your home’s construction.If the home is built from thefoundation to the finishedstage by a builder, it is likelyeligible for statutory warrantycoverage. However, there area variety of reasons why a cus-tom or contract home maynot be covered under the stat-utory warranty. Visit Tarion.com to find out what types ofhomes are and are not cov-ered. And remember, beforeyou hire a builder, alwaysensure he/she is registeredwith Tarion by checking ourlicensed builder directory. Ifyou have any questions aboutyour new home’s warranty,call us at 1-877-9TARION orsend an email to [email protected].

—Howard Bogach ispresident and CEO of TarionWarranty Corp. Look for his

columnn in the first weekendissue of every month.

When ‘pitching in’ is a really bad ideaGetting involved in the construction ofyour new home may affect your warranty

ElENatHEWiSE - FOtOlia

Design and work supplied orinstalled by the homeowner,as well as alterations,deletions or additions madeby the homeowner, are notcovered under warranty.

HOWARD BOGACH

YOURNEWHOME

Maintaining Your New Home

SERVICE AND SUPPORT TARION Annual Report 2012 20

SERvICE AND SUPPORT

BuildersmustenroleverynewhomewithTarionatacostthatisbasedonthesellingpriceofthehome.Thefeerangesfrom$350.00to$1,500.00(plusHST).Thewarrantyprovidesexcellentvalueandremainswiththehomeforsevenyears,evenifthehomeissoldduringthisperiod.Whilethevastmajorityofbuildersareabletoresolveanyissuesthatarisetothesatisfactionofnewhomebuyers,Tarionstandsbehindnewlyconstructedhomesandistheretohelpifadisputeaboutcoveragedoesarise.

Wedothisbyadministeringthenewhomewarrantyandensuringthatbuildersobservespecificcustomerservicestandards.Wealsoprovideaprocessformakingclaimsthatinvolvesworkingwiththepurchaser,thebuilderandotherpartiessuchasthelocalmunicipalityifneeded.Insituationswhereabuilderisunwillingorunabletoaddressanissuethatfallsunderthestatutorywarrantycoverage,wewillworkdirectlywiththehomeownertoresolvethematter.

• Protectionofdepositsupto$40,000forfreeholdhomesand$20,000forcondominiumunits.*

• Compensationofupto$7,500forcertaintypes ofdelaysinclosingoroccupancy.

• Aoneyearwarrantythatthehomeisfitforhabitationaswellasfreefromdefectsinworkandmaterials andviolationsoftheOntarioBuildingCode.

• Aoneyearwarrantyprovidingprotectionagainstcertainkindsofimpropersubstitutions.

• Atwoyearwarrantythatprotectsagainstdefectsallowingwaterpenetrationthroughthefoundation andbuildingenvelope,defectsintheelectrical,plumbingandheatingsystemsandtheexteriorcladding,andhealthandsafetyviolationsoftheOntarioBuildingCode.

• Asevenyearwarrantythatprotectsagainstwork andmaterialdefectsthatadverselyaffectaload-bearingpartofthehome’sstructure,causeittofail orsignificantlyaffectuseofthebuildingasahome.

*Condominiumdepositsinexcessof$20,000areprotectedbythetrustprovisionsofThe Condominium Act.

COvERAGE HIGHlIGHTS

WARRANTy PROGRAM

New homebuyers in Ontario are entitled to limited warranty coverage of up to $300,000 over a seven year term, which is provided by the builder and backed by Tarion. There is also separate coverage of up to $2.5 million for the common elements of a condominium (such as a lobby or garage).


Whenahomeownerisunabletoresolveanissuewithhisor herbuilderandTariondeterminesthattheitemiscoveredunderthestatutorywarranty,wewillworkdirectlywiththepurchaser toresolvethematter.Claimspaidreflectpaymentsmadetohomeownersoramountspaidtorepairdefects,wherethehomeownerandthebuildercouldnotresolveadispute.

In2012,Tarionpaidout493claimstotaling$7million.Claimpaymentsin2012weremarginallylowerthanin2011,butonparwith2011whenexaminedonaperclaimbasis.

HOMEOWNER PROTECTION

While many notable changes occurred at Tarion in 2012, we continued to offer the range of warranty services that Tarion has been refining for more than 35 years. In 2012, there were 48,324 new home possessions that fell under Tarion’s regulation.

WARRANTy SERvICES STATISTICS

TOTAL HOMES UNDER WARRANTY

22

,77

2

25

,73

5

27

,59

9

56

,89

5

2008

45

6,9

68

43

4,1

20

41

7,7

35

39

9,0

05

38

1,1

81

2009 2010 2011 2012

TOTAL HOMESUNDER WARRANTY

WARRANTY SERVICES STATISTICS

2008

47

%

49

%

51

%

2009 2010 2011 2012

PERCENTAGE OF HOME FOR WHICH 30-DAY FORMS

WERE SUBMITTED

PERCENTAGE OF HOME FOR WHICH YEAR-END

FORMS WERE SUBMITTED

2008 2009 2010 2011 2012

NUMBER OF YEAR-END FORMS SUBMITTED*

2008 2009 2010 2011 2012

NEW HOME POSESSIONS

* The number of forms received in 2011 and 2012 are calculated on a per home basis.

48

%

52

%

48

,32

4

56

,53

3

46

,77

3

50

,68

0

2008 2009 2010 2011 2012

2008 2009 2010 2011 2012

NUMBER OF 30-DAYFORMS SUBMITTED*

25

,23

7

26

,82

4

25

,80

4

20

,13

5

24

,74

8

24

,69

6

20

,64

5

44

%

43

% 49

%

45

%

43

%

PERCENTAGE OF HOMES FOR WHICH 30-DAY FORMS

WERE SUBMITTED

22

,77

2

25

,73

5

27

,59

9

56

,89

5

2008

45

6,9

68

43

4,1

20

41

7,7

35

39

9,0

05

38

1,1

81

2009 2010 2011 2012



2008

47

%

49

%

51

%

2009 2010 2011 2012


WERE SUBMITTED



2008 2009 2010 2011 2012


2008 2009 2010 2011 2012

NEW HOME POSESSIONS


48

%

52

%

48

,32

4

56

,53

3

46

,77

3

50

,68

0

2008 2009 2010 2011 2012

2008 2009 2010 2011 2012


25

,23

7

26

,82

4

25

,80

4

20

,13

5

24

,74

8

24

,69

6

20

,64

5

44

%

43

% 49

%

45

%

43

%

*The number of forms received in 2011 and 2012 are calculated on a per home basis.

NUMBER OF 30-DAY FORMS SUBMITTED*

22

,77

2

25

,73

5

27

,59

9

56

,89

5

2008

45

6,9

68

43

4,1

20

41

7,7

35

39

9,0

05

38

1,1

81

2009 2010 2011 2012



2008

47

%

49

%

51

%

2009 2010 2011 2012


WERE SUBMITTED



2008 2009 2010 2011 2012


2008 2009 2010 2011 2012

NEW HOME POSESSIONS


48

%

52

%

48

,32

4

56

,53

3

46

,77

3

50

,68

0

2008 2009 2010 2011 2012

2008 2009 2010 2011 2012


25

,23

7

26

,82

4

25

,80

4

20

,13

5

24

,74

8

24

,69

6

20

,64

5

44

%

43

% 49

%

45

%

43

%

NEW HOME POSSESSIONS

22

,77

2

25

,73

5

27

,59

9

56

,89

5

2008

45

6,9

68

43

4,1

20

41

7,7

35

39

9,0

05

38

1,1

81

2009 2010 2011 2012



2008

47

%

49

%

51

%

2009 2010 2011 2012


WERE SUBMITTED



2008 2009 2010 2011 2012


2008 2009 2010 2011 2012

NEW HOME POSESSIONS


48

%

52

%

48

,32

4

56

,53

3

46

,77

3

50

,68

0

2008 2009 2010 2011 2012

2008 2009 2010 2011 2012


25

,23

7

26

,82

4

25

,80

4

20

,13

5

24

,74

8

24

,69

6

20

,64

5

44

%

43

% 49

%

45

%

43

%


22

,77

2

25

,73

5

27

,59

9

56

,89

5

2008

45

6,9

68

43

4,1

20

41

7,7

35

39

9,0

05

38

1,1

81

2009 2010 2011 2012



2008

47

%

49

%

51

%

2009 2010 2011 2012


WERE SUBMITTED



2008 2009 2010 2011 2012


2008 2009 2010 2011 2012

NEW HOME POSESSIONS


48

%

52

%

48

,32

4

56

,53

3

46

,77

3

50

,68

0

2008 2009 2010 2011 2012

2008 2009 2010 2011 2012


25

,23

7

26

,82

4

25

,80

4

20

,13

5

24

,74

8

24

,69

6

20

,64

5

44

%

43

% 49

%

45

%

43

%

22

,77

2

25

,73

5

27

,59

9

56

,89

5

2008

45

6,9

68

43

4,1

20

41

7,7

35

39

9,0

05

38

1,1

81

2009 2010 2011 2012



2008

47

%

49

%

51

%

2009 2010 2011 2012


WERE SUBMITTED



2008 2009 2010 2011 2012


2008 2009 2010 2011 2012

NEW HOME POSESSIONS


48

%

52

%

48

,32

4

56

,53

3

46

,77

3

50

,68

0

2008 2009 2010 2011 2012

2008 2009 2010 2011 2012


25

,23

7

26

,82

4

25

,80

4

20

,13

5

24

,74

8

24

,69

6

20

,64

5

44

%

43

% 49

%

45

%

43

%

PERCENTAGE OF HOMES FOR WHICH YEAR-END FORMS

WERE SUBMITTED


“I would like to express to you My APPRECIATION OF THE MORE

THAN REqUIRED EFFORT THAT THE FIElD ClAIM REPRESENTATIvE

PUT FORTH to get my Tarion claim resolved with the builder…He is patient, professional and always ensured

that my interests were looked after. He is an excellentTarion representative. You are lucky to have him on staff.”

- Homeowner

CLAIMS BY TYPE OF COVERAGE

*Values have been rounded and do not include administrative and other costs associated with claims processing

$815K

WATER PENETRATION – BASEMENT & BUILDING ENVELOPE $1M

MSD

$3.5M

MATERIAL & WORKMANSHIP – 1ST YEAR

DEPOSIT REFUNDS

$566KOBC HEALTH & SAFETY INFRACTIONS $251K

MATERIAL & WORKMANSHIP – DISTRIBUTION

$102K

DELAYED CLOSINGS

$85K

MATERIAL & WORKMANSHIP – EXTERIOR CLADDING

$42K

SEPTIC ISSUES

$36K

UNAUTHORIZED SUBSTITUTION

$12K

*Values have been rounded and do not include administrative and other costs associated with claims processing

ClAIM PAyMENTS by TyPE OF COvERAGE


CLAIMS PAID ($ MILLIONS)*

2008

1,3

04

1,4

52

93

7

58

1

49

32009 2010 2011 2012

NUMBER OF CLAIMS PAID

2008

0.40

.6 0.9

6

2009 2010 2011 2012

CONDOMINIUM UNITS

2008

2.6

3.3

2.0

2.5

1.0

2009 2010 2011 2012

CONDOMINIUM COMMON ELEMENTS

CLAIMS PAID ($ MILLIONS)

2008

14

.0

17

.6

8.4

20

.9

7.0

2009 2010 2011 2012

TOTAL CLAIMS PAID

2008 2009 2010 2011 2012

FREEHOLD HOMES

0.6

0.4

10

.8

13

.9

5.4

17

.8

5.4

FREEHOLD HOMES

* Values have been rounded

+ + =CONDOMINIUM UNITS CONDOMINIUM

COMMON ELEMENTSTOTAL CLAIMS PAID

2008

1,3

04

1,4

52

93

7

58

1

49

3

2009 2010 2011 2012

NUMBER OF CLAIMS PAID

2008

0.40

.6 0.9

6

2009 2010 2011 2012

CONDOMINIUM UNITS

2008

2.6

3.3

2.0

2.5

1.0

2009 2010 2011 2012

CONDOMINIUM COMMON ELEMENTS

CLAIMS PAID ($ MILLIONS)

2008

14

.0

17

.6

8.4

20

.9

7.0

2009 2010 2011 2012

TOTAL CLAIMS PAID

2008 2009 2010 2011 2012

FREEHOLD HOMES

0.6

0.4

10

.8

13

.9

5.4

17

.8

5.4

NUMbER OF ClAIMS PAID

Thenumberofclaimsandclaimspaymentsfrom2011to2012wasrelativelystable,especiallyincomparisontothesteepreductionin2011,fromthe2009and2010years.Thedecreasedclaimsactivityinthepasttwoyearsisdrivenbyanumberoffactorsincludingadecreaseinnewhomepossessionsandapositivetrend-thatmoreclaimsarenowbeingresolveddirectlybetweenhomeownersandbuilderswithoutrequiringaclaimbeingpaidoutbyTarion.Tarionhasimplementedseveralinitiativestoincreasethelikelihoodofaresolution.Theseincludeearliercommunicationwithbuildersandhomeownersandahigherconciliationfeestructurethatencouragesresolution.

Othercontributingfactorsincludethegrowthofcondominiumunitsinrelationtofreeholdhomes,ascondominiumunitshavehistoricallylowerclaimratesthanfreeholdhomes.


In 2012, Tarion responded to an increasing number of enquiries including more than 98,000 telephone calls and approximately 29,000 emails from homeowners and builders. Most commonly, callers are enquiring about warranty coverage, the claims process or the status of a specific claim. An additional 2,400 homeowners and builders visited Tarion throughout the year to drop off warranty forms and other documents or to meet in person with Tarion representatives regarding a question or issue.

CUSTOMER SERvICE

Integrated into the newly formed Warranty Services department, Tarion‘s Customer Service Centre is the first line of contact for homeowners or homebuyers when they have questions or a concern.

“ Your representatives have done A GREAT jOb IN ANSWERING All OF OUR qUESTIONS.”- Homeowner


In2012,102homeownerappealswerefiledwithLAT. Ofthose102,mostweresettledandonly22proceededtoahearing.Tarion’sassessmentwasupheldin16cases,overturnedinfourcasesandupheldinpartintwocases.

WhenTarionissuesaproposaltorefuseorrevokeabuilder’slicence,buildersmayalsoappealtheproposaltoLAT.In2012,21builderappealswerefiledwithLATand18appealswereresolved.Ofthe18appealsresolved,Tarionwithdrewitsnoticeofproposalin12caseseitherbecausethebuildercompliedwiththeproposedtermsandconditionsofregistrationorbecauseasettlementwasreachedwiththebuilderthatresolvedtheissuesbeforetheLAThearing.InfivecasesthebuilderwithdrewtheappealorapplicationforregistrationpriortotheLAThearingandinonecasetheappealwasdismissedbyLATwithoutahearing.

TARION’S NEW HOME bUyER OMbUDSPERSON OFFICEHomeownerswhofeeltheyhavenotbeentreated fairlybyTarioncanturntoourNewHomeBuyerOmbudspersonOffice.TheOmbudspersonOfficereceives,investigatesandseekstoresolvecomplaints

AvENUES OF APPEAl

Once a decision about warranty coverage is made by Tarion, a homeowner has the right to an appeal if they do not agree with our determination. These appeals are conducted through an independent process administered by the Ontario Licence Appeal Tribunal (LAT).

fromhomeowners,providinganobjectiveperspectiveforconsumerconcernstodeterminewhetheradecisionwasmadefairly.TheOfficepromotesandprotectsfairnessandismeanttosupplement-notreplace-existingdisputeresolutionprocessesorformalchannelsofappeal.Accordingly,theOmbudspersondoesnotmakeorchangewarrantydecisions,mandatepolicies,orformallyadjudicateissuesforTarion.

TheOmbudspersonOfficemakesrecommendationsrelatedtospecificcomplaintsandsystemicconcerns. Asummaryofactivities,casestudies,observations, andrecommendationsforprocessimprovementand/orpolicychangesbasedonthepreviousyear’sactivity canbefoundintheOmbudspersonAnnualReport. In2012,theOmbudspersonOfficeAnnualReport outlinedtworecommendations.Tarionaccepted allrecommendations,anddevelopedand implementedanactionplantoupdatepolicies orprocessesaccordingtotherecommendations.

For more information about the New Home buyer Ombudsperson Office or for a copy of the 2012 Ombudsperson Annual Report visit www.tarion.com.

SERvICE AND SUPPORT TARION Annual Report 2012


Wealsolookathowpastconductreflectsonthebuilder’shonestyandintegrity.Builderlicensing reviewsoccurannuallyandinvolvesestablishingindividualtermsandconditionsofregistration inaccordancewiththeAct.

Thisinformation,aswellasabuilder’sperformanceinconstructingandservicinghomes,isusedtodetermineconditionsofregistrationwhenassessingalicencerenewal.

Ifabuilderisunwillingorunabletohonourhis/herwarrantyobligations,anumberofpenaltiesmayresult. Thetermsandconditionsoftheirregistrationmaybechangedsothat:

• Thebuilderislimitedinthenumberofhomes he/shecanconstruct;

BUILDERS REGISTERED2008

5,840 5,517 5,391 5,397 5,403

2009 2010 2011 2012

BUILDERS REGISTERED

201260,932 33,179 27,753

201158,610 33,069 25,541

201052,531 31,438 21,093

200947,649 32,226 15,423

NEW HOME ENROLMENTS

200861,320 37,916 23,404TOTAL ENROLMENTS FREEHOLD HOMES CONDOMINIUMS UNITS

NEW HOME ENROLMENTS

lICENSING & UNDERWRITING

Tarion is the regulator of new home builders and as such is responsible for licensing all new home builders in Ontario and ensuring they have the technical competence, customer service capabilities and financial capacity required to build new homes.

