A structure that was constructed under a building permit and has passed inspections by the municipality is expected to be a healthy and safe building. This expectation seems to stem from the awareness of the role building permits and construction inspections play in ensuring that the health and safety requirements of building codes are met. Yet the reality is that a passing grade on a municipal inspection is not a certification or assurance by the municipality of the soundness of the design or the quality of construction. For that, municipalities rely upon the design professionals involved. The sign-off by a municipality only signifies that construction was completed in general conformity with the approved plans and the minimum requirements of the applicable building code.
In recent years, municipalities have increasingly been named as defendants or co-defendants in disputes arising from issues such as inadequate thermal resistance of exterior doors and windows, water leakage into below-grade levels, building permits that remained open for years, and latent defects attributable to deficient or non-code compliant construction that was either not inspected or not detected during inspections. This article presents an overview of the powers and duties of municipalities under the Building Code Act1 and the Ontario Building Code2, provides examples of where municipalities can be vulnerable to liability, and discusses the view of the Canadian Courts on municipal liability.
The Powers and Duties of Municipalities
Under the Building Code Act (BCA) and the Ontario Building Code (OBC), building officials have the duty to review design plans, inspect construction, and, where warranted, issue orders to owners and permit holders to have construction comply with the BCA and OBC. Building inspectors are expected to identify any deviations or changes from the issued permit plans and require that a revised building permit be obtained for any material change. However, building inspectors are not required to continuously monitor construction. Rather, they have a duty to detect defects that are apparent by visual inspection during the inspection stages and to order those defects to be remedied. In exercising their powers, building inspectors are required to perform their duties in an independent manner and only in relation to matters for which they are qualified.
The BCA allows a municipality to revoke a building permit for several reasons including: where a permit was issued on the basis of false information, construction has not been commenced six months after the permit was issued, construction has been suspended or discontinued for over a year, or the permit was issued in error.[i] The Courts have held that where an owner obtains a building permit but commences construction of something substantially different to that which has been allowed by the permit, the municipality is entitled to revoke the permit.3
Inspection Stages
Inspections required under the OBC have evolved significantly since 1975 when the first edition of the Code was introduced.
The 1975 edition of the OBC required that municipalities be notified at the following stages of construction: commencement of construction; completion of excavation; readiness to construct the foundation; completion of foundations before backfilling; completion of the structural framing; readiness to apply interior finishes; and the completion of as-built drawings. The 1983 edition of the OBC introduced notifications at the following additional stages: insulation, duct work, fire separations; and exterior cladding. Inspecting masonry and factory-built fireplaces and their chimneys was added in the 1986 edition.
The 1997 edition of the OBC introduced occupancy permits and occupancy inspections. An occupancy permit is a permission by the municipality for a building to be occupied prior to the completion of construction. An inspection by the municipality of all components necessary for occupancy is required before an occupancy permit can be issued. An occupancy permit is not required where construction has been completed and the building permit has been closed by the municipality.
The 2006 edition of the OBC marked the introduction of optional “additional inspections”, which gave the municipality the discretion to conduct certain inspections such as interior finishes, and site grading. The inspection of fireplaces, which was previously mandatory, became optional in this revision.
What Does Passed Inspection Mean?
The purpose of a municipal inspection is to verify compliance with the issued plans and the general requirements of the OBC such as environmental separation (e.g. insulation and vapour barrier) and fire protection requirements. Not every aspect of construction is inspected by the municipality. For instance, while the municipality inspects for adequate wall insulation and the limits on glazing as a ratio of a wall area, they cannot verify the thermal resistance of exterior doors and windows. Similarly, the installation of proper interior finishes such as drywalls is verified but inspectors are not required to check the quality of the workmanship. Also, it is not the responsibility of building inspectors to verify the adequacy of the structural members and their connections. It is rather the responsibility of the design professional.
