Housing & Home Warranty Programs
World Research

September 2005

Organization for Housing Warranty
Japan

Contents
Preface
1. Outline of research
1-1. Countries covered
1-2. Research items
1-3. Research methods
2. Statistical Compendium for each Country2-1. Research item
2-2. Data according to country
Australia / Belgium / Brazil
Canada /China / Croatia
Denmark / Finland / France
Germany / India / Indonesia
Ireland / Israel / Italy
JAPAN / Malaysia / Mexico
Nepal / Netherlands / New Zealand
Norway / Philippines / Poland
Portugal / Russia / Singapore
South Africa / South Korea / Spain
Sweden / Switzerland / Thailand
Turkey / Uganda / United Kingdom
United States / Viet Nam
3. Home Warranty Schemes in the World
3-0. Introduction (consumer protection in housing)3-1. The Need of the Consumer Protection in Housing
3-2. Legal Background3-3. Consumers’ Movement
3-4. Countermeasures
3-5. Structure of Home Warranty Scheme
3-6. Working Hypothesis of Survey
4. New Home Warranty Schemes in the World (Country by country reports)
4-1. Australia
4-1-1. Background4-1-2. Licensing or Registration of Builders
4-1-3. Building Disputes
4-1-4. Home Indemnity Insurance (H.I.I.)
4-1-5. Building Audits
4-1-6. Cost of H.I.I.

4-2. Canada
4-2-0.Home Warranty in Canada
4-2-1. Alberta
4-2-2. Atlantic
4-2-3. British Columbia
4-2-4. Manitoba
4-2-5. Ontario
4-2-6. Quebec
4-2-7. Saskatchewan
4-3. China
4-3-1.Housing Circumstances
4-3-2.Quality Warranty for Newly Constructed Houses Housing “defect")4-3-3. Warranty Insurance
4-4. France
4-4-1.History
4-4-2.Outline of the System under the Spinetta Law
4-4-3.Uniqueness of the system-Double Compulsory Insurance System
4-4-4.Quality Control
4-4-5.Dispute Settlement
4-4-6. Performance Indication System
4-5. Ireland
4-5-1.History
4-5-2.Operation
4-5-3.Membership (Registration)
4-5-4.On-site Inspection
4-5-5.Warranty Coverage
4-5-6.The House Registration Fee
4-5-7.Numbers
4-5-8.Others
4-6. Japan
4-6-1.Housing Situation in Japan
4-6-2.New Home Warranty Program
4-6-3.OHW Warranty Program for Houses
4-6-4.Other Warranty Programs of OHW
4-6-5.Summary
4-7. Netherlands
4-7-1.Introduction
4-7-2.History and Objective of the GIW
4-7-3.Guarantees and Safeguards from the GIW
Guarantee and Safeguard Scheme
4-7-4.The Complaints Procedure
4-7-5.Appeal to the Defect Safeguard
4-7-6.Conclusion

4-8.South Korea
4-8-1.Housing Situation
4-8-2.New Home Warranty Program
4-8-3.Warranty Program for Houses
4-9.Sweden
4-9-1.Housing Situation in Sweden
4-9-2.History
4-9-3.AB Bostadsgaranti
4-9-4.GAR-BO AB
4-10.United Kingdom
4-10-1.Setting UK standards
4-10-2.Establishment of NHBC
4-10-3.NHBC Today
4-10-4.Other NHBC Services
4-10-5.Other UK Warranty Providers
4-11.United States
4-11-1.Background and History in the US
4-11-2.Bankrupcy of HOW
4-11-3.HBW
4-11-4.Warranty Programs for Existing Houses andExtended or Reconstructed Houses
Attachment: Copies of Panels Exhibited at Tokyo IHHWC.

Preface
Organization for Housing Warranty (OHW) carried out the first world research on housing andhome warranty in 1997. This time, in commemoration of the 10th anniversary of theInternational Housing & Home Warranty Conference (Tokyo IHHWC), OHW has updated theresearch results, expanding its coverage to the housing situation and related basic data in 38
countries.
At the outset of this research, the delegation from OHW asked for the cooperation from theAEHWO (Association of European Home Warranty Organizations) when the conference washeld in Stockholm in October 2002, which received offers of support from other participants.
Encouraged by this support, OHW has set up a working group to conduct a research headed by
Prof. Kohei Matsumoto, Department of Real Estate, Meikai University.
It is not easy to compare schemes from different countries on an equal footing. However, thiscollective information is expected to be used as a reference tool for further development of thescheme within these respective different countries. The panels exhibited on the conference site
are the “At a glance” version of the research. Copies of these panels are also included in thisCD-ROM.
It would not have been possible to have completed the research without the contribution fromthe following people, namely Mr. Murray Nugent from the Australian Home Warranty inAustralia, Mr. Nigel Lilley from Builders Registration Board in Australia, Mr. Bob Maling fromthe Homeowner Protection Office in Canada, Mr. Bruno Nantel from APCHQ in Canada, Mr.
David Ferguson from NHWP of Manitoba in Canada, Mr. Dennis Little from The Alberta New
Home Warranty Program in Canada, Mr. Gregory Gee from Tarion Warranty Corporation in
Canada, Mr. Keith Hanson from Saskatchewan Home Warranty in Canada, Mr. Pat Mulcahy
from Atlantic Home Warranty Program in Canada, Mr. TONG YUE-ZHONG from The Centerfor Housing Industrialization Ministry of Construction in P.R. China, Mr. Raphael Slama from
Qualitel in France, Mr. Eugene Farrel from HomeBond in Ireland, Mr. Kim Cham-Ho from the
Korean Housing Institute in Korea, Mr. Frits Horvers from SWK in The Netherlands, Mr. Kjell
Jutehammar from AB Bostadsgaranti in Sweden, Mr. Rod MacEachrane and Ms. Francesca
Templeman from NHBC in the United Kingdom and Dr. W. E. Fluhr from the Home Buyers
Warranty in United States of America. We are also indebted to the members of the Asian
Forum. All of the above individuals were kind, helpful and courteous during the many
communications that took place.
We firmly believe that this research is of great importance in providing a programatic
understanding of housing warranties in the world, and will serve as an excellent reference point
for the further development of these programs within each respective country.

We received a subsidy from the Ministry of Land, Infrastructure and Transportation to complete
this research.
September 2005
Fukuo Ochi
President, Organization for Housing Warranty1All rights reserved. No part of this publication may be reproduced in any material form
(including photocopying or storing it in any medium by electronic means and whether or nottransiently or incidentally to some other use of this publication.) without the written permission.
Published by
Organization for Housing Warranty
3F Akasaka Twin Tower Main Bldg.
2-7-22 Akasaka Minato-ku Tokyo 107-0062
Phone: +81-3-3584-5748
info@ohw.or.jp

September, 2005

2

1. Outline of research
1-1. Countries covered
The research covers a total of 38 countries, consisting of participants in past IHHWC, countries
for which OHW has conducted research on housing warranty and those expected to participate in
the tenth IHHWC.
1: Australia
2: Belgium
3: Brazil
4: Canada
5: China
6: Croatia
7: Denmark
8: Finland
9: France
10: Germany

11: India
12: Indonesia
13: Ireland
14: Israel
15: Italy
16: JAPAN
17: Malaysia
18: Mexico
19: Nepal
20: Netherlands

21: New Zealand
22: Norway
23: Philippines
24: Poland
25: Portugal
26: Russia
27: Singapore
28: South Africa
29: South Korea
30: Spain

31: Sweden
32: Switzerland
33: Thailand
34: Turkey
35: Uganda
36: United Kingdom
37: United States
38: Viet Nam

1-2. Research items(1) Housing conditions and other basic matters (applicable to all of the countries)
1) Basic data
Population, area, population density, elderly population, number of households, average life
expectancy, gross domestic product (GDP), GDP per person, number of construction
employees, etc.
2) Housing data
Housing stock, owner-occupied dwellings, number of dwelling per household, annual new
construction, floor area, etc.
(2) Housing warranty programs (applicable only to countries with warranty programs)
1) List of housing warranty programs in the world
Year of program foundation, main program operators, prevalence, annual number of houses
guaranteed, warranty period, freedom of program use, insurance back-up, home registration
fees, etc.
2) Outline of housing warranty programs in the world
Detailed description of housing warranty program, main program operator and outline ofprogram in major agencies (coverage, details of warranty, quality control, home registration
fees, records of program use, relation to insurance, handling of disputes, etc.)

1-3. Research methods(1) Research policy
Data are collected allowing for difference in level of detail from country to country.
No uniform rules are applicable to all countries in relation to the year of data collection andthe source of data. Best efforts are made to collect the latest data and specify the source.
3

(Figures will be rounded to the level of basic data provided by the Ministry of Foreign
Affairs when the research results are presented at the conference.)
Data on housing markets are collected and organized, and verified by the contact person ineach country.
(2) Data collection
1) Extraction from statistical data
"International statistical compendium 2004" prepared by the Statistics Bureau of the
Ministry of Internal Affairs and Communications of Japan
Statistical data are summarized to help understand the population facts and economic,
social and cultural conditions in other countries, compared with Japan's position in theworld.
(Data are extracted mainly from statistical documents and websites of internationalorganizations including the United Nations.)
Edited by the Statistical Training Institute, Statistics Bureau, Ministry of Internal Affairs
and Communications of Japan.
Published by the Statistics Bureau, Ministry of Internal Affairs and Communications ofJapan.
"Regional Affairs" prepared by the Ministry of Foreign Affairs of JapanThe Ministry of Foreign Affairs makes available basic data on countries throughout theworld. Data are accessible via the website. Major data items are listed below.

4General conditions

1. Area 2. Population 3. Capital 4. Ethnic groups
5. Languages 6. Religions 7. Average life expectancy
8. Literacy 9. College-going rate 10. Brief history
Government type and 1. Government type 2. Head of state 3. Parliament 4.
internal affairs
Cabinet 5. Internal affairs
Diplomacy and national 1. Basic diplomatic policy 2. Military strength
defense
Economy1. Major industries 2. GNP (in thousands of millions of US
dollars) 3. GNP per person (in US dollars) 4. Economic
growth rate (%) 5. Inflation rate (%) 6. Unemployment
rate (%) 7. Total trade value (in thousands of millions of US
dollars) 8. Trade items 9. Trading partners (in the order ofshare) 10. Exchange rate 11. Economic outlook
Economic cooperation
1. Records of Japanese assistance (cumulative total to 2000
of number of notes exchanged or number of JICA (Japan
International Cooperation Agency) projects implemented in
the case of technical assistance) 2. Key assistance areas(based on assistance programs for respective countries)
3. Records of assistance to major countries (Total net
expenditure: 502 million dollars in 2000) 4. Other
Bilateral
relationship 1. Political relationship 2. Economic relationship 3.
with Japan
Cultural relationship 4. Number of Japanese population in
the country 5. Number of nationals of the country living inJapan
6. Mutual VIP visits (since 1998; positions at the time of visit
are specified.) 7. Bilateral treaties or agreements
United Nations (UN Economic Commission for Europe: http://www.unece.org/)
Data on economic conditions in European countries are available at the website. (Major sources:
Statistical documents or websites of international organizations including the United Nations.)
Data of organizations of countries throughout the world (websites)
Data are collected from the websites of embassies, or of public organizations to which wereintroduced through inquiries addressed to embassies. Data are accessed via websites of countries
including the following.

5

URL of website of statistical bureaus of countries throughout the world
Country
Australia

Statistics Bureau
Australian Bureau
Statistics

URL
Notes
of http://www.abs.gov.a 2001
Censusofu/Population and Housing(Charge)
India
Census of India
http://www.censusin Census of India 2001
dia.net/Indonesia
Badan Pusat Statistik http://www.bps.go.id Population
Statistics,(BPS-Statistics Indonesia) /index.shtml
Social Welfare Statistics(There is no related
data.)
Malaysia
Department of Statistics http://www.statistics. Population and Housing
Malaysia
gov.my/Census 2000 (Charge)
Mexicohttp://www.inegi.gob Neither in English nor in.mx/inegi/default.asp Japanese
Statistics New Zealand
http://www.stats.govt 2001
CensusofInstituto.nz/
population
andNacional de
dwellings
Estadística,
Geografía eInformática
(INEGI)ofthePhilippines
・ National Statistical http://www.nscb.gov. Population
ph/Philippines
CensusCoordination Board(There is no related
・ National Statistical
data.)
OfficeSingapore
Department of Statistics http://www.singstat.g Household
Statistics
Singaporeov.sg/index.html(There is no related
data.)South Africa
Statistics South Africa
http://www.statssa.go Generalhouseholdv.za/
survey 2003
ThailandNational Statistical Office http://www.nso.go.th Population and Housing/eng/index.htm
Census 2000
UgandaUgandaBureauof http://www.ubos.org/ Population and Social
Statistics
Statistics 2002
Data are retrieved by accessing the website specifying such keywords as census, population,
household or dwelling.
2) Interviews with relevant people
A letter was sent to the embassy of the country in Japan to request cooperation, a telephone
call was made and the embassy visited.
A letter was sent to the Japanese embassy in the country to request cooperation.
The contact person resident in Japan was interviewed for Ireland, Norway, New Zealand,
China, South Africa, and the Republic of Korea, and direct contact was made in thefollowing cases.
A separate interview was undertaken for Croatia.
The participants in the third Asian Forum* held in December, 2004 were contacted by e-mailin April and May through the good offices of the Director for International Codes andStandards, Building Guidance Division, Housing Bureau, Ministry of Land, Infrastructure
and Transport (MLIT).
* Asian Forum is an international forum sponsored by Japan Ministry of Land, Infrastructure
and Transport and Institute of International Harmonization for Building and Housing.
6

Over this gathering the professionals in the fields of housing and housing construction
from public and private sectors in Asian countries exchange the information andexperiences.
(3) Implementation of questionnaire surveys
The questionnaire was sent to the contact person in each country. In a country without any
point of contact, the questionnaire was sent to a housing warranty organization through theembassy. Questionnaires were prepared and answered in English.
1) Countries with the past data on the housing warranty program
Surveys were conducted on housing warranty programs in eight countries.* The working
group sent these countries copies of an outline of the world’s housing warranty programs
that the working group prepared based on the past survey, and a list of general information
including housing condition and matters related to housing warranty programs, andrequested their modification.
*Denmark, the UK, France, the Netherlands, Sweden, the USA, Canada and Australia2) Other countries
The working group requested countries other than the eight mentioned in 1) above to
confirm a list that the working group prepared of basic matters related to housing conditions.
The working group also sent copies of the outline of housing warranty programs in the eight
countries mentioned in 1) above, and verified whether a housing warranty program exists or
not in the country. If there exists a warranty program, the working group requested that thecountry prepare and submit an outline of the said program according to the examples of theeight countries. The working group identified the quality guarantee programs of the country,
if any.
3) Organization of responses to questionnaires
The working group compiled a report on the responses to questionnaires and addressed
questions about unclear points to respondents whenever necessary.

7

Setup for research
In early 2003 the working group to convey the world research was established with Professor
Matsumoto of the Department of Real Estate Science, Meikai University, as a head and with Dr.
Shuichi Matsumura and Mr. Tadashi Tonami as supervisors for data collection, questionnaire
surveys, reporting on the research and preparation of results. Professor Matsumoto is well versedin the housing conditions and performance warranty programs in other countries.
Members of Housing & Home Warranty Programs World Research Group
LeaderKohei Matsumoto
Professor, Dept. of Real Estate, Meikai University
Supervisor Shuichi Matsumura Associate Professor, Department of Architecture,
Graduate School of Engineering, the University ofTokyo, Japan
Tadashi Tonami
Chief Research
Department of Housing & Urban
Engineer
Planning,
Building
Research
Institute
OHW
Tetsuo Numaoi
Executive Director Organization Housing Warranty(OHW)
Shunichi Hokura
Managing Director OHW

Designer
Consultants

Yasuo Suganuma
General Manager
OHW
Nobuhiko Yamashita Manager
OHW
Osamu Matsumura
Manager
OHW
Michiko Yamauchi Senior Staff
OHW
Reiko Sasaki
Chief Staff
OHW
Nobuko Inagaki
Ichiura Housing & Planning Associates Co. Ltd.

8

2. Statistical Compendium for each Country2-1. Research item
Research item list
Classification

Details2

Basic Data

Housing Data

・Country area (km )・Population
・Population density (person / km2)
・GDP per person (US$)
・Households
・Average size of household
・Population of 65 years old and above (%)
・Housing Stock・Owned occupied dwellings (%)
・The number of dwellings per household
・Detached houses (%)
・Housing Starts
・Average floor space per dwelling (m2)・Price index of dwellings (1985 = 100)

9

Stock
StartsStockStarts2-2. Data according to country
Australia
Classification

Details

Data

・Country area （k㎡）
・Population

Source: Mainly from ABS(Australian Bureau of Statistics)

200,000,000

2005

○

Source: Mainly from ABS(Australian Bureau of Statistics)

2.5

2005

○

Source: Mainly from ABS(Australian Bureau of Statistics)

30,0002005○

7,500,000

2005○

Source: Mainly from ABS(Australian Bureau of Statistics)

2.5

2005

○

Source: Mainly from ABS(Australian Bureau of Statistics)

12.5

2005

○

Source: Mainly from ABS(Australian Bureau of Statistics)

7,300,000

2005○

Source: Mainly from ABS(Australian Bureau of Statistics)

73

2005

○

Source: Mainly from ABS(Australian Bureau of Statistics)

1

2005

○

Source: Mainly from ABS(Australian Bureau of Statistics)

・Average size of household
・Population of 65 years old
and over（％）
・Housing Stock・Owned occupied dwellings（％）
・The number of dwellings
per household
Housing
Data

・Detached houses（％）
・Housing Starts

Notes

○

・GDP per person （US＄）
・Households

Source１ Source２ Source３ Source４ Source５

2005

・Population density （person/k㎡）
Basic
Data

Year

7,692,024

79.3

2005

○

Source: Mainly from ABS(Australian Bureau of Statistics)

150,000

2005○

Source: Mainly from ABS(Australian Bureau of Statistics)

・Average floor spaceper dwelling （㎡）

Stock

225

2005

○

Source: Mainly from ABS(Australian Bureau of Statistics)

Starts

230

2005

○

Capital cities
Source: Mainly from ABS(Australian Bureau of Statistics)

・Price index of
dwellings(1985=100)

Stock

-

-

Starts--Belgium
Classification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Source１ Source２ Source３ Source４ Source５

2000

10,372,000

2003

・Population density （person/k㎡）

339.8

2003

・GDP per person （US＄）

23,8472002

・Households

4,084,000

2001

2.4

2001

・Average size of household
・Population of 65 years old
and over（％）
・Housing Stock

○
○
○
○
○

16.7

1999
2001

○

66.4

2001

○

・Detached houses（％）
・Housing Starts

-

-

-

-

Notes

○

4,084,000

・Owned occupied dwellings（％）
・The number of dwellings
per household
HousingDataYear30,528○
Data refer to occupied dwellings only.

33,0001998

・Average floor spaceper dwelling （㎡）

Stock

368.0

2001

○

Starts

197.5

1997

○

・Price index of
dwellings(1985=100)

Stock

188.0

2000

○

Starts

106.0

2000

○

○
Data refer to average living floor space.

Public sales and sales by private contract of small andmedium sized dwellings.
Source: National Institute of Statistics(1998)
ABEX index reflecting the average costs of payments forthe various building stages.
Source: Indice ABEX

BrazilClassification

Details

Data

・Country area （k㎡）
・Population
・Population density （person/k㎡）
・GDP per person （US＄）
Basic
Data

Source１ Source２ Source３ Source４ Source５

2000

169,799,170

2000

20

2000

○

Notes

○
○

Source: IBGN(Instituto Brasileiro de Geografia eEstatistica）, Demographic Census 2000

2,567

2001

○

34,735,000

1991

○

・Average size of household

3.4

1991

○

Pesquisa nacional por amostra de de domicílios 1999 [CDROM]. Microdados. Rio de Janeiro: IBGE, 2000.
Source: IBGN(Instituto Brasileiro de Geografia eEstatistica）, Demographic Census 2000

・Population of 65 years old
and over（％）

5.9

2000

○

Source: IBGN(Instituto Brasileiro de Geografia eEstatistica）, Demographic Census 2000

・Households

・Housing Stock

HousingDataYear8,514,215

44,795,101

2000

○

・Owned occupied dwellings（％）
・The number of dwellings
per household

74.4

2000

○

-

-

・Detached houses（％）

89.3

2000

-

-

・Housing Starts
・Average floor spaceper dwelling （㎡）

Stock

-

-

Starts--・Price index of
dwellings(1985=100)

Stock

-

-

Starts--○

Source: IBGN(Instituto Brasileiro de Geografia eEstatistica）, Demographic Census 2000
Source: IBGN(Instituto Brasileiro de Geografia eEstatistica）, Demographic Census 2000

Source: IBGN(Instituto Brasileiro de Geografia eEstatistica）, Demographic Census 2000

Source１:International statistical compendium 2004, Statistics Bureau, Ministry of Internal Affairs and Communications
Source２:Bulletin of Housing Statistics for Europe and North America 2004、United Nations Economic Commission for
Europe(URL: http://www.unece.org/) Last Upgrade: 08/18/2004.
Source３: Housing Statistics in the European Union 2002, Department of Housing of the Direction Générale ofPlanning, Housing and Heritage (DGATLP, http://mrw.wallonie.be/dgatlp/HousingStats)
Source４: Statistics Bureau of each country
Source５:Embassy and Others

10CanadaClassification

Details

Data

Year

9,984,670

2000

・Population

31,630,000

2003

3.2

2003

23,536

2002

・Population density （person/k㎡）
Basic
Data

・GDP per person （US＄）
・Households

・Housing Stock

Source: Natural Resources Canada, GeoAcess Divison

○
○
○

2002

○

Source: Statistics Canada, Income Statistics Divison

2.5

2002

○

Source: Statistics Canada, Income Statistics Divison

12.8

2003

○

Source: Statistics Canada, CANSIM: Table 051-0001

12,659,700

2002

65.2

2002

○

Source: Statistics Canada, Income Statistics Divison

1.09

2001

56.8

2002

○

233,400

2005○○

・Owned occupied dwellings（％）
・The number of dwellings
per household
・Detached houses（％）
・Housing Starts

Notes

○

12,021,000

・Average size of household
・Population of 65 years old
and over（％）

Housing
Data

Source１ Source２ Source３ Source４ Source５

・Country area （k㎡）・Average floor spaceper dwelling （㎡）

Stock

120

2002

Starts--・Price index of
dwellings(1985=100)

Stock

-

-

Starts--○Data is based on calculation. Dwellings(2001): 12,477,800,
Households(2001): 11,563,000○

Source: Statistics Canada, Income Statistics Divison
Source: 2003 Canadian Housing Observer, Canada
Mortgage and Housing Croporation
Source: Natural Resources Canada, Office of Energy
Efficiency: Table-Residential Housing Stock and Floor

ChinaClassification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Year

Notes

2003

○

Source: National Bureau of Statistics of China

1,292,270,000

2003

○

Source: National Bureau of Statistics of China

・Population density （person/k㎡）

134

2002

○

Source: National Bureau of Statistics of China

・GDP per person （US＄）

955

2002

・Households

・Housing Stock

＊（㎡)

2003

○

Source: National Bureau of Statistics of China

3.38

2003

○

Source: National Bureau of Statistics of China

8.5

2003

○

8,911,146,000

2003

○

80.17

2003

-

-

-

-

・Owned occupied dwellings（％）
・The number of dwellings
per household
・Detached houses（％）

・Housing Starts

・Average floor spaceper dwelling （㎡）・Price index of
dwellings(1985=100)

Stock

○

361,980,000

・Average size of household
・Population of 65 years old
and over（％）

Housing
Data

Source１ Source２ Source３ Source４ Source５

9,600,000

Source: National Bureau of Statistics of China
Deta is based on calculation
Source: National Bureau of Statistics of China
Only citiy area○

Source: Ministry of Constraction/Only city area

urban :
550,000,000㎡/year
rural :
752,000,000㎡/year

2003

○

Source: National Bureau of Statistics of China

urban :
23.7㎡/person
rural :
27.2㎡/person

2003

○

Source: National Bureau of Statistics of China

Starts22.8㎡/person

2002

Stock

-

-

Starts--○

Source:Mr. Hao Bin

Croatia
Classification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Source１ Source２ Source３ Source４ Source５

Notes

2001

○

Source: Mr.Lenko Plestina.（2004/9/16）

4,437,460

2001○

Source: Mr.Lenko Plestina.（2004/9/16）

・Population density （person/k㎡）

78.4

2001

○

Source: Mr.Lenko Plestina.（2004/9/16）

・GDP per person （US＄）

6,385

2003

○

GDP per capita
Source: Mr.Lenko Plestina.（2004/9/16）

1,477,377

2001○

Source: Mr.Lenko Plestina.（2004/9/16）

2.99

2001

○

Source: Mr.Lenko Plestina.（2004/9/16）

15

2001

○

Source: Mr.Lenko Plestina.（2004/9/16）

1,660,649

2001○

・Owned occupied dwellings（％）

85.7

2001

○

・The number of dwellings
per household

1.12

2001

○

・Households
・Average size of household
・Population of 65 years old
and over（％）
・Housing Stock

HousingDataYear56,594・Detached houses（％）

Dwelling units: (a) for permanent residence
1.660.649(2001), (b) Inhabited dwellings 1.421623(2001)
Source: Mr.Lenko Plestina.（2004/9/16）
Owner occupied dwellings (b): 85.7%(2001)
Source: Mr.Lenko Plestina.（2004/9/16）
Dwellings per households (a): 1.12(2001), Dwellings perhouseholds (b): 0.96(2001)
Source: Mr.Lenko Plestina.（2004/9/16）
Detached houses: 932.093(2001)
Source: Mr.Lenko Plestina.（2004/9/16）

56.1

2001

○

19,5492002○

Source: Mr.Lenko Plestina.（2004/9/16）

・Average floor spaceper dwelling （㎡）

Stock

74.4

2001

○

Source: Mr.Lenko Plestina.（2004/9/16）

Starts

85.9

2002

○

Source: Mr.Lenko Plestina.（2004/9/16）

・Price index of
dwellings(1985=100)

Stock

-

-

Starts--・Housing Starts

Source 1: International statistical compendium 2004, Statistics Bureau, Ministry of Internal Affairs and Communications
Source 2: Bulletin of Housing Statistics for Europe and North America 2004, United Nations Economic Commission for
Europe (URL: http://www.unece.org/) Last Upgrade: 08/18/2004.
Source 3: Housing Statistics in the European Union 2002, Department of Housing of the Direction Générale of Planning,
Housing and Heritage (DGATLP, http://mrw.wallonie.be/dgatlp/HousingStats)
Source 4: Statistics Bureau of each country
Source 5: Embassy and Others

11Denmark
Classification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Source１ Source２ Source３ Source４ Source５

2000

5,368,400

2002

・Population density （person/k㎡）

124.6

2003

・GDP per person （US＄）

32,1582002

・Households

・Housing Stock

Notes

○
○
○
○

2,409,000

2002

○

2.2

2002

○

・Average size of household
・Population of 65 years old
and over（％）

Exclusive householde living in institutions, weekend cabin,
etc.

14.8

2000

2,540,900

2002

○

78.7

2002

○

Percent to total dwellings.

1.10

2002

○

Data is based on calculation.