ENROlMENTS 2012continuedtobeastrongyearfornewhomeenrolments,continuingtheupwardtrendseenin2010and2011.GiventheuncertaintyofOntario’snewhomemarketandthecoolinginnewhomesalesthattookplacein2012,therewasspeculationthatenrolmentswouldalsodecrease.Butwhileenrolmentsdofollowthetrendofsales,theydosowithatimelagofaboutayearortwo,ormoreinthecaseoflargecondominiumprojects.Total2012enrolmentswereupfourpercentover2011,butshowedslowergrowththanthe12percentincreaseseenfrom2010to2011.Thefreeholdmarketwasrelativelystable,whilecondominiumenrolmentsincreasedalmostninepercentover2011.

• Thesecuritytheyarerequiredtoprovide Tarionisincreasedorheldforalonger periodoftime;

• ATarion-approvedcustomerserviceplan isputintoplaceandthebuilderisaudited byTarionforcompliance;and/or

• Thebuilder’slicenceisrevoked.

Insomecases,Tarionmayrequirebuilderstopostsecurityintheformofsuretybonds,lettersofcredit,deposittrustagreements,cashorindemnityagreements.Inlinewiththecostsandrisksassociatedwitheachtypeofproject,securityamountsarehigherforcondominiumconstructionthanforfreeholdhomes.TheincreasingnumberofcondominiumsenrolledwithTarionascomparedtofreeholdenrolmentshasresultedina

correspondingincreaseinthesizeofTarion’ssecurityportfoliofrom$2.2billionattheendof2011to$2.3billionattheendof2012,primarilyattributabletosuretybondgrowth.

Builderregistrationshaveremainedrelativelystablesince2011,withasmallincreaseto5,403registeredbuildersin2012.Throughouttheyear,19buildersweredeniedlicencesandTarionrefusedtorenewtheregistrationsofninebuilders.


Duringtheyear,Tarion’senforcementteamcompletedtheimplementationofanintelligencebasedsoftwaresystem.Alongwithadedicatedintelligenceanalyst,itimprovesthespeedandaccuracyofdetectingillegalbuildingactivityacrosstheprovincebyidentifyinghigh-riskbuilders,includingrepeatoffendersandbuilderswhohaveeitherhadtheirlicencesrevokedorrefusedbyTarion.ItalsoalertsTariontobuilderswhoobtainabuildingpermitbutdonotincludeavendor/buildernumberonthepermit.Sinceimplementingthenewsoftware,therehasbeenasignificantincreaseinthenumberoffilesthathavebeenflaggedtoTarion’senforcementteam.

RecognizingtheundergroundeconomyinOntarioismuchlargerthanjustillegalbuildingactivities,Tarion’s

IllegalbuildingisaconcernacrossOntario,puttinghomeownersatriskandhurtingthereputationofthebuildingindustry.WhenabuilderfailstoregisterwithTarionorenrolahomewithTarion,purchasersaretypicallyunawareoftheirrighttonewhomewarrantycoverage.Inaddition,illegallybuilthomesoftendonotmeetOntarioBuildingCodestandardsandcanleavehomeownerslivinginunsafeandsubstandardconditions.

TheTarionEnforcementteamtracksdown,charges andprosecutesillegalbuilders.In2012,theefforts ofthisgroup,whichconsistsprimarilyofformerpoliceofficers,ledto69convictionsinprovincialcourtsandfinesof$262,000includingvictimfinesurcharges.

ENFORCEMENT

“ Ontario’s building official community is pleased to share building permit information with Tarion, used to identify illegally built homes. Ultimately ObOA and Tarion are working toward the same goal; ensuring home owners purchase safe, legally built homes that are constructed according to the Ontario building Code.”- Leo Cusumano, President, Ontario Building Officials’ Association

2008

60

1

41

9

35

4

157

32

4

2009 2010 2011 2012

NEW INVESTIGATIONS

ENFORCEMENT ACTIVITY

2008

154

353

71

2009 2010 2011 2012

CHARGES LAID

2008

37

9

18

4

84

24

1

69

2009 2010 2011 2012

CONVICTIONS

2008 2009 2010 2011 2012*

FINES LEVIED ($ THOUSANDS)

*Fines Levied for 2012 includes court imposed victim fine surcharges.

58

3

147

26

2*3

45

10

40

128

851

NEW INVESTIGATIONS FINES LEVIED ($ THOUSANDS)

2008

60

1

41

9

35

4

157

32

4

2009 2010 2011 2012

NEW INVESTIGATIONS


2008

154

353

71

2009 2010 2011 2012

CHARGES LAID

2008

37

9

18

4

84

24

1

69

2009 2010 2011 2012

CONVICTIONS

2008 2009 2010 2011 2012*

FINES LEVIED ($ THOUSANDS)

*Fines Levied for 2012 includes court imposed victim fine surcharges.5

83

147

26

2*3

45

10

40

128

851

CHARGES LAID CONVICTIONS

enforcementteamcollaborateswithvariousagenciesandlevelsofgovernmenttoshareinformation.IfabuilderisnotlicensedwithTarion,theymayalsobeengaginginotheractivitiesassociatedwiththeundergroundeconomy,suchashiringuntrainedorunskilledworkers,evadingtaxesandnotadheringtohealthandsafetyregulations.

TarionalsocontinuestoworkwithOntario’s426municipalities.Thebuildingpermitinformationshared withTarionplaysasignificantroleinidentifyingillegal buildingactivities.


*2012 fine amounts include victim fine surcharges


Tarionrecognizestheneedtodevelopamoreconsistentandcomprehensivecomplaintstrackingsystem,andin2012developedcustomerserviceenhancementstohelpachievethisgoalincludingupgradestoMyHomethatwillallowhomeownerstosubmitcomplaintsandcomplimentsonline. AnewapplicationforsubmittingcomplaintsandcomplimentsdirectlythroughTarion.comwasalsodeveloped.Bothinitiativesareexpectedtobeimplementedin2013.

Thesenew,easyandtransparentwaysforhomeownerstoraiseconcernswillhelpTarionestablishamorelong-termandcomprehensiveunderstandingofourcomplaintactivities.

Since2011,Tarionhasbeenreviewinghowcomplaintsaboutstaff,serviceandwarrantyprocessaretrackedandreportedthroughouttheorganization.Priortothatpoint,onlydatatrackedfromtheCustomerServicesdepartmentwasreportedinannualreports.Throughthereview,additionalintakepointsforcomplaintswereidentifiedandinadditiontocomplaintsoriginatingfromCustomerServices,wewereabletoreportoncomplaintsreceivedbyFieldClaimManagers,theOfficeofthePresidentandCEOandtheStakeholderRelationsdepartment.In2012,atotalof436complaintswerereceived.

TRACkING COMPlAINT TRENDS

REWARDING EXCELLENCE IN CUSTOMER SERVICE TARION Annual Report 2012 29

REWARDING ExCEllENCE IN CUSTOMER SERvICE

Theawardsarebasedontheresultsofcustomerservicesatisfactionsurveyssenttoallhomeownerswhohavetakenpossessionofahomeinthepreviousyear.Surveyquestionsfocusonhomeownersatisfactionwiththeirbuilder,coveringeverystageinthehomeowner-builderrelationshipfromsigningtheagreementofpurchaseandsale,throughconstruction andthepre-deliveryperiodtoafter-salesservice.

The2012AwardsofExcellencewerebasedontheresultsof6,800surveyscompletedbyhomeowners.

Exceptional customer service is the cornerstone of building a positive experience with homeowners. Tarion recognizes this through our annual Awards of Excellence.

HIGH-RISE CATEGORy: TheDanielsCorporation-Toronto

lARGE vOlUME CATEGORy: FusionHomes-Guelph

MEDIUM vOlUME CATEGORy: WrighthavenHomesLimited-Elora

SMAll vOlUME CATEGORy: CedarstoneHomesLimited-Ashton

IN 2012, AWARD RECIPIENTS INClUDED:

“ It is wonderful to be recognized by the industry and by peers, but to be recognized by our customers is the ultimate honour.”

- Niall Haggart, Executive Vice President, The Daniels Corporation

ON THE HORIZON TARION Annual Report 2012 30

ON THE HORIzON

TheChannelStrategywillcontinuetobeanimportantpartofensuringthatTarionmeetsthechangingneedsofitsstakeholdersandcontinuestoofferhighlevelsofserviceregardlessoftheebbsandflowsofthemarketplace.EnhancementstoBuilderLinkandMyHome,suchasonlinescheduling,paymentandregistrationwillbeimplementedin2013andTarionwillincreaseitssocialmediapresencetobettercommunicatewithstakeholders.

Tarionwillmoveforwardwiththeinitiativesthatwerepartofthepublicconsultationprocessin2012byimplementingchangestotheBuilderArbitrationForum,preparingbuildersfortheimplementationoftheperformancebasedpricingmodel,andfurtherconsultingwithstakeholdersonbuildercorecompetencies.

EnhancingcorecompetencieswillalsobeafocuswithintheorganizationasWarrantyServicesstaffcontinuetoworktowardobtainingaBuildingCodeIdentificationNumber. Bytheendof2013,allFieldClaimRepresentativeswillhavecompletedthePart9BuildingCodecourseand willenrollinfurthercoursesrelatedtolegalprocesses andlargebuildings.

As Tarion enters the second year of its three year plan, it will remain focused on building trust and transparency, managing risk and enhancing financial performance and efficiency. Many of the projects and changes that began in the past year will continue as multi-year initiatives designed to make Tarion a more efficient and effective organization.

Recognizingthatillegalbuildingcontinuestobeanindustry-wideissuethatputshomeownersatrisk,Tarionwillundertakeajurisdictionalreviewofillegalbuildingdetectionandenforcementin2013,examiningbestpracticesonhowtocombattheseillegalactivities.

TheseinitiativeswillbeimplementedaspartofTarion’sthreeyearplantobalancestakeholderinterestswhileseekingoperationalefficiencies.Tarionwillcontinuetoseekopportunitiestoincreasefinancialstabilityandoperationallyefficiencieswhilemeetingthechangingneedsofourstakeholders.

CORPORATE GOVERNANCE TARION Annual Report 2012 31

CORPORATE GOvERNANCE

CORPORATE lEADERSHIP TEAM

HOWARD bOGACH President and Chief Executive Officer DAvID j. GUINEyChief Operating Officer

PETER bAlASUbRAMANIAN Vice President, Warranty Services

jOHN E. bECEvEllO Vice President, Licensing and Underwriting

EIlEEN M. HOlDEN Vice President, Human Resources

EDMOND F. lEEVice President and Chief Financial Officer

kAREN MORTFIElD Vice President, Stakeholder Relations

lESlEy ROSS Deputy Corporate Secretary

TIM P. SCHUMACHER Vice President, General Counsel and Corporate Secretary

SUzANNE M. TIFFIN Vice President, Channel Strategy

bIll R. WAllACE Vice President and Chief Information Officer


SANDy EWENPrincipalDeveloperSurety Consulting Uxbridge

DANIEl GAbRIElEVice PresidentMarzHomesStoneyCreek

FRANk GIANNONE, ICDPresidentFramBuildingGroupMississauga

bRIAN k. jOHNSTON, CPA, CAChief Operating OfficerMattamyHomesOakville

HAROlD lEvyCorporate DirectorToronto

MICHAEl lIO, ICD.DPrincipalLio&AssociatesToronto

PETER OAkES, MbA, CPA, CA, ICD.DCorporate DirectorToronto

lyNN PETERSONCorporate DirectorThunderBay

PETER SATURNOPresidentMidhavenHomesOshawa

lEITH MOORE(Associate Member)SorbaraGroupofCompaniesToronto President,OntarioHomeBuilders’Association

lEA RAy, CPA, CA, ICD.D(Associate Member)CorporateDirectorToronto

HARRy HERSkOWITz Chair, PartnerDelzotto,ZorziLLPToronto

CHRISTOPHER S. SPITERI, ICD.DVice Chair, PartnerSpiteri&UrsulakLLPOttawaandToronto

HOWARD bOGACH President and Chief Executive OfficerTarionWarrantyCorporationToronto

MARk bASCIANOPresidentMountainviewHomesThorold

DEbORAH bROWN, ICD.DDirector of OperationsMinistryof GovernmentServicesToronto

RObERT COOPERPresidentAlterraGroup ofCompaniesToronto

bOARD OF DIRECTORS


GOvERNANCE POlICIES

The Board of Directors of Tarion Warranty Corporation is committed to a series of governance policies which are intended to support the supervisory role of the Corporation and to ensure that the Corporation acts in the best interest of the company having regard to its mandate and interest of its stakeholders. Some highlights of the Board’s current governance practices include the following:

INDEPENDENCEToensureindependenceoftheBoardandmanagement,anoutsideDirectoractsasChairoftheBoard.OnlyoneDirector,thePresidentandChiefExecutiveOfficer,isamemberofTarionmanagement.

bOARD COMPOSITIONInaccordancewiththeby-lawsoftheCorporation,membershipontheBoardofDirectorsiscomprisedofanumberofstakeholderswithaninterestinthehomebuildingindustryinOntario,includingrepresentativesofallstakeholders.Theby-lawsoftheCorporationprovidefortheappointmentofDirectorsfromnomineesrecommendedbyeachoftheOntarioHomeBuilders’Association(OHBA)andpersonsappointedbytheMinistryofConsumerServices,aswellasanindividualwithafinancialbackground.The2012Boardwascomposedof15MembersandtwoAssociateMembers.

FINANCIAl CONTROlSTheAuditCommitteeoftheBoardiscomposedentirely ofoutsideandunrelatedDirectorswhoseresponsibilitiesaresetforthinadetailedCommitteemandate.TheCommitteehastheabilitytodealdirectlywiththeexternalauditorregardingtheCorporation’sannualfinancialstatements,andwiththeexternalactuaryregardingthewarrantyliabilitiesoftheCorporation.

RISk MANAGEMENTTheBoard,togetherwiththeAuditCommittee,monitors,reviewsandapprovesadherencetocorporatepoliciestomanageandcontrolrisk,aswellascompliancewithpoliciesoftheCorporationandregulatoryrequirements.Amanagementrisksub-committeealsoidentifiesemergingissuesandreportstotheAuditCommittee.

STRATEGIC PlANNINGTheBoardengagesinastrategicplanningprocesseachyearwhichtakesintoaccountbusinesspolicyinitiativesandopportunities,aswellasoperationalandfinancialrisks.Throughouttheyear,theBoardreviewscorporateperformanceagainsttheCompany’sannualbusinessplanandthecurrentstrategicplan.

ANNUAl PERFORMANCE ObjECTIvESTheBoardapprovestheannualcorporatebusiness planaswellastheannualobjectivesofthePresident andChiefExecutiveOfficerandthecorporatekeyperformanceindicators.

CODE OF GOvERNANCE PRACTICESEachmemberoftheBoardisrequired,onan annualbasis,tosignaCodeofGovernance PracticesthathasbeenapprovedbytheBoard. ThisCodeisintendedtoassisttheDirectorsin performingtheirresponsibilitiestotheCorporation withappropriatedisciplineanddedication.


Audit Committee

lEA RAy, CPA, CA, ICD.D,Chair ROBERTCOOPER,ViceChair SANDYEWEN BRIANK.JOHNSTON,CPA,CA PETEROAKES,MBA,CPA,CA,ICD.D

TheAuditCommittee,composedentirelyofindependentDirectors,reviewstheannualauditedfinancialstatementsandfinancialoperatingperformance,theassessmentofreservesandtheresultsofcapitaladequacytesting.TheCommitteeisresponsibleforthedevelopmentandmonitoringofpoliciestoaddressriskmanagementaswellastheinternalcontrolframework.ItalsomakesrecommendationstotheBoardwithrespecttotheappointmentofanexternalauditor,theexternalactuaryandthepensionplanactuaryandadministrator.

Governance Committee

MARk bASCIANO,Chair DEBORAHBROWN,ICD.D,ViceChair FRANKGIANNONE,ICD HARRYHERSKOWITZ MICHAELLIO,ICD.D LYNNPETERSON PETERSATURNO CHRISSPITERI,ICD.D(ex-officio)

TheGovernanceCommitteeprovidesrecommendationstotheBoardwithrespecttogovernancemattersaffectingtheCorporation.TheCommitteehasresponsibilityfordevelopingandrecommendingongoingimprovementstocorporategovernance,andalsotoupdateasnecessarytheCodeofGovernancePracticeswhichisexecutedbyeachDirectorannually.

RESPONSIbIlITIES OF THE COMMITTEES OF THE bOARD

TheCommitteeisalsoresponsibleforrecommendingtheChairforeachBoardCommitteeinadvanceoftheAnnualMeetingoftheCorporation,togetherwiththemembershipforeachCommittee.Inaddition,theCommitteerecommendstheChairandViceChairappointmentstotheBoardfortheensuingyear.TheCommitteeisresponsibleforprovidinginputtotheBoardnominationprocesstoensurethattheBoardhasDirectorswiththeappropriateskillsandbackgroundtoaddressthebusinessissuesoftheCorporation.