Furthermore, there are inspections that are not part of the mandate of municipalities. These include the inspections required by the Electrical Safety Authority (ESA) for electrical work, the Technical Standards and Safety Authority (TSSA) for gas connections and lift installations among others, and the Wood Energy Technology Transfer (WETT) for wood burning fireplaces. When an occupancy permit is issued by a municipality, the assumption is that all inspections, including those required by ESA, TSSA, and WETT, have been successfully completed. The reality is that occupancy permits merely signify that the necessary elements for occupancy have been provided like a functioning heating and cooling system, running tap water, and an energized power connection. The issuance of an occupancy permit does not mean that the municipality has verified that inspections for these services were completed. It is the responsibility of utility suppliers to verify that the required inspections have been completed prior to delivering the service.
Municipal Liability
There are situations in which a municipality may be held liable to an owner in relation to OBC inspections. Some of the obvious examples include failing to conduct the required inspections, and passing inspections where construction did not meet the minimum requirements of the OBC. A couple of less obvious examples of potential municipal exposure are discussed in this section.
Deep excavation is one example of potential exposure to liability by municipalities. Deep excavation in an urban area introduces a set of conditions that could negatively impact the foundation of adjacent and nearby buildings. The direct impact of deep excavation is that adjacent foundation loses the confinement that was afforded by the removed soil, which may lead to lateral movement and settlement. Deep excavation often requires dewatering the construction site which is typically much lower than the ground water table. The loss of soil fines and the fluctuation of the ground water table due to dewatering may cause instability of the excavation sides and compromise the safety of the adjacent structures. While municipalities require that the shoring of deep excavations be designed by, and constructed under the supervision of, a qualified professional engineer, no comparable checks and controls are placed over the dewatering process which is usually left to the shoring sub-contractor to handle.
Another example is litigation against municipalities arising out of the failure of parties to close building permits at the conclusion of construction. Time limits to close/revoke open building permits are now being debated in the Courts. During the sale and purchase of real estate, the purchaser’s solicitor typically inquires into open building permits and/or outstanding orders as part of due diligence. A recent trend has emerged in which municipalities are declining to disclose information regarding permits and orders to third parties, including prospective buyers, citing privacy laws. This has led real estate solicitors to rely heavily on title insurance, as filing a freedom of information request can take months to be processed. In response to the increase in title insurance claims, underwriters have started to sue municipalities for negligence when building permits are kept open for years.
The View of the Canadian Courts on Municipal Liability
The Canadian Courts have held that municipalities owe a duty of care to occupants, buyers, and the public at large. However, this duty is not without limits. The Courts have made it clear that municipalities are not insurers, and they are not expected to discover every latent defect.
A leading case on the issue of duty of care is Ingles v. Tutkaluk Construction Ltd.4, in which the Supreme Court of Canada laid out the principles surrounding municipal liability in relation to inspections. The Court held that “municipalities owe a duty of care to all who it is reasonable to conclude might be injured by the negligent exercise of their inspection powers.”[ii] The rationale for such a broad scope is the underlying purpose of the building inspection regime, namely that it serves to protect the health and safety of the public. The Court in Ingles further held that the standard of care that a municipality must meet in carrying out building inspections is that which would be expected of an ordinary, reasonable, and prudent inspector in the same circumstances. What is “reasonable” depends on a variety of factors, including the facts of the case, the likelihood and gravity of harm, and the burden or cost to prevent injury. Notably, the Supreme Court of Canada has held that “the municipal inspector will not be expected to discover every latent defect in a project, or every derogation from the building code standards.”[iii]
In the past, municipalities have argued that the OBC does not impose a requirement to inspect upon receiving a notice for readiness and, as such, the municipality does not have an obligation to inspect. This position was rejected by the Courts. In Breen v. Lake of Bays (Township)5, the trial judge referred to the obligation of the permit holder to notify without a commensurate obligation on the municipality to inspect as a “gap” in the legislation. On appeal, the Ontario Court of Appeal held that once a building permit is granted, a municipality has an obligation to inspect construction regardless of whether the permit holder requests an inspection. In 2001, the BCA was amended to include requirements that specifically set out the obligation of municipalities to inspect. It is also of note that the BCA granted the chief building official the power to order work to be uncovered when a notice for readiness to inspect is not given in a timely fashion.
