Anthon Pang, Broker, e-PRO, SRES

Facing public opposition from consumers and the real estate industry, it appears the Province of Ontario is going to backdown on its plan to require mandatory home energy audits on the sale of homes.

As I blogged earlier, while this facet of the Act was well intentioned, the Energuide rating systems used in Canadian home energy audits has technical complexities and assumptions that make it a poor measure or comparison tool of a home's operational costs.

Last week, Pauline Aunger, president of the Ontario Real Estate Association, spoke to the Standing Committee on General Government:

First, let us look at the costs. Home sellers will first pay some $350 to $500 to obtain a home energy audit. It's an unnecessary fee because it provides very little information beyond a highly subjective number. But that's not the real problem. The real problem is that few homes will receive positive ratings, and those with less-than-ideal energy ratings will face pressure from homebuyers to either spend thousands of dollars to improve the energy efficiency of their home or lower their sale price.

For a moment, let's assume that a homeowner sells his home for $10,000 less than the original asking price based on the results of a home energy audit. Bill 150 presumes that homebuyers will use these savings to invest in improvements to the energy efficiency of their newly purchased home. I have been a realtor for over 30 years, and I can say with certainty that the overwhelming majority of homebuyers will not invest in new energy-efficient furnaces, wall insulation or solar water heaters. Instead, buyers tend to customize their recent purchase by investing in things like kitchen renovations, new furniture and other cosmetic alterations.

If the ultimate goal of mandatory home energy audits is to improve the energy efficiency of the housing stock of Ontario, then the government should expand its successful rebate program, not pass laws that won't work.

OREA is also concerned that mandatory home energy audits unfairly target single-family homeowners. Although subsection 2(1) of the bill is broad in terms of its application, OREA has learned that mandatory home energy audits will apply only to single-family homes. The fact that the government has chosen to place the burden of mandatory home energy audits directly on homeowners is extremely concerning to Ontario realtors. This design ensures that while all Ontarians contribute to our pollution problem and share in the benefits of going green, owners of single-family homes will bear the majority of the costs. If a culture of conservation is indeed a public good, as the government has indicated, then we should all share in its cost, not just homeowners.

As well as having concerns about home energy audits' impact on homeowners and our economy, realtors have serious doubts about their reliability. For example, an investigative report by the Toronto Star on home energy audits received three different sets of energy ratings and three different lists of recommended retrofit renos, ranging from $5,000 to $25,000, all on the same house. Compare this lack of standards to the consistent results of testing used to produce energy ratings on cars and appliances, and you will find that trying to rate an individual home is a very subjective process. We believe that the results of home energy audits are too inconsistent to be legislated as a requirement in a real estate transaction.

Realtors are not alone in their opposition to mandatory home energy audits. In fact, we are now joined by one of the largest, most important groups in this province: Ontario's 2.5 million homeowners. An Ipsos Reid public opinion survey released on Monday shows that 65% of Ontario homeowners oppose a system of mandatory home energy audits. Indeed, 92% of homeowners favoured voluntary audits, as does the Ontario Real Estate Association. Furthermore, a massive majority of 94% of homeowners believe that mandatory home energy audits will impose significant costs on home sellers and first-time buyers.

In addition, the poll found that 70% of Ontario homeowners believe that mandatory home energy audits will deter them from selling their home, having a detrimental effect on the real estate sector and Ontario's economy. Not surprisingly, the majority of Ontario homeowners oppose mandatory home energy audits because they know that the audits will hurt the affordability of housing, add yet another brake on the economy and erode hard-earned home equity.

In her response, the MPP from Etobicoke-Lakeshore stated:

It would seem to me that type of information, combined with the fact that the audit is then transferable to the new purchaser, helps very much on a critical issue and a critical barrier to first-time buyers and entry into ownership, and that is the carrying costs associated with that home.

To be clear, only the information in the audit is transferable to the purchaser. If the buyer wishes to carry out an ecoEnergy retrofit, the new owner must get a new pre-retrofit audit done, complete the work within 18 months, and obtain a post-retrofit audit to apply for the grant.

McGuinty and the Liberals are rushing "Bill 150, Green Energy and Green Economy Act" through the legislature this past week. (Introduced on Monday, with Second Reading immediately following on Tuesday, Wednesday, Thursday, ...)