Human Resources & Compensation Committee

MICHAEl lIO,ICD.D,Chair FRANKGIANNONE,ICD,ViceChair ROBERTCOOPER HARRYHERSKOWITZ(ex-officio) BRIANK.JOHNSTON,CPA,CA HAROLDLEVY PETERSATURNO

TheHumanResources&CompensationCommitteeisresponsiblefordeterminingthecompensationpayabletotheTarionPresidentandCEOandforthedeterminationofthepensionandotherbenefitspayabletoemployees.TheCommitteeworkswithexternalcompensationadviserswhoprovideinformationwithrespecttocurrentmarketcompensationpayabletoseniorexecutivesofcomparableorganizations.

TheCommitteeisalsoresponsibleforrecommendingtotheBoardofDirectorstheannualobjectivesforthePresidentandCEO,andforevaluatingperformanceagainstthoseobjectives.ItalsoundertakesanannualsuccessionreviewoftheseniormanagementteaminconsultationwiththePresidentandCEO.

Investment Committee

bRIAN k. jOHNSTON,CPA,CA,Chair PETEROAKES,MBA,CPA,CA,ICD.D,ViceChair ROBERTCOOPER SANDYEWEN LEARAY,CPA,CA,ICD.D

TheInvestmentCommitteeconsidersandrecommendsinvestmentstrategies,plansandpoliciesrelatedtotheinvestedassetsoftheCorporation.TheCommitteeoverseestheselectionandappointmentofoneormoreinvestmentmanagersandreviewsandapprovestheinvestmentpoliciesoftheCorporationeachyear.ItalsoreviewsreportsfromfundmanagersoninvestmentactivitiesandmeasuresinvestmentresultsagainsttheinvestmentgoalsoftheCorporation.Inaddition,theCommitteeisresponsiblefortheoversightofthemanagementofassetsrelatedtothepensionplanoftheCorporation.

Regulatory Affairs Committee

HARRy HERSkOWITz,Chair DEBORAHBROWN,ICD.D,ViceChair MARKBASCIANO ROBERTCOOPER PETERSATURNO CHRISSPITERI,ICD.D(ex-officio)

TheRegulatoryAffairsCommitteeassiststheBoardinfulfillingitsoversightresponsibilitieswithregardtoTarion’sregulation-makingpowersasprovidedintheOntario New Home Warranties Plan Act.

ItprovidesduediligenceonbehalfoftheBoardofDirectorsfortheplanning,research,stakeholderconsultationandeffectingofeachproposedregulationchange;evaluatestheadequacyandeffectivenessofcurrentorproposedlegislationorregulationstoensurecompliancewiththemandateoftheCorporation;andensuresthatTarionismeetingitsregulatoryobligationsandresponsibilitiesassetoutinitsMandate.


Consumer Committee

CHRIS SPITERI, ICD.D,Chair DEBORAHBROWN,ICD.D,ViceChair MARKBASCIANO DANIELGABRIELE FRANKGIANNONE,ICD HAROLDLEVY MICHAELLIO,ICD.D LYNNPETERSON

TheConsumerCommitteeprovidesinputtomanagementandtheBoardonstrategicmatterswithrespecttoconsumerprotectioninitiativesandexternalcommunicationbyTariontoconsumers.ItiscomposedofeightindependentmembersoftheBoardwhorepresentTarion’smajorstakeholders.

TheCommitteeassistsTarionmanagementwithconsumerpolicydevelopmentandprovidesinsightandinputonissues,bymakingrecommendationsregardingthedevelopmentanddeliveryofconsumerprotectionpolicies,byanalyzingrelevantconsumerresearchdataandbygivinginsightintocurrentcommunicationprogramsandtrends.

AConsumerAdvisoryCouncilwascreatedtoserveasasubcommitteetotheConsumerCommitteeforthepurposesofprovidingongoingadvicefromahome-buyerconsumerperspective,onproposedTarionpolicychanges.TheCouncilmetthreetimesin2012.

Nominations Committee

TheNominationsCommitteeisasubcommitteeoftheGovernanceCommitteeandiscomposedoftheBoardChair,anadditionalselectBoardmember,andministerialandindustryappointeeswhomeetannuallytoidentifycandidatesforvacantBoardpositions.

TheNominationsCommitteeinterviewsindividualsnominatedbytheindustrybasedontheidentifiedskill setdeterminedbytheBoard’sannualreviewofaDirectorsSkillMatrix.Followingtheinterviewprocess,nominees arerecommendedtotheGovernanceCommitteeand totheBoardofDirectorstofillidentifiedvacancies.

builder Education Task Force

TheBuilderEducationinitiativeisworkingtowards enhancededucationrequirementsforbothnewand existingbuildersasaconditionofregistrationwithTarion.ABoardofDirectorsappointedtaskforceisdevelopingthestrategyandprocedurestoenableTariontoachievetheobjective.In2012,theprojectcompleteditsinitialstakeholderconsultationphase.In2013,itwillwork todevelopproposedpoliciesandproceduresfortheenhancedregistrationrequirementsandpublishapaper onthesubjectforpublicconsultation.TheTaskForce iscomposedofsevenDirectorsandtworepresentatives fromtheOntarioHomeBuildersAssociation.

Condominium Task Force

TheCondominiumTaskForceiscomposedofthreeDirectorsandoneindustryappointeeexperiencedinthecondominiumindustryandwasestablishedasaforumtofacilitateresearch,provideinformedopinionanddiscussionandmakeprogressiverecommendationstoTarionmanagementandtheBoardofDirectors.Italsoassistsinpolicydevelopmentwithrespecttodeterminingpracticesandproceduresrelatingtoplanning,constructionandoperationofcondominiumdevelopmentsintheprovinceofOntarioastheyrelatetothemandateofTarion.TheTaskForceutilizesengineeringandotheravailableresourcestoassessemergingrisksintheareaofcondominiumdevelopmentintheprovinceandinquantifyingandtakingstepstominimizethedegreeofriskbeingassumedbyTarion.

Performance based Pricing Task Force

ThepurposeofthePerformanceBasedPricing(PBP)initiativeistointroduceawayofbettermatchingthecostofTarion’sservices/claimstothefeesforindividualbuildersandbydoingsoimprovethequalityofconstruction/aftersalesserviceofbuildersthroughthismonetaryincentive.ThePBPproposalisalsotorewardbuilderswith“good”performanceandpenalizebuilderswith“poor”performance.Aftersuccessfulstakeholderconsultationsin2012,theprojecthasentereditsdevelopmentphase.ThefirstoftwotrialiterationsofPBPwillbeexecutedin2013withallbuildersreceivingtheirscoresinthelatterhalfof2013.


DIRECTORS’ ATTENDANCE

DIRECTOR bOARD OF DIRECTOR MEETINGS

COMMITTEE MEETINGS

HarryHerskowitz 8of8 7of7

MarkBasciano 8of8 9of11

HowardBogach 8of8 24of24

DickBrouwer* 2of2 2of2

DeborahBrown 8of8 10of12

RobertCooper 8of8 7of8

SandyEwen 8of8 9of9

DanielGabriele* 6of6 3of3

FrankGiannone 8of8 10of10

BrianJohnston 7of8 5of13

HaroldLevy 8of8 7of8

MichaelLio 8of8 14of14

PeterOakes 8of8 8of9

LynnPeterson 8of8 6of6

LeaRay 8of8 8of9

PeterSaturno 5of8 7of11

ChristopherSpiteri 8of8 13of13

BobFinnigan* 2of2 N/A

LeithMoore* 3of4 N/A

Notes on Director Attendance:

1. TherecordofattendanceofDirectorsrelatestotheMeetingsoftheBoardofDirectorsandoftheBoardCommitteesheldbytheCorporationduring2012.

2. ThenumberofBoardandofBoardCommitteemeetingsheldbytheCorporationduring2012wasasfollows:

board of Directors–8meetings Audit Committee–5meetings Governance Committee–4meetings Investment Committee–4meetings Human Resources & Compensation Committee–4meetings Regulatory Affairs Committee–3meetings Consumer Committee –4meetings

Total–32meetings

*Reflectspartialtermsofoffice

CORPORATE GOvERNANCE Annual Report 2012

FINANCIALS TARION Annual Report 2012 37

FINANCIAlS

TAblE OF CONTENTS

2012 Financial Commentary 38

Management’s Responsibility for Financial Reporting 39

Independent Auditor’s Report 40

Appointed Actuary’s Report 41

Statement of Financial Position 42

Statement of Comprehensive Results of Operations 43

Statement of Changes In Equity 44

Statement of Cash Flows 45

Notes to the Financial Statements 46

FOR THE yEAR ENDED DECEMbER 31, 2012


2012 FINANCIAl COMMENTARy

Tariondeliveredexceptionalfinancialresultsin2012withabottomlineof$21.6Masaresultofstronginvestmentreturnsandfavourableclaimsexperiences,netofrecoveries.

WhilethereremaineduncertaintyintheOntariohousingmarketin2012,andacoolingofnewhomesales,in2012,enrolmentlevelscontinuedtobestrong,especiallyinthecondominiumcategory.Thenumberofenrolmentswashigherby4percentcomparedto2011,boostedbythehighernumbersofcondominiumsenrolled.

Theinvestmentportfolioreachedamilestoneattheendof2012withafairvalueof$410Mduetoinvestmentofpositiveoperatingcashflow,andareboundintheequitymarket.Despiteon-goingdomesticandinternationalfiscalandpoliticalchallenges,2012wasconsideredagoodyearforthecapitalmarketsrelativeto2011.Bothdomesticandforeignequitieshadstrongreturnscomparedtolastyearwhilethefixedincomeportfolioproducedmoderatereturnsinanenvironmentoflowyields.OurinvestmentmanagerstookadefensivepositiontoprotecttheFundagainstthepossibilityofinterestrateincreases.Totalinvestmentincomeof$24.5M,beforemanagementfees,comparedfavorablyto$13.1Min2011withtheincreaseprimarilydrivenbyrobustequityreturns.

Claimsexperiencein2012wasfavourableandremainsonthelowsiderelativetohistoriclevels.Recoverieswerealsofavourableasaresultoftheresolutionofonelargelitigatedcollectioncaseandtheexpectedrecoveryofsomeclaimscaseswithfullsecurity.

TheCorporationundertookseveralstrategicinitiativesduringtheyear,whichmarkedthefirstyearofitsthree-yearstrategicplanofBalancing Stakeholder Interests While Seeking Operational Efficiencies.TheCorporationwasabletomanageitsoperatingexpenseseffectivelydespiteembarkingonanumberofprojectsduringtheyearthatwillmitigatefutureclaimsexposuressuchasthemajorstructuraldefectcoveragechangeandimproveservicedeliveryefficiencyforbothhomeownersandbuildersunderChannelStrategyinitiatives.Total2012operatingexpensesof$38.0Mreflecteda3.0percentincreaseover2011,dueinparttoamortizationcostsofpreviousyears’softwareupgrades.

Withthestrongfinancialresults,Tarion’scapitalcontinuestostrengthenandcomparesfavourablytoitsinternalcapitalmanagementframeworksupportingtheCorporation’smandateofadministeringtheOntarioNewHomeWarrantiesPlanActintheinterestsofallstakeholders.


MANAGEMENT’S RESPONSIbIlITy FOR FINANCIAl REPORTING

ManagementisresponsiblefortheintegrityofthefinancialstatementsandoperationalinformationpresentedinthisAnnualReport.ThefinancialstatementshavebeenpresentedinaccordancewithInternationalFinancialReportingStandardsandreflectmanagement’sbestestimatesandjudgments.Financialinformationpresentedelsewhere intheAnnualReportisconsistentwiththesefinancialstatements.

Managementmaintainsasystemofinternalcontrols,toprovidereasonableassurancethatallassetsaresafeguardedandtofacilitatethepreparationofrelevant,reliableandtimelyfinancialinformation.

TheexternalactuarywhoisappointedbytheBoardofDirectorsisresponsibleforensuringthattheassumptions andmethodsusedinthedeterminationofthewarrantyliabilitiesareinaccordancewithacceptedactuarialpractice.

Theexternalauditorhasauditedandreportedontheannualfinancialstatementspreparedinaccordance withInternationalFinancialReportingStandards.

TheAuditCommittee,consistingofnon-executivedirectors,hasreviewedthesefinancialstatementswithmanagementandtheexternalauditorandhasreportedtotheBoardofDirectors,whichhasapprovedthefinancialstatements.

HOWARD bOGACHPresident&ChiefExecutiveOfficerApril25,2013

EDMOND lEEVicePresident&ChiefFinancialOfficerApril25,2013


INDEPENDENT AUDITOR’S REPORT

TO THE DIRECTORS OF TARION WARRANTy CORPORATION

WehaveauditedtheaccompanyingfinancialstatementsofTarionWarrantyCorporation,whichcomprisethestatementoffinancialpositionasatDecember31,2012,andthestatementofcomprehensiveresultsofoperations,statementofchangesinequityandstatementofcashflowsfortheyearthenended,andasummaryofsignificantaccountingpoliciesandotherexplanatoryinformation.

MANAGEMENT’S RESPONSIbIlITy FOR THE FINANCIAl STATEMENTS

ManagementisresponsibleforthepreparationandfairpresentationofthesefinancialstatementsinaccordancewithInternationalFinancialReportingStandards,andforsuchinternalcontrolasmanagementdeterminesisnecessarytoenablethepreparationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

AUDITOR’S RESPONSIbIlITyOurresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudit.WeconductedourauditinaccordancewithCanadiangenerallyacceptedauditingstandards.Thosestandardsrequirethatwecomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatements arefreefrommaterialmisstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements.Theproceduresselecteddependontheauditor’sjudgement,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttotheentity’spreparationandfairpresentationofthefinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalcontrol.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.

OPINIONInouropinion,thefinancialstatementspresentfairly,inallmaterialrespects,thefinancialpositionofTarionWarrantyCorporationasatDecember31,2012,anditsfinancialperformanceanditscashflowsfortheyearthenendedinaccordancewithInternationalFinancialReportingStandards.

Chartered Professional Accountants, Chartered Accountants licensed Public Accountants April 25, 2013

DeloitteLLP BrookfieldPlace 181BayStreet Suite1400 TorontoONM5J2V1 Canada

Tel:416-601-6150 Fax:416-601-6151 www.deloitte.ca


TO THE DIRECTORS OF TARION WARRANTy CORPORATION:

IhavevaluedthewarrantyliabilitiesofTarionWarrantyCorporationforitsStatementofFinancialPositionasatDecember31,2012andtheirchangeintheStatementofComprehensiveResultsofOperationsfortheyearendedDecember31,2012inaccordancewithacceptedactuarialpracticeinCanada,includingtheselectionofappropriateassumptionsandmethods.

Inmyopinion,theamountofthesewarrantyliabilitiesmakesappropriateprovisionforallwarrantyobligations,andthefinancialstatementsfairlypresenttheresultsofthevaluation.

liam McFarlane Fellow, Canadian Institute of Actuaries April 25, 2013

Ernst&YoungLLP InsuranceandActuarialAdvisoryServices Ernst&YoungTower, 222BayStreet,P.O.Box251 Toronto,ONM5K1J7Canada

Tel:416-941-7751 Email:[email protected] www.ey.com

APPOINTED ACTUARy’S REPORT


STATEMENT OF FINANCIAl POSITION

FOR THE yEAR ENDED DECEMbER 31, 2012 ($CAD thousands)

NOTES 2012 2011

ASSETS

Equipmentandleaseholds 4 $ 3,331 $ 3,734

Intangibleassets 5 3,693 3,005

Tradeandotherreceivablesfromvendorsandbuilders 6 4,932 4,063

Prepaidexpensesandotherassets 7 1,082 389

Investments 8 409,529 370,346

Cashandcashequivalents 9 2,764 2,527

TOTAl ASSETS $ 425,331 $ 384,064

EqUITy AND lIAbIlITIES

EqUITy $ 184,789 $ 163,214

lIAbIlITIES

Employeefuturebenefitsliabilities 10 5,993 4,356

Warrantyliabilities 11 183,981 165,124

Fundsheldassecurity 12 41,033 40,901

Leaseobligationsandinducements 13 2,479 2,829

Accountspayableandaccredliabilities 14 7,056 7,640

Totalliabilities 240,542 220,850

TOTAl EqUITy AND lIAbIlITIES $ 425,331 $ 384,064

Seeaccompanyingnotestofinancialstatements.