--

・Owned occupied dwellings（％）
・The number of dwellings
per household
Housing
DataYear43,094・Detached houses（％）
・Housing Starts○

18,1002002○

・Average floor spaceper dwelling （㎡）

Stock

109.0

2002

○

Starts

110.7

2002

○

・Price index of
dwellings(1985=100)

Stock

107.0

2001

○

Starts

112.0

2001

○

Data refer to average living floor space.
Data refer to average living floor space.
Index of one-family houses.
Source:Statistics Denmark and Ministry of Taxation
regulating price index excluding profits and other fees.
Source: Statistics Denmark

FinlandClassification

Details

Data

・Country area （k㎡）
・Population

5,210,000

2003

17.1

2003

・GDP per person （US＄）
・Households

○

Notes

○

Source: Statistics Finland○

Source: Statistics Finland○

persons/k㎡ of land area
Source: Statistics Finland

25,288

2002
2002

○

○

Source: Statistics Finland

2.2

2002

○

○

Source: Statistics Finland

15.6

2003

○

○

Source: Statistics Finland

2,574,000

2002

○

○

Source: Statistics Finland

57.7

2002

○

Source: Statistics Finland

1.10

2002

○

○

Data is based on calculation.
Source: Statistics Finland

・Owned occupied dwellings（％）
・The number of dwellings
per household
・Detached houses（％）
HousingData○2,354,000

・Average size of household
・Population of 65 years old
and over（％）
・Housing Stock

Source１ Source２ Source３ Source４ Source５

2000

・Population density （person/k㎡）
Basic
Data

Year

338,145

・Housing Starts

○

40.2

2002

○

○

Source: Statistics Finland

27,0002002○○

Source: Statistics Finland○

Source: Statistics Finland○

Data refer to average living floor space.
Source: Statistics Finland

・Average floor spaceper dwelling （㎡）

Stock

77.0

2002

Starts89.3

2002

・Price index of
dwellings(1985=100)

Stock

120.0

2001

○

Source: Statistics Finland

Starts

155.0

2001

○

construction cost index.
Source: Statistics Finland○

FranceClassification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Source１ Source２ Source３ Source４ Source５

2000

59,770,000.0

2003

・Population density （person/k㎡）

108.4

2003

・GDP per person （US＄）

23,913

2002

・Households
・Average size of household
・Population of 65 years old
and over（％）
・Housing Stock・Owned occupied dwellings（％）
・The number of dwellings
per household
HousingDataYear551,500

・Detached houses（％）
・Housing Starts

Notes

○
○
○
○

24,525,000

2002

2.4

2002

15.7

1998

29,495,000

2002

○

56.0

2002

○

1.20

2002

○

○
○
○

-

-

334,000

2002○

Data is based on calculation.

・Average floor spaceper dwelling （㎡）

Stock

90.0

2002

○

Starts

112.6

2002

○

・Price index of
dwellings(1985=100)

Stock

165.0

2001

○

Starts

107.0

2001

○

Acquisition by private individuals through a loan.
Source: Indice INSEE Notaires créé en 1994
excluding fees and financial costs.
Source: INSEE/ ICC (indice du coût de la construction)

Source 1: International statistical compendium 2004, Statistics Bureau, Ministry of Internal Affairs and Communications
Source 2: Bulletin of Housing Statistics for Europe and North America 2004, United Nations Economic Commission for
Europe (URL: http://www.unece.org/) Last Upgrade: 08/18/2004.
Source 3: Housing Statistics in the European Union 2002, Department of Housing of the Direction Générale of Planning,
Housing and Heritage (DGATLP, http://mrw.wallonie.be/dgatlp/HousingStats)
Source 4: Statistics Bureau of each country
Source 5: Embassy and Others

12Germany
Classification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Source１ Source２ Source３ Source４ Source５

2000

82,474,700

2003

・Population density （person/k㎡）

231.0

2003

・GDP per person （US＄）

24,0752002

・Households

・Housing Stock

○
○
○

2002

2.2

2002

16

1999

38,924,800

2002

○

Data refer to dwellings in residential and non-residentialbuildings, except dwellings in residential homes.

40.8

1997

○

Percent to total dwellings.

1.05

2002

○

Data is based on calculation.

--

・Owned occupied dwellings（％）
・The number of dwellings
per household
・Detached houses（％）
・Housing Starts

Notes

○

35,873,000・Average size of household
・Population of 65 years old
and over（％）

Housing
DataYear357,022○○○289,600

2002○

・Average floor spaceper dwelling （㎡）

Stock

90.0

2002

○

Starts

112.8

2002

○

・Price index of
dwellings(1985=100)

Stock

-

-

Starts--Data refer to average living floor space.

India
Classification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Source１ Source２ Source３ Source４ Source５

2000

○

Notes

1,065,462,000

2003

○

・Population density （person/k㎡）

305

2000

○

・GDP per person （US＄）

487

2002

191,963,935

2001

5.4

-

○

Source: Census of India 2001

5.1

2002

○

Source: HDR (Human Development Reports) 2004

179,275,605
urban 60
rural 92

2001
2002

○

・The number of dwellings
per household

0.93

2001

○

・Detached houses（％）--

・Households
・Average size of household
・Population of 65 years old
and over（％）
・Housing Stock・Owned occupied dwellings（％）

HousingDataYear3,287,263

・Housing Starts
Stock・Price index of
dwellings(1985=100)

Stock

-

-

Starts--

Source: HDR (Human Development Reports) 2004
Source: Census of India 2001, Census of India,
http://www.censusindia.net/

Source: Census of India 2001, Census of India,
http://www.censusindia.net/○

8,200,000 1997-2000
urban 37
rural 38
42-

・Average floor spaceper dwelling （㎡）Starts○○○

Source: NSS(National Sample Survey )○Source: NSS(National Sample Survey )○Source: NSS(National Sample Survey )Indonesia
Classification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Housing
Data

Year

Source１ Source２ Source３ Source４ Source５

1,904,569

2000○

219,884,000

2003

○

・Population density （person/k㎡）

111

2000

○

・GDP per person （US＄）

678

2001

○

・Households--

・Average size of household
・Population of 65 years old
and over（％）

-

-

-

-

・Housing Stock--・Owned occupied dwellings（％）
・The number of dwellings
per household

-

-

-

-

・Detached houses（％）

-

-

-

-

・Housing Starts
・Average floor spaceper dwelling （㎡）

Stock

-

-

Starts--・Price index of
dwellings(1985=100)

Stock

-

-

Starts

-

-

Notes

Source 1: International statistical compendium 2004, Statistics Bureau, Ministry of Internal Affairs and Communications
Source 2: Bulletin of Housing Statistics for Europe and North America 2004, United Nations Economic Commission for
Europe (URL: http://www.unece.org/) Last Upgrade: 08/18/2004.
Source 3: Housing Statistics in the European Union 2002, Department of Housing of the Direction Générale of Planning,
Housing and Heritage (DGATLP, http://mrw.wallonie.be/dgatlp/HousingStats)
Source 4: Statistics Bureau of each country
Source 5: Embassy and Others

13

IrelandClassification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Source１ Source２ Source３ Source４ Source５

2005

○

4,157,000

2005○

・Population density （person/k㎡）

59.14

2005

○

・GDP per person （US＄）

29,8402005○

1,694,000

2005

○

2.94

2005

○

11.4

2005

○

1,694,000

2005

○

81.5

2005

○

-

-

・Households
・Average size of household
・Population of 65 years old
and over（％）
・Housing Stock・Owned occupied dwellings（％）
・The number of dwellings
per household
HousingDataYear70,280・Detached houses（％）
・Housing Starts--

78,000

2005

-

-

Notes

○

・Average floor spaceper dwelling （㎡）StockStarts88.4

2002

・Price index of
dwellings(1985=100)

Stock

128.0

1995

○

Starts

113.0

1995

○

○

including labour and materials.
Source: Department of the Environment and Local

IsraelClassification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Source１ Source２ Source３ Source４ Source５

2000

6,574,400

2002

・Population density （person/k㎡）

296.7

2003

・GDP per person （US＄）

16,303

2002

・Households

1,737,000

2000

3.3

2000

9.8

2000

・Average size of household
・Population of 65 years old
and over（％）

HousingDataYear22,145・Housing Stock--・Owned occupied dwellings（％）
・The number of dwellings
per household

-

-

-

-

・Detached houses（％）--

・Housing Starts

Notes

○
○
○
○
○
○
○

38,2002002○

・Average floor spaceper dwelling （㎡）

Stock

137.0

1996

○

Starts

120.1

1993

○

・Price index of
dwellings(1985=100)

Stock

-

-

Starts--

Source: UNECE Environment and Human Settlements
Division

Italy
Classification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Source１ Source２ Source３ Source４ Source５

2000

57,913,600

2001

・Population density （person/k㎡）

192.2

2003

・GDP per person （US＄）

20,601

2002

・Households
・Average size of household
・Population of 65 years old
and over（％）
・Housing Stock・Owned occupied dwellings（％）
・The number of dwellings
per household
HousingDataYear301,318

・Detached houses（％）
・Housing Starts

Notes

○
○
○
○

19,909,000

1991

2.8

1991

17.8

1999

19,736,000

1991

○

68.0

1991

○

0.99

1991

○

-

-

159,800

2000

○

81.1

2000

○
○

○
○
○
Data refer to occupied dwellings only.

Data is based on calculation.

Source: Environment and Human Settlements Division
UNECE
Source: Environment and Human Settlements Division
UNECE

・Average floor spaceper dwelling （㎡）StockStarts87.4

1997

・Price index of
dwellings(1985=100)

Stock

195.0

1995

○

1988=100, price of dwellings in principal cities.

Starts

102.0

1990

○

including labour, inputs and transportation, 1999.
Source: Normisma

Source 1: International statistical compendium 2004, Statistics Bureau, Ministry of Internal Affairs and Communications
Source 2: Bulletin of Housing Statistics for Europe and North America 2004, United Nations Economic Commission for
Europe (URL: http://www.unece.org/) Last Upgrade: 08/18/2004.
Source 3: Housing Statistics in the European Union 2002, Department of Housing of the Direction Générale of Planning,
Housing and Heritage (DGATLP, http://mrw.wallonie.be/dgatlp/HousingStats)
Source 4: Statistics Bureau of each country
Source 5: Embassy and Others

14

JAPAN （Reference data）
Classification

Details

Data

・Country area （k㎡）
・Population○

127,654,000

2003

○

338

2003

31,277

2002

47,220,000

2003

・GDP per person （US＄）
・Households
・Average size of household
・Population of 65 years old
and over（％）○

Source: 2003 Housing and Land Survey of JAPAN
Statistics Bureau Management and Coordination Agency
Government of JAPAN

○

2.7

2000

○

2000

○

53,890,000

2005

・Owned occupied dwellings（％）

61.2

2003

○

・The number of dwellings
per household

1.14

2003

○
○

・Detached houses（％）

○

56.5

2003

1,193,038

2005○

・Average floor spaceper dwelling （㎡）

Stock

94.9

2005

○

Starts

88.5

2005

○

・Price index of
dwellings(1985=100)

Stock

-

-

Starts--・Housing Starts

Notes

○

17.3

・Housing Stock

Housing
Data

Source１ Source２ Source３ Source４ Source５

2000

・Population density （person/k㎡）
Basic
Data

Year

377,873

Source: 2003 Housing and Land Survey of JAPAN
Statistics Bureau Management and Coordination Agency
Government of JAPANSource: 2003 Housing and Land Survey of JAPAN
Statistics Bureau Management and Coordination Agency
Government of JAPANSource: 2003 Housing and Land Survey of JAPAN
Statistics Bureau Management and Coordination Agency
Government of JAPANSource: 2003 Housing and Land Survey of JAPAN
Statistics Bureau Management and Coordination Agency
Government of JAPANSource: 2003 Housing and Land Survey of JAPAN
Statistics Bureau Management and Coordination Agency
Government of JAPAN

Malaysia
Classification

Details

Data

・Country area （k㎡）

329,758

2000

24,425,000

2003

○

71

2000

○

3,960

2002

○

・Households--

・Average size of household--

・Population of 65 years old
and over（％）

3.9-

・Population density （person/k㎡）

Housing
Data

Source１ Source２ Source３ Source４ Source５○

・Population

Basic
Data

Year

・GDP per person （US＄）

・Housing Stock--・Owned occupied dwellings（％）
・The number of dwellings
per household

-

-

-

-

・Detached houses（％）

-

-

-

-

・Housing Starts
・Average floor spaceper dwelling （㎡）

Stock

-

-

Starts--・Price index of
dwellings(1985=100)

Stock

-

-

Starts

-

-

Notes

Data is based on calculation. 65 years and over population:
964,000 persons.
Source: Population and Housing Census 2000,
Department of Statistics Malaysia,
http://www.statistics.gov.my/○

MexicoClassification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Source１ Source２ Source３ Source４ Source５

2000

○

103,457,000

2000

○

・Population density （person/k㎡）

50.0

2000

○

・GDP per person （US＄）

6,249

2002

○

16,203,000

1990

○

5.0

1990

○

4.4

1995

○

22,000,000-

・Owned occupied dwellings（％）
・The number of dwellings
per household

-

-

-

-

・Detached houses（％）

-

-

-

-

・Households
・Average size of household
・Population of 65 years old
and over（％）
・Housing Stock

HousingDataYear1,958,201

・Housing Starts
・Average floor spaceper dwelling （㎡）

Stock

-

-

Starts--・Price index of
dwellings(1985=100)

Stock

-

-

Starts

-

-

○

Notes

Source: Centro Impulsor de la Construccion yla Habitacion,A.C.(CIHAC) Report

Source 1: International statistical compendium 2004, Statistics Bureau, Ministry of Internal Affairs and Communications
Source２: Bulletin of Housing Statistics for Europe and North America 2004、United Nations Economic Commission
for Europe (URL: http://www.unece.org/) Last Upgrade: 08/18/2004.
Source３: Housing Statistics in the European Union 2002, Department of Housing of the Direction Générale ofPlanning, Housing and Heritage (DGATLP, http://mrw.wallonie.be/dgatlp/HousingStats)
Source４: Statistics Bureau of each country
Source５: Embassy and Others

15

NepalClassification

Details

Data

・Country area （k㎡）
・Population

Source: Central Bureau of Statistics 2003

23,151,423

2001

○

Source: Population Census 2001

157.292001○

Source: Population Census 2001

223

2002

○

4,253,220

2001○

Source: Population Census 2001

5.4

2001

○

Source: Population Census 2001

4.2

2001

○

Source: Population Census 2001

・Housing Stock--・Owned occupied dwellings（％）
・The number of dwellings
per household

-

-

-

-

・Detached houses（％）

-

-

-

-

・Average size of household
・Population of 65 years old
and over（％）

Housing
Data

Notes

○

・GDP per person （US＄）
・Households

Source１ Source２ Source３ Source４ Source５

2003

・Population density （person/k㎡）
Basic
Data

Year

147,181・Housing Starts
・Average floor spaceper dwelling （㎡）

Stock

-

-

Starts--・Price index of
dwellings(1985=100)

Stock

-

-

Starts--Netherlands
Classification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Source１ Source２ Source３ Source４ Source５

2000

16,110,000

2002

・Population density （person/k㎡）

387.942005

・GDP per person （US＄）

26,001

2002

・Households

6,824,000

2000

2.3

2000

13.8

2003

6,764,000

2002

54

2005

-

-

・Average size of household
・Population of 65 years old
and over（％）
・Housing Stock・Owned occupied dwellings（％）
・The number of dwellings
per household
・Detached houses（％）
HousingDataYear41,526・Housing Starts
・Average floor spaceper dwelling （㎡）・Price index of
dwellings(1985=100)

Stock

-

-

71,300

2002

-

-

Notes

○
○
○
○
○
○
○
○
○

○

Starts

-

-

Stock

262.0

2001

○

Source: Nederlandse Vereniging van Makelaars (NVM)

Starts

132.0

2001

○

Contract sum in year x for social rental dwelling y iscompared to the fictitious contract sum in base year 1995.
Source: Centraal Bureau voor de Statistiek:
Maandstatistiek bouwnijverheid

Source１ Source２ Source３ Source４ Source５

Notes

New ZealandClassification

Details

Data

・Country area （k㎡）
・Population
・Population density （person/k㎡）
Basic
Data

・GDP per person （US＄）
・Households
・Average size of household
・Population of 65 years old
and over（％）

2000

○

3,876,000

2003

○

14

2000

○

15,208

2002○

1,344,267

2001

-

-

○

-

-

1,359,843

2001○

・Owned occupied dwellings（％）

67.8

2001

○

・The number of dwellings
per household

1.01

2001

○

・Detached houses（％）

81.3

2001

○

-

-

・Housing Stock

HousingDataYear

270,534

・Housing Starts
・Average floor spaceper dwelling （㎡）

Stock

-

-

Starts--・Price index of
dwellings(1985=100)

Stock

-

-

Starts--

Source: 2001 Census of population and dwellings, Statistics
New Zealand,
http://www.stats.govt.nz/

Source: 2001 Census of population and dwellings, Statistics
New Zealand,
http://www.stats.govt.nz/
Source: 2001 Census of population and dwellings, Statistics
New Zealand,
http://www.stats.govt.nz/
Data is based on calculation.
Source: 2001 Census of population and dwellings, Statistics
New Zealand,
http://www.stats.govt.nz/
Data refer to separate House.
Source: 2001 Census of population and dwellings, Statistics
New Zealand,
http://www.stats.govt.nz/

Source 1: International statistical compendium 2004, Statistics Bureau, Ministry of Internal Affairs and Communications
Source２: Bulletin of Housing Statistics for Europe and North America 2004、United Nations Economic Commission
for Europe (URL: http://www.unece.org/) Last Upgrade: 08/18/2004.
Source３: Housing Statistics in the European Union 2002, Department of Housing of the Direction Générale ofPlanning, Housing and Heritage (DGATLP, http://mrw.wallonie.be/dgatlp/HousingStats)
Source４: Statistics Bureau of each country
Source５: Embassy and Others

16Norway
Classification

Details

Data

・Country area （k㎡）
・Population

4,550,000

2003

・GDP per person （US＄）
・Households

14.1

2003

42,234

2002○

Population as at 1st January of each year.
Source: Population and housing census 2001, Statistics
Norway 2002○

Data refer to 70years and older.
Source: Population and housing census 2001, Statistics
Norway 2002○○

1,962,000

2001

○

2.3

2001

○

・Population of 65 years old
and over（％）

11.5

2001

1,985,300

2002○

・Owned occupied dwellings（％）
・The number of dwellings
per household

76.7

2001

○

1.00

2001

○

・Detached houses（％）

57.1

2001

・Housing Starts

Notes

○

・Average size of household・Housing Stock

Housing
Data

Source１ Source２ Source３ Source４ Source５

2000

・Population density （person/k㎡）
Basic
Data

Year

323,877

Data is based on calculation. Total stocks: 1,963,600(2001)○

21,7002002○

・Average floor spaceper dwelling （㎡）

Stock

123.0

2001

○

Starts

117.0

2002

○

・Price index of
dwellings(1985=100)

Stock

-

-

Starts--Data refer to detached house or farm house.
Source: Population and housing census 2001, Statistics
Norway 2002
Source: Environment and Human Settlements Division
UNECE

Philippines
Classification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Source１ Source２ Source３ Source４ Source５

2000

○

79,999,000

2003

○

・Population density （person/k㎡）

254

2000

○

・GDP per person （US＄）

992

2002

○

・Households--

・Average size of household
・Population of 65 years old
and over（％）

-

-

-

-

14,891,127

2000

・Owned occupied dwellings（％）
・The number of dwellings
per household

-

-

-

-

・Detached houses（％）

-

-

-

-

・Housing Stock

Housing
DataYear300,000

・Housing Starts
・Average floor spaceper dwelling （㎡）

Stock

-

-

Starts--・Price index of
dwellings(1985=100)

Stock

-

-

Starts

-

-

○

Notes

Data refer to occupied housing units.
Source: Population of the Philippines Census,
National Statistical Coordination Boar, National Statistical
Office,http://www.nscb.gov.ph/PolandClassification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Source１ Source２ Source３ Source４ Source５

1988

38,200,000

2003

・Population density （person/k㎡）

122.2

2003

・GDP per person （US＄）

4,901

2002

・Households
・Average size of household
・Population of 65 years old
and over（％）
・Housing Stock・Owned occupied dwellings（％）
・The number of dwellings
per household
HousingDataYear323,250

・Detached houses（％）
・Housing Starts

Notes

○
○
○
○

13,331,000

2002

2.8

2002

11.95

1999

11,763,599

2002

○

66.7

2002

○

0.88

2002

○

○
○
○

-

-

101,500

2001○

・Average floor spaceper dwelling （㎡）

Stock

69.0

2002

○

Starts

99.3

2002

○

・Price index of
dwellings(1985=100)

Stock

-

-

Starts--Data refer to occupied dwellings only.

Data is based on calculation.

Source: UNECE Environment and Human Settlements
Division

Source 1: International statistical compendium 2004, Statistics Bureau, Ministry of Internal Affairs and Communications
Source 2: Bulletin of Housing Statistics for Europe and North America 2004, United Nations Economic Commission for
Europe (URL: http://www.unece.org/) Last Upgrade: 08/18/2004.
Source 3: Housing Statistics in the European Union 2002, Department of Housing of the Direction Générale of Planning,
Housing and Heritage (DGATLP, http://mrw.wallonie.be/dgatlp/HousingStats)
Source 4: Statistics Bureau of each country
Source 5: Embassy and Others

17Portugal
Classification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Source１ Source２ Source３ Source４ Source５

2000

10,410,000

2002

・Population density （person/k㎡）

113.1

2003

・GDP per person （US＄）

12,1062002

・Households

・Housing Stock

○
○

2001
1991

○
○

○

15.3

1999

5,225,000

2002

○

75.7

2001

○

-

-

・Detached houses（％）
・Housing Starts○

3.1

・Owned occupied dwellings（％）
・The number of dwellings
per household

Notes

○

3,620,000

・Average size of household
・Population of 65 years old
and over（％）

HousingDataYear
91,982--

121,800

2002○

・Average floor spaceper dwelling （㎡）

Stock

83.0

2001

○

Starts

90.3

2002

○

・Price index of
dwellings(1985=100)

Stock

-

-

Starts--Data refer to average living floor space.

Russian Federation
Classification

Details

Data

2000

・Population

143,530,000

2002

8.4

2003

2,405

2002

○

57,297,000

1989

○

2.6

1989

○

12.5

1999

○

2,818,000

2001

○

56.8

1997

○

-

-

・GDP per person （US＄）
・Households
・Average size of household
・Population of 65 years old
and over（％）
・Housing Stock・Owned occupied dwellings（％）
・The number of dwellings
per household

Housing
Data

Source１ Source２ Source３ Source４ Source５

17,075,400

・Population density （person/k㎡）
Basic
Data

Year

・Country area （k㎡）

・Detached houses（％）
・Housing Starts--

396,400

2002

・Average floor spaceper dwelling （㎡）

Stock

-

-

Starts85.3

2002

・Price index of
dwellings(1985=100)

Stock

-

-

Starts

-

-

Notes

○
○
○

○

○

Data include area of balconies and loggias.

SingaporeClassification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Housing
Data

Year

Source１ Source２ Source３ Source４ Source５

683

2000

○

4,252,000

2003○

・Population density （person/k㎡）

6,049

2000

○

・GDP per person （US＄）

20,8062002○

・Households--

・Average size of household
・Population of 65 years old
and over（％）

-

-

-

-

・Housing Stock--・Owned occupied dwellings（％）
・The number of dwellings
per household

-

-

-

-

・Detached houses（％）

-

-

-

-

・Housing Starts
・Average floor spaceper dwelling （㎡）

Stock

-

-

Starts--・Price index of
dwellings(1985=100)

Stock

-

-

Starts

-

-

Notes

Source 1: International statistical compendium 2004, Statistics Bureau, Ministry of Internal Affairs and Communications
Source 2: Bulletin of Housing Statistics for Europe and North America 2004, United Nations Economic Commission for
Europe (URL: http://www.unece.org/) Last Upgrade: 08/18/2004.
Source 3: Housing Statistics in the European Union 2002, Department of Housing of the Direction Générale of Planning,
Housing and Heritage (DGATLP, http://mrw.wallonie.be/dgatlp/HousingStats)
Source 4: Statistics Bureau of each country
Source 5: Embassy and Others

18South Africa
Classification

Details

Data

2000

・Population

46,495,000

2003

○

Source:General household survey 2003, Statistics South
Africa, http://www.statssa.gov.za/○

Source:General household survey 2003, Statistics South
Africa, http://www.statssa.gov.za/

36

2000

2,329

2002

○

12,546,000

2003

・Average size of household--

・Population of 65 years old
and over（％）

5.0

2003

○

12,546,000

2003

○

71.6

2003

○

・GDP per person （US＄）
・Households

・Owned occupied dwellings（％）
・The number of dwellings
per household--

・Detached houses（％）

-

-

-

-

・Housing Starts
・Average floor spaceper dwelling （㎡）

Stock

-

-

Starts--・Price index of
dwellings(1985=100)

Stock

-

-

Starts

-

-

Notes

○

○

・Housing Stock

Housing
Data

Source１ Source２ Source３ Source４ Source５

1,221,037

・Population density （person/k㎡）
Basic
Data

Year

・Country area （k㎡）

Data is based on calculation. 65 years and over population:
2336000 persons.
Source:General household survey 2003, Statistics South
Africa, http://www.statssa.gov.za/
Source:General household survey 2003, Statistics South
Africa, http://www.statssa.gov.za/
Owned and fully paid off 7,736,000. Owned, but not yet fully
paid off 1,242,000.
Source:General household survey 2003, Statistics South
Africa, http://www.statssa.gov.za/

South Korea
Classification

Details

Data

・Country area （k㎡）○

46,136,101

2000

○

478

2002

○

10,0592002○

14,311,807

2000

○

3.1

2000

○

7.3

2000

○

10,959,342

2000

○

・Owned occupied dwellings（％）
・The number of dwellings
per household

54.2

2000

○

0.77

2000

○

・Detached houses（％）

37.1

2000

○

・Population density （person/k㎡）
・GDP per person （US＄）
・Households
・Average size of household
・Population of 65 years old
and over（％）
・Housing Stock

Housing
Data

Source１ Source２ Source３ Source４ Source５

2002

・Population
Basic
Data

Year
99,585・Housing Starts

585,382

2003○

・Average floor spaceper dwelling （㎡）

Stock

62.8

2000

○

Starts--・Price index of
dwellings(1985=100)

Stock

-

-

Starts

-

-

Notes

Data is based on calculation.

Data is average per household.