The Courts have made clear that there are a lot of limits on a municipality’s liability. For instance, the Court of Appeal in Breen distinguished between the deficiencies that a municipality should reasonably discover and those that it cannot be faulted for failing to note.[iv] In Ingles, the Court held that While a municipality has an obligation to carry out the required inspections, and to do so in accordance with the relevant standard of care, a municipality cannot inspect a project that it doesn’t know about. In White v The Corporation of the Town of Bracebridge6, the Court held that a municipality cannot be liable for work performed by a builder outside of the scope of the permits. Notably, the Court has held that where a permit is obtained after construction has commenced, and the municipality conducts an inspection under the belatedly obtained permit, the municipality’s duties in relation to the inspection are no different than if the permit had been obtained at the outset of construction.[v] The only exception to this principle is where an owner’s actions make it impossible for the inspectors to carry out their duty. The conduct must amount to knowingly ignoring the entire inspection scheme such as by not contacting an inspector at all.[vi]
Occasionally, the Court has considered a case where a building is constructed without obtaining a building permit, and deficiencies related to that construction are only discovered during subsequent permitted construction. The general view of the Canadian Courts is that owners who allow construction to proceed without first obtaining the required building permits, or allow construction to extend beyond the scope of the issued permits, remove themselves from the class of persons to whom municipalities owe a duty of care.4 & 6
Another circumstance in which the Courts have refused to impose liability on a municipality is when a buyer knowingly proceeds with the purchase of a property despite deficiencies noted in a pre-sale inspection report. In Thériault v. Lanthier7, the Ontario Superior Court of Justice dismissed the claim as against the township of Champlain on the basis that the buyers were aware of the construction defects prior to closing the purchase of the property.
Closure
It is advisable for municipalities to bear in mind the underlying rationale behind municipal liability: to ensure the health and safety of the public. Failing to note deficiencies that undermine this principle may expose municipalities to liability. The core principals of municipal liability as enunciated by the Courts can be summarized as follows:
- Once a building permit is issued, the municipality is obligated to inspect construction regardless of whether a notice of readiness for inspection was given.
- Municipalities are not insurers. In conducting inspections, the standard of care that a municipality must meet is that which would be expected of an ordinary, reasonable, and prudent inspector.
- Municipalities do not owe a duty of care to owners who allow construction to proceed without building permits or to extend beyond the scope of the issued permit.
- Buyers cannot seek to recover damages from municipalities for non-code compliant construction if they were aware of the defects prior to purchase.
- Municipalities are entitled to revoke a building permit when construction is substantially different from what was allowed under the permit.
Municipalities can limit their liability by conducting the required inspections, ensuring that inspections are carried out in a prudent manner, and exercising the powers available to them under the BCA as they conduct their inspections, for instance, the power to order part of a building to be uncovered, to ensure that areas that are not readily accessible may still be inspected.
References
- Building Code Act, 1992, S.O. 1992, C. 23
- O. Reg. 332/12: Building Code
- Chang v. Toronto (City), [2009] O.J. No. 3639
- Ingles v. Tutkaluk Construction Ltd., 2000 SCC 12
- Breen v. Lake of Bays (Township), 2022 ONCA 626
- White v. Bracebridge (Town), 2020 ONSC 3060
- Thériault v. Lanthier, 2010 ONSC 655
About the Authors
Dr. Korany is a consulting forensic engineer and the managing principal of KSI Engineering, a firm that specializes in investigating structural collapses and building envelope failures. He is a board-certified senior member of the National Academy of Forensic Engineers and has been qualified numerous times as an expert witness by all levels of the court. Prior to calling Ontario home, he taught undergraduate and graduate level structural analysis and design courses at the University of Alberta as a Professor in the Faculty of Engineering.
Ms. Kwinter is a partner in Torkin Manes LLP’s Construction Law and Litigation Groups. She has considerable experience with the Construction Act and has broad experience acting for clients on complex litigation matters, including regular appearances before Judges and Associate Judges of the Superior Court of Justice, Construction Lien Associate Judges, and the Ontario Court of Appeal. She served on the Ontario Bar Association’s Construction and Infrastructure Law Section Executive from 2018-2021.
[i] Building Code Act, Section 8(10)
[iv] Breen, para 59 – para 61
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