ApprovedbytheBoardofDirectors

HARRy HERSkOWITzDirectorandChairoftheBoard

lEA RAyDirectorandChairofAuditCommittee



NOTES 2012 2011

REvENUE

Homeenrolmentfeesearned $ 33,607 $ 31,822

Builders’registrationandrenewalfees 3,165 3,286

Investmentresults

Investmentincome 15 24,474 13,142

Investmentmanagementfees (1,030) (985)

Otherrevenue 612 717

60,828 47,982

ExPENSES

Netclaimsincurred 11 191 1,010

Salariesandbenefits 23,790 23,376

Generalandadministrative 11,013 10,943

Depreciationandamortization 4,5 2,690 2,098

Interestexpense 16 510 496

38,194 37,923

ExCESS OF REvENUE OvER ExPENSES 22,634 10,059

OTHER COMPREHENSIvE RESUlTS OF OPERATIONS

Actuariallossesforemployeefuturebenefits 10 (1,059) (321)

TOTAl COMPREHENSIvE RESUlTS OF OPERATIONS FOR THE yEAR $ 21,575 $ 9,738


STATEMENT OF COMPREHENSIvE RESUlTS OF OPERATIONS


STATEMENT OF CHANGES IN EqUITy


2012 2011

SURPlUS

Beginningofyear $ 164,486 $ 154,427

Excessofrevenueoverexpensesfortheyear 22,634 10,059

END OF yEAR 187,120 164,486

ACCUMUlATED ACTUARIAl lOSSES FOR EMPlOyEE FUTURE bENEFITS

Beginnningoftheyear (1,272) (951)

Changeduringtheyear (1,059) (321)

END OF yEAR (2,331) (1,272)

TOTAl EqUITy, END OF yEAR $ 184,789 $ 163,214



FOR THE yEAR ENDED DECEMbER 31, 2012 ($CAD thousands)2012 2011

NET INFlOWS (OUTFlOWS) OF CASH RElATED TO THE FOllOWING ACTIvITIES

OPERATING

Homeenrolmentfeesreceived $ 53,569 $ 54,397

Builders’registrationandrenewalfeesreceived 3,165 3,286

Paymentstoemployeesforsalariesandbenefits (23,160) (22,872)

Paymentstosuppliersforgeneralandadministrativeexpenses (10,960) (10,550)

Claimspayments (6,985) (8,423)

Securitiesreceiptsfrombuilders,netofreleases 120 1,032

Recoveriesforclaimsandconciliationfees 3,844 4,685

Interestexpenses (498) (474)

Othersettlementandfeesreceived 1,759 245

Cashprovidedbyoperatingactivities 20,854 21,326

INvESTING

Interestreceived 8,825 9,274Dividendreceived 3,550 2,914Investmentmanagementfees (1,081) (931)Proceedsfromsaleandmaturityofinvestments 288,147 261,415Purchaseofinvestments (316,835) (291,281)Purchaseofequipmentandleaseholds (175) (105)Purchaseofintangibleassets (2,336) (1,576)

Cashusedininvestingactivities (19,905) (20,290)

FINANCING

Paymentoffinanceleaseliabilities (712) (672)

Cashusedinfinancingactivities (712) (672)

NET INCREASE IN CASH AND CASH EqUIvAlENTS DURING THE yEAR 237 364

CASH AND CASH EqUIvAlENTS, bEGINNING OF yEAR 2,527 2,163

CASH AND CASH EqUIvAlENTS, END OF yEAR $ 2,764 $ 2,527


STATEMENT OF CASH FlOWS

NOTES TO FINANCIAL STATEMENTS — For the year ended December 31, 2012 ($CAD thousands)


2. SUMMARy OF SIGNIFICANT ACCOUNTING POlICIES

ThefinancialstatementsoftheCorporationhavebeenpreparedinaccordance withIFRSasissuedbytheInternationalAccountingStandardsBoard(“IASB”). Thesignificantaccountingpoliciesusedinthepreparationofthesefinancialstatementsaredescribedbelow.

Equipment and leaseholds

Equipmentandleaseholdsarerecordedatcostlessaccumulateddepreciation,amortizationandimpairment.Theassets’residualvalues,usefullivesandthemethodofdepreciationandamortizationarereviewedateachfinancialyearend,andadjustedasnecessaryonaprospectivebasis.ThedepreciationandamortizationexpenseonequipmentandleaseholdsisdisclosedseparatelyinNote4tothefinancialstatementsandincludedinthestatementofcomprehensiveresultsofoperations.

Depreciationandamortizationareprovidedatthefollowingrates:

Computerequipment -straight-lineoverfouryears Furnitureandofficeequipment -decliningbalanceat20%ayear Leaseholdimprovements -straight-lineoverthetermsofthelease Computerandofficeequipment -straight-lineoverthetermsoftheleasesunderfinancelease

Leasedpropertyincludesbuildings,computerandofficeequipment.Thereare norenewaltermsonbuildingleasesbutequipmentleasesincluderenewaloptions.Theseoptionsarebasedonthefairmarketvalueoftheequipmentandtheleaserateavailableatthetimeofexpiry.TheCorporationalsohastheoptiontoextendleasesonamonthtomonthbasismakingthesamepaymentsandthisistypicallytheoptiontakenbytheCorporation.

ThegainorlossarisingonthedisposalorretirementofanitemofequipmentandleaseholdsisdeterminedasthedifferencebetweenthedisposalproceedsandthecarryingamountoftheassetandisrecognizedinthestatementofcomprehensiveresultsofoperationsinOtherincome.Thegainorlossisrecognizedupondisposal orwhennofutureeconomicbenefitsareexpectedfromitsuseordisposal.

1. CORPORATION OPERATIONS

TarionWarrantyCorporation(the“Corporation”),domiciledinOntario,Canada, wasdesignatedin1976bytheGovernmentofOntariotoadministertheOntarioNewHomeWarrantiesPlanAct(the“Act”).TheobjectivesoftheActincludeconsumerprotection,builderregulationandprovidingconsumersandbuilders withabroadrangeofservicesincludinginformationandeducation.TheCorporationcollectshomeenrolmentandbuilderregistrationfeesandinvestsavailablefundsforthepurposesofsettlingwarrantyclaimsfromhomeowners, andprovidingforinvestigation,enforcement,andotheradministrativecostsrelatedtoitsresponsibilitiesinadministeringtheAct.WarrantyprotectionisoutlinedintheActandincludesprovidingawarrantytopurchasersofnewhomesinrespectof:

• lossofdepositifabuildercannotorwillnotcompletethesaleofahome,throughnofaultofthehomebuyer;

• specifiedconstructionandcontractualwarrantiesfordefectsinworkormaterial;and

• theeffectsofdelaysinclosing,undercertaincircumstances.

TheGovernmentofOntariohasdesignatedtheCorporationasanon-profitorganizationincorporatedwithoutsharecapitalundertheAct.TheCorporation’sequityisnottradedinapublicmarketanditrepresentstheretainedaccumulationofexcessofrevenueoverexpensesundertheAct.Theregisteredofficeislocatedat5160YongeStreet,12thFloor,Toronto,Ontario,M2N6L9.

Asanon-profitorganization,theCorporationisexemptfromincometaxes.

ThefinancialstatementsfortheyearendedDecember31,2012wereapproved bytheCorporation’sboardofdirectorsandauthorizedforissueonApril25,2013.



Intangible Assets

Intangibleassetsconsistofsoftwareandapplicationsacquiredseparatelyandinternalsoftwareenhancementsrelatedtothecustomizationofthesesoftwaresystemsandapplications.Theseintangibleassetshavefinitelivesandareamortizedovertheirusefuleconomiclife.Theestimatedusefullifeandamortizationmethodarereviewedattheendofeachannualreportingperiod,withtheeffectofanychangesinestimatebeingaccountedforonaprospectivebasis.TheamortizationexpenseonintangibleassetsaredisclosedseparatelyinNote5tothefinancialstatementsandincluded inthestatementofcomprehensiveresultsofoperations.

Softwareandapplications -straight-lineoverthreeyears Internalsoftwareenhancements -straight-lineoverthreeyears

FINANCIAl INSTRUMENTSIFRS 9–FinancialInstrumentsrequiresallfinancialassetstobeclassifiedintheirentiretyonthebasisoftheentity’sbusinessmodelformanagingthefinancialassetsandthecontractualcashflowcharacteristicsofthefinancialassets.Financialassetsaremeasuredeitheratamortizedcostorfairvalue.

• Financialassetsatfairvaluethroughprofitorloss(“FVTPL”)

Cashandcashequivalents,unsettledinvestmenttradereceivable,thefixedincomeportfolioandtheequityportfolioareclassifiedasFVTPL.FinancialassetsatFVTPLaremeasuredinitiallyatfairvaluewithanygainsorlossesarisingonsubsequentmeasurementrecognizedinthestatementofcomprehensiveresultsofoperations ininvestmentincome.

Transactioncostsarerecognizedinthestatementofcomprehensiveresults ofoperationsasincurred.

Interestincomeonthefixedincomeportfolioisincludedininvestmentincomeasearnedusingtheeffectiveinterestrate.Dividendincomeontheequityportfolioinvestmentsisrecognizedasofthedeclarationdateininvestmentincome.Thegainsandlossesfromcurrencytranslationarerecognizedinthestatementofcomprehensiveresultsofoperationsininvestmentincome.

• Financialassetsatamortizedcost

Tradeandotherreceivablesfromvendorsandbuildersaremeasuredatamortizedcost.Thecarryingvalueisbasedonmanagement’sbestestimateoftherecoverablevaluedeterminedbyconsideringpastcollectionexperience,theamountofsecurityheldandtheexistenceofguarantees.Impairmentisbeingassessedattheendofeachreportingperiod.Wherethereisobjectiveevidencethatthereisimpairmentintheseamounts,theimpairmentchargeisrecognizedinthestatementofcomprehensiveresultsofoperationsinnetclaimsincurredtoreducethecarryingvalueofthefinancialassetstotheirrecoverableamounts.

• Otherfinancialliabilities

Accountspayableandaccruedliabilities,andfundsheldassecurity,aremeasuredatamortizedcostusingtheeffectiveinterestmethod.

Prepaid Expenses and Other Assets

• Prepaidexpensesaremeasuredathistoricalcosts.Prepaidexpensesaregenerallysettledwithinoneyear.

• Otherassetsincludeunsettledinvestmenttradereceivable,andpropertiespurchasedbytheCorporationinitsnormalcourseofwarrantyremediation:

-Unsettledinvestmenttradereceivablerelatestoinvestmentstradesmadewithinthreebusinessdaysoftheendofthefiscalyearandwhichissettledimmediatelyafterthefiscalyear-end.Thefairvalueofunsettledinvestmenttradereceivableapproximatesthecarryingamountduetoitsshort-termmaturity.

-Inthenormalcourseofbusiness,theCorporationmayberequiredtopurchase(takelegaltitle)fromanewhomeowner,anuninhabitableproperty(landand/ordwelling)soastosettleawarrantyclaim.TheCorporation’sintentistoremediateanddivesttheproperty,assoonaspossible,orinsomecaseswhererestorationisnotpossibletodonatethesitestolocalgovernmentsforparksorgreen-space.Themostsignificantportionoftheassetrelatestothevalueoftheland.Theseassetsaregenerallypurchasedattheirfairvalueandrecordedasotherassets.Thegainorlossrealized,ifany,betweenthefairvalueonacquisitionandthefinalsaleprice,isrecordedaspartofnetgainondisposalofotherassets.Theseassetsareexpectedtoberecoveredmorethanoneyearafterthestatementoffinancialpositiondate.



CASH AND CASH EqUIvAlENTSCashandcashequivalentscomprisescashonhandandatthebank,anyshort-termdepositswithamaturityofuptothreemonthsonthedateofpurchaseandanybankoverdraftspayableondemand.Therearenorestrictionsorlimitationstotheuseofthecashandcashequivalents.

Employee Future benefits

Inadditiontoparticipatinginagovernmentmanagedemployeebenefitplan, theCorporationhasthefollowingemployeebenefitplans:

• Apensionplanconsistingofafullyvestedandcloseddefinedbenefitpensionplan,andanactivedefinedcontributionplanwhereemployeesbecomevestedaftertwoyearsofemployment;and

• Apost-employmentpensionandmedicalbenefitsplanforemployees.

Thecostsofpensionandotherpost-employmentbenefitsearnedbyemployeesareactuariallydeterminedusingtheprojectedunitcreditvaluationmethod.Thistakesintoaccountmanagement’sbestestimatesofexpectedplaninvestmentperformance,salaryescalation,retirementagesofemployeesandexpectedhealthcarecosts.

Forthepurposeofcalculatingtheexpectedreturnonplanassets,thoseassets arevaluedatfairvalue.

Actuarialgainsandlossesarerecognizedaspartofothercomprehensiveincome intheperiodtheyoccur.

TheCorporationaccruesitsobligationsunderemployeebenefitplansandthe relatedcosts,netofplanassets.Thedefinedbenefitassetorliabilitycomprises thenetpresentvalueofthedefinedbenefitobligationlesspastservicecostsnotyetamortizedandlessthefairvalueoftheplanassets,outofwhichobligationsaretobesettled.PlanassetsareheldinatrustandarenotavailabletocreditorsoftheCorporation,norcantheybepaiddirectlytotheCorporation.Fairvalueisbasedonmarketpriceinformation.Thevalueofanyassetrecognizedisrestrictedtothesumthatcanbeusedtoreducefuturecontributionstotheplan.

TheCorporation’scontributionstothedefinedcontributionpensionplanareexpensedinthestatementofcomprehensiveresultsofoperationsintheyeartowhichtheyrelateandareincludedaspartofsalariesandbenefitsexpenses.

Warranty liabilities

Warrantyclaimsliabilitiesincludeestimatesofcostsforclaimsreportedandinprocess, andprovisionsforclaimsincurredbutnotyetreportedatthestatementoffinancialpositiondatewhereitisanticipatedthatcostswillbeincurredbytheCorporation.

Thewarrantyperiodspanssevenyearsandsignificantperiodsoftimecanelapsebetweentheincurrenceofclaimsliabilitiesandtheirsettlement.Accordingly,theestimationoftheliabilitiesinvolvessignificantmeasurementuncertainty.

Theliabilitiesarediscountedtoreflecttheinvestmentincomeexpectedtobeearnedovertheperiodbetweentheincurrenceandsettlementofclaims.Thediscountratereflectstheexpectedfutureyieldfromthefixedinterestinvestments.Provisionsforadversedeviationareaddedtoallowfortheinherentmeasurementuncertaintythatarisesbecauseactualinvestmentyieldsmaydifferfromthediscountrate;becausetheactualsettlementsmayoccuratamountsthatdifferfromexpectedsettlementamounts;andbecausethetimingofsettlementsmaydifferfromexpectedtiming.

Claimsincurredincludeclaimsrecoveriesandchangesintheprovisionsforclaimsreportedandinprocessandforclaimsincurredbutnotyetreported.

Claimsrecoveriesincludeamountsrecoveredfrombuildersonclaimsincurredduringthecurrentyearorinpreviousyearsandchangesintheestimateofamountsrecoverablefrombuildersonoutstandingwarrantyclaimsliabilities.EstimatedamountsrecoverablefrombuildersarepresentedonthestatementoffinancialpositionasanassetoftheCorporation.

leases

LeasesareclassifiedasfinanceleaseswheneverthetermsoftheleasetransfersubstantiallyalltherisksandrewardsofownershiptotheCorporation.Allotherleasesareclassifiedasoperatingleases.Operatingleasepaymentsarerecognizedasanexpenseonastraight-linebasisovertheleaseterm.

AssetsheldunderfinanceleasesareinitiallyrecognizedasassetsoftheCorporationattheirfairvalueattheinceptionoftheleaseor,iflower,atthepresentvalueoftheminimumleasepayments.Thecorrespondingliabilitytothelessorisincludedinthestatementoffinancialpositionasafinanceleaseobligation.

Leasepaymentsareapportionedbetweenfinanceexpensesandreductionoftheleaseobligationsoastoachieveaconstantrateofinterestontheremainingbalanceoftheliability.Financeexpensesarerecognizedimmediatelyinthestatementofcomprehensiveresultsofoperations.

Assetsunderfinanceleasesaredepreciatedovertheshorteroftheestimatedusefullife oftheassetandtheleaseterm.



Provisions

ProvisionsarerecognizedwhentheCorporationhasapresentobligation(legalorconstructive)asaresultofapastevent,anditisprobablethatanoutflowofeconomicresourceswillberequiredtosettletheobligationandareliableestimatecanbemadeoftheamountoftheobligation.Theamountrecognizedasaprovisionisthebestestimateoftheconsiderationrequiredtosettlethepresentobligationattheendofthereportingperiod,takingintoaccounttherisksanduncertaintiessurroundingtheobligation.Whensomeoralloftheeconomicbenefitsrequiredtosettleaprovisionareexpectedtoberecoveredfromathirdparty,areceivableisrecognizedasaseparateassetifitisvirtuallycertainthatreimbursementwillbereceivedandtheamountofthereceivablecanbemeasuredreliably.Expensesrelatedtoanyprovisionarepresentedinthestatement ofcomprehensiveresultsofoperationsnetofanyreimbursement.

Revenue Recognition

• Home enrolment fees earned and builders’ registration and renewal fees

Homeenrolmentfeesareremittedbybuildersduringtheyear.Thesefeesaredeferredandtakenintorevenueasearnedbasedontheexpectedclaimsexperienceoverthewarrantyperiod.Thedeferredportionofhomeenrolmentfeesisincludedinwarrantyliabilities.Ifclaimsexperienceindicatesthathomeenrolmentfeescollectedwillnotbesufficienttodischargerelatedliabilities,aprovisionforpremiumdeficiencyisincludedinthewarrantyliabilities.

Builders’registrationfeesarerecordedasrevenueuponregistrationandrenewalfeesarerecordedasrevenueintheyearinwhichtheyaredue.

Otherrevenuecomprisesofvariousadministrationfeeschargedforservicesgenerallyrelatedtothehandlingofclaimsandlicensingandunderwriting.Thesefeesarerecordedasearned.

Interest Expense

Interestpaidisrecognizedinthestatementofcomprehensiveresultsofoperationsas itaccruesandiscalculatedbyusingtheeffectiveinterestratemethod.Accruedinterest isincludedwithinthecarryingvalueoftheinterestbearingliability.