Ｓｐａｉｎ
Classification

Details

Data

・Country area （k㎡）
・Population
・Population density （person/k㎡）
Basic
Data

・GDP per person （US＄）
・Households
・Average size of household
・Population of 65 years old
and over（％）
・Housing Stock・Owned occupied dwellings（％）
・The number of dwellings
per household
・Detached houses（％）

・Average floor spaceper dwelling （㎡）・Price index of
dwellings(1985=100)

Source１ Source２ Source３ Source４ Source５

2000

40,550,000

2002

80.1

2003

15,937

2002○

10,586,000

1981

○

3.5

1981

○

16.6

1999

○

20,823,000

2001

○

58

1991

○

-

-

Notes

○
○
○

-

-

417,800

2002

Stock

-

-

Starts

96.1

2002

Stock

186.0

2001

○

Starts

165.0

2001

○

・Housing Starts
HousingDataYear505,992○○
1987=100 Mortgage appraisals done by property appraisal
companies.
Source: INE: Consumer price indices; Ministry ofDevelopment: House price indices1987=100, mortgage appraisals done by property appraisal
companies.
Source: INE: Consumer price indices; Ministry ofDevelopment: House price indices

Source 1: International statistical compendium 2004, Statistics Bureau, Ministry of Internal Affairs and Communications
Source２: Bulletin of Housing Statistics for Europe and North America 2004、United Nations Economic Commission
for Europe (URL: http://www.unece.org/) Last Upgrade: 08/18/2004.
Source 3: Housing Statistics in the European Union 2002, Department of Housing of the Direction Générale ofPlanning, Housing and Heritage (DGATLP, http://mrw.wallonie.be/dgatlp/HousingStats)
Source４: Statistics Bureau of each country
Source５: Embassy and Others

19

SwedenClassification

Details

Data

・Country area （k㎡）
・Population

9,024,000

2005

○

20.1

2005

○

20,576

2005

3,830,000

1990

・GDP per person （US＄）
・Households
・Average size of household
・Population of 65 years old
and over（％）
・Housing Stock

2.20

1990

17.32

1999

4,329,200

2002

45.0

2005

-

-

・Owned occupied dwellings（％）
・The number of dwellings
per household
・Detached houses（％）
Housing
Data

Source１ Source２ Source３ Source４ Source５

2000

・Population density （person/k㎡）
Basic
Data

Year

449,964

・Housing Starts

Notes

○

○
○
○
○
○
○

-

-

27,0002005○

・Average floor spaceper dwelling （㎡）

Stock

89.0

2005

○

Starts

100.0

2005

○

・Price index of
dwellings(1985=100)

Stock

151.0

2001

Starts

165.0

2000

Percent to total dwellings.

estimates, Price index for owner-occupied one or two
dwelling units; excluding co-operative building society
dwellings.
Figures for 2000 adjusted.
Source: Statistics Sweden

Switzerland
Classification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Source１ Source２ Source３ Source４ Source５

2000

7,350,000

2002

178.0

2003

・GDP per person （US＄）

37,297

2002○

2,842,000

1990

○

2.6

2005

15.7

1999

・Average size of household
・Population of 65 years old
and over（％）
・Housing Stock

3,638,200

2002

・Owned occupied dwellings（％）
・The number of dwellings
per household

-

-

-

-

・Detached houses（％）--

・Housing Starts

30,3002002

・Average floor spaceper dwelling （㎡）

Stock

-

-

Starts--・Price index of
dwellings(1985=100)

Stock

-

-

Starts

-

-

Notes

○

・Population density （person/k㎡）

・Households

HousingDataYear41,284

○
○

○
○
○

○

ThailandClassification

Details

Data

・Country area （k㎡）○

62,833,000

2003

○

121

2000

○

2,034

2002

○

15,662,300

2000

・Average size of household--

・Population of 65 years old
and over（％）

6.1

・Population density （person/k㎡）
・GDP per person （US＄）

Notes

○

Data refer to privated households.
Source: Population and Housing Census 2000,
National Statistical Office,http://www.nso.go.th/eng/index.htm

2000

○

Data is based on calculation. Total Population: 60,617,200,
65 years and over population: 3,714,900
Source: Population and Housing Census 2000,
National Statistical Office,http://www.nso.go.th/eng/index.htm

15,662,300

2000

○

81.2

2000

○

Source: Population and Housing Census 2000,
National Statistical Office,http://www.nso.go.th/eng/index.htm

・The number of dwellings
per household--

・Detached houses（％）

79.7

2000

○

Source: Population and Housing Census 2000,
National Statistical Office,http://www.nso.go.th/eng/index.htm--

・Households

・Housing Stock・Owned occupied dwellings（％）

Housing
Data

Source１ Source２ Source３ Source４ Source５

2000

・Population

Basic
Data

Year

513,115

・Housing Starts
・Average floor spaceper dwelling （㎡）

Stock

-

-

Starts--・Price index of
dwellings(1985=100)

Stock

-

-

Starts--

Source 1: International statistical compendium 2004, Statistics Bureau, Ministry of Internal Affairs and Communications
Source２: Bulletin of Housing Statistics for Europe and North America 2004、United Nations Economic Commission
for Europe (URL: http://www.unece.org/) Last Upgrade: 08/18/2004.
Source３: Housing Statistics in the European Union 2002, Department of Housing of the Direction Générale ofPlanning, Housing and Heritage (DGATLP, http://mrw.wallonie.be/dgatlp/HousingStats)
Source４: Statistics Bureau of each country
Source５: Embassy and Others

20TurkeyClassification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Source１ Source２ Source３ Source４ Source５

2003

○
○

67,803,927

2000

・Population density （person/k㎡）

88.0

2000

・GDP per person （US＄）

2,604

2002

15,070,093

2000

○

4.50

2000

○

8.83

2000

○

16,235,830

2000

・Owned occupied dwellings（％）

70.9

1994

・The number of dwellings
per household

1.08

2000

・Households
・Average size of household
・Population of 65 years old
and over（％）
・Housing Stock

HousingDataYear769,604

・Detached houses（％）
・Housing Starts--

161,491

2002

・Average floor spaceper dwelling （㎡）

Stock

95.0

1994

Starts133

2002

・Price index of
dwellings(1985=100)

Stock

-

-

Starts

-

-

○

Notes
Source: Turkey's Statistical Yearbook 2003, State Instituteof Statistics Prime Ministry Republic of Turkey
Source: The General Population Censuses 2000, State
Institute of Statistics Prime Ministry Republic of Turkey
Source: Turkey's Statistical Yearbook 2003, State Instituteof Statistics Prime Ministry Republic of Turkey○○

Source: Turkey's Statistical Yearbook 2003, State Instituteof Statistics Prime Ministry Republic of Turkey
Source: Turkey's Statistical Yearbook 2003, State Instituteof Statistics Prime Ministry Republic of Turkey
Source: Turkey's Statistical Yearbook 2003, State Instituteof Statistics Prime Ministry Republic of Turkey
Source: Turkey's Statistical Yearbook 2003, State Instituteof Statistics Prime Ministry Republic of Turkey○○

Data is based on calculation.
Source: Turkey's Statistical Yearbook 2003, State Instituteof Statistics Prime Ministry Republic of Turkey○

Source: Turkey's Statistical Yearbook 2003, State Instituteof Statistics Prime Ministry Republic of Turkey○

Source: Turkey's Statistical Yearbook 2003, State Instituteof Statistics Prime Ministry Republic of Turkey○

UgandaClassification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Source１ Source２ Source３ Source４ Source５

2000

○

25,827,000

2003

○

・Population density （person/k㎡）

92

2000

○

・GDP per person （US＄）

240

2002

○

-

-

・Households
・Average size of household
・Population of 65 years old
and over（％）
・Housing Stock

Housing
DataYear241,038

-

-

4.7

2002

-

-

・Owned occupied dwellings（％）
・The number of dwellings
per household

-

-

-

-

・Detached houses（％）

-

-

-

-

・Housing Starts
・Average floor spaceper dwelling （㎡）

Stock

-

-

Starts--・Price index of
dwellings(1985=100)

Stock

-

-

Starts

-

-

Notes

Source: Population and Social Statistics 2002,
UBOS(Uganda Bureau of Statistics), http://www.ubos.org/○

United Kingdom
Classification

Details

Data

・Country area （k㎡）
・Population
Basic
Data

Source１ Source２ Source３ Source４ Source５

2000

59,230,000

2002

・Population density （person/k㎡）

243.8

2003

・GDP per person （US＄）

26,5242002

・Households
・Average size of household
・Population of 65 years old
and over（％）
・Housing Stock・Owned occupied dwellings（％）
・The number of dwellings
per household
・Detached houses（％）
HousingDataYear242,900

・Housing Starts

25,074,000

2002

2.4

2002

15.6

1999

25,617,000

2002

-

-

1.02

2002

-

-

25,617,000

2005

87.0

2001

Notes

○
○
○
○
○
○
○
○

○

Data is based on calculation.

○

・Average floor spaceper dwelling （㎡）StockStarts--・Price index of
dwellings(1985=100)

Stock

180.0

2001

○

Starts

181.0

2001

○

○

Trend in prices of previously occupied dwellings from
Survey of Mortgage Lenders; adjusted for type of property.
Source: Office of the Deputy Prime Minister
Trend in prices of new dwellings from Survey of Mortgage
Lenders; adjusted for type of property.
Source: Office of the Deputy Prime Minister

Source 1: International statistical compendium 2004, Statistics Bureau, Ministry of Internal Affairs and Communications
Source 2: Bulletin of Housing Statistics for Europe and North America 2004, United Nations Economic Commission for
Europe (URL: http://www.unece.org/) Last Upgrade: 08/18/2004.
Source 3: Housing Statistics in the European Union 2002, Department of Housing of the Direction Générale of Planning,
Housing and Heritage (DGATLP, http://mrw.wallonie.be/dgatlp/HousingStats)
Source 4: Statistics Bureau of each country
Source 5: Embassy and Others

21United States
Classification

Details

Data

・Country area （k㎡）
・Population

290,810,000

2003

・GDP per person （US＄）
・Households

○
○

2001
2001

12.7

1998

116,038,000

2001

○

66.9

1999

○

1.13

2001

○

-

-

・Detached houses（％）
・Housing Starts

2005
2002

Population data are mid-year estimates witch include
forces overseas.

○

2.6

・Owned occupied dwellings（％）
・The number of dwellings
per household
HousingData

30.0
35,891

Notes○

102,803,000・Average size of household
・Population of 65 years old
and over（％）
・Housing Stock

Source１ Source２ Source３ Source４ Source５

2003

・Population density （person/k㎡）
Basic
Data

Year

9,631,418○○○

1,648,400

2002○

・Average floor spaceper dwelling （㎡）

Stock

162.0

2001

○

Starts

194.9

2002

○

・Price index of
dwellings(1985=100)

Stock

-

-

Starts--Data is based on calculation.

Viet NamClassification

Details

Data

・Country area （k㎡）
・Population
・Population density （person/k㎡）
Basic
Data

Housing
Data・GDP per person （US＄）

Year

Source１ Source２ Source３ Source４ Source５

331,689

2000○

81,377,000

2003

○

234

2000

○

-

-

・Households--

・Average size of household
・Population of 65 years old
and over（％）

-

-

-

-

・Housing Stock--・Owned occupied dwellings（％）
・The number of dwellings
per household

-

-

-

-

・Detached houses（％）

-

-

-

-

・Housing Starts
・Average floor spaceper dwelling （㎡）

Stock

-

-

Starts--・Price index of
dwellings(1985=100)

Stock

-

-

Starts

-

-

Notes

Source 1: International statistical compendium 2004, Statistics Bureau, Ministry of Internal Affairs and Communications
Source 2: Bulletin of Housing Statistics for Europe and North America 2004, United Nations Economic Commission for
Europe (URL: http://www.unece.org/) Last Upgrade: 08/18/2004.
Source 3: Housing Statistics in the European Union 2002, Department of Housing of the Direction Générale of Planning,
Housing and Heritage (DGATLP, http://mrw.wallonie.be/dgatlp/HousingStats)
Source 4: Statistics Bureau of each country
Source 5: Embassy and Others223. Home Warranty Schemes in the World
Kohei Matsumoto
Professor, Department of Real Estate, Meikai University, Japan

3-0. Introduction (consumer protection in housing)
One of the most important policy subjects in the free nations is to establish a "small government”.
This policy is based on the Market Principle. According to this principle, adjustment of thevarious activities of the human being brings about better results by markets thangovernments.
The “deregulation" and “privatization” have the same root.
By the way, the traditional housing policies have a function of "the redistribution of income" bya good standard housing by the governmental interventions. The house rent control is also a kindof "redistribution of income" through rental agreements. Under the market principle, therationality of these housing policies is obviously denied except in some limited fields.
On the contrary, the home warranty scheme, the main theme of this paper which manages(prevents and remedies) risks in housing, is not always deemed to be a housing policy. Theintervention of government is very small in this field, although it is sufficiently reasonable, as
described later, according to the market principle. However, the history of the warranty scheme
goes back to the ancient age B.C. 18th (Code of Hammurabi). This code is the oldest formal law
which set down a warranty against defects of buildings.
In this paper, the need, validity and composition of the home warranty scheme will be analyzed
mainly from points of view of the market theory, building technology and constitution of asystem.
At first, the need of the consumer protection in housing will be discussed considering thecharacteristics of a building. And consumer’s risks in housing would become clear. Second, a
traditional legal background is going to be discussed. And limitation of a normal contract would
be pointed out. In addition, the discussion will find out that using professionals in order toprevent defects would not help warrant a house.
Third, the consumers’ movement will be shortly explained. Fourth, countermeasures against therisks in housing (consumer protection measures) would be described. Finally, a composition ofhome warranty scheme will be proposed.
My writing should be of your help to understand the various warranty schemes in the worldedited from the next chapter.

3-1 The Need of the Consumer Protection in Housing
An acquisition (buying or constructing a house) of a house could be the highest expense for mostpeople. If a serious defect is found in the house after the reception and no warrantee could beobtained for the reparation, a family would consequently suffer an irrecoverable loss. Therefore,
consumers these days are making strong demands not only for a reliable house building but also
for a long-term warranty. In other words, the consumer is willing to pay more to a risk-freehouse.
When we talk about a defect, many of you will probably expect that the term “defect” should
first be defined before discussion. In fact, whether or not a certain phenomenon is taken as adefect always becomes very critical.
23

However, here, in order to analyze the issue of the need of the consumer protection in housing, I
would like to start without a definition. Because the definition of defect would be analyzed laterand you will learn that a definition by many words would not be effective for a consumer
protection.
A defective house building is one of the largest issues in the consumer protection.
However, the risks that consumers are exposed to are not only defect, and I would like toconsider those risks by pointing out the characteristics of a building.

3-1-1 Characteristics of Buildings (hypotheses)
Before proceeding to the explanation below, let me make some definitions. The fundamental
function of buildings is to protect inhabitants from natural and social surroundings, and to realize
a comfortable living space, in other words to provide inhabitants with safety, habitability(functionality, comfortability and beauty), and durability etc..
Let’s define building characteristics necessary for those functions as “qualities”. And the word
“performance” in this text will be used as a unit of measurement to evaluate the function.
A building is one of the consumer durable goods. When compared with other industrial
consumer durables, it could be featured as:(1) Individuality(2) Unstable factors in production(3) A long period of production(4) Difficulty of measuring performance or quality(5) A long period of use(6) High priceCharacteristic (1) (Individuality)“Individuality” derives from the principle of constructing a building which is to realize therequirements of a client to the maximum extent under certain economic and social restrictions.
As a result, if you look at buildings closely, you will find that each of them has different
functions and qualities. Even when compared the units in the same condominium, each of themalso shows difference in those functions and qualities.
Especially in the Japanese market, the majority of existing and newly constructed house-building
is a wooden detached one which is constructed by a small contractor according to the order of anindividual owner. The house constructed for sale by builders is a majority in the housing market
in many nations.
As a result, it is very difficult for consumers to know if they have paid a reasonable price for the
product they obtained because they have no method to make a comparison, which may cause atime-consuming dispute. For the builders, planned production is impossible, which makes thequality management less easy.
Characteristic (2) (Unstable factors in production: Unstableness)“Unstable factors in production” inevitably remain in existence as buildings are composed ofmanual works in variable outdoor environments using hard-to-stabilize materials (such asconcrete and timber) and also on an unstable land. On the other hand, industrial products are24general produced based on the well-reviewed standard designs and on the machinery productionlines controlled by quality management systems in an indoor stable environment.
Characteristic (3) (Long period of production)
The building construction takes a long period of time from the project planning stage to theactual stage of occupancy, and it is quite possible that the economic backgrounds or preferenceof the parties concerned change during this period. A risk of bankruptcy of producers and changeof financial capacity of a client also could happen. Needless to say, a bankruptcy of builder
before reception of a house is very serious and difficult for a consumer to deal with.
Characteristic (4) (Invisible quality)
Safety, habitability and durability of a building are respectively highly abstract issues. Therefore
it is difficult even for a specialist to measure these performances and also to find out a “latent
defect” in a real building.
Technologically speaking, the quality of a house in many cases should be considered as an
output of a system consisting of human beings, environment and building itself. And
nondestructive testing is impossible in many cases. And furthermore, the evaluation of quality ofa house is greatly dependent on an individual scale of evaluation (preference).
In a word, many of qualities of a building are invisible or intangible. Only superficial qualities
such as the appearance and external beauty are visible or tangible. This is why disputes on
defects are uneasy to be settled.
Characteristic (4) implies that it takes an especially large amount of cost to confirm whether thebuilding is provided with the quality which is expected in a contract by the client. And there isalways enough room for complaints or disputes remaining.
The “invisible quality” accounts mainly for the so called “Defective Building Issue” and is amajor cause of long disputes. The defect issue is unable to be easily resolved.
Characteristic (5) (Long period of use)
No explanation may be needed. But, it should be noted that this feature itself includes
characteristics (4) (the durability is invisible), and also that the result of the transaction (defective
premise) makes bad effects on inhabitants and the environment over a long period of time.
Characteristic (6) (High price)“High price of building” may also need no explanation. But, it should be noted that this brings,
as a result, a lack of experience in transactions on the part of nonprofessional client (consumer).
A consumer is in a very vulnerable position in a real-estate market.
If a consumer repeats many transactions, he/she will be more successful, and even in the event ofa failure, he/she will be able to recover damages through successive transactions.

3-1-2 Consumer’s Risks in House Acquisition25

As stated above, the consumer is exposed to three types of risks in acquisition of a house (buying
or constructing a house):(a) Defect of building (risk of qualities):
associated with the characteristics (1), (2) and (4)(b) Breach of contract (risk of contract):
associated with the characteristics (3)(c) Failure of choice (risk of choice):
associated with the characteristics (1) and (4)And the characteristics (5) high price and (6) invisible qualities amplify a damage of consumers.

3-1-3 Economic Backgrounds (Mechanism of Market Failure)
The next factor is an economic background of defects. In the field of the building industry alabor shortage often continues in a growth of economy. Skilled labors can hardly be trained in ashort period.
It is clear from a macro economic point of view that an increase of demand over a long period oftime results in sharply rising prices and also reducing qualities of buildings as well as skills oflabors.
From a micro economic point of view, a transaction may be taken as a game in a market. Let us
consider what the market theory says.
When the market is in a state of "perfect competition", an optimum (Pareto-Optimum) result is
realized under some premises. This means the condition under which both a seller (construction
contractor, developer, builder or estate agent) and a buyer (client or purchaser) can not expect
more satisfaction without sacrifice from the other part. The perfect competition market is defined
variously, but can be simply put as a market of which the assumption of "pure competition” andthat of “perfect information” are satisfied.
For pure competition, it is assumed that the objects of transaction are homogeneous and that
there are sufficiently large number of sellers and buyers respectively, with free choice ofparticipation or withdrawal from the market.
For perfect (information) market, it is assumed that all of the participants in the transaction know
perfect information on the price and qualities of the object of the transaction.
As the characteristic (1) (individuality) stated in the preceding section indicates, buildings do not
fulfill the assumption of pure competition inherently. Normally, there are the participation of nota few construction contractors for one developer (project) in the construction market. In the caseof a transaction of a real estate, it may be regarded as a transaction game in which a number ofbuyers compete to get one seller.
In either case, it is a game determined by tactics. Accordingly, the influence of power(experience, economic forces etc.) appears in the result. An owner having economic power suchas a government agency or a big real estate company may generally hold a strong position to theconstructors.
On the other hand, individual home owners or purchasers (consumers) are placed in a
disadvantageous position against the builders, developers or real estate companies.
In reality, however, extremely biased results do not always occur. Coalitions of consumers may
26be made on the one hand, and there are leading prices in market, although indefinite, and safetyvalves such as noneconomic restrictions from social reputation to the concerned parties on theother.
Next, buildings are highly incomplete information goods with respect to quality as thecharacteristics (1) (individuality), (4) (invisible qualities) and (5) (long period of use) indicate. It
is sure that the assumption of the perfect (information) market is not also satisfied. The
characteristic (5) (long period of use) also indicates that there is incompleteness in the priceinformation (especially maintenance expense).
Further, from the characteristic (6) (high price), it can be easily understood that the consumers
are generally placed in an overwhelmingly disadvantageous position with respect to the volume
of information because of the lack of experience in transaction of a house. The purchase of ahouse could be an once-in-a-lifetime event for a large majority of consumers.
If the competition is made in such an imperfect market, the “adverse selection” occurs, resulting
in degradation of the quality. That is, “good appearance, bad in essence” buildings are likely togovern the market. It is a matter of course that the quality of works is going to degrade, because
the proper quality is difficult to confirm. This is the most important point of the defective
premises issue. If the information on the market were complete, or nearly complete, there might
be a very little difference produced between the expectation and the reality, but if any difference,the details of such difference could be arbitrated. The defect could be prevented before the fact
and remedied after the fact. There would be no defective building (social) issue.
As remarked above, a failure in the transaction of a house building is a long lasting bad influence
a in view of the characteristic (5) (long period of use) and also is not recoverable damage for a
consumer because of the characteristic (6) (high price).
The building market fails if it is free. The non-market system for consumer protection isnecessary even in free nations. Out of the point of the argument, the building control is also
necessary for public protection for the same reason.

3-2 Legal Background3-2-1 Limitation of Contract
The "principle of private autonomy" is in general applied to transactions of buildings. However,in the case of buildings, the qualities which concern the safety of occupants or third parties are
subject to be controlled under the Building Code and other rules or regulations. This (building
control) is to be considered a restriction to the said principle.
Consequently, the qualities of the individual buildings are determined, for the greater part, by thecontract agreement or agreement of sale. In the case of the latter (sale), the scope of choice of thepurchaser become narrower than in the former, but it may be taken as a determination in theprinciple (economically in the market).
In the contract, the “lack of qualities expected normally or on the contract” is called a “defect".
Practically there are many terms of the same meaning and different impacts mentally in a
culture.
The contract is an agreement written by symbols and words. Then it is unable to define all of thephysical qualities and characteristics of an objective article of the contract. A word is a symbol
27but not a thing. Important points in an agreement are noted by symbols, but the other points are
not nor could not be noted specifically in the contract.
The thing has infinite qualities (by articulation) but we can not infinitely use words. The
ambiguous parts not-described are placed in the concept of "normally expected qualities”(implied qualities) for consideration.
For example, the quality "no rain leaks” is not always conspicuously confirmed by wording in
the contract, but it is a normally expected quality, so that if the roof has a leak, there arises aissue of reparation of “defect” as a matter of course. In the case of sale of an existing building(sale of a determinate article), the situation is more or less complex and “latent defects” becomesa key concept, but the same thing can be said.
Here, it should be noted that the normally expected qualities are subject to change with social
conditions, as they are determined, so to speak, socially, not technologically. Particular careshould, therefore, be taken for qualities concerned with safety.
The definition of the defect above mentioned has always a definite center and indefinite
surroundings. This associates with characteristics (mechanism) of a word and symbol.
Anyway, such ambiguity, if it is of a large extent, makes it difficult to resolve the issue of defect.
As lawyers say, it is reasonable as a legal act to agree and write very minute points in a contract.
However it requires much more cost (money and time) in practice with another ambiguity
It is vital that a consumer has generally no knowledge sufficient to understand neither words in acontract, design drawings nor specifications of a house building. Therefore the in-depth detailed
agreement is not always reasonable.
Thus, ambiguous (simple or non-detailed) contracts prevail. Especially in Japan small housing
projects by individual owners make up the majority of the building market. And these houseowners in many cases can not understand drawings and specifications of house building theyordered.
Because of the knowledge gap, the agreement between a consumer and a producer (builder ordeveloper) is always imperfect.

3-2-2 Traditional* Responsibility of Defect in Japan
Every nation may have its own legal system in regard to the responsibility of defects. Let me
touch upon a Japanese legal system concerning a defect. In Japan the fundamental law system isstipulated in the Civil Code which is traced back to the Napoleon Code in France.
When a “latent defect” is found, there is a responsibility for a builder to compensate damages ofa client resulting form the defect. In the Civil Code, the right of claim for repair andcompensation of damage by a defect, even if a defect found in the ground, is recognized for theowner in the case of a construction contract (Article 638) but the right to cancel the contract(Article 635) is not recognized. Duration of the responsibility for defect is stipulated as 5 years
after reception of the building, or 10 years for the hard buildings (Article 638). This article isexplained as an adoptive provision. The period is extensible for duration of prescription (10years) by a special agreement (Article 639). However there is no definition of the defect.

*

Before the Housing Quality Assurance Law (1999)

28

In the case of a sales contract (sale of determinate article), the right of claim for compensation ofdamage (and according to theory, the right of claim for repair) by latent defects is recognized forthe purchaser, or the right to cancel the contract for a defect of an extent endangeringachievement of the object of the contract (Article 570). The right of claim maintains 1 year fromthe time of finding the defect.
Under the Land and Building Transaction Law of Japan, any contracts more disadvantageous to
the purchaser than the provisions in the Civil Code are made null and void at present, except
those specially agreed for 2 years warranty (Article 40, ibid.). It is technically and empiricallyunrealistic to specify a warranty period of 10 years for all sorts of defects or l year after
discovery (not delivery). The period of 2 years indiscriminately seems to be realistic andwell-balanced with industrial goods, but not always satisfactory for consumers in case ofstructural defects.
It is characteristic that two types of responsibility against defects, long term responsibility forstructural defects and short term responsibility for the other defects are imposed to a producer,
and that no defect is specifically defined in laws.
In Japan, Housing Quality Assurance Law 1999 (HQAL1999.) was introduced with thefollowing purposes:(1) Promotion of maintaining the quality of the housing(2) Protection of the housing purchaser(3) Rapid and economical solution of dispute
HQAL establishes three schemes for those purposes:(1) Housing performance indication system (not compulsory)(2) 10-year liability for fundamental performances of new housing(compulsory) (a special law of the Civil Code)(3) Alternative Dispute Resolution system for housing adopting theindication system
The 10 year liability and performance indication system is introduced based on the Frenchsystem.
Suppliers (builders or developers) are now liable for defects of structural and rain-proof
performance of a new house building during 10 years after delivery. The other defects are
conducted on the common rules.
The housing performance indication system stipulated in HQAL lays down a set of common
rules and standards to evaluate performances (indicators) of housing system. The evaluatedperformances become objects of contracts. A purchaser can make a comparison among different
types of housing by the performance indicators and avoid the risk of choice mentioned above(2-1).

3-2-3 Using Professionals to Prevent DefectTo prevent defects, a supervising system by professionals is adopted in many countries. In Japan,
supervising based on the Architect Law is provided after the Second World War. But this law
system may be efficient for large building projects but not adapted to individual small housemarket.
29

The main reasons of dysfunction of this system are that it costs too much for an authorizedarchitect or engineer to supervise the works of a small individual house-building and thatsupervision (or inspection) can not assure the qualities of a building. It is a good design andworks that create quality of a building. Architects or building engineers can not warrant a defectby themselves.
The warranty of results is important but records of supervision are not important for a consumer.
An effect against cost is not efficient.
If a builder gives assurance to provide expected results, the client choice not to ask the architect
to supervise the works may be reasonable, although the results may be more or less risky.
The architect (engineer) law system is so constructed as not to meet with needs of end users(consumers).

3-3 Consumers’ Movement
The consumers’ issue or the consumers’ movement is considered to occur as a naturalconsequence along with the development of a production system. The issue of defects is acharacteristic of the consumers’ issue.
In the old days, the products were generally traditional ones so that every one had more or lessknowledge and experience of their properties (qualities) and methods of production througheveryday life. In addition, the production was done in a local community so that the purchaserand seller were, in most cases, familiar with each other.
Accordingly, the completeness of information in transactions was substantially maintained. In
other words, both purchaser and seller had a good understanding each other. Though disputes
occurred exceptionally, judgments were passed relatively easily. It seems that the prototype ofcivil law was formulated as criteria for such backgrounds.
However, with technological development, the social division of production took place.
Separation of the producers and consumers occurred. As a result, differentials in economic
power, knowledge, experience, etc. between the two sides expanded increasingly, and impeded a
direct communication or a mutual understanding between them. The consumer is placed in a
relatively weaken position in the market. The expression "planned production is to produce
things without knowing the face of customers” straightforwardly reveals such a change of social
relation.
Then, there occurred consumers’ movements to recover a strong position in the market. First, inthe middle of the 19th century, a livelihood co-operative association was formed in England. It
spread through the European countries toward the latter part of the century. However, this means
nothing but the consumer himself becoming a producer (mainly distributor). Therefore it may be
inherently limited.
On the other hand, in the U.S.A. a consumer federation was organized in the end of the
19thcentury, as a movement to purchase commodities from good shops. This movement took root,
through struggles against the issue of the safety of foods, etc., as a movement intended to offer
proper information concerning the commodities. After the World War II, this movement spreadto the advanced free nations. It was intended to secure freedom of choice for consumers and, atthe same time, obtain good commodities at reasonable prices through the market competition.
30

The former is called the consumers’ movement of the livelihood co-operative association type,
and the latter the informational type. In Japan, similar movements are also spread.
In the field of building, however, technical knowledge and experience are required. Therefore
the first type is not likely to succeed, but the second type will develop further, or otherwise
another type will be generated with a specialty in buildings (dwellings). The housing warranty
system is closely relative to the second type movement, though the characteristic of the systemchanges according to the stage of progress.

3-4 Countermeasures
Above mentioned (3-1-2), the consumer is exposed to three types of risks in acquisition of ahouse:(a) Defect of building (risk of quality)(b) Breach of contract (risk of contract)(c) Failure of choice(risk of choice)In many countries the warranty scheme is mainly composed to protect a consumer from the first
type of risk (quality assurance) and a few schemes have a system against the second type of risk
(completion warranty).
Details of the present situations in the world will be referred in the following sections.
As concerns the third type of risk only two nations (France and Japan) adopt a system for
consumer protection. This system (a quality labeling scheme or quality evaluation scheme inFrance and Japan) is differently categorized from the warranty scheme, so this analysis excludes
it.
In the following sections the author analyzes countermeasures mainly to deal with the risk ofquality and collaterally the risk of contract.