A notable component of the bill is a mandatory home energy audit prior to the sale of a home. Like the private member's bill (Bill 101, Home Energy Rating Act) -- that appears to have died in committee -- the mandatory home energy audit raises many of the same concerns that I pointed out in October, including:

• EnerGuide ratings are not consistently measured. EnerGuide ratings of an existing home can, and do, vary between energy advisers, depending on the assumptions they make and extent of data collected on the building's actual construction (limited to non-invasive visual inspection), without consulting the builder, building plans, materials specification, or equipment (e.g., HVAC) specifications.

• EnerGuide ratings between different homes cannot be meaningfully compared. First, the EnerGuide rating scale is logarithmic (according to the Canadian Home Builders' Association); a home that rates 80 is not 10% more efficient than a home that rates 70. Second, the HOT2000 software (used to compute the EnerGuide rating) makes adjustments for climate zones (heating and cooling degree days); thus, homes in different climate zones may have the same EnerGuide rating, but have very different energy efficiencies.

• EnerGuide ratings are not stable over time. First, the tightness of the building envelope may change over time (e.g., degradation of caulk, compromised vapor barrier, etc). Second, the Ontario government has no control or oversight into the implementation of the HOT2000 software -- achieving minimum EnerGuide ratings could be akin to chasing a moving target. Natural Resources Canada made controversial changes to the software last summer, without industry consultation, which if applied retroactively, would have had the general effect of lowering the EnerGuide ratings of existing homes already labelled. An added confusion is that EnerGuide rating reports and labels do not show the version of the HOT2000 software used.

• EnerGuide ratings alone are not a measurement of building quality. The Canadian Home Builders' Association advocates the design and construction of a "house as a system". One danger in emphasizing EnerGuide ratings is that we may end up with homes with very tight building envelopes but which fare poorly on indoor air quality, humidity levels conducive to mold, etc.

Given these technical problems, homeowners should be extremely concerned about the impact of an unfavorable home energy audit on the resale value of their homes. (Nevermind that the home energy audit is going to cost you somewhere around $300 to $350 up front, before you receive the provincial rebate of (up to) $150 in the mail, roughly six weeks later.)

And the government's claim that mandatory home energy audits would stimulate green renovations is weakened because the ecoENERGY 'D' audit (the pre-retrofit audit) is not transferrable between homeowners (e.g., from seller to buyer). [The ecoENERGY Retrofit program is a federal program managed by Natural Resources Canada; the province can't change this constraint.] There is no immediate incentive under the proposed bill for the new homeowner to undertake any renovations, green or otherwise.

Hey! OREA's policy submission re: private member's Bill 101, and a recent press release, "Mandatory home energy audit could significantly hurt home sellers in an already tough economy" borrowed a phrase from my text without attributing me as its source! Plagarized by my own association? I'm flattered. ;)

Here in the GTA and other parts of Ontario, water consumption is a metered utility. The occupant or owner may be billed quarterly by the city, regional municipality, or the local utility company. Like other utilities (e.g., natural gas & electricity), the seller is responsible for any consumption up to the date of closing.

However, unlike other utilities, water bill arrears can be carried forward and billed to the new owner. And from what I've seen, solicitors can overlook this in the closing adjustments.

One of my clients received a notice from the utility company for water bill arrears owed by the property's previous owner. Knowing that my client had title insurance, I contacted the insurer and confirmed that his policy covered the water bill arrears and that the deadline to file a claim had not lapsed. I assisted my client in preparing a claim, and in about a month, he received a cheque.

This incident came up in conversation with another client, and he remembered getting stuck with the bill on another property he had purchased directly through the listing agent. Unfortunately, too much time had elapsed.

Work with a knowledgeable and competent real estate professional who'll represent you and protect your best interests.

The Bank of Canada surprised some today by sharply cutting its key benchmark rate by 75 basis points (3/4 of a percent), at the high end of analyst predictions. This matches a 50 year low, last seen in 1958!

Ok, the central bank says Canada is entering a recession. On the other hand, this is positive news to homeowners with variable rate mortgages tied to prime before discounts disappeared and banks started quoted prime-plus. Some clients are enjoying prime minus 1% and prime minus 0.6% on their mortgages.

I don't think it's the start of a trend, but sooner or later, someone in Canada was going to borrow this incentives idea from the Brits.

Country Wide Homes took out a half page ad in the weekend Toronto Star. The builder is offering a 2010 fuel efficient vehicle (ok, it's a Kia Rio, valued at $7500) with another $7500 in builder upgrades with the purchase of a new home in Newmarket. (Alternatively, pick a different Kia vehicle and pay the difference, or get $15000 in builder upgrade.)

Also worthy of mention is that the 90 detached homes planned (on 36' wide lots) for this community are all designed to Energy Star energy-efficient standards.