Impairment of Non-Financial Assets

TheCorporationassessesateachreportingdatewhetherthereisanyindicationthatanassetmaybeimpaired.TheCorporationreviewsandconsidersbothinternalandexternalsourcesofinformationthatindicateanyeventsorchangesincircumstancescausingthecarryingamountofthenon-financialassetsnotberecoverable.

Animpairmentlossisrecognizedfortheamountbywhichthecarryingamountofthecashgeneratingunitexceedsitsrecoverableamount,whichisthehigherofthecashgeneratingunit’sfairvaluelesscoststosellandvalueinuse.Forthepurposesofassessingimpairment,assetsaregroupedatthelowestlevelsforwhichthereareseparatelyidentifiablecashflows.

Whereanimpairmentlosssubsequentlyreverses,thecarryingamountoftheasset(orcash-generatingunit)isincreasedtotherevisedestimateofitsrecoverableamount,butsothattheincreasedcarryingamountdoesnotexceedthecarryingamountthatwouldhavebeendeterminedhadnoimpairmentlossbeenrecognizedfortheasset(orcash-generatingunit)inprioryears.Areversalofanimpairmentlossisrecognizedimmediatelyinthestatement ofcomprehensiveresultsofoperations.

Currency Translation

TheCorporation’sfinancialstatementsarepresentedinCanadiandollars,thefunctionalcurrencyoftheCorporationandthecurrencyoftheprimaryeconomicenvironmentinwhichtheCorporationoperates.Transactionsinforeigncurrenciesareinitiallyrecordedatthefunctionalcurrencyrateprevailingatthedateofthetransaction.

MonetaryassetsandliabilitiesdenominatedinforeigncurrenciesaretranslatedintoCanadiandollarsattheperiod-endrate.Thetranslationimpactisrecordedinthestatementofcomprehensiveresultsofoperationsintheperiodinwhichtheyarise.Exchangegainsorlossesonfinancialassetsatfairvaluethroughprofitorlossarereportedaspartofinvestmentincomeinthestatementofcomprehensiveresultsofoperations.RevenueandexpenseitemsinaforeigncurrencyaretranslatedintoCanadiandollarsatthetransactiondaterate.



Future Accounting Changes

IFRS 4 – Insurance Contracts

InJuly2010,theIASBissuedanexposuredraftproposingchangestotheaccountingstandardsforinsurancecontracts.Theproposalwouldrequireaninsurertomeasure itsinsuranceliabilitiesusingamodelthatfocusesontheamount,timinganduncertaintyoffuturecashflowsassociatedwithfulfillingitsinsurancecontracts.Are-exposuredraft isexpectedtobeissuedbytheIASBinQ22013,andthefinalstandardisexpectedto beissuedin2014withaproposedeffectivedateofJanuary1,2018.Asthestandard isstillevolvingandnotexpectedtobefinalizedforafewyears,managementcontinues tomonitorthedevelopmentsinthisareaandwilldevelopaplantoevaluatetheimpact ontheCorporation’sfinancialstatementsoncethefinalstandardisissued.

IFRS 9 – Financial Instruments

TheCorporationearlyadoptedIFRS9effectiveJanuary1,2011whichrequiredallfinancialassetstobeclassifiedoninitialrecognitionatamortizedcostorFVTPL.InNovember2012,theIASBpublishedforpubliccommentanexposuredraftofproposedlimitedamendmentstoIFRS9.Asthestandardisfurtherrevised,managementwillassesstheimpactofsuchchangesontheCorporation’sfinancialstatementsandadjustthefinancialstatementsaccordingly.

IFRS 13 – Fair Value Measurement

InMay2012,theIASBreleasedanewversionofIFRS 13 – Fair Value Measurement. ThestandardincludesincreaseddisclosurerequirementsregardinginformationaboutLevel3fairvaluemeasurements.ThestandardbecomeseffectiveforfinancialyearsbeginningonorafterJanuary1,2013.TheCorporationhasreviewedthenewstandardandconcludedthatitwillnothaveasignificantimpactonitsfinancialstatements.

IAS 1 – Presentation of Financial Statements

EffectiveJanuary1,2013,theCorporationwilladopttheguidanceintheamendedIAS 1: Presentation of Financial Statements.TheamendedstandardincludesrequirementsthatOtherComprehensiveIncomebeclassifiedbynatureandgroupedbetweenthoseitemsthatwillbereclassifiedsubsequentlytoprofitorloss(whenspecificconditionsaremet)andthosethatwillnotbereclassified.Otheramendmentsincludechangestooverallfinancialstatementpresentation.TheCorporationhasreviewedtheamendedstandardandconcludedthatitwillnothaveasignificantimpactonitsfinancialstatements.

IAS 17 – Leases

TheIASBwillissueasecondexposuredraftontheproposedaccountingmodelforleases. TheimpactofadoptionoftheproposedchangeswillbedeterminedbytheCorporationoncethefinalleasestandardisissued,whichhasyettobedeterminedbytheIASB.

IAS 18 – Revenue

TheIASBtargetstoissuethestandardwithin2013.TheimpactofadoptionoftheproposedchangeswillbedeterminedbytheCorporationoncethefinalstandardisissued.

IAS 19 – Employee Benefits

EffectiveJanuary1,2013,thecorridormethodofrecordingactuarialgainsandlosseswillbeeliminated.ThisdoesnotimpacttheCorporationas,effectiveJanuary1,2010,managementelectedtorecognizetheactuarialgainsandlossesimmediatelyinOthercomprehensive resultsofoperationsupontheadoptionofIFRS.Therevisedstandardalsointroducesthereportingofnetinterestonnetdefinedbenefitliabilityinthestatementofcomprehensiveresultsofoperations,andrequiresthatpastservicecoststoberecognizedimmediately. Thiswillresultina$460transitionaladjustmenttotheaccumulatedcomprehensive incomeandequityonJanuary1,2013fortheunamortizedpastservicecostsofother post-employmentmedicalbenefits(“OPEB”).Thestandardhasenhancedthepresentationanddisclosurerequirementsofcertainitemsarisingfromdefinedbenefitplansaswell. TheCorporationhasreviewedtherevisedstandardandconcludedthatitwillnothave asignificantimpactonitsfinancialstatements.



3. kEy ACCOUNTING jUDGEMENTS, ESTIMATES AND ASSUMPTIONS

Thepreparationoffinancialstatementsrequiresmanagementtomakejudgements,estimatesandassumptionsthataffectthereportedamountsofrevenue,expenses,assetsandliabilitiesanddisclosureofcontingentassetsandliabilitiesasatthedateofthefinancialstatements.Actualamountscoulddifferfromthoseestimates.

Key management judgements

IntheprocessofapplyingtheCorporation’saccountingpolicies,management hasmadethefollowingjudgements,whichhavethemostsignificanteffect ontheamountsrecognizedinthefinancialstatements:

• Internallygeneratedsoftwareenhancements

Internallygeneratedsoftwareenhancementscostsarecapitalizedif,andonlyif,allofthefollowingcriteriaaremet:(1)thetechnicalfeasibilitycanbedemonstrated;(2)managementhastheintentionandabilitytocompletetheintangibleassetforuse;(3)theintangibleassetwillgenerateprobablefutureeconomicbenefits;and(4)expendituresattributabletotheintangibleasset canbemeasuredreliably.

Key management estimates and assumptions

Thekeyassumptionsconcerningthefutureandotherkeysourcesofestimationuncertaintyatthereportingdatethathaveasignificantriskofcausingamaterialadjustmenttothecarryingamountsofassetsandliabilitieswithinthenextfinancial yeararediscussedbelow:

• Valuationofwarrantyliabilities

Warrantyclaimsliabilitiesincludeestimatesofcostsforclaimsreportedandinprocess,andprovisionsforclaimsincurredbutnotyetreportedatthestatementoffinancialpositiondatewhereitisanticipatedthatcostswillbeincurredbytheCorporation.Theamountofclaimsliabilitiesequalsthepresentvalue,atthestatementoffinancialpositiondate,ofcashflowsonaccountofclaims(andrelatedexpenses)incurredbeforethatdate.TheultimatecostofoutstandingclaimsisestimatedbyusingactuarialvaluationtakingintoaccounttheCorporation’sclaimshandlingpractices,actuarialassessments,

thejudgementofmanagement,differencebetweenactualandexpectedsettlementamounts,historicalprecedentsandtrends,prevailinglegal,economic,socialandregulatoryenvironmentsandexpectationsoffuturedevelopments.DetailsofthekeyassumptionsusedintheestimatesarecontainedinNote11.ThewarrantyliabilitiesamountspresentedfortheseclaimsarestatedattheactualamountsexpectedtobepaiddirectlybytheCorporationtosettleitsobligationswhichreflecttheamountspaidinthenormalcourseofoperations.

• Valuationoftradeandotherreceivablesfromvendorsandbuilders

Tradeandotherreceivablesfromvendorsandbuildersrecordedinthestatementoffinancialpositioncannotdirectlybederivedfromactivemarkets.Theyaremeasuredatamortizedcostlessimpairment.Thecarryingvalueisbasedonmanagement’sbestestimateofrecoverablevaluedeterminedbyconsideringpastcollectionexperience,financialconditionofthebuilders,securityheld,legalactionsought andjudgementsawarded.Detailsofthekeyassumptionsusedintheestimates arecontainedinNote6.

• Revenuerecognitionofhomeenrolmentfeesearned

Homeenrolmentfeesaredeferredandtakenintorevenueasearnedbasedontheexpectedclaimsexperienceoverthewarrantyperiod.Thedeferredportionofhomeenrolmentfeesisincludedinwarrantyliabilities.Theresultsaresubjecttosignificantuncertaintybasedontheactualclaimsexperienceoverthewarrantyperiod.DetailsofthekeyassumptionsusedintheestimatesarecontainedinNote11.

• Usefullivesofdepreciableassets

TheCorporationreviewstheusefullivesofdepreciableassetsateachreporting date.AtDecember31,2012,managementassessedthattheusefullivesreflect theexpecteduseoftheassetstotheCorporation.

• Employeefuturebenefits

Thecostsofdefinedbenefitpensionplansandotherpost-employmentmedicalbenefitsaredeterminedusingactuarialvaluations.Theactuarialvaluationinvolvesmakingassumptionsaboutdiscountrates,expectedratesofreturnonassets,futuresalaryincreases,mortalityratesandfuturepensionincreases.Duetothelong-termnatureoftheseplans,suchestimatesaresubjecttosignificantuncertainty.Details ofthekeyassumptionsusedintheestimatesarecontainedinNote10.



4. EqUIPMENT AND lEASEHOlDS

EquipmentandleaseholdsconsistofthefollowingasatDecember31,2012:

Computer Equipment

Furniture and Office

Equipment

leasehold Improvements

Computer and Office

Equipment Under Finance lease

Total

AT COST

balance at january 1, 2012 $ 1,336 $ 1,470 $ 2,415 $ 3,091 $ 8,312

Additions 135 29 11 464 639

Disposals – – – (1,113) (1,113)

balance at December 31, 2012 1,471 1,499 2,426 2,442 7,838

ACCUMUlATED DEPRECIATION

balance at january 1, 2012 1,235 1,091 653 1,599 4,578

Depreciation expense 73 79 193 697 1,042

Disposal – – – (1,113) (1,113)

balance at December 31, 2012 1,308 1,170 846 1,183 4,507

CARRyING AMOUNT

balance at December 31, 2012 $ 163 $ 329 $ 1,580 $ 1,259 $ 3,331

BalanceatDecember31,2011 $ 101 $ 379 $ 1,762 $ 1,492 $ 3,734



5. INTANGIblE ASSETS

TheCorporation’sintangibleassetsarecomprisedofexternallypurchasedsoftwareandapplicationsandinternallydevelopedsoftwareenhancements:

SOFTWARE AND APPlICATIONS

INTERNAl SOFTWARE ENHANCEMENTS

TOTAl

AT COST

balance at january 1, 2012 $ 5,397 $ 2,351 $ 7,748

Additions 1,686 650 2,336

Disposal (456) – (456)

balance at December 31, 2012 6,627 3,001 9,628

ACCUMUlATED AMORTIzATION AND IMPAIRMENT lOSSES

balance at january 1, 2012 3,698 1,045 4,743

Amortization expense 1,078 570 1,648

Disposal (456) – (456)

balance at December 31, 2012 4,320 1,615 5,935

CARRyING AMOUNT

balance at December 31, 2012 $ 2,307 $ 1,386 $ 3,693

BalanceatDecember31,2011 $ 1,699 $ 1,306 $ 3,005

Developmentcostsrecognizedasanexpenseundergeneralandadministrativeinthestatementofcomprehensiveresultsofoperations duringtheyearamountto$934(2011-$420).



6. TRADE AND OTHER RECEIvAblES FROM vENDORS AND bUIlDERS

securityand/orindemnitors.Assessmentsarerevisitedannuallyatregistrationrenewaltimeorearlierifadditionalriskfactorssurface.

AsatDecember31,2012,therearesix(2011–three)vendorsandbuilderseachofwhomrepresentmorethan5%ofthebalanceoftradereceivablesnetofallowances.However,duetotradereceivablesbeingalmostfullyreserved,theoverallnetexposureoftheCorporationtothesevendorsandbuildersasatDecember31,2012isonly$808(2011-$375).

AsdescribedinNote12,theCorporationobtainssecurityfrombuilderstominimizeitsfinanciallossesfromfuturewarrantyclaims.AtDecember31,2012thereis$2,011(2011-$1,503)ofcashandnon-cashsecurityheldassociatedwiththetradeandotherreceivablesfromvendorsandbuilders.

Unregistered vendors and builders

Warrantycoverageisalsoavailableforhomeswhichwerebuiltbyunregisteredbuilders.However,undertheAct,unregisteredbuildersaredeemedtobebuildingillegallyandaresubjecttoprosecutionandarerequiredtoindemnifytheCorporationforanyfinanciallosstheCorporationincurswithrespecttothehomestheunregisteredvendorsandbuildersbuilt.IncludedinthetotaltradeandotherreceivablesfromvendorsandbuildersasatDecember31,2012areamountsrecoverablefromunregisteredvendorsandbuildersof$283(2011-$205).

Aging of past due but not impaired

InassessingtheimpairmentoftheTradeandotherreceivablesfromvendorsandbuilders,theCorporationindividuallyassessesaccountsthataregreaterthan$50basedonthecredithistoryofthevendor/builder,itsfinancialcondition,securityheld,legalactionsoughtandjudgementawarded.Foraccountslessthan$50,ageneralrecoveryrateisapplied.Therateuseddependsontheaccountstatusas towhetheritisincollectionlitigationoractivecollection.Therecoverabilityrates arebasedontrailingaverages.AsatDecember31,2012,a1%changeintheserateswouldhaveanimpactof$16(2011-$18)tothetradereceivables.Theseratesarerecalculatedannuallyandassessedforreasonability.

Actualrecoveryonthesebalancesmaydifferifthefinancialhealthofthevendor/builderchanges,iftheguarantors/indemnitorsfinancialsituationchangesand/orifthecourtortribunal’sdecisiondiffersfromthatoftheCorporation.TheobjectiveevidenceofimpairmentfortheamountsrecoverablefrombuildersincludestheCorporation’spastcollectionexperience,financialconditionofthebuilders,securityheld,legalactionsought,andjudgementsawarded.

Tradeandotherreceivablesfromvendorsandbuildersconsistofthreetypes ofreceivables:

• Tradereceivablesfromvendorsandbuildersrepresentamountsreceivablearising fromwarrantyclaimsthattheCorporationhaspaidoutonbehalfofvendorsand buildersduringtheremediationprocess.Tradereceivablesfromvendorsandbuildersaremeasuredatamortizedcostlessimpairment.Amountsreceivablefromregisteredbuildersareclassifiedasfinancialassets.Alltheamountsare dueimmediately.FairvalueoftradereceivablesisdisclosedinNote8.

• Amountsrecoverablefromvendorsandbuildersrepresenttheestimatedamountsrecoverablefromvendorsandbuildersinrespecttotheoutstandingwarrantyclaimsrecognizedunderthewarrantyliabilities.AmountsareinvoicedtothevendorsandbuildersonlywhentheCorporationhaspaidoutmoniesfortheclaim.

• Otherreceivablesfromvendorsandbuildersrepresentotherreceivablessuch asenrolmentand/orregistrationfees.

2012 2011

Grosstradereceivables $ 22,527 $ 22,039

Less:Allowanceforimpairment (20,819) (20,766)

Tradereceivables 1,708 1,273

Amountsrecoverablefrom vendorsandbuilders

2,775 2,169

Otherreceivablesfromvendors andbuilders

449 621

$ 4,932 $ 4,063

Beforeacceptingregistrationforanyvendorandbuilder,theCorporationundergoesanunderwritingprocessthattypicallyincludesobtaininganexternalcreditscoretoassistinassessingtheapplicant’screditquality,anassessmentoftheapplicant’sconstructionexpertise,theapplicant’sbusinessacumenandwhereapplicable,themeritsoftheapplicant’sproposaltoconstructabuildingorproject.Termsandconditionsofregistrationvaryfromapplicanttoapplicantbuttypicallyincludelimitsonthevolumeandtypeofnewhomeconstruction,andarequirementtoprovide



AsatDecember31,2012,thetradeandotherreceivablesfromvendorsandbuildersincludes$1,271(2011-$758)thataregreaterthan90dayspastduebutnotconsideredtobeimpaired.TheCorporationconsidersregisteredbuilderswhohavepastduebutnotimpairedbalancestobeabletopaytheirdebtsastheyfalldue.TheCorporationdoesnotholdanycollateraloverthesebalancesexceptforcashandnon-cashsecuritiesasnotedabove,butdoeshavecreditenhancementintheformofindemnitiesforthebalancesofwhichhavebeenreflectedintherecoverableamounts.