3-4-1 Characteristics of Defects of Building
The cessation of vital or important functions of a system is called technologically “failure”. The
defect in building can be considered the failure. It is known that the failure rate function λ(t) ofa system generally has the following characteristic (Figure 1).
Failure Rateλ(t)time period

Initial failure
periodRandom failure
periodFig. 1 Failure

wear-out failure
period31

Statistic data of repair after reception, although they are not always disclosed, shows that thebuilding repair in a short time after reception has also the same characteristic of failure in theinitial failure period of a System.
From the legal point of view, it is clear that the man on producer’s side must supply his products
to consumers without any defect. In disregard of theoretical possibility, however, to supply aperfect product with no defect is not realistic considering its cost and time. Therefore it is lessexpensive and more reasonable to repair defects found in the stage of use, even if the probabilityof defect of product can not be neglected.
The failure in the initial failure period must very probably be a result of defects of some sort, andtherefore the guarantee period must cover at least the initial failure period which depends on thecharacteristic of parts and materials of product.
In the case of building, considering the characteristic (2) (unstableness) mentioned at the chapter
2, it takes at least one year after completion of works, during which the building is reallyexposed to the all loads of environmental effects of the every 4 seasons and stabilized in quality
after drying and shrinkage of materials.
The goods in building which are used everyday like equipments of kitchen can be tested during
the short period of use, but defects in antiseismic function of structure, energies conservation
function of building, fire safety performance of building spaces, or water tightness of exterior
parts of building are difficult to be found out.
There are a couple of complex issues when defining a defect. The first is an issue caused by theundesirable but inherent nature of building materials. The concrete cracking, the timber warping
resulting from drying are typical examples of this category. They are inevitable phenomena but
frequent causes of disputes between producers and consumers. It is necessary for producers to
explain the negative side of characteristics of materials beforehand and at least, to design toprevent substantial damages from them.
The second is an issue coming from the uncertainty of the performances of building. The
evaluation of performances of a building generally depends on a complex system which iscomposed of the qualities (performances) of building, the effects from environment (including
human activities) and the human judgments.
To simplify the issue, let’s consider the case in which the human judgment has no influence. The
magnitude of an effect on building caused by the environment and levels of quality of building
are measurable. And these elements are random variables.
In the simplest case where the quality can be evaluated by a physical measurement and where acertain level is guaranteed by a producer, a failure (defect) is defined as falling under theguaranteed level of quality. (Figure 2)
In the general case, the failure arises when the magnitude of an effect exceeds the strength levelof quality. (Figure 3)

32

Distribuiton of quality and defectDensity

Design level of qualrity
targetGuaranteed level

Quality level

DefectFig. 2 Distribution of Quality and Defect
The margin of quality (quality level - effect level) is a key concept. If the margin is negative thefailure arises, and if the margin is positive the failure does not arise. (Figure 4)
It is clear that there is a case where the failure occurs even if a defect does not exist and vice visa,
there is a case where the failure does not occur even if a defect exits. The cause of failure is notalways easy to find out.
Density

Distribution of effect and quality
Target level

Guaranteed level

Effect dist.

Quality dist.

Level of effect and quality

Level of quality &effectFig. 3 Distribution of Effect and Quality

33

Distribution of quality margin
Quarity margin = Quality - EffectDensity

failure0

Margin( Q- E )Fig. 4 Distribution of Quality Margin
In the real world, however, the magnitude of effect and the level of quality are not always
measurable, and moreover the human factor has always a vital influence on evaluation of the
failure. The evaluation of performance of the house as an object of a construction contract or anagreement of purchase depends, in a large portion, on individual standards of the concerned
parties. The judgment of a failure or the presumption of the cause is inevitably disputable.

3-4-2 Definition of Defect and Term of Warranty
The “defect” is defined as a lack of qualities expected normally and on the contract. The clear
and specific definition of defects might be desirable, but an ambiguity in wording is unavoidable.
Symbols and words are not a thing and can not represent characteristics of all defects. The
detailed definition by many words will disappoint consumers. The consumer satisfaction is an
important key concept.
A wide coverage of warranty is also desirable for consumers. The more the coverage and term of
warranty spreads over, the more the cost of scheme increases. The optimum point may change
according to economical and social environments of the scheme.
The decision of warranty conditions, which contain a definition of defects, should be made basedon the concept of “consumer satisfaction”. So it is very important to explain consumers not only
without inconsistency but also in plain words for consumer’s understanding.

3-4-3 Dispute over DefectA dispute over a defect often happens between a producer and a consumer, when the latterevaluates the house acquired lacking some of the qualities expected normally or prescribed in thecontract, but the former does not. The producer, therefore, could keep out of the dispute, if he
has quality-control to realize the expected qualities and repair defects without any delay.
This contains some truth but the actual dispute is a little more complicated. A man in disputemakes an effort to keep his position advantageous. A man would not make a dispute before hemakes sure the advantage over his opposite party. The real causes of dispute in this case do notalways correspond with the facts which he insists on as the causes of dispute.
34

The purpose of dispute is a recovery of discontent sustained in a contractual relationship. In
many disputes the facts insisted on are measures to attain this purpose. If a concerned party ofcontract has any dissatisfaction at the results of negotiation, the detailed descriptions defining thedefects to be repaired have an only effect on reducing the means of dispute.
A basic point to prevent disputes is an effort to maximize the satisfaction of customer under the
economical and technical restrictions. The word is not a thing (building) and the design drawing
is not the building which it stands for.

3-4-4 Preventive System against DefectThe level of quality in which the consumer finds satisfaction is naturally limited by the cost of
construction, but the consumer is apt to enlarge his expectations disregarding his payment. The
fundamental cause of defect troubles is the difference between the expectations and the realities.
It is therefore necessary to make the information perfect of the object of contract, especially tofurnish full information on the house to the consumer who has no sufficient experience in houseacquisition.
The plain presentation of guarantee conditions is efficient. The reasonable determination of theconditions is logically a very difficult issue, because it depends ultimately on the distributive
justice (equity in distribution). But in reality it can be empirically determined on the statisticalbase on the current industrial standards.
The guarantee against every failure seems to reduce the loss of consumer and so appears a goodmeasure of consumer protection, but the increasing cost of guarantee may be partially loaded on
top of the price of house through the market mechanism. Therefore, the overall guarantee
without any restriction is not always reasonable for the consumer itself, the guarantee undercertain limited conditions is more effective.
The cost of repair or prevention of defects should be borne by “the cheapest avoider” of failure.
The quality control system under the supply side responsibility is technologically indispensableand efficient to prevent defects of building. It realizes steadily the quality expectations throughthe well-reviewed plans and the reliable executions of work. Measure such as the inspections by
the third party or an employed engineer and the registration of builders would have some benefit,
but the effect is limited from this point. They are rather indispensable from the moral hazard
perspective in the insurance system mentioned later.
Even if the quality control system is well established and operated, the failure can not becompletely prevented. The repair system without delay is necessary in order to stop the
propagation of physical damages and customer’s dissatisfaction. On the other hand, it is notalways easy for the producer to bear the risk of repair. Because the responsibility for building
generally rests during a long period and so there is a risk, although it is a very little, that the costof repair runs into huge figures.
The insurance system is, therefore, very effective to secure the of repair cost without delay andto stabilize the management condition of the producer.
Even after all measures, there is still a fair possibility of the dispute over defect, because thediscrepancy of interruption of an agreement is based on the conflict of interests between the
consumer and the producer. Therefore a system for conciliation, mediation or arbitration isnecessary and effective to settle disputes, although the final settlement is a judicial proceeding.
35

Judicial process is often lacking the expert knowledge of building and takes a long time, much
expense and heavy mental stress with respect to an expected result.

3-4-5 Breach of Contract (bankruptcy of builder, etc.)
When a client made an advance payment to a builder and the builder failed to complete a project,
the client suffers from a heavy damage and it is almost impossible for a client consumer to deal
with the event. So as a matter of course the consumer needs safety net upon acquisition of ahouse building. However a fail of business enterprise is not a stochastic phenomenon. It is a
result of decisions of business administrators and change of economic and social environments.
So it is very difficult to control (inhibit and stabilize) the risk of bankruptcy.
In order to control the risk a registration system of builders or developers is generally adopted.
To be registered they are examined on their financial and technical ability or a surety bond by abank is required.
The registration system or bond rating agency is necessary but not perfect to control a risk of
breach of contract. However on the registration system we can compose a “completion warranty
system”, which protects consumers form the risk of contract in certain extent.

3-5 Structure of Home Warranty Scheme
First of all it is necessary to set a target of the scheme, more specifically, the warranty conditions
for consumer protection. Mentioned above, the more the coverage and term of warranty spreadover, the more the cost of scheme increases. The final target is to realize “consumer satisfaction”.
The optimum solution may be different in economical and social environments of the scheme.
According to the previous analysis, the composition of the warranty scheme should be as
follows:(1) Warranty system, the aim is to describe the warranty conditions (responsible person,
duration and coverage) in plain words.
(2) Quality management system (which contains a quality control system to prevent
defects technologically) which leads to “consumer satisfaction”.
(3) Registration system of producers (builder and developer), the aim is to prevent possible
defects of building and bankruptcy of producer.
(4) Insurance system, the aim is to pool the risks; not only a risk of quality but also a riskof contract.
(5) Dispute resolution system, it is impossible to resolve all the risks in regard to quality,
contract, as well as dispute over them. So, “Alternative Dispute Resolution”(ADR)
system is effective in many cases, though the final resolution depends on the
judicial system.In practice there may be many different system arrangements. One
organization can integrate those 5 subsystems, but every 5 systems could
independently exist and function in a coordinated manner on contracts.
(6) Efficiency of scheme
For consumers, the cost is always the major concern. The risk of house acquisition is importanteconomical matter in almost all cases. So the economical efficient scheme is an essentially
important point for analyzing the system.
The total cost of a warranty scheme is mainly composed of a cost for defects prevention, cost of
remedy and procedures. The total cost per house must be lower than the risk premium for36

consumers who purchase the house.
As I mentioned above, the consumer satisfaction is an ultimate goal of the scheme. We canevaluate the effectiveness of the home warranty program by surveying consumer’s satisfactionlevel.
So the effectiveness of scheme is a very essential to analyze the warrant program.

3-6 Working Hypothesis of Survey
We designed a survey on warranty schemes around the world based on the structure (5subsystems and 1 point of consumer’s view) mentioned above as a working hypothesis.
We have tried to collect uniform information though the result of survey does not always
correspond with our intention. This also would explain the difficulty of setting an impeccable
scheme of consumer protection based on the actual situation in each country.
However, it is beneficial for us to understand the various schemes in different countries, using
the structure developed in this chapter.

37

4. New Home Warranty Schemes in the World(Country by country reports)

4-1.Australia
4-1-1. Background
In Australia, consumer awareness of their rights has increased substantially over the years.
Notwithstanding this, and considerable consumer protection legislation, it is still common for
consumers to enter into building contracts on the shake of the hand.
To address these issues, State Governments have introduced a variety of laws that put the onus onbuilders to be fair, by regulating Home Building Contracts, providing for “Home Indemnity
Insurance” schemes, and the licensing of builders.
Australia comprises 8 States and Territories, each being autonomous and obviously, as in any
democracy, their approaches to these matters are different. For ease of this paper, matrixes areused to explain the variations.

4-1-2. Licensing or Registration of Builders
STATE/TERRITORY
AUSTRALIANCAPITAL TERRITORY (ACT)Capital City – Canberra
NEW SOUTH WALES (NSW)
Capital City – Sydney

STATE LICENSINGHOME
INDEMNITY
INSURER

Yes

1924

PrivateYes

1971

Government
Private1988

1973-96
1997

NORTHERN TERRITORY (NT)Capital City – Darwin

No

QUEENSLAND (QLD)
Capital City – Brisbane

Yes

1971

SOUTH AUSTRALIA (SA)Capital City – Adelaide

Yes

1968 Private

1986

WESTERN AUSTRALIA (WA)Capital City – PerthYes1939 Private

1997

VICTORIA (VIC)
Capital City – Melbourne

Yes1995 Government
Private1974-95
1995

TASMANIA (TAS)
Capital City – Hobart

Yes

2004 Private

1993

Under Consideration

38

Government

1979

Most States/Territories are modifying these systems continually and the information provided istherefore in general terms.

4-1-3. Building Disputes
In addition to licensing builders, Queensland, New South Wales, Victoria and Western Australia
have introduced what are referred to generically as ‘Building Disputes Tribunals’.
These are quasi judicial Tribunals with varying powers but with an emphasis on being a low cost,
non legalistic, speedy forum to determine workmanship and some contractual disputes that arise inhome building.
Orders that emanate are legally binding on the parties and failure by the builder to comply can resultin cancellation or suspension of their license and/or a fine or prosecution in the Local Court. In
certain circumstances the owners can also be prosecuted .
“Refer to Summary Matrix – Builder Regulation”. (Attached)

4-1-4. Home Indemnity Insurance (H.I.I.)
Originally, H.I.I. applied to all residential buildings undertaken throughout Australia. In recent
times, Insurance providers have lobbied State Governments to get exemption for, in general terms,
multi unit developments exceeding 3 storeys.
The traditional cover that the home owner can expect from H.I.I. is for an agreed amount tocomplete the house or remedy defects in the event that
their builder dies, disappears or becomes insolvent and cannot complete these statutory obligations.

4-1-5. Building Audits
Insurers and licensing authorities have, in recent times, taken far more interest in builders’performance and will not insure or license them unless the builder has provided adequate trading
and financial figures and a reasonable business plan.
Premiums are set accordingly.
Notwithstanding this, builders consider that the limitations set by some insurers are too restrictive toallow for the flexible market that prevails.

4-1-6. Cost of H.I.I.
Costs vary widely due to turnover, previous history/claims, location, construction methods etc.
The likely cost for insuring an AU$200,000 home through the H.I.I. legislation would be in theregion of AU$500 to AU$1500.
Attached is a matrix of each States H.I.I. provisions.

39

INSURANCE

QLD

Scope of Insured
Work

NSW

COVER

VIC

MATRIX

ACT

SA

TAS

WA

Domestic
Residential
Residential
Residential
Buildings,
Construction Work
Residential
Residential building
Construction Workextensions and building only.Multi
up to 3 residential Work subject to abuilding only.Multi
only.Multi unit
up to 3 storeys,
unit development
renovations,domestic building
storeys plus
unit development
development exceeding
outbuildings,
excludes detached exceeding 3 storey
work contract
garages,
exceeding 3 storey
3 storey are exempt.
extensions,are exempt.
garages /extensions andare exempt.
renovations
outbuildings
renovations

Minimum Insured
Value$3 300$12 000$12 000$12 000$12 000$12 000$12 000

Period of Cover

6 years 6 months
from contract

6 years fromcompletion

6 years 6 months fromcompletion

5 years fromcertificate ofoccupancy

5 years fromcompletion

6 years from dateof completion

6 years frompractical
completion

Sum Insured

Replacement
value but notexceeding $200
000

$200 000

MT $200 000

Value of theValue of contract
Value but notcontract work towork to maximum
exceeding $80 000
maximum $85 000$200 000$100 000$500 maximum

Nil - Non completion
Defects: 12 months - 3
years $500 maximum 3 5 years $750 maximum
5 years + $1 000

Excess

Deposits

Nil

Unrestricted cover,
10% of contract
legislation
value < $20 000;prescribes
5% of contract >recommended$20 000
deposit

$500

$400

10% of contract value <Any extra cost to$20 000; 5% of contract Maximum $10 000
complete> $20 000

40

$500

$500

Limited to 3% of
the contract for
6.5% of thebuilding $20,000
contract and over. 10% formaximum $13 000
contracts under$20,000NT

NZ

INSURANCE

QLD

NSW

VIC

Source ofCompensation

Death
disappearance,
insolvency,
termination

Insolvency, deathor disappearance

Insolvency, death ordisappearance

Time Limit for claims

2 years fromcontract - Qld tocheck

12 months fromfailure180 days from event

Defects

Category 1 structural
Category 2 standard of finish

Breach of
Warranty Insolvency, deathor disappearance

Breach of Warranty Insolvency, death ordisappearance

Subsidence

No fault
subsidence
regardless ofcause

As a result of
defective work

As a result of defective
work

UninsuredConsumers

Consumers are
deemed to be
insured wherecontract enteredinto licensed
house builder or in
the case of
fraudulent
misrepresentation

No coverNo cover

COVER

MATRIX

ACT

SA

TAS

WA

Insolvency, death Insolvency, death Insolvency, death Insolvency, deathor disappearance or disappearance or disappearance or disappearance

90 days fromevent

90 days fromevent

Within 3 months of
event

Nil

Breach of
Breach of
Breach of
Breach of
Warranty Warranty Warranty Warranty Insolvency, death Insolvency, death Insolvency, death Insolvency, deathor disappearance or disappearance or disappearance or disappearance

As a result of
defective work

Where the work is
defective and thecontractor isinsolvent, dead or
has disappeared

As a result of
defective work

Where the work is
defective and thecontractor isinsolvent, dead or
has disappeared

No coverNo coverNo coverNo cover

41

NT

NZ

INSURANCE

QLD

Owner Builders

Types of Policies
Permitted

No provision

Job specific

NSW

VIC

7 year cover from
6 years from thethe completion forcompletion or within 7
defects not
years after the date ofidentified at salecommencement of work
inspection. For(if not C/O or CFI) for
subsequent
defects not identified atowner, must buy
sale inspection
insurance.
Job specific,
annual,professional
indemnity

COVER

MATRIX

ACTSANo provision

No provision

Job specific

Job specific

Job specific and annual

42

TAS

WA

6 years from thecompletion or
Cover to bewithin 7 years after
provided if soldthe date ofcommencement of within 7 years ofwork (if not C/O or issue of building
license
CFI) for defects
not identified atsale inspection
Job specific

Job specificNT

NZ

BUILDER REGULATION MATRIXQLD NSW

VIC

ACT

SA

TAS

WA

NT

MT

NZ

Licensing Regulatory Approach
Government
Regulation

Y

Y

Y

Y

Y

Y

Y

Co-regulation

N

N

N

N

N

Y

N

Self-regulation

N

N

N

N

N

N

Licensing / Accreditation
Regulation

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

MT

Y = Yes

Y

N

Y

Y

Y

Y

Y

?

N = NoTrade Contractor

Y

Y

Y

N

Y

N

N

N

Supervisor

Y

Y

N

N

Y

N

Y

N

Plumbers
Gasfitters

Y

Y

Y

Y

Y

Y

Y

Y

Electricians

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

N

N

Y

Y

N

Y

Y

Y

Y

N

Y

MT

Y

Y

N

Y

N

N

Y

N

N

Engineer

Y

N

Y

N

N

Y

N

Y

Company

Y

Y

Y

Y

Y

N

Y

?

Individual

Y

Y

Y

Y

Y

N

Y

N

Partnership

N

Y

Y

Y

Y

N

Y

?

Public Register

Y

Y

Y

Y

Y

Y

Y

?

Residential
Builders
Commercial
Builder

Public Building
Certifiers
Private Building
Certifiers
Design / Drafts
Persons

MT = Moving Towards

Licensing / Accreditation Assessment Criteria
Licensing

Y

Y

Y

Y

Y

Y

Y

Y

Competency
Based Assessment

Y

Y

Y

N

Y

Y

Y

Y

Categories /Classes of Licence
Aligned with BCA

Y

N

N

Y

N

Y

N

N

Technical

Y

Y

Y

Y

Y

Y

Y

Y

Managerial

Y

MT

Y

N

Y

N

Y

N

43

MT

Y=Yes, N=No, MT=Moving Towards

BUILDER REGULATION MATRIXQLD NSW

VIC

ACT

SA

TAS

WA

NT

Financial

Y

Y

N

N

Y

N

Y

N

Fitness andPropriety

N

Y

Y

N

Y

N

Y

N

Access tolicensee's public
dispute history

Y

Y

N

N

N

N

N

N

Non Bankrupt
Criteria

Y

Y

Y

N

Y

N

Y

N

NZ

Compliance Program
Technical Audits

Y

Y

Y

Y

N

Y

Y

Y

Financial Audits /Investigations

Y

MT

N

N

Y

N

Y

N

Fitness andPropriety
Investigations

Y

Y

Y

Y

Y

Y

Y

Y

Unlicensed
Contracting Audits/ Investigations

Y

Y

Y

Y

Y

Y

N

Y

Disciplinary Program
Unlicensed
Contracting

Y

Y

Y

Y

Y

Y

Y

Y

Failing to Rectify

Y

Y

Y

Y

Y

Y

Y

Y

Breach of FTA

Y

Y

Y

Y

Y

Y

Y

Y

Negligence /Incompetence

Y

Y

Y

Y

Y

Y

Y

Y

Dispute Resolutions
Alternative Dispute
Resolution

Y

Y

N

Y

Y

Y

MT

N

Formalised
Industry-Based
Scheme

N

N

N

N

N

Y

N

N

Courts

Y

Y

Y

Y

Y

Y

Y

Y

Tribunals

Y

Y

Y

N

N

Y

Y

N

44

Y=Yes, N=No, MT=Moving Towards

BUILDER REGULATION MATRIXQLD NSW

VIC

ACT

SA

TAS

WA

NT

Industry Experts(outside of tridunalsystem)

N

N

N

N

N

N

N

N

Limited Legal
Representation for
Small Value
Disputes

Y

Y

N

Y

N

Y

Y

N

NZ

Standard Minimum Contract Requirements
Regulation of
Minimum Contract
Requirements for
Residential
Building Sector

Y

Y

Y

MT

Y

N

Y

MT

Plain Language

Y

Y

Y

MT

N

N

MT

MT

Statutory WarrantyY

Excludecompulsory
Arbitation Clauses

N

Rights under
Regulatory
Framework cannot
be Varied
Arbitration Clauses

Y

N

N

N

MT

Y

N

N

Y

N

N

N

MT

Insurance
Mandatory
Reporting
Requirements for
Indemnity
Insurance
Providers

Y

Y

Y

Y

N

Minimum for
Statuary Warranty

Y

Y

Y

Y

Y

Builder Default
other than Death,
Disappearance or
Insolvency

Y

N

N

N

N

Of Building as
opposed toindividual trades
Competative
Market orCompetative
Neutral Market

Y

Y

N

N

N

Y

Y

45

Y=Yes, N=No, MT=Moving Towards

4-2. Canada
4-2-0. Home Warranty in Canada
Three Canadian provinces have legislated (mandatory) home builder licensing and homewarranty requirements, Ontario (1976), Quebec (1999) and British Columbia (1998). The
remaining provinces have voluntary warranty systems available through Home Warranty
Programs.
Only BC has a legislated requirement for home builders to be licensed through a Provincial
Crown Agency (the Homeowner Protection Office), Ontario and Quebec are not for profits. BC
is also the only province that requires that home warranty insurance* be provided byprivate-sector, provincial-regulated insurance companies, all other provinces’ warranties are
based on a pooled fund approach with no insurance regulations.
Six New Home Warranty Programs operate in Canada (Atlantic, Quebec APCHQ, Ontario,
Manitoba, Saskatchewan, and Alberta New Home Warranty Programs). These six are
essentially creatures of their individual provincial chapter of the Canadian Home Builders’
Association (CHBA). Most were established as a marketing tool in the mid-70s and are still
under the influence of their provincial CHBA. There is an association of the CHBA New Home
Warranty Programs called the National Home Warranty Council. It has no authority over theindividual Programs, though they meet 3 or 4 times a year to exchange information on topics ofmutual interest or concerns.

46

4-2-1. Alberta
4-2-1-1. History
Start of the Program: 1974

4-2-1-2. Origins of the Program
The Alberta New Home Warranty Program (ANHWP) was established in 1974 by the Alberta
Council of the Housing and Urban Development Association of Canada (HUDAC), a national
industry association.
The mid seventies were a period which saw a huge rise in the number of homes being built in
Canada, thanks largely to greater numbers of young baby boomers moving into the home buying
market.(At the time,270,000 to 280,000 new homes were annually being built in Canada,
compared to 150,000 to 160,000 today.)
The Canadian Mortgage and Housing Corporation (CMHC) started raising concerns in regard to
the quality of the homes that were being built, as it found that some industry players were having
trouble keeping up with the demand. (In addition, it was finding some instances of fraud, in theform of companies absconding with consumers’ deposits.)
CMHC therefore signaled to the industry, particularly during a 1974 builders’ conference, thatsolutions were necessary, and presented strong indications that a national, legislated solution
might be found.
A group of members of the Alberta Council of HUDAC took these signals quite seriously and,opposed to the notion of a mandatory national solution, set about establishing a warranty
program that would suit the industry’s and consumers’ needs as expressed by CMHC, but on aprovincial and voluntary basis.
The details of the initiative, originally called the Alberta New Home Certification Program, were
worked out in close collaboration with the consumer affairs department of the Alberta provincial
government, and were modeled in part on a well-established non-governmental home warranty
program in the United Kingdom.
The Alberta New Home Warranty Program is not a government entity, though a (currently
unfilled) seat is available on the Board of Directors for a government representative. Nor does
the program enjoy a monopoly, as builders are not required to be members and other programs
may compete against it. According to ANHWP President Dennis Little, some 80-85% of the newhomes built in Alberta in 1995 (22,000 out of a total of about 27,000 yearly) are sold with awarranty from the organization.
This is in contrast to other programs, such as Ontario’s New Home Warranty Program, which(though it is not a government body) has been delegated, the authority to administer the Ontario
New Home Warranty Act. Builders attempting to construct houses in Ontario who are notprogram participants are subject to prosecution and fines of up to $100,000.

4-2-1-3. Participation in the System
Voluntary

4-2-1-4. Major Warranty Provider
Alberta New Home Warranty Program (ANHWP)

47

4-2-1-5. Structure of the Organization
ANHWP is a non-profit corporation with offices in Calgary and Edmonton. Its twenty-member
Board of Directors consists principally of representatives of the home builders industry. The
current Board also has two financial services representatives, a corporate counsel, and a
consumer interests representative (who is chosen by the Consumers Association of Canada, at
the ANHWP’s request.) A veteran consumer representative, CAC Alberta chapter president Larry
Phillips, feels that despite there being only a single seat reserved for the consumer interest, thoseinterests nevertheless are attended to by the Board as a whole. Mr. Phillips notes that this isbecause in order to continue to avoid the prospect of government regulation (which is always aconcern), the Board has to ensure that the program is seen to work for consumers. He notes that
the ANHWP pays the consumer representative a per diem, and provides a caucus fee to the
CAC’s Alberta chapter for its services to the Board. The Board sets policy for the ANHWP,
including the content of warranties; typically, its decisions are based upon the advice of ANHWP
staff, headed by the President, Dennis Little. All Board members are able to vote on decisions
made.
ANHWP runs two offices, in Edmonton and Calgary (the site of its headquarters).Management
and staff in both offices total 40 employees.

4-2-1-6. Protections Offered to Consumers
The original two-pronged concept of the ANHWP has not changed since its inception. It is based
upon certification of builders to prevent complaints from occurring, and a warranty to deal withproblems when they arise.
Certification
The certification aspect of the program consists in ensuring that each “Registered Builder
Member” is indeed competent in the trade, and financially solvent. The builders execute a
detailed “Agreement with Builder” which establishes the contractual relationship, which isfurther enhanced by the builders providing personal guarantees, letters of credit and othersecurity instruments to cover the amounts described below.
The warranty
A consumer who puts a deposit on a house being built by a “Registered Builder Member”
receives a set of five warranty protections that arise on the default of the builder in accordancewith the Agreement with Builder.
1. Deposit protection
If the builder defaults, the consumer’s deposit is insured for up to 15% of the purchase price to a
maximum of $60,000.
2. Builder Performance protection
Coverage for up to $30,000 towards the completion costs of discharge of builders’ liens on thedefault of the builder to complete the home as contracted. The Program will organize andadminister the completion of the home including up to $3000 in additional legal expense for the
homeowner to have access to independent advice.

48

3. Materials and Workmanship protection
Coverage of up to $60,000 to repair defects in materials and workmanship, during the first yearof occupancy only. The $60,000 also applies to the next part of the warranty.
4. Structural integrity protection
The unused portion of the $60,000 in materials and workmanship protection coverage is applied
to cover five years of protection from structural defects affecting load bearing components of thehouse.
5. Additional Living expenses protection
Up to $60,000 coverage to provide pre-approved temporary accommodation if it is necessary forthe occupants to live elsewhere while work is being performed in accordance with warranty
coverage.

4-2-1-7. Construction Standard
Alberta Building Code

4-2-1-8. Public Awareness /Education
Aside from the certification and warranty aspects of ANHWP’s work, a third element is public
education, for both builders and homeowners. Education for builders is carried out through theProfessional Home Builders Institute of Alberta, a not-for-profit corporation that is wholly
owned by ANHWP. The PHBIA courses on technical aspects of home building focus on thebusiness management and administrative aspects of homebuilding and offer several certification
programs, including Certified Master Builder.
Consumer education is provided principally via publications that are offered to purchaser of awarranty-protected house and through public seminars which are based upon the information
provided in the home buying publications , “from purchase to possession and beyond” and “TheWay Home” (A Condominium Buying Guide Book).

