The Lower Mainland's strong housing market is overshadowing its continuing leaky condo problem, say real estate industry insiders.

"The hot real estate market we have experienced in the last couple of years has put us in a trance regarding leaky condos," says Nancy Bain, a Tsawwassen-based consultant who wrote a widely publicized report on leaky condos in 2003.

According to the British Columbia government's Homeowner Protection Office, 65,000 B.C. homes are leaky condos - in which water penetrated the building envelope and caused rot, rust, decay and mould.

A flood of compensation claims killed the province's new-home warranty program and prompted the creation of the Homeowner Protection Act in 1998. Poor construction was often blamed.

Bayne Stanley, Business Edge
Aqua-Coast’s Conrad Desrosiers says engineers have been “unfairly” targeted by lawsuits.

Most builders now include rainscreens, which allow envelopes to "breathe" and dry out rather than trap water in nooks and crannies that result from a building settling. But rainscreens can malfunction if not installed properly, says Bain.

Bain's report, commissioned by Canada Mortgage and Housing Corp. and the province's since-renamed municipal affairs ministry, examined how much buyers knew about leaky condos before they purchased them. After studying 40 sales transactions between 1997 and 2002, Bain concluded that poor disclosure exacerbated the problem.

Buyers did not have enough information to make adequate decisions and "what they got is not what they thought they bought," she says. They are still at a disadvantage in today's overheated market - and forced to make hasty decisions, says Bain.

"Buyers are (still) at a severe disadvantage in a sales transaction since the tools available to discover the true condition of the property are costly, time consuming and do not provide definitive information whether a building is leaking, or if it has other serious problems.

Combine this with the duress of dealing in an extremely overheated seller's market where a buyer is pressured to make fast decisions."

But, she says, the Real Estate Council of B.C. (REBC), which governs real estate licensees in the province, has not taken any action on her findings. "Generally speaking, the report has caused a defensive rather than proactive reaction," says Bain.

In 2000, the council introduced form B, which requires sellers to disclose more information to buyers, in addition to the property disclosure statement. Sellers are also now required to provide strata corporation meeting minutes, from a longer time period - but those tools still don't tell a buyer whether a building leaks.

Bain says the council only issued one bulletin, after receiving a complaint, on the implications of phased stratas - condo ownership groups that grew as buildings were built in phases.

Robert Fawcett, executive officer of REBC, says senior council staff looked at Bain's report when it was released, but he could not say whether his group will take action on it. Noting that the council receives many reports, he says it has been "going gangbusters" on getting the revised Real Estate Services Act of B.C. up and running.

Under the amended law - which took effect Jan. 1 - rules governing the sale of strata buildings are now embedded in the agent licensing manual section, whereas before the law contained recommendations, he adds.

However, there are no direct changes with respect to leaky condos. "I imagine that there's always room for improvement as far as disclosure goes," says Fawcett, adding the council will continue looking at the issue.

The REBC is also developing best practices with home inspectors, he says. And in January of 2006, strata managers will require licenses to operate. Rules concerning the handling of strata fees in trust accounts will also be in place.

Fawcett says there is an "awareness problem" and predicts leaky condo problems will continue to be around for "some time."

Ben Larsson, president of Interlink Realty Corp., a Richmond-based property management company, says new rules for strata managers will put them all on a level playing field.

Many strata managers, he says, are not qualified.

"You can wash cars tomorrow and you can be a strata manager the next day," says Larsson, a certified property manager.

Usually, the decision on which strata manager to use comes down to who offers the lowest price - and those willing to do more thorough inspections have to charge more.

He is calling for the province to require building inspectors to be subject to statutory questionnaires that ensure problems are properly diagnosed - and repaired.

"I don't want to be a bureaucrat, but somebody has to lay down some guidelines," says Larsson.

Property owners now voluntarily provide engineering reports but they only examine one problem - and then new problems emerge, says Larsson. In one case, he says, balconies fell off a building after an inspection and subsequent repair focused on first-floor water damage stemming from an underground parking garage.

He says newer structures will suffer damage if they are not regularly inspected and maintained.

"(Developers) advertise carefree living," says Larsson. "Some people interpret that as careless living."

Carmen Maretic, president of the Consumer Advocacy in Support of Homeowners Society (CASH), says leaky condos are "almost forgotten" - but "the crisis continues."

"There is a commercial interest in putting this issue in the past and moving forward," says Maretic, who is a realtor and has relatives in construction.

CASH is calling on the province and home-building industry to create an ICBC-like organization that oversees leaky condo claims.

Now, she says, builders do not require training and almost anyone can get warranty insurance simply by filing for it and not lying on the application form. The Home Protection Office is working to educate people, but it is slow, says Maretic.

She says a new homebuilder-insurance body would help homeowners avoid legal battles and insurance headaches. Most disputes will be settled out of court for amounts significantly less than repair costs, she says, because homeowners are required by provincial law to pay for repairs before they pursue litigation.

"Most are overwhelmed with the repair costs - never mind the legal costs," says Maretic.

Builders contend that they did not foresee the problem and were merely following municipal building codes. Many municipalities have "walked away" and lost their insurance coverage, says Maretic.

Conrad Desrosiers, president of White Rock-based Aqua-Coast Engineering Ltd., which specializes in building-envelope assessments and inspections and has acted as an expert witness in mediation cases, says engineers are being unfairly - and wrongly - targeted in lawsuits for their insurance money.

"It appears that not just engineers but anyone with insurance appears to be targeted because they appear to have the deep pockets, so (plaintiffs) always seem to look for the insurance," says Desrosiers, a past-president of the Association of Professional Engineers and Geoscientists of B.C.

He says his company was terminated as an expert witness because it refused to include a window manufacturer whose product worked fine. His own company also faces pending legal action with its insurer.

As a result of all the legal activity, Desrosiers estimates engineering firms' insurance prices have increased 40 per cent and insurance premiums equal five per cent of total revenue. That means a company with $2 million in revenue would pay $100,000 for insurance.

"I will remember that extremely poor workmanship and detailing and lack of attention in wood-incorporated buildings during the past housing boom (in the 1990s)," says Desrosiers. "It is atrocious how buildings were able to get away without asking how to do things properly - and incorporated a Band-Aid and expected it to last for the life of the building."

Desrosiers says municipalities, engineers and architects all could have ensured that condos were built beyond minimum standards.

"(The minimum) is probably fine in Eastern Canada or Central Canada," says Desrosiers. "But they don't have to contend with the rainforest application. That depends on the location - and we're in the worst location."

Web watch: www.interlink-realty.com

www.aqua-coast.com (Monte Stewart can be reached at www.businessedge.ca)