2012 2011

1to90Days $ 437 $ 515

91to360Days 282 293

Over360Days 969 465

Total Receivables, End of year $ 1,708 $ 1,273

MOvEMENT IN TRADE RECEIvAblES 2012 2011

GrossTradeReceivables

Beginningofyear $ 22,039 $ 34,543

NewBillsIssued 6,774 7,036

Write-offsProcessed (2,442) (14,855)

Recoveries (3,844) (4,685)

Endofyear $ 22,527 $ 22,039

AllowanceforDoubtfulAccounts

Beginningofyear $ (20,766) $ (32,969)

ImpairmentLossesRecognized (netofrecoveries)

(2,495) (2,652)

Write-offsProcessed 2,442 14,855

Endofyear $ (20,819) $ (20,766)

Trade Receivables, End of year $ 1,708 $ 1,273

7. PREPAID ExPENSES AND OTHER ASSETS

AsatDecember31,2012,prepaidexpenseswere$246(2011–$289).

Otherassetsincludeanunsettledinvestmenttradereceivableof$836(2011–Nil)andpropertiespurchasedbytheCorporationinitsnormalcourseofwarrantyremediationofNil(2011–$100).In2012,theCorporationsoldthepropertiesresultinginanetgainof$55(2011–Nil)whichisrecognizedinotherrevenue.

8. FINANCIAl INSTRUMENTS

(a) Fair value

Fairvaluerepresentstheamountthatwouldbeexchangedinanarm’slengthtransactionbetweenknowledgeableandwillingpartieswhoareundernocompulsiontoact.TheCorporation’scashandcashequivalentsandinvestmentsaremeasuredatfairvalue.Thecarryingvalueforfundsheldassecurityandaccountspayableandaccruedliabilitiesapproximatesfairvalueduetotheirshort-termnature.

TheCorporationhasclassifiedthefixedincomeportfolioandtheequityportfolio asFVTPLfinancialassets.Bothclassesofassetsarereportedatfairvaluebasedonquotedbidpricesinactivemarketsonthestatementoffinancialposition.ThefairvaluesofbondsandequitiesdenominatedinforeigncurrenciesaretranslatedintoCanadiandollarsattheexchangerateineffectatDecember31.

Thefairvalueoftradeandotherreceivablesfromvendorsandbuildersapproximatescarryingvalue;thereisnoexternalactivemarketforthistypeofassetandtheinputsrequiredtovaluetheseareprimarilybasedontheCorporation’sassumptionsaboutthecreditqualityofthevendorsandbuilders,andtheavailabilityofcollateralforthereceivable.SeeNote6onthevaluationmethodologyused.Adiscountedcashflowanalysisisperformedovertheexpectedcashflows toberecoveredfromthevendorsandbuilders.



ThefollowingtabledisclosesthecategoriesoffinancialinstrumentsasatDecember31,2012:

2012 2011

Fair value FairValue

Financialassetsmeasuredatfairvaluethroughprofitorloss(FVTPL)

Fixedincomeportfolio:

Federal,provincialandmunicipalgovernmentbonds $ 102,169 $ 91,147

Financialinstitutionbonds 111,129 105,508

Othercorporatebonds 45,323 45,020

Treasurybillsandshort-termnotes 21,259 11,577

279,880 253,252

Equityportfolio 129,649 117,094

Totalinvestments 409,529 370,346

Unsettledinvestmenttradereceivable(note7) 836 –

Cashandcashequivalents 2,764 2,527

413,129 372,873

Financialassetsmeasuredatamortisedcost

Tradereceivablesfromvendorsandbuilders(note6) 1,708 1,273

Totalfinancialassets $ 414,837 $ 374,146

Financialliabilitiesmeasuredatamortizedcost

Fundsheldassecurity(note12) 41,033 40,901

Accountspayableandaccruedliabilities(note14) 7,056 7,640

Total financial liabilities $ 48,089 $ 48,541



Fair Value Hierarchy

IFRS 9 – Financial Instrumentsrequiresclassifyingoffairvaluemeasurementsusing athree-levelfairvaluehierarchy,describedbelow,fordisclosurepurposes.Eachlevelreflectstheinputsusedtomeasurethefairvaluesoffinancialassetsandfinancialliabilities:

• Level1–inputsareunadjustedquotedpricesofidenticalinstrumentsinactivemarkets.

• Level2–inputsotherthanquotedpricesincludedinLevel1thatareobservable fortheassetorliability,eitherdirectlyorindirectly.

• Level3–inputsusedinavaluationtechniquearebasedonunobservablemarketdata.

Thefollowingtablepresentsthefinancialinstrumentsmeasuredatfairvalueclassified bythefairvaluehierarchy:

2012 2011

level 1 Categorization

Cashandcashequivalents $ 2,764 $ 2,527

Unsettledinvestmenttradesreceivable 836 –

Equityportfolio 129,649 117,094

level 2 Categorization

Treasurybills/ShortTermNotes 21,259 11,577

Bonds 258,621 241,675

level 3 Categorization – –

Total $ 413,129 $ 372,873

DuringtheyearsendedDecember31,2012and2011,therewerenotransfersamong Levels1,2and3.



(b) Market Risk

Tomanagetherisksintheinvestmentportfolio,managementregularlymonitorstheperformanceofinvestmentmanagerswhoarerequiredtooperatewithinspecificinvestmentcriteriarelatedtocreditquality,diversificationandtomaximizeyieldwithinthoseconstraints.

Marketriskiscomprisedofthreerisksthatmayimpactthefairvalueofafinancialinstrumentasdescribedbelow.

TERMS OF MATURITy (1)

2012 Due within one year

Due one through five years

Due five through ten years

Due ten through twenty years

Due after twenty years

TOTAl

GOvERNMENT

Federal $ 4,705 $ 55,122 $ 3,172 $ 7,179 $ 9,097 $ 79,275

yield to Maturity (yTM) 1.0% 1.2% 1.6% 1.9% 1.3% 1.3%

Provincial – 17,708 3,877 733 185 22,503

yTM – 1.5% 2.5% 3.2% – 1.8%

Treasury bills 12,470 – – – – 12,470

yTM 0.9% – – – – 0.9%

Total Government 17,175 72,830 7,049 7,912 9,282 114,248

yTM (%) 1.0% 1.3% 2.1% 2.0% 1.4% 1.3%

Financial Institutions – 80,859 15,782 600 13,022 110,263

yTM – 1.8% 2.7% 3.3% 3.7% 2.1%

Other Corporate 4,721 14,964 11,574 1,788 11,762 44,809

yTM – 2.0% 2.9% 3.0% 4.1% 2.8%

Short-Term Notes 8,779 – – – – 8,779

yTM 0.5% – – – – 1.4%

Total Fixed Income $ 30,675 $ 168,653 $ 34,405 $ 10,300 $ 34,066 $ 278,099Accrued Interest 1,781 – – – – 1,781Total Fixed Income with Accrued Interest $ 32,456 $ 168,653 $ 34,405 $ 10,300 $ 34,066 $ 279,880

yTM 1.0% 1.6% 2.6% 2.3% 3.2% 1.9%

(1) Thetimingofactualmaturitiesmaydifferfromthecontractualmaturitiesshownabove,sinceborrowersmayhavetherighttoprepayobligationswithorwithoutprepaymentpenalties.

• Interestraterisk

Interestrateriskistheriskthatthevalueofafinancialinstrumentwillfluctuateduetochangesinmarketinterestrates.TheCorporationisexposedtointerestrateriskonitsfixedincomeportfolioanditsfundsheldassecurity.DetailsoftheCorporation’sfixedincomeportfoliowithinterestrateexposureasatDecember31aredisclosedbelow:



TERMS OF MATURITy (1)

2011 Due within one year

Due one through five years

Due five through ten years

Due ten through twenty years

Due after twenty years

TOTAl

GOvERNMENT

Federal $ 30,937 $ 37,589 $ 706 $ 5,488 $ 9,621 $ 84,341

YieldtoMaturity(YTM) 1.1% 1.1% 2.0% 2.4% 2.3% 1.3%

Provincial – 2,168 4,055 355 – 6,578

YTM – 1.5% 2.2% 3.3% – 2.0%

TreasuryBills 4,741 – – – – 4,741

YTM 0.8% – – – – 0.8%

TotalGovernment 35,678 39,757 4,761 5,843 9,621 95,660

YTM(%) 1.1% 1.1% 2.2% 2.4% 2.3% 1.4%

FinancialInstitutions – 80,586 13,183 546 10,115 104,430

YTM – 1.8% 3.1% 4.6% 4.7% 2.3%

OtherCorporate – 18,226 13,421 1,787 11,085 44,519

YTM – 2.1% 3.3% 4.0% 4.5% 3.1%

Short-TermNotes 6,834 – – – – 6,834

YTM 1.4% – – – – 1.4%

TotalFixedIncome $ 42,512 $ 138,569 $ 31,365 $ 8,176 $ 30,821 $ 251,443AccruedInterest 1,809 – – – – 1,809Total Fixed Income with Accrued Interest $ 44,321 $ 138,569 $ 31,365 $ 8,176 $ 30,821 $ 253,252

yTM 1.1% 1.7% 3.1% 2.9% 3.9% 2.0%

(1) Thetimingofactualmaturitiesmaydifferfromthecontractualmaturitiesshownabove,sinceborrowersmayhavetherighttoprepayobligationswithorwithoutprepaymentpenalties.



• Equitypricerisk

Equitypriceriskistheriskthatthevalueofafinancialinstrumentwillfluctuateduetochangesinequitymarkets.TheCorporationisexposedtoequitypriceriskonitsequityportfolio.TheCorporation’sequityportfolioisdiversifiedandinvestedinwellestablished,active,liquidmarkets.

2012 2011

Financials $ 37,112 29% $ 32,493 28%

Energy 25,041 19% 23,670 20%

ConsumerStaples 13,669 11% 13,543 12%

ConsumerDiscretionary 11,142 9% 9,886 8%

Industrials 13,621 11% 12,131 10%

Telecommunication 12,931 10% 11,372 10%

Materials 6,597 5% 4,906 4%

InformationTechnology 2,958 2% 2,113 2%

HealthCare 2,494 2% 2,920 2%

Metals&Mining 1,049 1% 1,914 2%

Utilities 2,173 2% 1,611 1%

Service 139 0% 187 0%

Other 723 1% 348 0%

Total: $ 129,649 100% $ 117,094 100%

• Foreigncurrencyrisk

ForeigncurrencyriskistheriskoflossduetoadversemovementsinforeigncurrencyratesversustheCanadiandollar.TheCorporationisexposedtocurrencyriskonitsforeigncurrencydenominatedfixed-incomeandequityinvestments.AsatDecember31,2012,theCorporationhadapproximately7.60%(2011–9.40%)ofthefairvalueofitsequityinvestmentsandapproximately1.26%(2011–0.32%)ofthefairvalueofitssecuritieswithinterestrateexposuredenominatedinU.S.dollars.TheCorporationmanagesitsforeigncurrencyexposurebylimitingtheforeigncontentintheinvestmentmanagers’portfolio.



Thetablebelowshowsthepotentialimpactonthestatementofcomprehensiveresultsofoperationsandstatementoffinancialpositionequityasaresultofspecificstressscenariosappliedtofinancialassetsandfinancialliabilities(excludingwarrantyliabilities).Theanalysisreflectsmanagement’sviewofkeysensitivities.Theactualresultsmaydifferfromthissensitivityanalysisandthedifferencecouldbematerial.

Thestressscenariosfor2012are:

• Interestraterisk:ashiftof-25/+25basispointsininterestratesforallmaturities.FundsheldasSecuritiesarecreditedatfloatinginterestrates(Primeless2%)andarechangedsemi-annuallytocalculatetheinterestpaidonsecurity. Theannualinterestpaidimpactona-25/+25basispointschangeininterestratesisdisclosedbelow.

• Equitypricerisk:anincrease/decreaseof10%inequitymarketprices.

• Foreigncurrencyrisk:astrengthening/weakeningof5%intheCanadiandollarrelativetotheU.S.dollar.

Thestressscenariosfor2012are:

Carrying amount

Interest Rate Risk

Equity Price Risk

Foreign Exchange Rate Risk

-25BP +25BP -10% +10% -5% +5%

($’000) ($’000) ($’000) ($’000) ($’000) ($’000) ($’000)

FINANCIAl ASSETS

FVTPLinvestments:

Fixedincomeportfolio 279,880 3,044 (2,938)

Equityportfolio 129,649 – – (12,908) 12,908 521 (471)

FINANCIAl lIAbIlITIES

Fundsheldassecurity 39,784 99 (99) Fortheabovescenarios,theCorporationhasassumedthatinterestrates,equityprices,andcurrencymovedindependently.



(c) Credit Risk

CreditriskarisesfromthepossibilityoffinanciallossoccurringasaresultofadefaultbyacounterpartyonitsobligationtotheCorporation.FinancialinstrumentsthatpotentiallysubjecttheCorporationtoconcentrationsofcreditriskconsistofcashandcashequivalents,investmentsandtradeandotherreceivablesfromvendorsandbuilders.Thecarryingvalueoffinancialassets,includingcashandcashequivalents,investmentsandtradeandotherreceivablesfromvendorsandbuilders,representsthemaximumcreditexposure.TheCorporationhasadoptedthefollowingstrategiestomitigatethisrisk:

• TheCorporation’sinvestmentpolicieslimitstheconcentrationinanyoneinvesteeorrelatedgroupofinvestees,exceptforfinancialinstrumentsissuedbytheGovernmentofCanadaforwhichthereisnolimit.

• TheCorporationonlydealswithcounterpartiesbelievedtobecreditworthyandactivelymonitorscreditexposure,requiringminimumcreditratingsofAfordebtsecuritiesatthetimeaninvestmentispurchased.AtDecember31,2012,98.7%(2011–99.2%)ofthedebtsecuritieshavearatingofAorbetter,and1.3%(2011–0.8%)ofthedebtsecuritieshavearatingofBBB.

• Cashandcashequivalentsandinvestmentsareplacedwithgovernments, well-capitalizedfinancialinstitutionsandothercreditworthycounterparties.

• TheCorporationassessesthebuilders’riskprofile,includingtheirfinancialposition,duringtheregistrationandrenewalprocesses.Basedontheassessment,abuildermaybelicensedandasdisclosedinNote12,securityisobtainedintheformofcash,lettersofcredit,andotherguaranteesfromthebuilderinordertoreducetheriskoffinanciallossrelatedtofuturewarrantyclaimsfromhomeowners.

(d) LiquidityRisk

LiquidityriskistheriskthattheCorporationwillencounterdifficultyinmeetingobligationsassociatedwithfinancialliabilities.TheCorporationisexposedtodailycashrequirementsfromsettlementofclaims,operatingexpensesandcashsecurityreleases.Thesettlementofclaimshavenofixedtermsandisdependentonthetimingoftherepairworkinvolvedandthecashsecurityreleasehasnofixedtermsandiscontingentuponfulfilmentofcertainrequirements(seeNote12).Liquidityriskisconsideredlowasasignificantpercentageoftheinvestmentportfolioistradedinanactivemarketandcanbereadilydisposedof.TheCorporationalsohasa$3,000(2011–$3,000)lineofcredititcandrawonofwhichtheamountoutstandingatDecember31,2012isNil(2011–Nil).

9. CASH AND CASH EqUIvAlENTS

Forthepurposeofthestatementofcashflows,cashandcashequivalentsincludecashatthebankandonhandandinvestmentsinshort-termdepositswithamaturityofuptothreemonthsonthedateofpurchase,netofoutstandingbankoverdrafts.AtDecember31,2012,cashandcashequivalentswassolelycashatthebankandonhandof$2,764(2011-$2,527)withnoshort-termdepositsorbankoverdraftspayableondemand.Therearenorestrictions,pledgesorlimitationstotheuseofthecashandcashequivalents.

10. EMPlOyEE FUTURE bENEFIT PlANS

TheCorporation’sPensionPlaniscomprisedofadefinedbenefitprovision (“DBPlan”)whichisclosedtofurthercontributions,andadefinedcontributionprovision(“DCPlan”).

Inaddition,theCorporationprovidesotherpost-employmentbenefits(“OPEB”),primarilyhealthanddentalcoverage,onanunfundedbasis.

Defined contribution plan

TheDCPlanisopentoallfull-timeemployeesoftheCorporation,subjecttomeetingcertaineligibilityconditions.UnderthetermsoftheDCPlan,employeescontributeapercentageofeligibleemployeeearningsperyear.TheCorporationmakescontributionsforeachcontributingemployeeinamountsthatvarydependentupontheemployee’sageandthenumberofyearsofeligibleservice.

TherealsoexistsaSupplementaryExecutiveRetirementPlan(“SERP”)forseniormanagement.ThepurposeoftheSERPistooffsetthelimitationoncontributionsotherwisepayableundertheregisteredpensionplanresultingfromtheapplication ofthemaximumcontributionlimitsspecifiedundertheIncomeTaxAct(Canada). TheSERPprovidesonlyforbenefitsinexcessofthosepayableunderthe RegisteredPlan.