4-2-1-9. Share
Builders Registered 710
Total Homes Enrolled 360,000
Homes under Warranty Protection

115,000

4-2-1-10. Costs
Builder Registration $1,000
Home Enrollment Fees
$90 to $885 based on Purchase Price and Builder Rating
The program enrollment fee is paid by the builder to the Program (it being understood that costs
to builders are passed on to the consumer). The average enrollment fee in 2005 was $316.
Fees are based on the price of the house and the Builder Accreditation (risk factor), and went up
in 2005 to typically about $316, which contrasts with jurisdictions with mandatory warranty
49

programs where the fee is often three times that amount. Enrollment fees are low, according to
Adrian deJonge, Vice President of ANHWP, as a result of the Program getting other types of
security from the builders, such as personal security. The Program evaluates members’ customer
service and financial standing, and will terminate a builder for violations. Where the Program is
not satisfied by the trend of a builder’s track record, ANHWP will raise premiums and become
more rigorous in all its requirements.
Builder Members in addition pay an annual membership /or renewal fee. The Program maintains
an investment portfolio of approximately $27,000,000 to offset its warranty reserve liability,
which is actuarially modeled by its consultant (KPMG). The investment portfolio has been
funded by accumulated enrollment fee revenue.
The investment portfolio is invested in accordance with the Board approved investment policy
which favors a fixed income security strategy to provide preservation of principle.
The warranty reserve liability is reviewed bi- annually and to assure Board Approved Confidence
levels are maintained.

4-2-1-11. Dispute Resolution
Mediation
Conciliation
Arbitration
In case of dispute between buyers and builders, the Program offers three levels of dispute
resolution. The process may start with a “request for assistance,” either from the builder or fromthe consumer. No fee for facilitating a mediation is currently charged as the Program believes
this is the most timely and cost effective dispute service.The three levels of dispute resolution are
mediation, conciliation, and arbitration.
Mediation is described as an informal process where the builder and buyer agree to meet with a
mediator approved by the two parties. “The facilitators assist both parties to find a mutuallyacceptable solution to the issues.
Conciliation is described as a more formal process, in which an inspector appointed by the
Program conducts an investigation and issues a report to the builder and the buyer. A fee of $100
is paid by both parties. If the builder fails to complete the work called for in the report in the time
allotted, then the Program does the work, in accordance with the coverage provided in thewarranty. It should be noted that this process does not, strictly speaking, describe what one
generally considers to be conciliation (a term one usually associates with an agreement that isconsensual for both parties).The conciliation decision is described as binding, though it may be
appealed to arbitration. Conciliation involves no fees beyond the original fee for a request forassistance.
Under Arbitration, “an arbitrator is chosen with the mutual consent of the buyer and builder to
conduct a formal hearing and issues a binding decision that includes the allocation of costs to beborne by the parties. “Arbitrators are outside professionals, and the costs involved in procuring
their services can be significant. The application fee is $200, and it may cost an additional $600
to arrange the arbitration. Mr. Little points out that the ANHWP is anxious to ensure that, bothparties think it is worth the effort to continue with an arbitration and the process is fair. The costs,
by establishing a proper arbitration, contribute to ensuring fairness and, furthermore discourage
parties from proceeding purely on a particular point of principle. He said that in the past
ANHWP employed less expensive forms of dispute resolution, but that there are inevitably those50

who will take advantage of a free process, using it to the greatest extent possible, even when
their case is weak. Although it is the disputant who pays the fees, and they are not refunded by
the program, arbitrators may make decisions in regard to costs, meaning the fees may ultimately
be borne by the loser.

4-2-1-12. Publication of Results
Current figures indicate that less than 3% of enrollments (22,000 in 2004) result in a request forassistance. Of this 4%, approximately 1/8th (5% of all enrollees, in Mr. Little’s terms), aresatisfied at the mediation stage, and 3/4 at the conciliation stage, while 1/8 move on to anarbitration. Although ANHWP’s annual report lays out these figures in regard to complaints anddispute resolution, the outcome of specific processes is kept confidential.

4-2-1-13. Relationship with the Legal System
Panel
Administration
Rules
As we have noted, membership in ANHWP is not required by provincial law. However, theprogram, particularly its dispute resolution services, does not operate in a legal vacuum.
Arbitrations in Alberta are governed by the Arbitration Act, which provides for only minimal
intervention by the traditional court system process. The Program has established a “Set of Rulesof Arbitration” specific to residential construction and warranty type issues.
It is notable that when purchasing a house from a Builder Member, a buyer is obliged to utilize
the ANHWP dispute resolution system first, before any other remedy. The warranty mentions
that there may be a fee to initiate this service. Due to the large amounts of money at stake in theconstruction and sale of houses, it is not surprising that disputes occasionally do end up before
the courts, despite the fact that the Program is designed to provide a system and process ofalternative solutions. Such cases may involve an attempt to appeal an arbitrator’s ruling.
Interestingly, the Program’s inspection services can sometimes serve an evidential function;
judges generally accept the findings of an inspector as a basis for their decisions.
Knowledge Base Approach
The Program believes that a “knowledgeable home buyer is the best home buyer”. As aconsequence, a transparent and open approach to sharing information and knowledge isfundamental to the Program’s approach. The internet is a valuable tool to provide a knowledge
base for consumers. The following are excerpts from the homebuyers’ section of the Program’s
websites.
• www.anhwp.com• www.intheknowcondo.com• www.moisturesmart.com

51

4-2-2. Atlantic
4-2-2-1.History
Start of the Program: 1976

4-2-2-2.Participation in the System
Voluntary

4-2-2-3.Construction Standard
・National Building Code
・AHWP Standards

4-2-2-4.Major Warranty Provider
Atlantic Home Warranty Program (AHWP)

4-2-2-5.Overview of Atlantic Home Warranty Program (AHWP)
AHWP was established in July 1976 by the Atlantic chapters of the Canadian Home Builders’
Association (CHBA).
It is one of six new home warranty programs throughout Canada and was originally known as
the “New Home Certification Program of the Atlantic Provinces”.
It is the leader and innovator in the provision of investment protection to homeowners andquality services to all stakeholders in Atlantic Canada.
It fosters professionalism in the residential construction industry.
It is a private, not-for-profit organization comprised of hundreds of builder members and led by a
Board of Directors comprised of Atlantic Canadian people.
Headquartered in Halifax, Nova Scotia, the Program has Warranty Service Representatives ineach of the four Atlantic Provinces.
It was formed as a solution to satisfy a growing demand for new home buyer protection.
Its purpose is to provide consumers confidence in builders and to protect the investment made byowners in their new home.
AHWP’s warranty provides homeowners with peace of mind that their home investment is
protected for 7 or 10 years.
Homeowners can choose from two home warranty programs: Platinum 7 or Ultimate Plus.

52

○Warranty programs
・Platinum 7
1) Deposit Protection, up to a max of $10,000.
2) A guarantee that the builder will repair any defects in workmanship or materials during thefirst year of ownership.
3) Protection against major structural defects during the remainder of the warranty period to a
max of $30,000.
4) A conciliation service to handle any disagreements between a consumer and their builder
during the first year.

・Ultimate Plus
1) Additional 12 months of protection against exterior water penetration through the foundation
walls.
2) Additional 12 months of protection against defects in workmanship or material in the delivery
and distribution of the electrical, plumbing and heating systems.
3) Additional 3 years of major structural coverage (from 7 to 10 years).
4) Additional major structural coverage limit of $20,000(from $30,000 to $50,000).
5) Off-site living allowance if major structural repairs cause consumers to move out of theirhome (up to $1,500).

○Fees
Builder Registration
Home Enrollment$600 (Builder renewal $200)$310.00○Quality Control
All members receive professional training sponsored by the Program, such as courses offered by
the Atlantic Home Builders’ Training Board in an effort to encourage quality construction thatprevents problem.

○Dispute
There is a conciliation service to handle any disagreements between consumers and builders
during the first year.

○ShareBuilders Registered 840
Home Enrolled Since Inception over 95,00053

4-2-3. British Columbia
4-2-3-1. History
In January 1999 the Province of British Columbia, Canada introduced a system of residentialbuilder licensing and mandatory, third-party home warranty insurance as a result of a need forprotections for buyers of new home. The Homeowner Protection Office, a Crown corporation of
the provincial government, was set up to administer these requirements in May 1999.
In the late 90’s British Columbia became aware of the worst housing failure to ever strike
Canada. The so called leaky condominium disaster will probably cost homeowners in BC close
to $1.5 billion (CDN) to remedy.
In March 1999 the New Home Warranty of British Columbia, a voluntary warranty company that
had been in business since 1976 and owned by the Canadian Home Builders Association of BC
collapsed because the value of claims from leaky condominiums exceeded its reserves.
This event shocked warranty providers around the world, and reinforced the need for consumer
protection legislation.
As of July 1999, all homes in B.C. must be constructed by Licensed Residential Builders andmust be covered by a mandatory, third-party home warranty insurance plan. Owner-built homes
may be exempt from these requirements. After September 30, 2000 similar regulations were
implemented requiring repair contractors who perform building envelope renovations to belicensed by the Homeowner Protection Office and arrange for repair warranty insurance on leaky
condo repairs.
Before July 1, 1999 (prior to the implementation of the Homeowner Protection Act) voluntary
warranty coverage usually included one year on labour and materials, and 5 years on structure.
Water ingress was only covered for the first year. Only if major structural defects occurred due
to a leak was water ingress covered beyond the first year. Because the former warranty system
was voluntary prior to July 1999, there were some houses that did not have any warranty
coverage at all.
The Homeowner Protection Act also established the Reconstruction Loan Program that is also
managed by the Homeowner Protection Office. It provides no-interest repair loans to owners ofleaky homes/condos where the building envelope has deteriorated prematurely.

4-2-3-2. Homeowner Protection Office
The HPO is a Provincial Crown Corporation established under the Homeowner Protection Act.
The HPO has a mandate to strengthen consumer protection for new home buyers, performresearch and education to improve the quality of residential construction in the province, andprovide financial assistance to leaky condo owners.

4-2-3-3. Relevant Law
The Homeowner Protection Act and Regulations

4-2-3-4. Participation in the System
Mandatory for Residential Builders
54

As of July 1, 1999, residential builders are required to be licensed by the HPO and arrange forthird-party home warranty insurance from a warranty provider authorized by the provincial
Financial Institutions Commission (FICOM). Without a license and warranty insurance a builder
cannot obtain a building permit for new home construction or commence construction (ingeographic areas where building permits are not required for new home construction).

4-2-3-5. Major Warranty Providers
As of March 2005 there are four companies offering home warranty insurance in British
Columbia.
1. Commonwealth Insurance (represented by Willis Canada)
2. Lombard General Insurance Company of Canada
3. Royal & Sun Alliance (represented by National Home Warranty Programs and Marathon
Warranty Company)
4. St. Paul Guarantee Insurance Company

4-2-3-6. Licensing Fees
The Homeowner Protection Act and Regulations require residential builders to pay a licensing
fee of $600 plus $25 per unit (when constructed). Annual renewal fees are $500 per year plus
$25 per unit.
A $750 per unit reconstruction fee is also required for multi-unit construction in the coastal
climate zone of B.C. that goes directly to pay for the Reconstruction Loan Program for owners ofhomes affected by the leaky condo crisis.
(1) Warranty coverage[New Home 2 -5 -10 year warranty]
1 year: Most defects in materials, design and labour.
2 years: Any defect in materials and labor supplied for the electrical, plumbing, heating,ventilation and air conditioning delivery and distribution systems.
Any defect in materials and labor supplied for the exterior cladding, caulking, windows anddoors that may lead to detachment or material damage to the new home.
Any defect in materials and labor which renders the new home unfit to live in.
5 years: Defects in the building envelope of a new home including a defect which permits
unintended water penetration such that it causes, or is likely to cause, material damage to the
new home.
10 years: Any defect in materials and labor that results in the failure of a load bearing part of the
new home.
Any defect that causes structural damage that materially and adversely affects the use of the newhome for residential occupancy.
[Envelope Renovation Work]
As of September 30, 2000, building envelope renovators also must be licensed by the
Homeowner Protection Office and arrange for third-party repair warranty insurance on repairs
subject to the Homeowner Protection Act.
Minimum coverage and standards for warranty insurance covering applicable building envelope55

renovations are now set by regulations. The coverage includes 2 years on labour and materials
and a 5-year warranty on the building envelope including water penetration.

4-2-3-7. Dispute
The regulations provide for third-party mediation of disputes between owners and warranty
providers. This process can be initiated at the sole option of the owners. This process isperformed independently of the Homeowner Protection Office.

4-2-3-8. Owner-built Homes
An owner-builder is defined as an individual who builds a single, detached home for their own
personal use. They are not required to be licensed or provide home warranty insurance on theirhome. An Owner Builder Declaration and Disclosure Notice must be obtained from the HPO inorder to obtain a building permit or commence construction. An individual can only build anowner-built home once in any 18-month period and has a legal obligation to subsequent owners
for defects if the home is sold within 10-years.

4-2-3-9. Statistics
Should be updated right before the conference or taken from our 2004-2005 annual report thatwill be released in June 2005.

56

4-2-4. Manitoba
4-2-4-1.History
Start of the Program: 1976

4-2-4-2.Participation in the System
Voluntary

4-2-4-3.Construction Standard
・Manitoba Building Code・NHW Standards

4-2-4-4.Major Warranty Provider
Manitoba New Home Warranty Program

4-2-4-5.Overview of Manitoba New Home Warranty Program
1) Non-profit organization
2) Warranty coverage
The Program offers a five-year warranty, broken into two major categories:○Year one: Materials and Workmanship
The Program warrants that, during the first year, the Registered Builder will repair Defects inMaterials and Workmanship as defined in the Program’s Warranty Certificate. The Program will
ensure that the necessary work is complete up to a max of $30,000 per residential unit. Materials
and Workmanship covered by the Program include those supplied and installed by the Registered
Builder, its employees and those trades and others contracted directly by the Registered Builder.
○Years One to Five: Major Structural Defects
Structural Defects affecting the load bearing portion of new homes are protected over the entire
five year period up to max of $30,000 per residential unit. In the event consumers move out
while major structural repairs are underway, the warranty allows for an additional relocation
expense up to a max of $3,000.
○Deposit Coverage
The Program provides coverage in relation to down payments provided to Registered Builder
Members, up to a max of $10,000 per new home. Included in the deposit coverage are Trust
Deposits given by a Realtor to the Registered Builder, with written authorization from thepurchaser.

573) Types of Homes Covered
The Program covers new homes built on site with permanent foundations and new
ready-to-move homes (RTM’s) moved onto a permanent foundation. These new homes musthave been built for sale or under contract by a Registered Builder member of the Program. This
includes single detached homes, semi-detached homes, homes located within First Nation lands,
row housing, duplexes, and condominium units located within buildings up to 3 stories in height.
Homes not eligible for coverage are renovated homes or additions, recreational homes, mobile
homes, and condominium units located in buildings greater than three stories in height.
4) Builder Registration
The capacity of New Home Warranty to provide the guarantees to protect the new home buyer iscontained in a contract into by the New Home Warranty with the builder, commonly referred toas “The Agreement with Builder.”In the contract, the builder assigns to New Home Warranty the right to administer the terms of
warranty; that is to monitor the builders’ construction practices, to resolve disputes that arise
between the builder and his purchaser, to enforce compliance to dispute resolution process
findings, to carry out the terms of warranty should the builder default or fail to carry out theterms of the warranty, and within the limits of the warranty the builder undertakes to reimburse
the Warranty Program for any costs incurred to settle bona-fide warranty claims. The Warranty
Programs have developed processes to measure the technical skills of a builder applicant, in
addition to measuring a builder’s financial capacity; that is to finance the initial construction andto ensure that the builder has sufficient funds available to service the home throughout the
warranty period. As such, the New Home Warranty Programs have taken on the responsibility
and have been recognized as the sole means of builder vetting.
Once qualified and registered, a builder is required to provide the benefit of warranty to all
residential construction eligible for warranty coverage. Further, Registered Builders aremonitored on an on-going basis, and are subject to annual renewal requirements.
5) Fees
Builder Registration
Home Enrollments$500 (Builder Renewal $175)$150 to $460 Sliding Scale

6) Dispute
Through the processes of Mediation and Conciliation, the Program can provide the means toeffectively settle disputes between homeowners and Builder Members.
7) Share
Builders Registered 121
Home Enrolled Since Inception 41,100

58

4-2-5. Ontario
4-2-5-1. Overview of Tarion Warranty Corporation and its Mandate
Tarion Warranty Corporation (formerly called the Ontario New Home Warranty Program)(“Tarion”) was established in 1976 as a private, non-profit corporation designated to administer
the Ontario New Home Warranties Plan Act (the “Act”). Tarion was created by letters patent
under the Ontario Corporations Act. Tarion is not a government body, crown agent or public
insurance body. It receives no government funding and is financed entirely from builder
registration, renewal and home enrolment fees.
The Act is a unique statue in that it provides mandatory and universal coverage for all purchasersof new homes whether or not the builder is registered or the home is enrolled with Tarion. It isalso unique in that it delegates responsibility for builder licensing, conciliation of warranty
disputes and financial compensation to a single entity, namely Tarion. The intent of the Act is
to create a consumer protection scheme designed to protect consumers from incompetent or
financially irresponsible vendors and builders (collectively referred to as “builders” in this paper),and to avoid expensive multi-party litigation.
As the self-regulating body of Ontario’s new home building industry, Tarion registers new home
vendors and builders, enrolls new homes, investigates illegal building practices, resolves
warranty disputes between builders and homeowners, and promotes high standards ofconstruction among Ontario’s new home builders. Tarion also works with the building industry
to help educate new home buyers regarding their warranty rights and ways to protect andmaintain their warranty. Under the Act, therefore, Tarion plays three important roles:
1. Regulator: In its role as regulator, Tarion registers builders of new homes in Ontario;
imposes terms and conditions on registration, such as security requirements and limits on
the number of homes that may be built; and revokes registrations.
2. Surety: Tarion maintains a guarantee fund and pays claims and/or arranges fornecessary repairs when builders fail to comply with their warranty obligations under theAct.
3. Conciliator/Adjudicator: Tarion conciliates disputes between builders andhomeowners, and determines the validity of warranty claims.

4-2-5-2. Tarion as Regulator
One of the most significant provisions of the Act is section 6, which prohibits a person fromacting as a builder in Ontario without being registered by the Registrar under the Act.
Registration must be done on an annual basis. At the end of 2004, there were 5,394 registeredbuilders in Ontario. Failure to register as a builder is provincial offence, and subject toprosecution under the Ontario Provincial Offences Act (with a maximum fine of $100,000 and amaximum term of imprisonment of 1 year).
The purpose of the registration process is to ensure that builders in Ontario pay the required fees
to maintain the guarantee fund, and meet and maintain: financial capabilities to fulfill theirwarranty obligations, technical competence, honest and integrity, and a good after sales service
record. The Act sets out criteria for registration, and the grounds upon which Tarion may
revoke a registration, refuse to register an applicant or refuse to renew registration. A builder
may appeal Tarion’s decision to refuse/revoke/refuse to renew its application to the LicenceAppeal Tribunal, a quasi-judicial administrative body established by the Ontario government.
59

The Act also establishes terms and conditions that attach to every registration. For example,
builders must diligently perform their obligations under the Act, and must indemnify Tarion for
any losses Tarion suffers as a result of the builder’s default. The Registrar may also attach
additional terms and conditions to a particular registration; for example, the requirement to post
security (in the form of cash, bond or letter of credit) with Tarion for each home built, or a limiton the number of homes a builder can build. A builder’s failure to comply with the terms andconditions of registration can lead to revocation of its licence, as outlined above.
Builders are also required under the Act to enroll with Tarion each new home they build, and to
pay the required enrolment fee. The home must be enrolled prior to the commencement ofconstruction. The enrollment fee is based on a sliding scale (ranging from $350 to $750 (Cdn)),depending on the sale price of the home. Most builders include the enrollment fee in thepurchase price of the home (either implicitly included in the sale price or as a line item on theStatement of Adjustments at closing). There were approximately 75,000 homes enrolled in
2004, and the number of homes under warranty reached 433,659.

4-2-5-3. Tarion as Surety - Warranty Protection under the Act
The Act provides certain statutory warranties that all vendors are deemed to provide to newhome purchasers and owners. The warranties flow from the builder, and Tarion essentially acts
as the guarantor of the builder’s warranty when the builder is unable or unwilling to meet its
warranty obligations. In 2004, Tarion paid over $12 million (Cdn) in claims to purchases andhomeowners. The statutory warranties take effect when the home (freehold or condominium) is“completed for the owner’s possession”. The Act also provides for a separate warranty on thecommon elements of a condominium (to a maximum of $2.5 million, and which take effect fromthe date of registration of the declaration that creates the condominium corporation). The
statutory warranties are enforceable even though there may be no privity of contract between theowner and the builder; that is, the warranties accrue to the benefit of subsequent owners, until the
expiry of the applicable warranty periods.
The limit of coverage for freehold homes and condominium units is $150,000.
The statutory warranties are as follows:
Construction Defects
One-year Warranties
The Act provides that for one-year from the date of possession, the builder warrants that thehome is:• Free from defects in work and materials;• Fit to live in; and• Constructed in accordance with the Ontario Building Code.
Two-year Warranties
The Act provides that for two years from the date of possession, the builder warrants that thehome is free from:• Water penetration through the basement or foundation;60• Defects in the building envelope, such as caulking, windows and doors, that result inwater penetration;• Defects in work and materials in the electrical, plumbing and heating delivery anddistribution systems;• Defects in work and materials which result in the detachment, displacement or
physical deterioration of exterior cladding; and• Violations of the Ontario Building Code’s health and safety provisions.
Seven-year Warranty
The Act provides that for seven years from the date of possession, the builder warrants that thehome is free of major structural defects, which is defined as follows:• Any defect in work or materials that results in failure of a load-bearing part of thehome’s structure, or that materially and adversely affects its load bearing capacity; or• Any defect in work or materials that materially and adversely affects the use of thehome for the purpose for which it was intended.
There are certain exceptions to the definition outlined above.
All the construction warranties outlined above also apply separately to the common elements ofa condominium (to a maximum of $2.5 million (Cdn)).
Substitution Warranties
The Act also sets out the rights and limitations of a builder to substitute materials during
construction of the home. These rights and limitations depend on whether the items substituted
are “selected items” or “referred items”.
Selected Items
For those items of construction or finishing for which the purchaser is entitled to make aselection pursuant to the purchase agreement, the builder warrants that there will be no
substitutions without written consent from the purchaser. “Selected items” are items that are notspecified in the purchase agreement, but selected by the purchaser from the builder's samples
usually after signing of the agreement of purchase and sale. Typically, these are finishing items
involving colour and materials. Some exceptions apply to this warranty. The measure ofdamages in substitutions where the purchaser is given a choice to select from the builder’ssamples is the full replacement cost of whatever the owner originally selected, including the costof re-installing the item.
Referred Items
These are items referred to in the purchase agreement that are not to be selected by the purchaser.
These items can be substituted by the builder without the owner’s consent, but the builder
warrants that if a substitution is made, it will be of equal or better quality than the item referred
to in the purchase agreement. Where a substitution occurs, the owner is only entitled to thedifference in value between the specified item and the substituted item because the breach is notin making a substitution, which the builder is entitled to do as long as the item is of equal or
better quality, but in failing to give at least equal quality. For example, the owner would beentitled to the difference in price between the round bathtub specified in the purchase agreement
and the square bathtub substituted, if the latter was of lesser quality.
61Delayed Closing
The Act creates a one-year warranty for delayed closing and occupancy without adequate notice.
The “delayed closing” warranty applies to freehold homes, and the “delayed occupancy”
warranty applies to condominium units. This is not a warranty against delays per se, but rather
a warranty that the vendor will provide adequate notice of the delay and will not exceed the
maximum delay permitted. Not all delays are compensated – delays beyond the control of thebuilder, such as strikes, fires, floods or “acts of God” are exempted from coverage.
Under this warranty, compensation is provided for expenses incurred by the purchaser that are
directly caused by the delay (e.g. hotel accommodation, meals, storage expenses), to a maximumof $5,000.
Deposit Protection
Under the Act, a purchaser’s deposit is protected if a builder cannot or will not complete the salethrough no fault of the purchaser. The limit of coverage for a deposit refund claim for freehold
homes is $40,000. Condominium purchasers’ deposits are protected up to $20,000 by Tarion,and deposits above this amount are protected by the trust provisions of the Ontario Condominium
Act.

4-2-5-4. Tarion as Conciliator/Adjudicator
Tarion conciliates disputes between builders and homeowners under the Act, and determines thevalidity of warranty claims. When Tarion receives a claim from a homeowner, a builder isgiven a reasonable opportunity to repair the deficiency. If the builder does not address the
problem, Tarion conducts an inspection of the complaint to determine if it is warranted under theAct. Tarion’s inspectors (called Field Claim Representatives), have many years of experiencein the new home construction industry (some are engineers or former building officials) andextensive knowledge of the Ontario Building Code and industry standards. If the problem isdetermined to be warranted, the builder is ordered by Tarion to address the deficiency. If this is
not done within a very short time frame, Tarion steps in to address the problem directly, either byarranging for necessary repairs or paying compensation to the homeowners.
In 2003, Tarion introduced the new Customer Service Standard, which provides for minimum
after-sales warranty standards and repair timelines that Tarion requires from builders.

4-2-5-5. Governance of Tarion
Tarion is governed by a Board of Directors with 15 members representing key stakeholders
within the new housing industry in Ontario, including builders, consumer advocates, thefinancial community, and provincial and municipal governments. The Act provides for theappointment of a Registrar (currently Gregory Gee), who is appointed by the Board of Directors
in the dual role of President and Registrar of Tarion.
Tarion is not regulated by the legislation in Ontario and Canada applicable to financial
institutions, like banks and insurance companies. However, Tarion voluntarily follows the
Minimum Capital Adequacy Tests (MCAT) and other reserving requirements set out in thislegislation. At present, Tarion has approximately $250 million (Cdn) in its guarantee fund tosatisfy future claims by homeowners, and about $50 million (Cdn) of this amount is appropriatedsurplus (capital).

62

4-2-5-6. Tarion’s Operations
Tarion’s Corporate Office (made up of the following departments: Corporate Affairs, Finance,
Law, Human Resources and Information Systems) is located in Toronto, Ontario, along with its
Central Operations Group and new Customer Centre. Tarion also has a Western Office inLondon, Ontario, and an Eastern Office in Ottawa , Ontario.
The Central Operations Group, made up of approximately 150 employees, is comprised of thefollowing departments:• Claims: manages all claims throughout the province, including conducting of homeinspections;• Licensing & Underwriting: registers all vendors and builders (including the taking of
security) and enrolls all new homes;• Builder Relations: liaises with builders and identifies industry issues and trends; and• Enforcement: identifies and investigates illegal building activity (i.e. a builder’s
failure to register with Tarion and enroll each home).1• Contact Centre: manages all telephone and email inquiries (on average, about 1,000
per day), processes all forms received from homeowners and schedules all homeinspections.
Over the past three years, Tarion has enrolled an average of about 76,000 new housing units per
year. The Corporation currently has about 230 employees.

1This Department is comprised of nine former police officers. In 2004, Tarion’s Enforcement staff identified over
5,000 unenrolled homes, which led to the collection of $2.8 million in related enrollment fees. In 2004, Tarion
obtained 467 convictions and collected 575,000 in fines (payable to the Receiver General of Ontario). Two builders(both repeat offenders) were each sentenced to jail for six months.
63

4-2-6. Quebec
4-2-6-1.History
Start of the voluntary Program: 1976

4-2-6-2.Participation in the System
Mandatory since January 1, 1999

4-2-6-3.Construction Standard
・Quebec Building Code・Quebec Energy Code・Quebec Construction Bylaws

4-2-6-4.Major Warranty Providers
・LA GARANTIE DES MAISON NEUVES DE L'APCHQ (80% market share)
・QUALITÉ HABITATION (19% market share)
LA GARANTIE DES MAÎTRES BÂTISSEURS (1% market share)
Supervision by a government agency : Régie du batiment du Quebec

4-2-6-5.Guarantee Plan supervised by the Regie du batiment duQuebec・ Outline
The guarantee plan for new residential buildings, which is mandatory for all the new buildings
contemplated, gives the buyer an affordably priced basic guarantee and well defined coverage.
The plan provides a fast, impartial and accessible procedure for processing claims and settling
disputes (mediation, arbitration). In addition, it is easy for the buyer to check whether thebuilding he wishes to purchase is guaranteed.
Three (3) private managers, accredited by the Regie du batiment du Quebec administer the plan.
Each must do so in a transparent fashion and must render account of his activities to the Regie
annually. The contractor must adhere to one of the approved guarantee plans providers andhold a specific license authorizing him to work in the field of new residential construction. The
future buyer of a new dwelling can easily check with the Regie to find out whether the contractor
with whom he wants to deal holds the licence.
The guarantee plan for new residentilal buildings also assures the buyer that the home hepurchases meets standards for quality. To be able to offer the plan, the contractor must prove heis qualified and carry out the pre-inspection required by the plan manager.
Only buildings intended mainly for residential purposes are covered by the plan.
Only buildings for which the purchase contract or business contract is signed by the beneficiaryand an accredited contractor as of January 1, 1999 will be covered by the plan.
64

The guarantee is transferable to any eligible subsequent buyer, for the remaining term of theguarantee.