Defined Benefit Plan and Other Post-Employment Benefits

TheDBPlanisfullyvestedandclosedtonewemployeeseffectiveJanuary1,1999.PlanparticipantswhoelectednottoconverttothedefinedcontributionprovisionretainedtheirDBpensionsearnedtodate.ForservicesubsequenttoDecember31,1998,allmembersofthePensionPlanparticipateonadefinedcontributionbasis.

TheDBPlanandOPEBaresubjecttoperiodicactuarialvaluations.TheCorporationhasaDecember31measurementdate.AvaluationoftheaccruedpensionbenefitobligationwasperformedasatJanuary1,2010andavaluationoftheOPEBwasperformedasofDecember31,2011.ThenextvaluationoftheaccruedpensionbenefitobligationisexpectedtobeperformedasatJanuary1,2013andthevaluationoftheOPEBwillbeperformedasatDecember31,2014.

Theamountsrecognizedinthestatementoffinancialpositionforemployeefuturebenefitsliabilitiesatthestatement offinancialpositiondateareasfollows:

2012 2011

Db Plan OPEb Total DBPlan OPEB Total

Fairvalueofpensionassets $ 4,222 $ – $ 4,222 $ 4,074 $ – $ 4,074

Presentvalueofthedefinedbenefitobligation (5,425) (5,250) (10,675) (5,042) (3,925) (8,967)

Netdefinedbenefitobligation (1,203) (5,250) (6,453) (968) (3,925) (4,893)

Unamortizedpastservicecosts – 460 460 – 537 537

Accruedliability (1,203) (4,790) (5,993) (968) (3,388) (4,356)

Employercontributions $ – $ 21 $ 21 $ – $ 53 $ 53

Employeecontributions – – – – – –

Benefitpaymentsandtransferstootherplans $ 218 $ 21 $ 239 $ 22 $ 53 $ 75

ThepresentvalueoftheSERPobligationasatDecember31,2012is$297(2011-$197),whichisincludedinthe OPEBamountsinthetableabove.ThebenefitpaymentstotheSERPfortheyearendedDecember31,2012were $Nil(2011-$35).

FortheyearendedDecember31,2012,theemployercontributionstotheDCPlanwere$1,045(2011-$1,014) andtheemployeecontributionstotheDCPlanwere$596(2011-$584).



Historical Funding Table

Theemployeebenefitsamountsforthecurrentandpreviousyearsareasfollows:

2012 2011

Fairvalueofpensionassets $ 4,222 $ 4,074

Accruedbenefitobligation,pensionplan (5,425) (5,042)

Deficit (1,203) (968)

Accruedbenefitobligation,OPEB (4,954) (3,728)

Accruedbenefitobligation,SERP (296) (197)

Netemployeebenefitsobligationreported $ (6,453) $ (4,893)

Experienceadjustmentsonemployeefuturebenefitsliabilities $ (1,167) $ (11)

Experienceadjustmentsonpensionassets $ 108 $ (310)

AsofDecember31,2012,thecurrentliabilitiesare$36(2011-$18)withrespecttotheOPEBplan. Therearenocurrentliabilitieswithrespecttotheotherplans.



Themovementsinthepresentvalueofaccruedbenefitobligationareasfollows:

2012 2011


Openingbalance $ (5,042) $ (3,925) $ (8,967) $ (4,166) $ (4,028) $ (8,194)

Currentservicecost – (369) (369) – (369) (369)

Pastservicecost – – – – – –

Interestcosts (222) (189) (411) (229) (239) (468)

Benefitpayments 218 21 239 22 53 75

Actuarialgain/loss (379) (788) (1,167) (669) 658 (11)

Curtailments/settlements – – – – – –

Accruedpensionobligation,Endofyear $ (5,425) $ (5,250) $ (10,675) $ (5,042) $ (3,925) $ (8,967)

Themovementsinthefairvalueofplanassetsareasfollows:

2012 2011


Openingbalance $ 4,074 $ – $ 4,074 $ (4,138) $ – $ 4,138

Contributionsbyemployer – 21 21 – 53 53

Expectedreturnonplanassets 258 – 258 268 – 268

Actuarialgains/(losses) 108 – 108 (310) – (310)

Benefitspaid (218) (21) (239) (22) (53) (75)

Curtailments/settlements – – – – – –

Planassets,endofyear $ 4,222 $ – $ 4,222 $ 4,074 $ – $ 4,074



Themajorcategoriesofplanassetsattheendofthereportingperiodforeachcategoryareasfollows:

Fair value of Db Plan Assets

2012 2011

Canadianequitysecurities 35% 35%

InternationalandUSequitysecurities 28% 28%

Bonds 30% 31%

Cash 7% 6%

100% 100%

TheoverallexpectedrateofreturnontheDBassetsfor2012is6.50%(2011-6.50%)anditisaweightedaverageoftheexpectedreturnsofvariouscategoriesofplanassetsheld.TheactualreturnonplanassetsoftheDBPlanwas$366(2011-$(42)).

Adiscountrateof4.00%perannumwasusedforthedisclosuresatDecember31,2012forboththeDBPlanandOPEB(2011-4.50%fortheDBPlanand4.75%fortheOPEB).Specifically,thediscountratewasdeterminedasthesinglediscountratethatwouldproducethepresentvalueofobligationsdeterminedbydiscountingtheplanscashflowsusingCorporateAAspotratesatDecember31,2012.

Theamountsrecognizedinthestatementofcomprehensiveresultsofoperationsinrespectoftheemployeebenefitsliabilitiesareasfollows:

2012 2011


Currentservicecosts $ – $ 369 $ 369 $ – $ 369 $ 369

Interestcosts 222 189 411 229 239 468

Expectedreturnonplanassets (258) – (258) (268) – (268)

Curtailment/settlements – – – – – –

Amortizationofpastservicecosts – 77 77 – 77 77

Netexpense $ (36) $ 635 $ 599 $ (39) $ 685 $ 646

Actuarialgains/(losses)charged toOtherComprehensiveIncome

$ (271) $ (788) $ (1,059) $ (979) $ 658 $ (321)



ThenetexpensefortheSERPin2012was$100(2011-$62).Thenetexpense fortheDCPlanin2012was$1,045(2011-$1,014).

ServicecostisreportedaspartoftheCorporation’stotalsalariesandbenefitsexpense inthestatementofcomprehensiveresultsofoperations.

Significant Assumptions

Theoverallexpectedrateofreturnonassetsisdeterminedbasedonmarketexpectationsprevailingonthatdate,applicabletotheperiodoverwhichtheobligationistobesettled.Theexpectedrateofreturnof6.50%wasusedin2012(2011-6.50%).Thediscount ratewasdeterminedwithreferencetomarketinterestratesofAAcorporatebondyields.

Theprincipalactuarialassumptionsusedindeterminingthepensionbenefitobligation fortheCorporation’splansareasfollows:

2012 2011

Db Plan OPEb DBPlan OPEB

Expectedrateofreturn onpensionassets

6.50% N/A 6.50% N/A

Accruedbenefitobligation asofDecember31

Discountrate 4.00% 4.00% 4.50% 4.75%Salaryincrease 3.50% N/A 3.50% N/AGeneralinflation 2.50% 2.50% 2.50% 2.50%

Benefitcostfortheyear:

Discountrate 4.50% 4.75% 5.50% 5.75%Salaryincrease 3.50% N/A 3.50% N/AGeneralinflation 2.50% 2.50% 2.50% 2.50%

Assumedhealthcarecosttrend ratesatDecember31:

Initialhealthcarecosttrendrate N/A 7.50% N/A 8.00%

Costtrendratedeclinesto N/A 5.00% N/A 5.00%

Yearthattheratereachesthe rateitisassumedtoremainat

N/A 2018 N/A 2018

Sensitivity Analysis for OPEB

Assumedhealthanddentalcarecosttrendrateshaveasignificanteffectontheamountsreportedforthehealthanddentalcareplans.Aone-percentagechangeinassumedhealthanddentalcarecosttrendrateswouldhavethefollowingimpactontheemployeefuturebenefitsandtherelatedcostsfor2012:

1% change

valuation Assumptions

Increase Decrease

Totalofserviceandinterestcost at4.75%perannum:

$ 459 $ 157 $ (111)

Accruedbenefitobligationas atDecember31,2012at4.00%perannum:

$ 4,954 $ 1,498 $ (1,089)



11. WARRANTy lIAbIlITIES

ThedeterminationoftheCorporation’swarrantyliabilitiesisdependentontheCorporation’sclaimshandlingpractices,onactuarialassessments,onthejudgementofitsmanagement,onhistoricalprecedentsandtrends,onprevailinglegal,economic,socialandregulatoryenvironmentsandonexpectationsoffuturedevelopments.Periodicreviewsareperformedbymanagementandreviewedbyourappointedactuarytoassesswhetherwarrantyclaimsliabilitiesrecordedforhomesandcondominiums,anddeferredhomeenrolmentfeesareadequaterelativetofutureclaimsandrelatedadministrationcoststoadministerclaims.

ThefollowingtablesummarizesthecomponentsofthewarrantyclaimsliabilitiesasatDecember31:

2012 2011

Changeinprovisions,netofreversals $ 5,880 $ 356

Recoveries (5,689) 654

Netclaimsincurredfortheyear $ 191 $ 1,010

2012 2011

Deferredhomeenrolmentfees, beginningofyear

$ 140,380 $ 117,805

Feesreceived 53,569 54,397

Feesearned (33,607) (31,822)

Deferredhomeenrolmentfees,endofyear 160,342 140,380

Warrantyclaimsliabilities,beginningoftheyear 24,744 32,811

Changeinclaimsoutstanding 6,340 (683)

Changesduetoassumptions(suchas:risk,inflation&discountrate)

(460) 1,039

Claimspaid (6,985) (8,423)

Warrantyclaimsliabilities,endofyear 23,639 24,744

Warrantyliabilities,endofyear $ 183,981 $ 165,124

Warranty coverage and policy

Thewarrantycoveragebeginswhenthehomeisenrolled,providingdepositprotectionandcompensationfordelayedclosingandoccupancy.Oncethenewownertakespossessionofthehome,therearethreeperiodsofwarranties:one-year,two-yearandseven-yearwarranty,eachwithdifferentindemnityscopesandlimitsofsettlementcoveringdefectsthatareprescribedundertheAct.

Significant warranty claims liability risk and assumptions

ThemarketinwhichtheCorporationparticipatesisunique.TheCorporationisthesoleproviderforwarrantycoverageonnewhomesintheprovinceofOntario.TheCorporationwasdesignatedin1976bytheGovernmentofOntariotoadministertheAct.TheprimaryobjectivesoftheActincludeconsumerprotection,builderregulationandhomeownerandbuildereducation.AnoverviewoftheCorporation’sriskmanagementframeworkandassumptionswithregardstothewarrantyliabilitiesaresummarizedbelow.

Insurance Risk

AstheadministratoroftheAct,theCorporationisexposedtoinsurancerisksimilartoanormalpropertyandcasualtyinsurancecompany.Theinsuranceriskistheriskoflossarisingfromdefectsofnewhomesifthebuildershavefailedtoperformtheirfirstandsecondyearwarrantyobligationstothenewhomeowners,orthehomeshavewarrantablemajorstructuraldefectsduringthethreetosevenyearsofthewarranty.TheCorporationisprimarilyconcernedwiththepossibilityofthewarrantableeventoccurringandtheuncertaintyoftheamountoftheresultingclaim.

InsurancerisksaremanagedthroughtheCorporation’sbuilderregulationandlicensingstrategy.Annuallicensingassessmentsareperformedonnewandexistingregisteredbuilderstoverifythattheyhavethetechnicalexperience,customerservicecapabilitiesandfinancialcapacityrequiredtobuildnewhomesincompliancetothetermsandconditionsoftheAct.



TheCorporationalsomaintainsaproactiveclaimsmanagementprogramtoensure theadequacyofthewarrantyliabilitiesandclaims:

• Collectionofhomeenrolmentfeesfrombuilderspriortoconstruction ofeachhometohelpdischargetherelatedliabilities;

• Obtainssecuritiesintheformofcash,lettersofcreditandotherguaranteesfromthebuildersduringtheregistrationandrenewalprocesstoreduceriskoffinanciallossrelatedtotheclaims;

• Experiencedclaimsservicerepresentativesworkcloselywithhomeowners andbuilderstoassesstheadequacyoftheclaimsinaccordancetotheAct;

• Processesexisttoensurethatallclaimsarecaptured,reviewedandupdatedonatimelybasiswitharealisticassessmentoftheultimatesettlementcosts;

• Engagequalifiedactuariesannuallytoreviewandassesstheadequacy ofthewarrantyliabilityandtheprovisioningprocess;and

• TheappointedactuarydeterminesassumptionsusedtomeasurewarrantyliabilitiesinaccordancewiththeprocessrecommendedbytheCanadianInstituteofActuaries.Managementreviewstheassumptionsrecommendedbytheactuary.

Theestablishmentofwarrantyliabilitiesisbasedonestablishedactuarial practice,managementjudgementandexperience.Actualsettlementsmay alsodiffersignificantlyfromtheestimatesoftheseliabilitiesduetothemeasurementuncertaintyinvolvedinestablishingassumptionsforsuchvariables asfutureratesofclaimfrequency,severity,inflation,theabilityofbuilderstofulfilltheirobligationstohomebuyers,recoveriesfrombuildersandadministrativecosts.TheCorporationisexposedtothefollowingclaimsprovisioningrisksintheprocessofadministeringtheAct:

• Futureclaimsadjustmentcost

Thisassumptionreflectsthecostsgenerallyrelatedtoclaimsadministrationincludingclaimsstaffsalaries,arelatedshareoffacilitiesoverheadandrentthatarenotallocatedtoindividualclaimfiles.Anactuariallyestimatedcostpercentageofthefutureclaimcostisappliedtotheoutstandingclaims attheendofthereportingperiod.Thisassumptionisreviewedannually bytheCorporation’sactuary.

• Incurredbutnotreportedclaims

Actualclaimsettlementsmaydifferfromestimatedclaimsettlements.Theseclaimsareestimatedbasedonhistoricalpatternsoffluctuationsinclaimestimatesandsettlements.Ingeneral,thelongertheperiodoftimebetweentheincidenceoflossandthesettlementoftherelatedclaim,thegreaterthepotentialforactualsettlementamountstodifferfromtherecordedestimates.Theimpactofchangesinincurred butnotreportedclaimsissetoutinthesensitivityanalysisonpage70.

• Adversedeviation

Theliabilityhasinherentmeasurementuncertaintythatarisesbecause:

(i)actualinvestmentreturnsmaydifferfromthediscountrateusedinactuarialcalculations;and

(ii)actualclaimssettlementsmayoccurforamountsorattimesthatdifferfromestimates(claimrisk)–thisriskoflosscanoccurduetoactualexperiencedifferingfromtheexperienceassumed.ThedevelopmentsofassumptionsforfutureclaimsarebasedontheCorporation’sexperienceandknowncasesorpotentialissues.Suchassumptionsrequireasignificantamountofprofessionaljudgement;therefore,actualexperiencemaybemateriallydifferentthantheassumptionsmadebytheCorporation.Homebuilderpaymentpatterns,renewals,withdrawalsandsurrenderactivities,canbeinfluencedbymanyfactorsincludingmarketandgeneraleconomicconditions.Theirbehavioralsohasanimpactonassessingfutureclaims.Theimpactofchangesinadversedeviationissetoutinthesensitivityanalysisonpage70.

Recovery Risk

Inthenormalcourseofmanagingthewarrantyprogram,theCorporationreducesexposuretoclaimsbyseekingrecoveryfrombuildersforcertainwarrantyrelatedissues.TheabilitytoseekrecoverydoesnotdischargetheCorporation’sresponsibilitytomanagewarrantyissues.FailurebyabuildertoupholditsobligationcouldresultinlegalactionbytheCorporation.Consequently,allowancesareestablishedforamountsdeemeduncollectible.Thisriskismanagedbyobtainingsecurityfromthebuildersattimeofregistrationorrenewal,asdisclosedinNote12,andtheCorporation’sproactivecollectionprocess. TheimpactofchangesinrecoveryriskissetoutinNote6.



Credit Risk

TheCorporationassessesthebuilders’riskprofileincludingfinancialhealthduringtheregistrationandrenewalprocesses.Basedontheassessment,abuildermaybelicensedandasdisclosedinNote12,securityisobtainedintheformofcash,lettersofcredit,andotherguaranteesfromthebuilderinordertoreducetheriskoffinanciallossrelatedtofuturewarrantyclaimsfromhomeowners.

liquidity Risk

LiquidityriskistheriskthattheCorporationwillencounterdifficultyinmeetingobligationsassociatedwithwarrantyliabilities.TheCorporationisexposedtodailycashrequirementsfromsettlementofclaims,cashsecurityreleasesandoperatingexpenses.Liquidityriskisconsideredlowasthemajorityofitsinvestmentportfolioaretradedinahighlyliquidmarketandcanbereadilyconvertedtocash.TheCorporationalsohasa$3,000lineofcreditthatitcandrawonandcurrentcashequivalentsof$2,764(2011-$2,527).