・Quality Control
Only a general contractor accredited by a manager of the guarantee plan is authorized toconstruct a building contemplated by the plan. To be accredited, the contractor must meet the
professional and financial requirements laid down in the Regulation respecting the guarantee
plan for new residential buildings. He must also hold a special licence issued by the Regie dubatiment du Quebec.
Before signing a contract with a contractor for the purchase of a building contemplated by theguarantee, the buyer also must check with the Regie to ensure that the contractor is indeed
accredited and that he holds the appropriate licence. The same applies if the contract is signedwith a promoter, who must meet the same regulatory requirements as the contractor.

・Contractual Documents
The guarantee contract is given to the beneficiary at the time of the building contract and must
contain a description of the coverage and the dispute settlement procedures stipulated in theregulation.
It must be approved by the Regie and contain the number and date of the decision of the Regie.

・ Warranty Coverage
Before the buyer takes possession
The buyer has coverage for his partial payments up to $30,000 or for completion of the work
described in the original contract and of supplementary work agreed upon in writing. The planalso provides for compensation of up to $5,000 for expenses incurred by the buyer for the
relocation, moving and storage of his property if the building is not delivered on the anticipated
date.
Before taking possession of the building, the buyer carries out a mandatory inspection on thebasis of a pre-established list of items to be checked. The list is furnished by the plan manager.
The inspection is carried out in the presence of the contractor, and the buyer may be
accompanied by a person of his choice.
After the buyer takes possession
The plan guarantees completion of the work and repairs to defects and poor workmanshipindicated in writing at the time of acceptance of the building or, if the beneficiary has not moved
into the building, in the three days following acceptance.
The plan also covers repairs to:・Existing but not apparent defects discovered within the year following the buyer’s taking
possession
・Hidden defects discovered within three years of the buyer’s taking possession
65・Faulty design, construction or production and the unfavorable nature of the ground, discovered
within five years of the end of the work

・Fees
Builder Registration
375$ (Builder Renewal 325$)
Home Enrollments
800$ to 1100$ per Unit. Sliding Scale for Cooperative Housing

・Dispute
In the event of a dispute with the contractor, the guarantee plan provides the buyer withcoverage for his partial payments, and for defects and faulty workmanship.
・ Mediation
If mediation is sought by both parties, the mediator is chosen from a list established by the
Minister of Labor. If an agreement is reached, it is binding on the contractor, the beneficiary andthe plan manager. If mediation fails in whole or in part, the dispute must be submitted toarbitration. Mediation fees are shared equally by the contractor, the beneficiary and the planmanager if he intervenes in the mediation.
・ Arbitration
The application for arbitration must be sent to an arbitration body authorized by the Regie dubatiment.
The body sees to the appointment of an arbitrator chosen from a list drawn up by the body
beforehand and sent to the Regie du batiment.
The body must give the parties concerned an explanatory document concerning the arbitration
procedure. Measures required to preserve the building may be requested before or during thearbitration proceedings.
The buyer, contractor and plan manager are bound by the decision of the arbitrator, which is final
and without appeal.
When the contractor applies for arbitration, the arbitration fees are shared equally by theapplicant and the plan manager. When the buyer applies for the arbitration, the fees are charged
to the plan manager, unless the buyer fails to obtain a favorable decision on any of the elementsof his claim. The reasonable costs incurred by the beneficiary for relevant expert opinions must
be reimbursed to him if he wins his case in whole or in part. Other expenses incurred by thebuyer, the contractor and the plan manager for the arbitration is borne by each one of them.

・ShareBuilders Registered
4 667 in total (3348 with APCHQ)
Home Enrolled
Approximately 15 000 to 25 000 units per year66

4-2-7. Saskatchewan
4-2-7-1.History
Start of the Program: 1976
The New Home Warranty Program of Saskatchewan, Inc. was formed by the building industry in
May 1976 as a solution to the growing demand for new homebuyer protection. Its purpose was toprovide consumer confidence in builders and to protect the investment made by owners in their
new homes.

4-2-7-2.Participation in the System
Voluntary

4-2-7-3.Major Warranty Providers
The New Home Warranty Program of Saskatchewan, Inc.

(NHWP)

It is incorporated as a private non-profit corporation. It is headquartered in Saskatoon with aBranch Office in Regina. The Program is governed by a Board of Directors elected by thebuilder members.
Operations of the Program are paid for through membership fees and a fee charged to enroll eachhouse. Membership in the NHWP is voluntary, although both Canada Mortgage and Housing
Corporation (CMHC) and its private equivalent, Genworth Financial Canada require the builder
to belong to a Warranty Program in order to receive mortgage insurance on high ratio loans (90%or higher).
The New Home Warranty Program provides a third party guarantee of the builder’s warranty andundertakes to perform the builder’s warranty obligations should the builder default.
All builder members of the NHWP register all their eligible units, which consists of all for-salehousing of the following type: single family houses, semi-detached homes, townhomes, low-risebuildings up to four stories, as well as ready to move homes (RTM’s).

4-2-7-4.Construction Standard
・Saskatchewan Building Code・NHWP Performance Standards

4-2-7-5. Warranty Coverage
Deposit Protection
For all houses registered after January 1st, 2003, the initial deposit for the purchase of a newhome is protected for 15% of the purchase price up to a maximum of $25,000 in the event thedeposit becomes legally refundable and cannot be recovered because of bankruptcy, default,
insolvency or fraud on the part of the builder. It does not cover reimbursement because of a67

contract dispute between the parties.
Workmanship And Materials Protection 一 One year
All Registered Builders are required to warrant that the house is constructed in accordance withthe building standards prescribed by the Province of Saskatchewan and that the house is freefrom defects in workmanship and materials for a period of one year from the date of possession.
Water Leaks Protection 一 Two years
Registered Builders warrant that the building envelope (roof, exterior cladding, windows anddoors) and the basement foundation walls will be free of exterior water penetration for two years
from original occupancy.
Major Structural Defects Protection 一 Five years
All registered builders warrant that the houses they built will be protected against major
structural defects for five years from the date of possession. Major structural defects mean
defects in workmanship or material which have or are likely to have an adverse effect on theperformance of the load bearing portion of the home such as footings, piles, basement walls,
beams, floor joists, teleposts, load bearing walls, and roof trusses.
The total combined limit of protection for workmanship and materials, water leaks and major
structural defects is $50,000 for all houses enrolled by the builder after January 1st, 1998.

4-2-7-6. Fees
Builder Registration
Home Enrollments$ 500 initial application; $280 annual renewal fee$300 to $600 Sliding Scale depending on house price and builder risk
level.

4-2-7-7. Dispute
Conciliation
If the builder does not respond, there is a dispute resolution process called “Conciliation.” On
receipt of a completed “Request for Conciliation” form from the purchaser and a $100 fee, the
NHWP will engage an independent Conciliator (usually an engineer) to investigate the dispute.
The Conciliator will provide a written decision, which is binding on both parties and outlines thebuilder’s responsibility (if any) for warranty repairs. If the builder is found to be responsible forrepairs, a deadline is established for completion. If the builder does not complete the repairs
within the time frame allotted, the NHWP ensures that the work is completed as per theConciliator’s decision.

4-2-7-8. Share
Builders Registered
Homes under warranty

134
9,012

68

4-3.China
4-3-1. Housing Circumstances
4-3-1-1.History
In China, after reform opening policy was carried out in1978, the economy grew rapidly andsteadily. The national income increased and the house construction expanded every year.
Especially by the city housing revolution in 1990s the government stopped providing houses
directly and adopted commercial houses program, more houses were constructed and many realestate developer were born.
Quantity of Chinese house construction is about 1,300,000,000 ㎡. Compared with othercountries it is very large number. It is 10 times much as 1978’s, but it is considered that thistrend will keep on going because there still remain many old houses in rural area, the floor area
per person is small and the government is taking policy of urbanism.

4-3-1-2.Total Number of Houses (floor area)
The total number of houses amounts up to about 8,900,000,000 ㎡ in urban area by the end of
2003 (National Bureau of Statistic China). By the way, other statistics indicates that city
population holds about 41% of all population with about 520,000,000.

4-3-1-3.Tenure
The percentage of owner-occupied houses is up to 80.17% in urban area (Ministry ofConstruction). It is very high figure compared with other countries. It is because during thecity housing revolution in 1990s, public-owned houses were all sold off to the residents.

4-3-1-4.Structure and Types of Buildings
Most of the houses in city are made of reinforced concrete and condominium. Detachedhouses locate in suburb, but a few. Traditional brick houses still remain in the center of the city.
But the number is decreasing because of urban renewal public enterprise.

4-3-1-5.Home Warranty Program
Housing quality improvement has been one of the most important point of the city housing
revolution. Home warranty system against housing “defect” is legally established as“Construction Quality Management Act” in 2000. But it regulates only the housing developer
and the constructer. So, in 2001 “Commercial Buildings Sale Management Regulation” wasestablished which obliges housing developer to execute home warranty program for customer
with handing over “Home Warranty Certification”.
And because of this background, there is no group of housing constructer and no registration
system of constructer or house such as OHW in Japan or NHBC in the UK.

69

4-3-2. Quality warranty for newly constructed houses (Warranty
against housing “defect”)
4-3-2-1.Building Law
Basic policy of quality warranty for newly constructed houses is based on “Building Law”
established in 1997.
Article 62 of the Building Law describes ‘Anyone who constructs buildings must execute
warranty program’.

4-3-2-2.Construction Quality Management Act
Based on Building Law the specific regulation is provided in “Construction Quality
Management Act” established in 2000.
When construction is completed and condominium is delivered from constructer to developer(temporary owner), the constructer must hand over “Home Warranty Certification” . In thecertification, coverage and period of warranty including reform works and responsibility for thedefect should be described. The constructer is obliged to reform the house, when any defectwithin coverage and period is found. And the compensation of loss is also obliged.
Warranty period is different according to the part of the house. Generally speaking,warranty period of facilities and interior decorations is 2 years. Main structure is according to
the designed term.

4-3-2-3.Commercial Buildings Sale Management Regulation“Building Law” and “Construction Quality Management Act” are limited to the relation
between the housing developer and the constructer. After “Commercial Buildings SaleManagement Regulation” was established in 2001, the housing developer must execute homewarranty program for consumer who purchase the house. Incidentally, in China most of the city
houses are condominiums sold by the housing developer. There are few houses for rent or
self-built detached house. Therefore most of the houses are under the regulation.
This regulation obliges the housing developer to give the purchaser “Home Warranty
Certification” and “Housing Instruction ” . In the certification, coverage and period of warranty
including reform works and responsibility for the defect should be described as the Construction
Quality Management Act’ s one .
The warranty period is start from ownership transfer. It must not be shorter than the rest
warranty period of The Act and must not be shorter than the minimum warranty period
prescribed in “Rule of Home Warranty Certification and Housing Instruction applied tocommercial house” established in 1998. In the Rule, minimum warranty period is, generally
speaking, 1 year for facilities and interior decorations, 3 years for roof waterproof, reasonable
period for main structure (usually 10 years)704-3-3. Warranty Insurance
4-3-3-1.Housing Quality Warranty Insurance by The People’s
Insurance Company of China (PICC)
BackgroundAs mentioned before, the city housing revolution in 1990s promoted house production andtrading in the market and upgraded housing quality. As a part of the strategy, “Housing
performance evaluation program” and “Housing Quality Warranty Insurance” have been
executed.
Brief of the program
In 2002 PICC started Housing Quality Warranty Insurance for the first time in China. The
insurance contractor who contracts with PICC and pays insurance premium is housing developer.
The insured who receives insurance is house purchaser.
The objects of the insurance are the houses which were evaluated “A” by Housing performance
evaluation program. The housing developer which sell the house and PICC make a contract of
insurance. To make a contract or not is optional.
According to the “Housing Quality Warranty Insurance Provision”, warranty period is 10 years
for main structure and important parts to safety, 5 years for other parts. It starts 1 year after theconstruction completion.
Dispute Settlement
When the dispute about the insurance application occurs among housing developer, purchaser
and insurance company, first stage is negotiation among the 3 groups. But if the negotiation is
not going well, the second stage is the arbitration by the committee or legal action to The
People’s Court. This choice should be prescribed in advance on the insurance bill.
Insurance Premium
Insurance Premium rate of PICC Housing Quality Warranty Insurance is 5% in principle. But
according to the house situation, it might change within 20% range. Insurance Premium is set
before sales. If actual price is different from planned price, the difference will be adjusted.
Achievement
Some of the contracted houses are reported on the newspaper, but the number is not released.

4-3-3-2.Housing Performance Evaluation Program
Housing Performance Evaluation Program is prerequisite condition of Housing Quality
Warranty Insurance. This program started in 1999 as a pilot program. In 2005, Housing
Performance Technical Standard will be issued and the evaluation program will be officiallyestablished.

71

The procedure of the program is as below.
The procedure of the Housing Performance Evaluation
Housing developer

Application

Designinspection

Housing
Performance
Certification
Organization

On-citeCompletion

inspection

inspection

Construction
Administration
Authority

Performance
Evaluation &Judgment
Organization

Rating

Housing
Performance
Certification
Organization

DeliveryIssuecertification

Construction
Administration
Authority

Performance
Evaluation &Judgment
Organization

Housing Performance Certification Organization certificates housing performance. But
according to the objective data and standard, Performance Evaluation & Judgment Organization
evaluates and judge the performance.
Performance Evaluation & Judgment Organization inspects design stage, constructing stage,completion stage. Quality controls in other countries is executed in this procedure.
According to the total points an 5 category points, performance grade is decided.
is A and B. A grade is divided into 3A, 2A and 1A.

The grade

4-3-3-3.Other information (Construction Quality Warranty
Insurance Regulation (Tentative Scheme))
To assure buildings quality, Ministry of Construction is arranging Construction Quality
Warranty Insurance Regulation. Content is not clear now, but it is reported that without
insurance contract, starting construction will be restricted and selling houses will not be
permitted. It is also reported that after 1 or 2 years trial, official regulation will be established.

72

4-4. France
4-4-1. History
The history of home warranty in France goes back to the Code of Napoleon enforced in March
1804 that established the concept of liability for defects. The Code said that if a part or wholeof a building lost its shape or intended function because of a defect, its architect or builder had tobear an absolute liability for 10 years that could not be circumvented by any exceptional clause.
In 1967 the Code was revised and the liability period was shortened to 2 years except for a
defective work in the structural part.
In 1928 an insurance product to back up this liability from financial aspect came into the market
that is the origin of the present warranty program. This insurance product played a driving
force for development of the systems of site inspections and rating of builders. The French homewarranty system could be formed by combining general programs based on the individual needs.
Those general programs have been established based on the forcible provisions of the Civil Code.
It is characteristic comparing with the home warranty programs in other countries that have been
established only for warranty of housing and operated by the specialized organizations.
However, there was a critical problem when a dispute arose and the case was brought to the court.
It took 8 years in average to reach the final decision during which the defect was left without any
substantial repair.
The design or planning of the buildings in France in general tends to emphasize designing itself
not much the function. This has created an insufficient check (inspection) system against a defectduring the designing stage. In particular, since 1967, the building permit delivered by the publicauthority only assesses the conformity with city planning rules and does not include any
technical validation of the design of the works.
As a result, though consumer protection in the legal frame has been well developed, it did notpractically help decrease occurrence of the defects and defects were found frequently, and therepair works were delayed. As for consumers, they were not protected as intended and, evenworse, they suffered from the damages including the litigation cost.
In 1978 the Spinetta Law was introduced in order to prompt the necessary repair work, to avoid
occurrence of defects and to clarify the responsibility by each professional. The changes weredrastic and the followings are the major points:
1) Identification and clarification of liability;
2) Introduction of inspection system;
3) Restructuring of insurance scheme (proactive use of claim for indemnity)

4-4-2. Outline of the System under the Spinetta Law(1) Liability systems
The Spinetta Law says that all parties engaging in the construction work including thedesign stage who have exchanged a contract with the client are liable for 10 years for thedamage that would impair solidity of the structure or the intended use of the building(10-year Liability) and for 2 years for other construction works, materials and members of
the building (2-year Liability -- warranty for functions). Both 10-year Liability and 2-year
Liability could not be deleted nor altered.
In regard to a flaw found after delivery of the building (including sound insulation), the73

builder is liable for one year within the scope of completion warranty. The warranty starts
when the building is hand over. There is no clear definition in regard to a warrantable defector damage, and the final decision is left to the court.
(2) Coverage
Wide range of buildings is covered by 10-year Liability including houses. 10-year
Liability is also applied to the repair work of the defect. Maintenance work for existingbuildings are not covered, however renovation works such as implementation of central
heating system or elevators are covered.
(3) Damage
The Spinetta Law is edited using more concrete terms, and the “damage” is clearly defined
to distinguish from “defect”. The damage means a physical damage occurred directly inthe building and does not mean an economical damage such as increase of construction fee
caused by the damage. Those damages would be attributed to delinquency or miscalculationof the building producer.
(3) - 1 Damage to solidity
The application of 10-year warranty for damage to solidity of the building is limited to thecritical or major damage. The evaluation of degree of the damage is left to the judge.
The warranty could be used by claiming either damage to solidity or to the intended use of
the building.
(3) - 2 Damage to the intended use of the building
Criterion of judgment by a legislator whether the damage is warrantable or not is that if thecondition “would disturb the occupant, which degree is unacceptable”. The followings are
the defects which have been determined by the Supreme Court in the past:・ The danger of fire breaking because of a defective work of implementation of electric
equipment;
・ Condensation inside the walls;
・ Flaw in the exterior waterproof envelope;・ Defect in the central heating equipment.
The examples above have led the following conditions to define the defect as a warrantabledamage:・ Rainwater leakage that would influence on the roof of the building or disturb the normal
living condition;
・ Noise generated from the central heating equipment that is abnormal or unacceptable;
・ Defect of air-conditioning equipment in the airtight area.
The following conditions are not warrantable:
・ Flaking of exterior concrete that would not jeopardize the safety of an occupant;・ Inadequate waterproofing performance at the joints of balcony.

4-4-3. Uniqueness of the System - Double Compulsory Insurance
SystemA double compulsory insurance system for housing is characteristic in the French warranty
74scheme. Since it is a compulsory system, the Central Premium Rate Committee would makethe final decision of the insurance premium.
(1) Compulsory Liability Insurance
Compulsory liability insurance has been legally imposed on the parties including a builder, anarchitect, an engineer, a developer, an agent, producers or suppliers of the parts and a realtor.
Those people should bear 10-year liability, and the builder has liability of completion.
Before the Civil Code was revised, it was only an architect who was obliged to take out theliability insurance.
Insurance premium and the deductible are set in an individual contract. Since this is acompulsory insurance, any conflict in regard to insurance contract could be referred to theCentral Premium Rate Committee.
(2) Compulsory Non-life Insurance
The old system had to clarify where responsibility lies before deciding the final repair cost to
be paid to the insured. This time-consuming system did not achieve the major purpose of thesystem, protection of an owner. This is the reason to adapt non-life insurance along with theliability insurance considering the following features: 1) the insurance money will be paideven if the responsibility issue has not been clarified; 2) if it is clear who is responsible, thealready-paid insurance money could be claimed for indemnity.
The building producer (including his agent) is obliged to take out non-life insurance to insure
the following damages making the owner of the building be an insured.
a. The repair cost for a damage applicable to 10-year liability (warranty of quality)b. The repair (completion) cost caused by default of the building producer (warranty of
execution of work)
Once the warrantable event occurs, the repair cost will be paid based on the investigation
conducted by an appraiser without waiting for identification of the responsible party. At thetime of insurance payment the insurer would obtain the right for subrogation of claim forindemnification and make a claim for the paid insurance amount to the party who is
responsible for the event. If the case is brought to the court, the party who has been judge tobe responsible for the event has to bear the legal cost from his own liability insurance.
By adopting this system the remedy for the damage will be carried out even if identificationof the responsible party took a long time.
The sum insured should be the replacement value, though could be reevaluated based on theprice fluctuation.
There is currently a modification of the Spinetta law, aimed at excluding fixed equipments
related to an industrial activity, from the insurance coverage.

4-4-4. Quality Control(1) Builders’ evaluation
Organisme Professionel de Qualification et de Classification du Batiment (OPQCB) owned
50/50 basis by the government and private sectors is an organization that evaluates thebuilding suppliers’ capability.
It has a nationwide network with members fromconstruction-related organizations. OPQCB issues a certificate that includes the rating of the75

building supplier.
(2) Inspection
There is a building control system in France, though it is based on the aspect of city planning.
Each building is required to go through inspection in order to take out liability or fire
insurance, which is carried out by private inspection companies. The first private inspection
company started in 1928, and now several companies are offering the service.
The inspector should be the third party that is not involved with other stages of the building
and will check not only the construction stage but check from the designing stage. The
inspection fee is born by the owner of the building. An inspection company is liable for 10
years, which condition is the same as a building supplier. There are two technical standards
that are not mandatory but recommended. Inspections are carried out based on these twostandards.
(3) Organization to protect defect occurrence and improve the quality of buildings
Because of erratic fluctuation of insurance cost, AQC (Organization to assure the quality ofbuildings) was established in 1982. Its aim is to prevent defects as well as to improve thequality of building, and eventually to lower the insurance cost. AQC is composed ofgovernment people, building professionals, builders’ associations and representatives of therelevant organizations. The activities are: 1) statistical work and analysis of the warranted
accidents, and publication – SYCODES; 2) announcement of warnings of continuous
accidents; 3) study of the past accidents.

4-4-5. Dispute Settlement
The dispute is brought to the court. If a person who is obliged to take out insurance isrejected by the insurance company, he/she could appeal to the Central Premium Rate
Committee.

4-4-6. Performance Indication System
In 1973 Qualitel was established as a housing evaluation body. The professional inspector
carries out an evaluation of the house based on the set items that can be evaluated objectively(below), and the results are disclosed for a consumer to make a fair decision. Those items
are the ones.
1. Plumbing (itemized into 5 relevant items)
2. Electric Equipment (2)3. Indoor Noise (6)4. Outdoor Noise (2)5. Air conditioning (2)6. Maintenance Fee of Roof and Exterior (6)7. Cost of Heating and Hot Water (2)8. (OPTION) Accessibility (10)The evaluation Qualitel performs covers from the designing stage that has 5 ranks from single
star to 5 stars in order for consumers to compare the quality of houses in the market. Thissystem is voluntary, though a housing project subsidized by the government with certain scale
is obliged to go through this evaluation. “Label Qualitel” will be issued for the project thathas been graded over a certain rank.
In the recent years, the certification has been increasingly stressing environmental
76performances of the new dwellings. In September 2005, the quality of the existing stock will
also be addressed with a global technical assessment of the building, providing a quality
profile, and a certification after refurbishment works, based on the new profile of quality
targeted.

77

4-5. Ireland
4-5-1. History
In 1978 The National House Building Guarantee Company Limited (the Company) wasestablished as a result of discussions between the Government and The Construction Industry
Federation in order that the housing construction industry would comply with acceptablebuilding-related standards and maintain them.
The Company operates the home warranty program called HOMEBOND in order to achieve its
missions as well as to obtain the people’s trust.

4-5-2. Operation
The Company operates the HOMEBOND Scheme to instill greater public confidence in theindustry and give protection to homeowners.
HomeBond’s aims are to:・set standards of construction;
・inspect new homes under construction;
・provide a one year complaints assessment scheme for various non-structural defects in
new homes;
・protect purchasers against loss of certain stage payments in certain circumstances
・provide a 10-year warranty against major structural defects and a guarantee against water andsmoke penetration for the first 2 years of the warranty period.

4-5-3. Membership (Registration)
HOMEBOND membership is available for developers and builders. The Company carries out
an assessment of applicants in regard to financial and technical resources and abilities.

4-5-4. On-site Inspection
The member should apply for all necessary inspections: At a minimum these includes
inspections of (1) the foundations and (2) the main structure immediately the roof is completed.
The Company’s inspectors/advisors will carry out these inspections.

4-5-5. Warranty Coverage* Units ………..………… All dwellings* Coverage ………………. Major structural defects (10 years)
Water and smoke penetration (first 2 years of thewarranty period)“The Stage Payment Bond” -- Loss of deposit or stage
payments before completion of the house

4-5-6. The House Registration Fee
Calculated based on the floor area of the dwelling. In case of refurbishment, the registration fee
is a flat rate fee which may be increased from time to time.
78

4-5-7. Numbers
Over 3,800 builders have enrolled as members of HOMEBOND.

4-5-8. Others
•

•
•
•
•

HOMEBOND offers One Year Complaints Assessment service. The purchaser canwrite to the registered member a claim of defects within the Complaints Period. If thebuilder does not respond within certain period, HOMEBOND will investigate thecomplaint and request the builder to remedy the situation (in those cases which
HOMEBOND considers appropriate).
HomeBond produces publications and a “House Building Manual” to promote goodbuilding practices and make people aware of the Building Regulations.
HomeBond holds seminars around the country to promote good building practices.
HomeBond’s advisors offer advice to builders on the Building Regulations and current
standards.
HomeBond involves itself with all agencies in Ireland relating to standards ofconstruction in house building.

794-6. Japan
4-6-1. Housing Situation in Japan
4-6-1-1. Total Number of Housing Units
A housing shortage, estimated at about 4.2 million units immediately after World War II,
rapidly dissolved through intensive housing construction work thereafter. In 1968, the total
number of housing units exceeded that of all the households. In 2003, it reached about 1.14
times as many as the total households.

4-6-1-2. Tenure
The percentage of owner-occupied housing began to increase in 1998, reaching 61.2% in
2003. The percentage of owner-occupied housing in the three major metropolitan areas is
56.6%, and 66.1% in the rest of the country.

4-6-1-3. Types of Buildings
The percentage of detached houses is decreasing, and was 56.5% in 2003. The number ofcollective housing units, however, continues to increase.

4-6-1-4. Structure
Wooden structures make up about two-thirds of all the housing stock when classified bystructure, but the proportion of non-wooden structures such as reinforced concrete houses
and steel-frame houses, is still increasing.

4-6-1-5. Present State
The average floor area for newly-built housing units consistently increased for owneroccupied housing and housing for sale. For housing for rent and company-supplied employee
housing, on the other hand, it fell greatly in the 1980s when land prices soared, andsubsequently increased in the 1990s due to the fall in land prices. In general, housing size is
still increasing.

4-6-1-6. Legal System of Home Warranty(1) Civil CodeIn contracts in general, a “defect” is defined as “lack of qualities expected under the contract
or based upon normal social conventions”. In Japanese there are many terms theoreticallyhaving the same meaning but in fact having different interpretations. Providers of buildings
manipulate contracts to create wording that can be interpreted as other than “defects”.
When a defect under the contract of sale is found in a building, the seller (developer, housebuilder and also previous house owner) is responsible for compensating the purchaser fordamage resulting from the concealed defect. The purchaser must execute the right of claim
for repair within a year after finding the defects (Article 566 and 570). If the seller is a realestate professional, as described later, he can choose the above-mentioned conditions
provided by the Civil Code or a warranty of two years after delivery of a building (Real
Estate Trader Law, Article 40). The purchaser can cancel the contract if the defect is fatal to80

achievement of the object of the contract (Article 570).
In the case of a contract for building work, the builder (contractor) is responsible forrepairing the defects and compensating the orderer for damage resulting from the defects(Article 634). However, the orderer does not have the right to cancel the contract (Article
635). Duration of liability for defects is stipulated as 5 years after acceptance of the building,even if a defect is found in the ground, or 10 years for the fixed buildings (Article 638). This
period is extensible for a maximum of 10 years by a special agreement (Article 639).
The Civil Code also describes the liability to compensate for damages caused by intention or
culpable negligence (Article 709). On this provision, many disputes about defects lead tolegal proceedings. The duration of liability is 20 years. Complaints about damage caused by
defects can be made both to the builders and to concerns without any contract.
(2) Real Estate Trader Law
Under the Real Estate Trader Law, any trader who sales a property (land, old building or
newly constructed building) must not make a contract more disadvantageous to thepurchaser in respect of liability for concealed defects than provided for in Civil Code Article
570, but can make a special contract of warranty of 2 years after delivery (Article 40, ibid.).
It is technically and empirically unrealistic to specify a warranty period of 10 years for all
kinds of defects, or l year after discovery. The period of 2 years across the board seems to berealistic, but not always satisfactory for consumers in general.
(3) Housing Quality Assurance Act
The Housing Quality Assurance Act came into force in the year 2000 for the purpose of
consumer protection. This Act has two important functions. One is enforcement of a 10-year
liability for defects on a builder or seller of a newly-constructed residence. The other isestablishment of a Housing Performance Indication System and the setting up of a Housing
Dispute Resolution System for the indicated housing.
The 10-year liability system and performance indication system are based on theinvestigation of the French systems, that is, “la résponsabilité decennale” and “Qualitel”.
There are, however, two material differences between the 10-year warranty systems. First,
the 10-year liability in Japan can not be taken over by successive house owners. Second, noinsurance is enforced on any builders, sellers, designers or anyone who are liable for defects.
The 10-year liability in this Act is a special rule of the Civil Code. It applies only tocontractors or sellers who build or sell the newly-constructed residence (except for
non-residential buildings). It covers defects of structural performance and waterproof
performance against rain. No contract which reduces the 10-year liability for a
newly-constructed residence is valid. The liability for other miscellaneous defects is definedin the Civil Code or the Real Estate Trader Law.