Concentration of Insurance Risk

TheCorporation’sexposuretoconcentrationofinsuranceriskismitigatedbytheestablishmentofadiversifiedportfolioofcompetentbuildersthroughtheCorporation’sstrongregulatingandlicensingstrategy.Builders’registrationandrenewalsareassessedannually.ThetablebelowshowsthewarrantyclaimliabilitiesbyclaimtypesasatDecember31:

2012 2011

Freehold $ 2,084 $ 3,187

Condominiums

High-rise 7,504 5,146

Low-rise 101 357

Non-casespecific 615 2,259

Totalclaims $ 10,304 $ 10,949

Impactofchangesinassumptions 13,335 13,795

Totalwarrantyprovision $ 23,639 $ 24,744

Market Risk

Marketriskistheriskthatthefairvalueorfuturecashflowsofthewarrantyliabilities willfluctuatebecauseofchangesinmarketprices.Thisriskiscomprisedof:

• Interestraterisk

Interestrateriskistheriskthatthevalueoffuturecash-flowsofafinancialinstrumentwillfluctuatebecauseofchangesinmarketinterestrates.Warrantyclaimsliabilitiesarediscountedtoreflectthetimevalueofmoneyovertheperiodsbetweenthestatementoffinancialpositiondateandsettlementdatebasedonacceptedactuarialpractice.Thediscountrateusedisbasedonmarketyieldofthefixedincomeportfoliosupportingthewarrantyliabilities.Theimpactofchangesininterestrateissetoutinthesensitivityanalysisonpage70.

• Inflationrate

Thecosttoresolveclaimsaresubjecttoinflationarypressure.TheCorporationusedtheConstructionPriceIndexasthebasisofinflationaryindex,adjustedbyexpectedeconomicandhousingindustryimplicationsbasedonmanagement’spastexperiencesandexpertise.Theimpactofchangesininflationrateissetoutinthesensitivityanalysisonpage70.

Sensitivity analysis on warranty claims

Thefollowingtableillustratestheassumptionsusedindevelopingtheadequatewarrantyclaimliabilityrequiredforthestatementoffinancialposition:

2012 2011

Discountrate 1.9% 2.0%

Inflationrate 2.5% 2.5%

Futureclaimsadjustmentcosts 29.0% 26.0%

Incurredbutnotreportedclaims $ 6,000 $ 6,762

Adversedeviation $ 2,681 $ 2,686

Discount $ (74) $ (257)



Theanalysisbelowisperformedforreasonablypossiblemovementsinkeyassumptionswithallotherassumptionsheldconstant,showingtheimpacttowarrantyclaimliabilities,statementofcomprehensiveresultsofoperationsandequity.

Change in Assumption

Impact on warranty liability

Impact on comprehensive results

of operations

Impact on equity

Increase Decrease Increase Decrease Increase Decrease

Discountrate 1.0% $ (505) $ 523 $ 505 $ (523) $ 505 $ (523)

Inflationrate 1.0% $ 367 $ (360) $ (367) $ 360 $ (367) $ 360

Futureclaimsadjustmentcosts 1.0% $ 185 $ (185) $ (185) $ 185 $ (185) $ 185

Maturity profile

Thetablebelowsummarizesthematurityprofileofthewarrantyclaimliabilities.Thematurityprofiles aredeterminedbasedonestimatedtimingofnetcashoutflowsfromtherecognizedwarrantyliabilities.

Warranty liability Due within one year

Due two through five years

Total

2011 $ 12,837 $ 11,907 $ 24,744

2012 $ 10,820 $ 12,819 $ 23,639

Sensitivity analysis on deferred home enrolment fees

Ashomeenrolmentfeesarecollected,theyaredeferredandtakenintorevenueovertheperiodofthewarrantythatthefeescover.Therateatwhichthesefeesarerecognizedinrevenueisbasedonthepatternofincurrenceofclaimcostsoverthewarrantyperiod,or‘earningpattern’.Shiftsinclaimspatternsaffecttheearningpattern.Theanalysisbelowisperformedforreasonablypossiblemovementsintheearningpatternwithallotherassumptionsheldconstant,showingtheimpacttowarrantyliabilities,statementofcomprehensiveresultsofoperationsandequity.

Change in Assumption

Impact on warranty liability

Impact on comprehensive results of

operations

Impact on equity

Accelerated Decelerated Accelerated Decelerated Accelerated Decelerated

EarningPattern 2.5% $ (7,587) $ 7,444 $ 7,587 $ (7,444) $ 7,587 $ (7,444)



Claim history

Claimsareclassified,managed,analyzedandreservedforbasedonspecificknowncasesandpotentialcasesandtheliabilityisadjustedforadversedeviation.

ThefollowingtableillustratesthepastexperiencerelatedtotheclaimstheCorporationhassettled:

Estimateofcumulativeclaims All Prior years Claims with

Outstanding liability

2007 2008 2009 2010 2011 2012 TOTAl

AllPriorYears $ 73,345

Atendofoccurenceyear $ 18,365 $ 29,552 $ 26,646 $ 16,095 $ 6,425 $ 4,955

OneYearLater 16,712 22,426 20,848 12,539 9,058 –

TwoYearsLater 15,832 20,626 19,255 12,752 – –

ThreeYearsLater 12,360 20,448 19,352 – – –

FourYearsLater 12,053 20,476 – – – –

FiveYearsLater 12,129 – – – – –

CURRENT ESTIMATE OF CUMUlATIvE ClAIMS

73,345 12,129 20,476 19,352 12,752 9,058 4,955 $ 152,067

ClaimsPad

AllPriorYears 72,805

Atendofoccurenceyear 5,521 7,833 9,989 5,721 3,628 2,270

OneYearLater 4,083 7,944 6,831 3,505 2,635 –

TwoYearsLater 1,640 3,862 626 1,300 – –

ThreeYearsLater 572 194 339 – – –

FourYearsLater 39 214 – – – –

FiveYearsLater 211 – – – – –

CUMUlATIvE ClAIMS PAID 72,805 12,066 20,047 17,785 10,526 6,263 2,270 141,763

Reconciliationtothestatement offinancialposition

Currentprovisionbeforediscounting $ 540 $ 63 $ 429 $ 1,567 $ 2,225 $ 2,795 $ 2,685 10,304Actuarialreserves 13,409Discounting (74)

Present value recognized on the statement of financial position

$ 23,639



12. FUNDS HElD AS SECURITy

TheCorporationreceivessecurityintheformofcash,lettersofcreditandotherguarantees,frombuildersinordertoreducetheriskoffinanciallossrelatedtofuturewarrantyclaimsfromhomeowners.Thefundsheldassecuritydonothaveanyfixedcontractualmaturitiesandaretobereturnedtothebuildersorreleasedonlyuponsatisfactorycompletionofcertainrequirements,suchastherebeingnoorminimaldepositorfinanciallossriskandthecompletionofoutstandingwarrantyobligationsundertheAct,thetimingofcompletionofwhichcannotbereasonablyestimated.

SecurityreceivedincashisinvestedaspartoftheCorporation’sinvestmentportfolio.AsatDecember31,2012,thefundsheldassecurityof$41,033(2011-$40,901),presentedonthestatementoffinancialpositionasaliabilityarethepotentiallyrefundablesecuritydepositsreceivedincash,includingcumulativeaccruedinterestthereontoDecember31,2012of$1,249(2011-$1,238).Lettersofcreditandotherguaranteesareavailabletobedrawnupontosettleknownclaims.Suchdrawnamountswouldreducetheamountsrecoverablefrombuildersinthestatementoffinancialposition.

Duringtheyear,theCorporationincurredinterestof$396(2011-$394)oncashsecuritydeposits.InterestiscalculatedbasedonPrimeless2%,adjustedevery sixthmonth(generallyAprilandOctober).

13. PROvISIONS, CONTINGENCIES, COMMITMENTS AND GUARANTEES

Inthenormalcourseofbusiness,theCorporationisapartytoanumber oflawsuitsastheadministratoroftheAct.

Totheextentthatlawsuitsrelatetodisputesofwarrantycoverage,provisionsfor lossareincludedinthewarrantyliabilitiesonthestatementoffinancialposition.Otherlawsuitsareatvariousstagesoflegalproceedings,theoutcomeofwhich arecurrentlynotdeterminableandarenotexpectedtohaveasignificantimpact ontheCorporation’sfinancialposition.Accordingly,noprovisionforanyliability hasbeenmadeinthesefinancialstatementsasatDecember31,2012.

Inthenormalcourseofoperations,theCorporationexecutesagreementsthatprovideforindemnificationtothirdpartiesintransactionssuchasserviceagreements,leasesandpurchasesofgoods.Undertheseagreements,theCorporationagreestoindemnifythecounterpartyagainstlossorliabilityarisingfromtheactsoromissionsoftheCorporationinrelationtotheagreement.Inaddition,theCorporationhasalsoagreed toindemnifyitsdirectorsandcertainofitsofficersandemployeesinaccordancewiththeCorporation’sby-laws.

Theseindemnificationprovisionswillvarybasedonthenatureandtermsoftheagreements.ThenatureoftheseagreementsprecludesthepossibilityofmakingareasonableestimateofthemaximumpotentialamounttheCorporationcouldberequiredtopayastheagreementsoftendonotspecifyamaximumamountandtheamountsaredependentontheoutcomeoffuturecontingentevents,thenatureandlikelihoodofwhichcannotbedetermined.Historically,theCorporationhasnotmadesignificantpaymentsundersuchindemnificationagreements.Accordingly,noamountshavebeenaccruedrelatedtotheseagreementsasatDecember31,2012and2011.

Operating lease commitments

TheCorporationhasenteredintocommercialleasesonpremisesandothermiscellaneousequipmentwhicharerecognizedandreportedaspartofgeneralandadministrativecostsinthestatementofcomprehensiveresultsofoperations.For2012,theCorporationrecognizedminimumleasepaymentsof$747(2011-$679)inthestatementofcomprehensiveresultsofoperations.Theseleaseshaveanaveragelifeofthreeyearswithrenewaloptionincludedinthemiscellaneousequipmentcontracts.TherearenorestrictionsplacedupontheCorporationbyenteringintotheseleases. Thefutureminimumannualleasepaymentsunderoperatingleaseforthenextfiveyearsandthereafterasfollows:

2012 2011

Operatinglease Minimum lease payments

Minimumleasepayments

Withinoneyear $ 757 $ 754

Betweenoneandfiveyears 3,177 3,078

Morethanfiveyears 2,716 3,572

Presentvalueofminimumleasepayments $ 6,650 $ 7,404



Finance lease obligations

TheCorporationhasleasedcomputersandotherofficeequipmentthatqualifiesasafinancelease.Thebalanceofthefinanceleaseobligationsarisingfromtheacquisitionofcertaincomputerandofficeequipmentarereportedseparatelyonthestatementoffinancialposition.ThetotalvalueoftheseobligationsasatDecember31,2012is$1,200(2011-$1,446).Interestexpenseof$114wasincurredduring2012(2011-$102)ontheleasesandisreportedinthestatementofcomprehensiveresultsofoperations.Theseleaseshaverenewaloptionsforeithersingleormulti-years.Theymaycontainpurchaseoptionsandescalationclauses.Renewalsareattheoptionofthespecificentitythatholdsthelease.

Futureminimumleasepaymentsandthepresentvalueofthenetminimumleasepaymentsunderthefinanceleases areasfollows:

2012 2011

Minimum lease

payments

Present value minimum payments

Minimum lease

payments

Presentvalue minimum payments

Withinoneyear $ 788 $ 688 $ 683 $ 604

Betweenoneandfiveyears 582 512 901 842

Morethanfiveyears – – – –

1,370 1,200 1,584 1,446

Lessamountsrepresentingfinancecharges

170 – 138 –

Presentvalueofminimumleasepayments

$ 1,200 $ 1,200 $ 1,466 $ 1,446

Lease inducements

TheCorporationreceivedvariousformsofleaseinducementsforitscurrentCorporateofficesincludingreducedrentandleaseholdimprovements.Theseleaseinducementsareamortizedoverthetermoftheleaseagreementsandoffsetagainstrentexpenseswhichareincludedingeneralandadministrativeonthestatementofcomprehensiveresultsofoperations.TheamortizedbenefitsinDecember31,2012were$96(2011-$82).

AsofDecember31,2012,thetotalunamortizedleaseinducementsreportedonthestatementoffinancialposition is$1,279(2011-$1,383).



14. ACCOUNTS PAyAblE AND ACCRUED lIAbIlITIES

2012 2011

Tradeandsupplieraccruals $ 1,560 $ 1,917

Amountsduetovendorsandbuilders 1,310 1,547

Salariesandbenefits 3,000 2,949

Deferredrevenue 126 106

Otherliabilities 1,060 1,121

Totalaccountspayableandaccruedliabilities $ 7,056 $ 7,640

Expectedtobesettledwithinoneyear $ 5,746 6,093

Expectedtobesettledinmorethanoneyear 1,310 1,547

Totalaccountspayableandaccruedliabilities $ 7,056 7,640

15. INvESTMENT INCOME

2012 2011

Changeinfairvalueoffixedincomeportfolio $ 463 $ 8,073

Interestincomefromfixedincomeportfolio 8,802 9,453

Changeinfairvalueofequityportfolio 11,662 (7,430)

Dividendsfromequityportfolio 3,628 3,032

Foreignexchange(losses)gains (81) 14

Totalinvestmentincome $ 24,474 $ 13,142

16. INTEREST ExPENSE

2012 2011

Interestonfundsheldassecurity(note12) $ 396 $ 394

Interestonleaseobligations(note13) 114 102

Totalinterestexpense $ 510 $ 496

17. CAPITAl MANAGEMENT

TheCorporation’scapitalconsistsofthesurplus.AlthoughthereisnoexternalregulatoryrequirementsimposedontheCorporation’scapital,managementhasadoptedacapitalmanagementframeworkmodeledaftertheframeworkusedinthepropertyandcasualtyinsuranceindustryinCanadaandmodifiedtoreflecttheCorporation’scircumstancesincludingitsinabilitytoraisecapitalintraditionalways.Thisframeworkincorporatesthebusinessrequirementsforsufficientcapitalthroughoutthevariationsofthenewhomebuildingcycle,includingpossiblelossesfromafuturecatastrophicevent.ItalsoreflectstherelativelyhighriskprofileoftheCorporation’swarrantyoperations,includingthehighlevelofmeasurementuncertaintyinherentinitswarrantyliabilitiesduetothelongwarrantyperiodofuptosevenyearsandtootherfactorsexplainedinNote11.TheCorporationisnotsubjecttoanyexternallyimposedcapitalrequirementsundertheActorotherwise.

Inapplyingtheframework,thetotalequityoftheCorporationasatDecember31,2012and2011hasbeendeterminedbymanagementtobesufficienttocoverpossiblelossesfromafuturecatastrophiceventasfurthersupportedbytheannualdynamiccapitaladequacytestingperformedbytheCorporation’sappointedactuaryduringtheyear.



18. RElATED PARTy TRANSACTIONS

Intheordinarycourseofbusiness,theCorporationprovidesabroadrangeofservicestohomeownersandbuildersbasedonitsmandatetoadministertheAct.Accordingly,theCorporationmayenterintotransactionswithbuildersrelatedwiththeCorporation’sBoardofDirectorsthrougharelationshipofprincipal,director,officerand/orguarantor.

AsatDecember31,2012,therearenocollectionandlitigationaccountreceivablesandcashsecuritiesrecognizedduefromrelatedparties.Lettersofcreditandotherguaranteeslodgedbyrelatedpartiesarerecognizedinthefinancialstatementsonlytotheextenttheyareexpectedtobedrawnupontosettleknownclaims.Transactionsbetweenrelatedpartiesaremadeatnormalmarketprices.

TheCorporationpaysanoversightfeetotheGovernmentofOntarioforeachcalendaryear.ThefeeiscalculatedbasedontheestimatednumberofenrolmentsbyhomepurchasersintheActduringthefiscalyearoftheGovernmentofOntario(April1toMarch31)atfivedollarsperenrolment.TheCorporationisrequiredtopayanamountnotlessthan$200andnotmorethan$300perannum.In2012,theCorporationincurredafeeof$280(2011-$254).

Key management personnel compensation

IAS 24, Related Party Disclosures,defineskeymanagementpersonnelasthosepersonshavingauthorityandresponsibilityforplanning,directingandcontrollingtheactivitiesoftheentity,directlyorindirectly,includinganydirector(whetherexecutiveorotherwise)ofthatentity.ThekeymanagementpersonneloftheCorporationaremembersoftheboardofdirectorsandmembersoftheCorporateleadershipteam.Keymanagementpersonnelcompensationincludesthefollowingexpenses:

2012 2011

Short-termemployeebenefits $ 3,613 $ 3,618

Boardofdirectorsfees 388 407

Post-employmentbenefits 347 358

$ 4,348 $ 4,383

19. COMPARATIvE FIGURES

Certaincomparativefigureshavebeenreclassifiedinthefinancialstatementstoconformtothecurrentyear’spresentation.TheseincludethecombiningofPrepaidexpensesof$289andOtherassetsof$100asoneiteminthestatementoffinancialpositionasthetwoseparateamountswerenotmaterial,andthereclassificationof$472fromOthersettlementsandfeesreceivedtoRecoveriesforclaimsandconciliationfeesintheStatementofcashflowstobetterreflectthenatureoftheitem.

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CHANGE IS THE FOUNDATION OF GROWTH - Tarion.com · 2018. 4. 6. · 2007 2009 2012 69% 72% 74% 76% EMPLOYEE ENGAGEMENT* * 2007–2011 results are based on a bi-annual employee opinion