4-6-2. Home Warranty Program
4-6-2-1. History① Establishment of programs and organizations (background)

The modernization of the construction industry became a key priority for the Housing Bureauof the Ministry of Construction (now the Ministry of land Transport) from the early 1960s
onwards. The Bureau conducted research and surveys into problems relating to on-site
construction and post-completion services, and studied measures to overcome these issues.
On the basic of this work, the Construction Council proposed setting up a program to warrant
81the quality of houses (establishment of the “Warranty Program for Houses”) to help createhigh-quality housing stock and foster housing suppliers, while providing protection for
consumers, and it became an improvement policy focus for the Ministry of Construction. On
April 1, 1982 the Organization for Housing Warranty (OHW), initially known as the“Registration Organization for Warranted Houses”, was established to administer the
Warranty Program for Houses.
1980

1982

1986
1992
1997
1999

2000

2001
2002
2003

・ Registration Organization for Warranted Houses established as a voluntaryorganization
・Warranty Program for Houses established for new detached houses
・ Registration Organization for Warranted Houses (ROWH) established as a
non-profit organization
・Notification of “Enforcement of Warranty Program for Houses” distributed toprefectural governors by the Director of the Housing Production Division, Housing
Bureau, Ministry of Construction
・Warranty Program for Houses extended nationwide
・Warranty coverage expanded to apartment buildings
・Warranty program expanded to apartment buildings for rent
・ Name changed from Registration Organization for Warranted Houses toOrganization for Housing Warranty (OHW)・Fund for Defect Warranty established・Completion Warranty Program for Houses established・Simplified measurement service of formaldehyde introduced
・Building confirmation inspection services introduced
・Government Housing Loan Corporation inspection services introduced
・Programs extensively updated to reflect the introduction of the Housing Quality
Assurance Act
・Housing performance evaluation services introduced
・Warranty Program for Existing Houses established・Warranty Program for Houses expanded to extension and alteration works above acertain size
・ Government Housing Loan Corporation compliance certification services
introduced② Developments of the programs

The program was preceded by a trial implementation in Kushiro, Hokkaido, and thesuccessful results led to expansion of the program nationwide from fiscal year 1982.
Nationwide implementation was achieved in fiscal year 1986, following the establishment ofadministrative offices in all prefectures with the support of relevant organizations including
prefectural governments.
Subsequently the Government Housing Loan Corporation introduced its “Durable Wooden
Housing” program, which required taking out the 10-year warranty under the Warranty
Program for Houses. The use of the warranty program also became a requirement for loans,interest subsidies and other preferential treatment provided by prefectural governments.
Rising consumer concern about the safety and durability of housing, especially after theGreat Hanshin-Awaji Earthquake of 1995, also contributed to the expanding use of theWarranty Program for Houses.
In 1999, OHW established the Fund for Defect Warranty with subsidy from the government
in readiness for introduction of the Housing Quality Assurance Act in the following year.
This fund was intended to ease the burden on financially weak housing suppliers who havebecome obliged to provide 10-year defect warranty for new houses along with theintroduction of the Act. The Warranty Program for Houses was extensively updated in linewith this Act.
Consumer needs in relation to housing warranties have continued to diversify. OHW
82

responded to this trend by establishing the following two new programs: the Completion
Warranty Program for Houses in fiscal year 1999, and the Warranty Program for Existing
Houses in fiscal year 2001, in addition to the Warranty Program for Houses. Also, in fiscal
year 2002, the coverage of the Warranty Program for Houses was expanded to include
extension and alteration works under certain conditions.

4-6-2-2. Home Warranty Providers in Japan
With the enforcement of the Housing Quality Assurance Act in 2000, there grew a need for
housing warranty systems to help housing suppliers assume the liability for defects ofhousing. Consequently, the Organization for Housing Warranty (OHW) and other housingorganizations and private companies emerged as home warranty providers.

83Home warranty providers in Japan
Organization for
Housing Warranty(OHW)
Registration of houses

Warranty coverage

Warranty period
Exemption from
responsibility periodHouseplus
Jutaku Anshin
Corporation, Inc Hosho K.K.

Japan Inspection
Organization corp.

Newly-built house
Newly-built detached house andExtended parts of detached shop house by timberhouses and terraced houses construction, wood frame
construction, mixed structure,steel structure (up to 3 stories)
Wooden apartment house
Major structural members Major structural members,
and parts used to prevent parts used to prevent rainwater
rainwater leakage
leakage and ground

Japan Federation Japan ERIof Architects &Company, Limited
Building

Newly-built house by Newly-built detached Newly-built house
timber construction, housewood frame
construction

Newly-built houseevaluated performance byJAPAN ERI CO. LTD.

Major structuralmembers and parts
used to prevent
rainwater leakage
10 years
2 years

Major structural members
and parts used to prevent
rainwater leakage

Major structuralmembers and parts
used to prevent
rainwater leakage
10 years
2 years

Major structuralmembers and parts
used to prevent
rainwater leakage
10 years
2 years

10 years
2 years

10 years(Nothing)

Inspection

Following completion of
the foundation structure.
Following completion of
the roof works.

Registration Builder registration fee
fee

New registration ¥31,500
Renewal ¥26,250

Following completion of theFollowing completion Following completion Following completion Following completion offoundation structure.
of the foundationof the foundationof the foundation
the foundation structure.
Following completion of the structure.
structure.
structure.
Following completion of
structure.
Following completion Following completion Following completion the structure.
Following completion of the of the roof works.
of the roof works.
of the roof works.
Following completion ofExterior substrate works.
the interior substrate
Following completion of theworks.
building.
New registration ¥31,500
New registration
New registration
New registration
Free
Renewal ¥26,250¥31,500¥52,500¥16,800(nothing)
Renewal ¥26,250
Renewal ¥21,000
Renewal ¥16,800¥137,550 (where floor space is
Building costs ×
Housing price ×¥86,000 (where
Housing price × 0.25%
under 165 m2)
0.4725% or 0.525%
0.38%
housing price is¥20,000,000)
Repair cost × about 80%
Repair cost × about
Repair cost × about
Repair cost × about
Repair cost × about 80%
80% or 90%
80%
80%
5,456
470
1,197
830
10

Example of houseregistration fee
Insurance amountAchievement Number of registeredbuilders (~2004/03/31)
Number of registeredhouses

Housing price × 0.5189%(Repair cost – 100,000) ×80%
42,067110,748
Cumulative total of(2003/04/01~2004/03/31)
registered houses atthe end of April 2005

23,7153,615

is 1,005,181.

84

1,680

365

10 years
2 years13

4-6-3. OHW Warranty Program for Houses
4-6-3-1. Registration① Registration of Builders

Housing suppliers should be registered with OHW as registered builders to use the Warranty
Program for Houses. Registration should be completed by simply submitting the application
to OHW.
② Registration of Houses・ Houses Eligible for Registration
Any type of newly-built house is eligible for application for registration.
・ Applications for House Registration
An application for house registration should be submitted to the representative
organization of OHW where the house is to be built, some time between the issuance ofthe construction permit and commencement of the construction work. In a case in which
the house would be built for sale, the application should be submitted by either the sales
agent or house builder by agreement. (The applicant would be a warrantor.)

4-6-3-2. Warranty Coverage① Warranty Program for Houses

The Program covers not only new houses, but also extension and renovation works above
a certain size.
(1) Long-term Warranty…10 years
Long-Term Warranty covers major structural members and parts used to prevent rainwaterleakage, as defined in the Housing Quality Assurance Act. In order to ensure the proper
operation of the long-term warranty, measures such as an insurance program covering
long-term warranty liability from the third year following the delivery are available.

85

(2) Short-term Warranty…1-2 years*
Items covered by the short-term warranty include peeling of finishing materials,
deformation of fittings, leaks in bathrooms, and defective equipment.
*Up to five years for certain buildings such as apartment buildings, etc.
Detached
houses1 to 2 years

Apartmenthouses,etc.

2 years
2 years

Chipped paint on finishing, warping of fittings,
bathroom leaks and defective equipment
Chipped tiles or stone veneers
Malfunction of interior fittings or equipment

4-6-3-3. Quality Controls① Technical Requirements

On the assumption that the registered builder should carry out construction work withconscience and with voluntary quality control, a site inspection would be conducted by aprofessional inspector to see if the house complies with the OHW Design and Construction
Standards and other relevant standards.
② Plan Check and Site Inspection

Every house submitted to the Warranty Program for Houses should pass the site inspections
carried out by OHW in order to be registered.
Site inspections for detached houses:
First inspection: Following completion of the foundation structure
Second inspection: Following completion of the roof work
Site inspections for apartment house, etc.:
First inspection: Following completion of the foundation structure
Second inspection: Following completion of the reinforced concrete installationon the intermediate floors (Second floor from the bottom, and every seventh floor
counting from the third)
Final inspection: Following completion of the roof sealing work

4-6-3-4. Insurance(1) Short-term Warranty
Taking on a warranty (providing free repair work, etc.) could require huge amounts ofmoney, and the burden of the liability could bring financial difficulty to the registeredbuilder, which would threaten the capability of pursuing further warranty liability. In orderto ensure the proper operation of the long-term warranty described above, measures areavailable such as an insurance program covering long-term warranty liability from the thirdyear following the delivery of a house.
(2) Long-term Warranty
Insurance amounts payable to a registered builder who carries out repair work shall be86calculated as shown below. Where a registered builder can not discharge the warranty
liability due to bankruptcy, etc., a certain proportion of the repair costs for the parts coveredby the long-term warranty shall be paid, including for the period of the first two years.
<Calculation of Insurance Amount> Insurance payable*1 is calculated as follows.
Detached house

Insurance Amount =Deductible(Repair Cost - ¥ 100,000)

Allowable percentage
× 80%

Apartment house, etc. Insurance Amount = (Repair Cost - 100,000*2)
× 80%*1. When using the Fund Course, a certain part of the insurance amount is paid by OHW.
*2. The excess for an apartment house can be selected as either ¥100,000 or ¥500,000 upon application orregistration of the house.

4-6-3-5. Dispute Settlement① Way to solve

Any dispute between the owner of a registered house and the registered builder over a defectin the house can be referred to the Technical Committee, consisting of lawyers andconstruction specialists.
② Conciliation fee

A fee of ¥52,500 incl. 5% consumption tax shall be charged.

4-6-3-6. Registration Fee (Administration Cost of the Program)① Builder Registration Fee

OHW charges the following fees for builder registration:¥31,500 (incl. 5% consumption tax) for new registration;¥26,250 (incl. 5% consumption tax) for renewal
When combined with the Completion Warranty Program for Houses, the fee is reduced to:¥26,250 (incl. 5% consumption tax) for new registration;¥21,000 (incl. 5% consumption tax) for renewal.
② House Registration Fee

The registration fee would be calculated based on the housing price and registration fee rates
which depend on the above-mentioned courses. The following is a model for a detachedhouse of ¥20 million value:Standard Course: ¥20 million* 0.5189% = ¥103,780 incl. 5% consumption tax;
Fund Course: ¥20 million*0.4384% = ¥87,680 incl. 5% consumption tax;
In the case of non-detached houses such as apartment houses, the calculation rates varydepending on the size, etc.
Detached Houses
Housing price ×
0.5189% or 0.4384%

Apartment building. etc
Quantum +Apartment unit price × fee rates (%)

87

4-6-3-7. Achievement① Number of registered builders

As at the end of April 2005, the number of registered builders in Japan is 40,894.
② Number of registered houses

OHW is about to achieve the goal of registering one million houses by the end of April
2005, of which 965,307 will be detached houses and 39,874 will be apartment houses.

4-6-4. Other Warranty Programs of OHW
4-6-4-1. Completion Warranty Program for Houses
The Completion Warranty Program for Houses is a mechanism that allows an orderer tocomplete his/her house at minimal additional cost if the construction work has beensuspended because of bankruptcy or other failure of contracted building suppliers who are
categorized as a small or medium-sized entity. In such incidents, the warranty payment will
be made by OHW based on the warranty contract. If requested by the orderer, OHW will
also introduce an alternative builder or contractor to take over the work.
Users of this program are also eligible for early interim disbursement of the loans provided
by the Government Housing Loan Corporation.
To maintain the steady development of this program, OHW has established the Fund forCompletion Warranty in addition to using non-life insurance.

4-6-4-2. Warranty Program for Existing Houses
This program was established for an existing house that has been traded. The major
structural parts of the house will be covered for five years (2 years for parts relating to thewaterproof performance) after passing on-site inspections based on the Inspection
Standards. If a problem is found during the warranty period, OHW will pay most of therepair cost.
There is a one-stop service for applications to this program and to the Housing Performance
Indication System based on the Housing (Quality Assurance) Act (Existing House Warranty
along with Performance Evaluation).
To maintain the steady development of this program, OHW has established the Fund for
Promotion of the Warranty Program for Used Houses in addition to using non-life
insurance.

884-6-5. Summary
Brief History
Establishment of programs or organizations(background)Developments of the programs

Legal System of Home WarrantyHome Warranty Providers in Japan
Main Provider
Other Operators (providers)Warranty Program for Houses of OHW
Registration of Builders

Registration of Houses

Warranty Coverage(Long-term Warranty)

・On April 1, 1982 the Organization for Housing Warranty(OHW), initially known as the “Registration Organization
for Warranted Houses”, was established to administer the
Warranty Program for Houses.
・ 1982 Registration Organization for Warranted Houses(ROWH) established as a non-profit organization
・1992 Warranty coverage expanded to apartment buildings
・1997 Warranty program expanded to apartment buildings for
rent
・1999 Completion Warranty Program for Houses established・2000 Programs extensively updated to reflect the introductionof the Housing Quality Assurance Act
・2001 Warranty Program for Existing Houses established・2002 Warranty Program for Houses expanded to extension
and alteration works above a certain size
・Civil Code = The responsibility is imposed on the act of
not following the law. (Outrage responsibility.)・Housing Quality Assurance Act = The 10-year liability isbased on this act
・Organization for Housing Warranty (OHW)・Japan Inspection Organization Corp.
・Houseplus Corporation, Inc・Jutaku Anshin Hosho K.K.
・Japan Federation of Architects & Building
・Japan ERI Company Limited・Housing suppliers should be registered with OHW as
registered builders to use the Warranty Program forHouses. Registration should be completed by simply
submitting the application to OHW.
・Registration validity term = 1 year
・Registration cost = New ¥ 31500 and update ¥ 26250
・Houses Eligible for Registration
Any type of newly-built house is eligible for application
for registration.
・Registration cost
Detached Houses = Housing price × 0.5189% or 0.4384%
Apartment building etc. = Quantum + Apartment unit
price × fee rates (%)
・10 years
・ Major structural members and parts used to prevent
rainwater leakage, as defined in the Housing Quality
Assurance Act.

89

Warranty Coverage(Short-term Warranty)

Technical Requirements
Plan Check and Site Inspection

Insurance

Dispute Settlement

Achievement (2005/04/31)

・Detached Houses = 1 to 2 years
・Apartment houses, etc. = 2 years
・Peeling of finishing materials, deformation of fittings,
leaks in bathrooms, and defective equipment.
・The OHW Design and Construction Standards and otherrelevant standards by a professional inspector.
・Site inspections for detached houses:
First inspection: Following completion of the foundation
structure
Second inspection: Following completion of the roof work
・Insurance amount payable to a registered builder who
carries out repair work shall be calculated as shown
below.
・Detached house
Insurance Amount = (Repair Cost - ¥ 100,000) × 80%
・A defect of the house can be referred to the TechnicalCommittee consisting of lawyers and construction
specialists.
・Conciliation fee of ¥52,500 incl. 5% consumption tax shallbe charged.
・The number of registered builders = 40,894
・The number of registered houses = 1,005,18190

4-7. Netherlands
4-7-1. Introduction
Buying a newly developed residence can involve considerable risks. For example, the building
contractor can go bankrupt during construction, which means construction will come to a
standstill. Also, structural defects may appear in the residence after delivery.
The ordinary Dutch contractual liability arrangement between buyer and building contractor does
not always offer buyers sufficient safeguards. In the Netherlands, the Stichting Garantie Instituut
Woningbouw (Guarantee Fund for Housing Development) was founded in order to develop asolution to these problems.

4-7-2. History and objective of the GIW
The Stichting Garantie Instituut Woningbouw (GIW) was founded in 1974 and has its offices inRotterdam. Following a two-year start-up period, the GIW became operational in 1976.
The objective of the GIW is to improve the quality of new owner-occupied residences in the
Netherlands and to increase the level of trust between property developers and property buyers.
Furthermore, the GIW provides safeguards and offers solutions in the event of problems.
Three groups are represented on the GIW board, namely:
・The public interest through the Vereniging van Nederlandse Gemeenten (Association of Dutch
Local Authorities);
・Building contractors (through manufacturer organisations);
・Consumers (through the Consumentenbond (Consumer Association) and the Vereniging Eigen
Huis (Homeowner’s Association)).
The chairman of the board is independent. The GIW works with so-called affiliates in theimplementation of the GIW scheme. These affiliates are:- Bouwfonds Woningbouw B.V. (Bouwfonds property developer)- Stichting Waarborgfonds Koopwoningen (SWK) (Safeguard Fund for Owner-Occupied Residences)- Stichting Woningborg (Residential Safeguard)
These Affiliates assess building contractors in terms of financial resources and professional skills
before these contractors can join the GIW. They also ensure that the financial risks involved inproviding safeguards are covered.
It is therefore with good reason that building contractors that are members of the GIW – a totalof roughly 1600 throughout the Netherlands – are called ‘quality contractors.’ These contractors
guarantee that a residence meets certain structural conditions.
The GIW itself mainly deals with policy, rules and supervising the implementation of the GIW
scheme by the affiliates and the implementation of the defect safeguard.
(1) The national model contract and the GIW Guarantee and Safeguard scheme
The GIW obliges its building contractor members to use a national model contract when they
enter into an agreement/contract with buyers of new residences with a GIW guarantee. Thismodel contract strikes a balance between the rights and obligations of the parties concerned. This91

model contract also has its own liability arrangement.
The applicability of the GIW Guarantee and Safeguard scheme is included as a standard part ofthe model contract. This scheme was developed after careful consultation between all parties
involved in the GIW (building contractors, consumers and the VNG (Association of Dutch Local
Authorities)).
The GIW Guarantee and Safeguard scheme offers buyers of a new residence additional security
in addition to the liability arrangement included in the national model contract.
The buyer of a new residence with a GIW guarantee receives the GIW guarantee and safeguard
certificate from one of the Affiliates. People who qualify for this guarantee can use thiscertificate to appeal to the guarantees and safeguards in the GIW Guarantee and Safeguard
scheme. The certificate is tied to an individual residence. Hence, a subsequent buyer can also
appeal to the guarantees and safeguards from the GIW Guarantee and Safeguard scheme.

4-7-3. Guarantees and safeguards from the GIW Guarantee andSafeguard scheme
The elements of the GIW Guarantee and Safeguard scheme are summarised below.
1.Guarantee from the contractor
In addition to his normal contractual and legal liability, the contractor gives the buyer an (extra)
GIW guarantee, which implies that the residence will meet certain structural requirements ondelivery.
2.The insolvency safeguard from the GIW / affiliate
If a contractor goes bankrupt during the construction of a residence, then the GIW (actually, theGIW affiliate on behalf of the GIW) guarantees the buyer that the residence will be completed at
no additional cost in agreement with the applicable purchase/building contract, or that acompensation scheme will be implemented.
In practice, the construction will usually be completed through mediation of the relevant GIW
Affiliate. At its own discretion, the Affiliate will compensate the buyer either on the basis of theadditional amount paid to the completing contractor or on the basis of the instalments alreadypaid. The compensation will be at most 17% of the agreed purchase/building price including the
ground.
3.The defect safeguard from the GIW / affiliate
If, after delivery, a residence displays defects that represent a breach of the GIW guarantee andthe contractor no longer exists or is insolvent, then the buyer can appeal to the GIW defectsafeguard. In that case, the GIW (together with the affiliate) will ensure that the defect is repaired.
Buyers can also appeal to this defect safeguard if the contractor remains in default after anarbitral judgement has been pronounced in which it is determined that the GIW guarantee has
been breached. In that case, the objective is repair in kind.
As noted earlier, these safeguards are implemented at the expense and risk of the affiliates, who
are also responsible for the risk cover of these safeguards. This process is supervised by theboard of the GIW.

92

4-7-4. The complaints procedure
Any structural defects must be reported to the building contractor by the person who qualifies forthe guarantee in writing and within the applicable guarantee period. The guarantee periods aredescribed in the GIW Guarantee and Safeguard scheme. The following main rules apply:
・a general guarantee period of 6 years;
・a guarantee period of 10 years for serious structural defects that affect whether the residence isfit for habitation; and・varying guarantee periods for specific parts of the residence, such as fittings and paintwork.
If the person who qualifies for the guarantee does not report the defects in writing and within theapplicable guarantee period to the building contractor, then he is no longer entitled to his rights
under the GIW Guarantee and Safeguard scheme.
After a written report of a complaint, the contractor must investigate the complaint and report
within 4 weeks whether he will carry out repair work and if so, how and when.
The objective of all parties is to resolve disputes in amicable consultation. If this fails, then therelevant Affiliate can mediate, if required.
Should the dispute continue to exist despite mediation, then both buyer and building contractor
can request independent arbitration from an arbitration body. This procedure should be fast,
inexpensive and easily accessible. Representation of parties by a lawyer is not compulsory.
The buyer only pays a limited complaint fee of € 300 for the consideration of his dispute. The
buyer’s financial risks remain limited during the procedure. For example, a buyer can only be
fined to pay costs to a limited extent.
The arbitrator will give his final verdict in a judgement. An appeal against this judgement is
excluded by contract. So the parties are tied to the arbitrator’s verdict.

4-7-5. Appeal to the defect safeguard
If the arbitrator decides in favour of the person who qualifies for the guarantee, then thearbitrator will sentence the building contractor to repair the defects in the residence within acertain period of time and/or to pay damages. If the building contractor does not implement thejudgement, then the person who qualifies for the guarantee can request in writing that the GIW
implement the judgement. Under penalty of the dissolution of his rights, a person who qualifies
for the guarantee must submit this type of request within a year of an arbitral judgement.
In the case of a legitimate complaint, the GIW will ensure implementation of the arbitral
judgement, but never for more than a sum of € 95,000 (as of 1 January 2003, followed by anannual indexed increase).
In the case of a dispute between the person who qualifies for the guarantee and the GIW on theimplementation of the safeguard scheme, it will be settled by the government judge.

4-7-6. Conclusion
Given the above, we can conclude that the GIW guarantee provides buyers of a newly developed
residence additional security and that it therefore has obvious added value compared to theunderlying agreement. Therefore, it comes as no surprise that in the context of buyer protection,93

many Dutch local authorities have made construction with a GIW guarantee compulsory.
Rotterdam, October 200494

4-8. South Korea
4-8-1. Housing Situation(1) The Quantitative Status
The Republic of Korea has suffered severe shortage of housing stock due to the rapid increase inpopulation and high population density in big cities due to economic growth. To solve theshortage, the government launched a supply program for multiple-unit houses such as apartmentcomplexes. Four hundred thousand units of housing have been supplied each year according to
the 2 million units supply program of 1988. As a result, the housing supply ratio increased from
71.3% in 1985 to over 100% in 2002. However, the shortage problem is not solved yet since thehousing supply ratio varies by region; 86.3% in Seoul, 93.9% in the capital region.
(2) Quality of Dwellings
The quality of housing was not good during the period of housing shortage since the priority of
housing policy was placed upon quantity. Furthermore, it was difficult to expect quality
improvement by the housing constructors since the sale price was controlled by the government.
Defects were a common problem.
Due to the apartment culture developed in the big cities since the 1980s, most new housing units
are equipped with modern facilities. According to the survey of population and housing, theaverage size of a home rose 170% from 47.7 m2 in 1975 to 82.8 m2 in 1995, and the dwellingarea per person doubled from 8.2 m2 in 1975 to 17.2 m2 in 1995. In addition, conveniences suchas bathing facilities, toilet facilities, and kitchens, have been improved to a considerable extent,
and also the degree of improvement is rising appreciably.
In 1998 the price control was abolished and the housing constructors could set the sale price for aproper profit. While the housing supply ratio increased, the housing market transformed to
become consumer-oriented and the quality of housing has been enhanced.
Recently, gentrification and various concept houses such as wellbeing and intelligent houses
with IT systems have been developed due to the intensive quality competition among housing
constructors.
(3) Recent Status of Housing Market
The rapid economic growth has brought a rise in housing and land prices, and housing has been
the investment asset for wealth. The housing price decreased sharply after the foreign currency
crisis in 1997. The economy recovered after the crisis ended in 1999 and the housing price rose
dramatically in 2002 and 2003. The most outstanding characteristic of the housing market in the
2000s is the big difference in housing price increases by region and the marked rise of price ofhigh quality houses. In addition, the housing price in reconstructed complexes showed a steep
rise due to the expectation of high profit (capital gain).
The government launched a policy mix of transaction control and a stronger tax system forstabilizing the housing price. In response, the price was stabilized from the end of 2003.

4-8-2. New Home Warranty Program(1) History
Since the 1960s Korea has seen unprecedented economic growth accelerated by rapid
industrialization and urbanization, and the growth of the nuclear family. Moreover, the sustained95

migration of people to the large cities has led not only to an acute housing shortage, but also a
rapid increase in the price of housing.
In 1977, the government adopted the Housing Construction Promotion Law. This has led to theimplementation of various housing-related policies. Accordingly, the pre-construction sales
system was adopted so that the builder can obtain the necessary construction funds.
In the 1990s, 500,000 to 600,000 dwellings were produced. This placed an increasing burden on
the housing builders for acquiring funds, hence increasing the possibilities of insolvency. The
housing guarantee system was established precisely to prevent bankruptcies for these housingbuilders.
Potential homeowners must be protected in order to guarantee a stable and efficient supply ofhomes.
1992
1993

1999

2003

・ Official announcement of the Korea Housing Financial Law(Source: Revised Korea Housing Construction Promotion Law)
・Established and registered the Housing
・Began operations - 14 types of guarantees and loans including
housing completion guarantees
・Official announcement of the Korea Housing Guarantee Company
Act(Source: Revised Korea Housing Construction Promotion Law)
・Established and registered the Korean Housing Guarantee Co. Ltd.
・Introduction of three new guarantee products, including guarantees
for the completion of multipurpose buildings for residences andbusinesses(2) Home Warranty Main Providers
Korea Housing Guarantee Co. Ltd. (KHGC)
Korea Housing Guarantee Co. Ltd. (KHGC) is a government-invested organization, which was
originally established as the Korea Housing Financial Co-operative (KHFC) in April 1993 andthen restarted in June 1999 through joint investments by the government, financial institutions,and housing business entities.
The company has been established with a view to contributing to the improvement of national
prosperity and the balanced development of the national economy. To this end, it aims to protect
potential homeowners and occupants through all types of housing construction-related
guarantees and to promote housing construction by supporting smooth business performance byhousing construction contractors.

4-8-3. Warranty Program for Houses(1) Guarantees for repair compensation
KHGC guarantees the entire housing industry process from sale, leasing, supervision, licenses
and permits, to compensation for the repair of apartments, houses and multi-purpose buildings.

96This product guarantees the execution of repairs when any defects are found within the
mandatory period (between the housing inspection and the expiration of an obligatory period for
repairs).
Guarantees for supervision deposits
We provide guarantees for the payment of supervision fees that housing builders must pay inrelation to the supervision of housing construction businesses.
(2) Credit Ratings
Credit ratings aim to evaluate the financial condition and management capabilities of housingbuilders and to objectively lay down terms and conditions of business according to these results.
KHGC has jointly developed state-of-the-art credit rating systems with professional agencies.
We utilize evaluative indicators and methods that can best reflect the characteristics of individual
housing builders. These credit ratings are classified into nine grades in accordance with standard
credit evaluation models and bankruptcy prediction models. We conduct credit ratings on anannual basis to issue letters of guarantee.
(3) Guarantee Fee Rate Table by Credit Rating
Credit ratings are essential for the operation of housing businesses and the improvement of
reliability. KHGC ensures fair and accurate evaluations backed by objective and scientificsystems.
(unit: %, p.a.)
Credit Rating
Guarantee Type

A+

A

B+

B

C+

C

D+

D

E

Guarantees for Repair
0.24% 0.24% 0.27% 0.29% 0.29% 0.29% 0.40% 0.44% 0.44%
Compensation※Rates for housing completion guarantees are the same as those for multipurpose
buildings for residences and businesses, and as rental dwellings guarantees.
Source: Korea Housing Guarantee Co. Ltd. Home Page97

4-9. Sweden
4-9-1. Housing Situation in Sweden
Considering its 8.9 million inhabitants, Sweden has had a somewhat limited new homeconstruction over the last ten years, in relation to the demand. However, since year 2000
construction has increased, and 17,200 new housing units were newly constructed. For
2001 the number of new dwellings under way is expected to exceed 20,000.
The new housing market is dominated by four large public companies that produce housing
across the country. These companies and many others strive for improved quality. In mostcases this assurance of quality permeates every phase of housing production, which leads to a
reduction in the occurrence of flaws or damage.

4-9-2. History
Currently there are two major home warranty providers in Sweden which are Bostadsgaranti
Insurance Co. and GARBO Insurance Co.
In 1962 AB Bostadsgaranti was established with intent to provide warranty for apartment
houses built for Housing Cooperatives which was funded by the building industry.
In October 1976 based on the agreement (called Smahus 76) between SBEF (The AssociatedGeneral contractors and House Builders of Sweden) and SVF (The Association of Swedish
Home-Owners) the new scheme was established in order to promote consumer protection.
Under this scheme AB Bostadsgaranti became the first organization offering 10-year
warranties to buyers of new homes in Sweden. There were three major contents in thescheme:(1) Setting up General Conditions of Contract to be signed between a builder and a home owner;(2) Completion Guarantee by a warranty company;(3) Commitment in regard to a long-term warranty(1) General Conditions of Contract
This is a revised version of AB72 (later revised as ABS95) which stipulates standard
conditions upon exchanging contract agreement. The followings are the points of note:a. The site inspections should be carried out under a house owner’s responsibility;b. A defect found within two years since the final inspection should be put right by thebuilder (defects liability period);c. If the defect is due to the architect’s negligence, the builder has a right to claim forindemnity. In case of a design-build contract, the builder is liable in contract also for
defects due to the architect’s negligence.
(2) Completion Guarantee by AB Bostadsgaranti
AB Bostadsgaranti insured that the builder would carry out theperformance guarantee. If the builder became bankrupt or insolvent
during the two-year defects liability period, AB Bostadsgaranti would take over the
repair work for the defect reported.
(3) Commitment in regard to a long-term warranty
It covered serious damage caused by defects occurred after the two-year defects liability
98period up to the end of the 10th year from the completion of the house. This warranty
was provided to consumers by AB Bostadsgaranti. AB Bostadsgaranti should take out
insurance to diverse risks. Skandia and Trygg-Hansa underwritten insurance.
Conflicts over the liability issue were handed to Committee of Small Dwelling
Guarantee. If the arbitration did not work, the issue was brought to intermediation process.
There are two acts enforced with the aim of consumer protection for new construction ofhomes. Those are Consumer Services Act and Building Defects Insurance Act. In Sweden
it is required by law that all housing that is constructed for permanent residence must have
Building Defects Insurance which are offered by Bostadsgaranti Insuörance Co. and
GAR-BO Insurance Co.

4-9-3. AB Bostadsgaranti
Since 1984 AB Bostadsgaranti has been owned 50/50 basis by the Central Government andSwedish Construction Federation.
In the year 2000 a wholly owned subsidiary,
Bostadsgaranti Insurance Co. was formed which are now offering insurance covering 10-year
warranty which consists of Completion Warranty Insurance and Building Defects Insurance.
while the parent company provides warranties covering Deposits and Advance Payments inthe context of apartments in tenant-owner societies.

4-9-3-1. Warranty Schemes(1)

Building Defects Insurance (offered by Bostadsgaranti Insurance Co.)

Building Defects Insurance will indemnify reasonable costs within the Sum Insured, toremedy:・ Fault in the construction of the building
・ Fault in the material which has been used in the construction
・ Fault in the construction workmanship・ Damage to the property insured caused by such faults
Those faults and damages should be the ones that are discovered and reported within 10
years from the date of the certificate of completion.
Building Defects Insurance can also apply to repairs, renovations and additions,however the insurance applies to only the contract works on the building.
Building Defects Insurance can be taken out for multiple resident buildings as well as
for small houses, either directly by the owner or by the entrepreneur that performs theconstruction. The Building Defects Insurance remain with the home when it changes
hands.
(2)Completion Warranty Insurance (offered by Bostadsgaranti Insurance Co.)
Should the building company become insolvent during the construction period, theCompletion Warranty Insurance ensures that the house or the remedy work is completed.
There is one ①Completion Warranty Policy during the Contract Period, and ②anotherduring the Defects Liability Period. The former is to ensure completion of the works
written in the contract agreement, and the latter is to ensure that defects becoming99manifest during the Defect Liability Period are remedied. Aggregate Limit will
normally be 10% of the contract price①, and for the Defect Liability Period ② 5 or 10%of the contract price.
(3) Deposit Guarantee (offered by Bostadsgaranti Ltd.)The parent company, AB Bostadsgaranti Ltd. issues Deposit Guarantee in association
with the construction of homes that are intended to form tenant-owner’s societies. The
contractor building or transforming premises intended for a tenant-owner society can takeout the policy. Deposit Guarantee is a security for deposits and that are paid to thetenant-owner’s societies. The premium is paid once and for all.
(4) Advance Payment Guarantee
dvance Payment Guarantee protects a party who has made an advance payment for theenjoyment of an apartment in a tenant-owner society; future tenant-owners are sometimes
required to make advance payment upon exchanging a so-called preliminary agreementwith the society. The contractor building or transforming premises for a tenant-ownersociety can take out this guarantee.
**

Deposit is the money the buyer of the housing cooperatives pays after the
project started up. All deposits together constitutes a part of the financingof the project. Advance payment is a part (usually 10% or more) of the
Deposit that can be taken out from the buyer by the tenant-owner society at
an early stage, before the budget for the project is finally settled and theconclusive selling document is signed.

4-9-3-2. Registration of Builders
Builders who wish to take out Bostadsgaranti Insurance Co.’s warranty have to go throughscrutiny which includes the builder’s financial status and his business history.
Bostadsgaranti Insurance Co. supervises the builders’ deeds continuously and conducts athorough check when the builder launches a new housing project.

4-9-3-3. Dispute
Disputes arising out of the above warranties shall be dealt(1) if the Insured is a legal person, it will be settled in accordance with Swedish
legislation and by an arbitration conducted by Bostadsgaranti Insurance Co.
(2) if the Insured is a natural person, it will be settled in accordance with Swedish
legislation and by a general court in Sweden.

4-9-3-4. The Warranty Fee and Deductible
The warranty fee for a home varies largely according to the solvency rating of the builder andthe construction cost. As of 2004 the average fee for a detached house with construction
cost SEK 2.300.000 (approximately 303,000 US dollars) is SEK 16.100 Kroner (2123 US
dollars) which is 0.7% of the construction cost.
The owner of the building has to pay the deductible which is index-based and decided inaccordance with the law “The Law of General Insurance”.
As of 2004 it is SEK 19.650. The total undertaking per home is limited to the purchase sum100(exclusive of cost of site).

4-9-4. GAR-BO AB
GAR-BO AB was established in 1988 funded by some 50 companies specifying constructionof wooden houses. The GAR-BO AB’s warranties are backed up by LFAB Insurance
Company. These warranties were also applied when houses are exported to UK or
Germany.

4-9-4-1. Warranties
The warranties, today offered by GAR-BO Insurance Co., consist of Completion Warranty
and Building Defects Insurance. The former is taken out by a builder to assure completionof the construction work. If the builder fails to the obligation, GAR-BO AB will take overthe builder’s responsibility.
The Building Defects Insurance follows the Building Defects Insurance Act and give
approximately the same cover as the Building Defects Insurance provided by Bostadsgaranti
Insurance Co.
The builder should pay the warranty fees and defines the warranty coverage in the contract.

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4-10. United Kingdom
4-10-1. Setting UK standards
NHBC is the standard setting body and leading warranty and insurance provider for new homes
and newly converted homes in the UK. NHBC was established over 65 years ago as a
non-profit distributing company, and its primary purpose is to help raise standards in the newhouse-building industry and provide consumer protection.
Providing risk management services to the house-building and wider construction industry,
NHBC has approximately 18,000 registered builders who agree to comply with NHBC Rules
and Standards. Around 170,000 new homes are registered for Buildmark warranty cover eachyear and the Buildmark covers more than 85% of new homes in the UK. To date, NHBC has
protected over 30% of existing homes in the UK.

4-10-2. Establishment of NHBCNHBC was started in 1936 by professional bodies and interested parties in the house-building
industry with the object of giving homeowners a fair deal at a time when poor building standards
was a matter of national concern.
At its formation in 1936, NHBC’s objective was to “encourage and promote a high standard ofdesign, workmanship and materials in house building in the United Kingdom.” This was to beachieved by establishing a register of qualified house-builders who built to a set of minimum
standards.
In 1967, NHBC extended its role by offering consumer protection to homebuyers through theintroduction of a 10-year warranty and insurance policy called the Buildmark.
The Buildmark
policy had two parts. For the first two years NHBC offered a warranty to underwrite thebuilder’s liability to repair any defects in the property. NHBC would act as a ‘mediator’investigating whether any defect was a breach of its Technical Standards and instruct the builder
to carry out repairs. If this did not happen, NHBC could intervene to ensure the work was carriedout.
The second part of the Buildmark cover was an insurance policy in years 3-10 for the main
structure of the home.
With the introduction of Buildmark, NHBC’s business model was firmly established. NHBC
would raise standards in house building by setting standards for construction, inspecting during
construction to monitor compliance and providing reassurance to new home buyers through the
10-year Buildmark policy. Successive increases in the level of cover or additions andimprovements to the Standards would raise the level of builder performance and the quality of
new homes.
Whilst in the UK there is no statutory requirement for builders to offer warranties on new homes,
warranties became almost mandatory in 1968 when mortgage-lenders in the UK agreed that nomortgage advances (i.e. loans to purchase a home) would be made on newly built homes withouta certificate from NHBC. The commercial necessity for builders to provide a warranty was
therefore clear, and NHBC’s role in certifying new homes established.
In 1985, NHBC’s role was broadened when Government authorised it to carry out Building
Control inspections in competition with local authorities. House builders then could choose to102

use either NHBC or the Local Authority to check that the home complied with statutory Building
Regulations.
In the late 1980s, NHBC’s position as the only supplier of new home warranties changed whenan existing company ‘Municipal Mutual Insurance’ offered an alternative warranty to NHBC.
When a few years later this company ceased to operate, its business passed to Zurich Building
Guarantees. Today Zurich and two other providers have approximately 10 -15% share of themarket.
In 1997, a new Government was elected that sought to increase consumer protection for
homeowners. NHBC worked closely with Government to reform its governance and improve thelevel of cover offered. A Consumer Committee was established to champion homeowners’
perspective within the company, and the NHBC Council and Board was re-structured to ensurethat the interests of homeowners, builders, lenders and professional bodies was balanced.
NHBC was therefore firmly independent of both Government and the house builders, with a
mission to work with all stakeholders to build a community of interest to raise the standards of
new homes.

4-10-3. NHBC Today
A Stakeholder Company
NHBC is a non-profit distributing company independent of both Government and house builders.
Its governing Council includes a wide-range of stakeholders with an interest in raisinghouse-building standards. It includes mortgage lenders, the Local Government Association,
consumer organisations, the Law Society, architects, builders and surveyors.
How NHBC Raises Standards
NHBC sets, monitors and maintains construction standards. It registers builders, inspects theirwork at key stages of the construction process, and through expert risk assessment reduces thenumber of defects in new homes. To protect homeowners if a problem does occur, NHBC
provides the 10-year Buildmark warranty and insurance cover.
Technical Standards
NHBC's Technical Standards lie at the heart of its aim to help raise the quality of new homes.
They set the standard to which new homes are built and provide invaluable advice and assistanceto house builders. The Standards are up-dated each year and new chapters are added to reflectchanges in the construction process.
Registration
NHBC has approximately 18,000 house builders and developers on its register. All new applicant
builders are put through a technical and financial vetting system. Once accepted on to theregister, the builder must comply with NHBC Rules and build to their Technical Standards.
NHBC registered builders build around 85% of the new homes built in the UK every year.
Inspection
NHBC carries out inspection at key stages of construction of a new home. There are aminimum of four key stage inspection visits which take place: during the excavation offoundations, before plastering, when the superstructure is built and before the hand over of theproperty to the homeowner. NHBC’s 330 inspectors carry out almost one million inspections
each year and use world-leading technology to gather vital data and management information to
help builders raise standards. By inspecting every home at 4 key stages of construction, NHBC
seeks to minimise defects and manages risk for the offering the Buildmark warranty andinsurance policy.

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Where NHBC also carries out Building Control inspections, an additional inspection is carriedout. NHBC is now the largest single provider of Building Control with over 50% of the market
in England and Wales.
Warranty and Insurance
NHBC's 10-year warranty and insurance cover for newly built or newly converted residential
housing is called Buildmark. NHBC’s 10-year Buildmark Cover currently protects around 1.6
million homes in the UK. In addition to this core product NHBC also offers Buildmark Choice
for social housing and Solo for self-built homes (where homeowners buy land and build thehome themselves.)
NHBC registered builders apply for Buildmark when they register their residential building plots
with NHBC. The builder pays the premium directly to NHBC and this is based on a scale ofcharges relating to the sales value of each home.
The builder includes the Buildmark warranty and insurance cover when selling newly-built or
newly-converted residential homes to homebuyers because the cost is included in the purchaseprice of the new home.
Buildmark is divided into four main parts:
Section 1 – During Construction
Before a newly built home is completed - If, due to insolvency or fraud, the builder does not startbuilding or converting a home or fails to finish it, NHBC will reimburse money the homebuyer
has paid the builder for the home where the money cannot be recovered from him.
If the property is not finished, NHBC can arrange for the property to be finished in accordancewith NHBC Technical Standards. There is a financial limit of £100,000 or 10% of the original
purchase price (whichever is the less) to this part of the cover.
Section 2 – Years 1 and 2
For the first two years after the house is complete, the builder is responsible for rectifying defects
or damage in the home which do not comply with NHBC’s Technical Standards. If thehomeowner discovers any defects or damage, they must report these to the builder in writing.
If a homeowner and builder do not agree on what repair work is required, NHBC can offer its
free independent Resolution Service. This involves NHBC carrying out an investigation of the
problems and instructing the builder to carry out repair works where necessary.
If the builder does not agree to remedy these defects, NHBC will intervene and undertake thework itself. Effectively in years one and two NHBC acts as a mediator in disputes between the
homeowner and builder and ensures that the builders honour their liabilities in terms of NHBC’s
Rules and Standards.
Section 3 – NHBC Insurance Years 3-10
For the remaining eight years of the Buildmark policy, NHBC’s insurance protects the homes fordamage costing more than £640 to put right which is caused by work that does not comply with
NHBC’s Technical Standards. This part of the Buildmark covers many items relating to thestructure of the home, including items such as double-glazing, staircases and wet-applied wall
plaster.
Section 4 – NHBC Insurance for Building Control
This insurance covers the period of 10 years and only applies if NHBC has carried out thestatutory Building Control. It covers homeowners against costs arising from the builder's failure
to comply with specified statutory Building Regulations. NHBC will pay the cost of putting
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right any of the work specified in the Final Certificate that does not comply with the Specified
Regulations.

4-10-4. Other NHBC Services
NHBC also provides a range of Services, including technical information, training, health andsafety, engineering and energy rating services.
Health and Safety
NHBC is the UK’s leading provider of health and safety services to the house-building industry.
It provides site inspections, health and safety audits, accident investigation, and planningsupervision.
Training
NHBC is the largest provider of construction management training in the UK. It provides a wide
range of training and qualification programs, seminars and on-site training, designed specificallyfor builders and developers.
Energy and Environment Services
NHBC provides energy ratings - a technical assessment of the energy efficiency of new homes,
required by Building Regulations. We also have licensed assessors who conduct EcoHomes
assessments, examining the environmental impact of new developments.
Information Services
NHBC provides management information to major house-builders on a quarterly basis in theform of Builder Reports. These contain all the crucial data to allow builders to benchmark theirperformance against their competitors and between the sites and regions within their companies.
Data regarding types of defects and customer satisfaction levels is provided to allow builders tomonitor and improve their performance.
Praising Best Practice
NHBC’s annual Pride in the Job Awards celebrates the achievements of site managers across the
UK. Around 18,000 managers from sites across the UK compete for the Supreme Award eachyear. By ‘praising the best and encouraging the rest,’ NHBC makes an important contribution to
improving the quality of new homes.

4-10-5. Other UK Warranty Providers
Zurich Insurance Building Guarantees
Zurich Insurance Building Guarantees has a ten year latent defects warranty. It covers newly built
homes for sale or rent by the private or social housing sector, and also covers conversions.
Where elements of the home are factory built, a manufacturers warranty is available. For the firsttwo years, either the developer or manufacturer are responsible for rectifying damage or major
damage caused by defects that do not meet Zurich's published technical requirements. If they do
not deal with them, Zurich will act for the policy holder and arrange for remedial action
themselves. The remainder of the 10 years is insured by Zurich.
The policy provides a range of options to widen the cover and the warranty can be extended by five
years at the end of the 10 year term, subject to claims experience and the payment of an additional
premium. Warranty cover can also be provided for self builders and commercial buildings.

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Premier
Premier Guarantee was established in 1996 and gained accreditation to offer warranties in 2001.
It operates in the Republic of Ireland and in the UK.
Premier’s 10 year warranty provides structural defect cover for full costs of repairs to any one
house up to €200,000 in respect of residential houses, and €2,000,000 in respect of apartmentbuildings index linked.
Premier has recently also launched a new version of its warranty scheme called ‘Hallmark’, inpartnership with local authorities.

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4-11. United States
4-11-1. Background and History in the US
Since 1950s, “Principle of Implied Guarantee for Inhabitability” has come to a recognition of the
public. It means that houses are required to have been built with relevant technical standards
and to be suitable for habitation without a written document. In early 1970s, the Federal
Government was considering to set up some legal framework in regard to housing supply tocorrespond to the consumer-protection movement.
NAHB (National Association of Home Builders of the United States) was offended by thisGovernment’s move as the biggest home builders’ association in the US. In 1972 the Federal
Government and NAHB sent a research group to NHBC (National Association of Home
Builders) in U.K. to find the solution. Based on this research NAHB quickly developed Home
Owners Warranty Program in 1973 in order to avoid the Government’s intervention andestablished Home Owners Warranty Corporation (HOW) to operate the system as its 100%
subsidiary. This practically blocked the enforcement of the legislative measures, and in 1977
the bill to establish Office of Consumer Representation was rejected at the Congress.
However, in 1994 HOW was forced to cease the warranty business because of excess of debt.
(details will be described later).
In 1980s several private home warranty programs came into the market. Currently several
private organizations offer warranty programs. HBW is the biggest provider in the U.S. in
number of warranted houses founded in 1980. RWC has the second biggest share, and QBW is
the third.
HBW (Home Buyers Warranty)
RWC (Residential Warranty Insurance Corporation)
QBW (Quality Builder’s Warranty Company)
PWC (Professional Warranty Corporation)
The U.S. Department of Housing and Urban Development (HUD) approves 10-year warranty
programs based on the guidelines HUD developed.
There has been a movement to set a Uniform Warranty due to the fact that the findings of someresearch revealed that effectiveness of the third party home warranty programs approved by
HUD was often diminished by variations in the coverage afforded and by shortcomings in thedispute resolution process. However HUD has not approved the implementation of the
Uniform Warranty.

4-11-2. Bankruptcy of HOW(1) History
In 1993 just before being forced to bankruptcy, HOW was said to have more than 7,000
registered builders and more than 1.7 million houses under its coverage which occupied the halfof the home warranty market nationwide.
In 1994 the State Insurance Bureau carried out the audit and found out that HOW had capital
deficit of 4,740 dollars. Though the Bureau issued orders to accumulate the reserve and otherfund within 90 days, HOW did not follow this order, and the Bureau decided to order thesuspension of the business.

107Since HOW was not considered as an insurance company, there was no relief applied by theState Fund.
Currently HOW offers the warranty service for used houses, and only in the State of New Jersey
it continues the warranty business(2) Cause
According to a professional of NHBC, the HOW system had a high risk of accidents. However
the management people of HOW insist that the decision of the State Insurance Bureau was the
mistake.
There is no definite cause identified, however the reasons of bankruptcy are assumed as follows:(1) According to NHBC, the direct cause was an extreme amount of insurance payment
happened at housing development in New Mexico because of uneven soil.
(2) The number of accidents involving the payment of insurance money had increased, however
HOW could not raise the premium since the competition between the warranty providers had
intensified.
(3) Low level of risk management: 1)Under the HOW system HOW did not carry out inspection
on its own and depended on the inspection results by municipality; 2) HOW did not have its
own technical standards and borrowed the industry standard; 3) Since the claim was madedirectly to the insurance company (later recourse to OHW), the builder or developer ofinterest did not deal with the matter.

4-11-3. HBW(1) General Description
HBW was established in 1980, and now it has grown to a nationwide warranty provider with
15,000 registered builders in 48 States and more than 1.1 million new and pre-owned homes
under warranty.
HBW has warranty programs for extended or reconstructed houses, existing houses andcondominiums in addition to newly built houses.
When the builder launches a housing development project, he is obliged to go through certain
procedures set by HBW at the nearby HBW office. HBW backs up the builder in the marketing
aspect such as providing various handouts for purchasers such as the ones to explain the contentsof the warranty and to instruct how to maintain the house.
(2) Builder Registration
A builder (developer) should apply for registration as a company not as an individual at the local
HBW branch where its business size, past achievements, claim history, technical level, financial
status and the President’s business achievements and such are considered. The second stage ofscreening is to see the financial credit of the applicant.
HBW could require security deposit or letter of credit from the financial institution. Once abuilder is accepted as a member of HBW, he should agree to follow the rules set by HBW andexchange agreement with both HBW and NHIC.
The membership is good for one year. Renewal procedure is the same as the first-time
application. If the registered builder violated the HBW rules or financially became unhealthy,108the registration would be eliminated.
As of 1997 the initial registration fee is 300 dollars and 295 dollars upon renewal.
(3) Coverage
There are two programs: short-term warranty program and long-term warranty program, which abuilder has a choice to take out both or one out of two. 20% of the builders take out only
long-term warranty program. Both warranties will be carried over to the succeeding owner if
the ownership is changed.
1). Short-term Warranty
There are 2 year coverage and 1 year coverage: Two-year coverage against defects inelectricity, piping and ductwork and mechanical systems; and one-year coverage against
defects in other non-structural parts. In case where the builder neglected to perform his
warranty obligation and no settlement were reached through conciliation or arbitration, HBW
would pay the repair cost or carry out the repair work instead of the builder. The definitionof “Defect” covered under the short-term warranty is specified in Construction Quality
Standard developed by HBW.
2). Long-term Warranty
The long-term warranty program offers the major structural defect coverage for 10 years.
The defect subject to this warranty coverage is the one which makes the house unsafe or
unsanitary or unlivable.
When a claim is made, the registered builder is obliged to carry out investigation and make anappraisal in regard to the required repair work as well as its cost. If the builder did not carry out
the investigation, HBW will pay 250 dollars to the owner as the appraisal fee.
If the defect occurred because of uneven ground or bad soil owing to force majeure, the builder
would be indemnified.
(4) Insurance Back-up
HBW has strong financial backing from National Home Insurance Company (RRG), Residential
Insurance Company (RRG), Swiss Re, an international insurance company, Quanta and Toa Re
America.
(5) Quality Control
Under the HBW scheme there are three measures to keep and maintain the quality of houses.
1). Building Control by municipalities followed by HBW inspections
Municipalities carry out the building control which includes in-depth checking and site
inspections. HBW first evaluates the results of those checks carried out by the municipality
and sends out its own inspectors when considered necessary. The site inspections arecarried out in three phases: 1) when foundation work is finished-- before pouring concrete; 2)
when structural work is completed—before the interior work starts; 3) when completed.
As of 1997 HBW has more than 700 employees nationwide, 10 risk management experts and1,050 contracted inspectors all of those are licensed Building Code Inspector. There are also
12 HBW employees who supervise those contracted inspectors by auditing or carrying out
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spot checking.
2). Quality Control by HBW“Construction Quality Standard” contains definitions of the “defects” which are described in a numericalmanner. This will give the explicit understanding to the owner in regard to the quality of the house inaddition to indicating the target in regard to quality control for the builder.

3). HBW also has Risk Management Manual in order to prevent defects.
Particularly in regard to ground (soil) and foundation work, the manual has in-depth
instructions for builders such as how to avoid land subsidence as well as the guidelines to
conduct inspections(6) Insurance Payment
Insurance money is paid when the builder does not perform his obligation under the short-term
warranty or when the event covered under long-term warranty happens.
For the first case, 250 dollars of deductible per defect will be charged. For the latter case, there
is no deductible set, though the maximum amount of payment should not be more than theoriginal price of the house.
The insurance amount (repair cost) under the long-term warranty includes the repair cost to put
right the structural durability/strength as well as the loss concomitantly occurred in other parts
because of the defect in the structural parts. Quality of the repair works are limited to the ones
to recover the original level of safety, hygiene and livability including the related finishing work.
The insurance payment will be decided based on the report prepared by the registered builder.
The insurance company first verifies and obtains the owner’s consent in regard to the contents of
the report. If there is a dispute between the parties concerned, HBW would send the third-party
professional inspector and carry out investigation and appraisal.
NHIC obtains a subrogated right of claim for indemnity for the insurance amount paid.
has reinsurance contracts with several insurance companies.

NHIC(7) Conciliation and Arbitration
Any dispute will be referred to HBW arbitration procedure. If there is no settlement reached,
AAA (American Arbitration Association) or other professional arbitration organization which theparties concerned agree on leaving the case will take over. Settlement should be concluded
within 40 days after the application is submitted.
[Premiums]
There is a premium rate book by the area. The premium differs by the size of the project,history of the registered builder and if the house is low-rise or high-rise. The premium of
high-rise houses is twice as expensive compared to low-rise houses, and the premium in the area
where the condition of the grounds are at risk.
If the builder takes out only long-term warranty, the premium is 70% compared to take out both
long-term and short-term warranties. The lowest premium is 0.15% of the price of the house,
and the highest is 1.0%.

1104-11-4. Warranty Programs for Existing Houses and Extended or
Reconstructed Houses
Several companies offer warranty programs for existing houses. The major ones are HBRWC(Home Buyers Resale Warranty Corporation) which is a subsidiary of HBW, UOHPC (United
One Home Protection Corporation) and NHWA (National Home Warranty Association) which isthe nationwide builders association.
This program is applied by either the buyer or the seller of the house via realtor.
As of 1995 the number of houses under any of those warranty programs for existing houses or
remodeled houses is over 800,000.
There is no insurance back-up for these programs.
[Contents of the warranty]
There is not much difference among those programs, which give one-year warranty after thecertain inspection process for heating/air conditioning system, kitchen appliances, pipes, garage
door. Those programs do not cover any part of the building itself. The coverage can beextended by an extra premium.
[Costs]The premium is between 350 dollars to 450 dollars.
The repair cost is decided by the negotiation between warranty provider, the insured and thebuilder who did the repairing work. The deductible is 50 to 100 dollars. Sometimes there is alimited amount set.
[Merit]
It is said that the price of the warranted houses is 2.4% higher in average and the time to be soldis 27 days shorter in average compared to the houses with no warranty.

111