Legislature(2001 - 2002)
04/30/2002 01:40 PM Senate L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 27-HOME INSPECTORS/CONTRACTORS
CHAIRMAN BEN STEVENS called the Senate Labor & Commerce Committee
meeting to order at 1:40 pm and announced HB 27 to be up for
consideration.
REPRESENTATIVE ROKEBERG, sponsor of HB 27, said that right now
anyone who wants to call themselves a home inspector can "hang up
a shingle." HB 27 seeks to protect the homeowner and endeavors to
balance the legal responsibilities of the inspectors together
with the consumers and those other people who are a part of a
real estate transaction. The version they are working with, CSHB
27(FIN), adds the home inspector licensures to the specially
contract and endorsement section in statute. He explained that
several versions of this bill have a stand alone board, but the
cost for the biennial fee was in excess of $1,500. So, they have
lowered those costs to $250 by not establishing a board, but
creating an endorsement as a specialty contractor license.
CHAIRMAN STEVENS asked regarding page 6, line 4, who requests the
inspection.
REPRESENTATIVE ROKEBERG replied that it could be either a buyer,
a seller, a bank "or somebody." It gives ownership of the report
to the person who is purchasing it.
CHAIRMAN STEVENS asked if anybody has the authority to order it.
REPRESENTATIVE ROKEBERG replied that anybody could, but there has
to be consent from the purchaser of the report to pass it on to
someone else. Typically, a buyer wants to make an offer on a
home, puts money down contingent on a home inspection. At that
point a home inspector is hired by the buyer and he produces a
report. In this case, the report is in the buyer's hands.
Typically, he would give that to the seller of the house noting
the items that need repairs before he completes the purchase. The
intent is to keep the seller from being able to pass the report
around to other parties who weren't party to the original
transaction giving them standing to bring an action against the
inspector.
SENATOR TORGERSON asked regarding page 3, line 10, where
"specialty contractor" is defined and noted that it is only used
once.
REPRESENTATIVE ROKEBERG said as he indicated, the home inspector
under this legislation is a specialty contractor under the
contractor's section of the statute, which is already on the
books.
CHAIRMAN TORGERSON noted that the work is good for six months and
asked if that was an industry standard.
REPRESENTATIVE ROKEBERG said that was a standard after
discussions.
MR. STEVE CONN, Executive Director, AKPIRG, supported HB 27, but
said there were several problems with it. Section AS
08.18.061(b), related to the bonding has a long-term problem,
because the bonds, which were set a long time ago, are "woefully
low" in terms of the actual potential damage. "Ten and five
thousand dollars is really almost laughable."
Section AS 08.18.061 talks about the exemptions, because they
speak of non-applicability of certain provisions when the work is
$10,000 or less. He doesn't agree with that, since a roofing job
that cost less than $10,000 should have the same legal right
accorded to it as anything else. "To use that as a jumping off
place for an exemption and at the same time only bond people at
$10,000 and $5,000 seems illogical to say the least."
The section related to limits of liability is also too short. On
existing homes AS 08.18.085 has a one-year provision to bring an
action. A person who has an inspection in the spring might not
find out how inadequate the inspection was until it has
experienced an Alaskan winter. Finally, he thought that cities
like Anchorage and Fairbanks would want to require a bond based
on the realities of their market, if the state is going to allow
inspectors to be under-bonded.
REPRESENTATIVE ROKEBERG responded that this is a business
transaction and it sounds like he wants to protect the public
with a "legal license." The bonding requirement is not intended
to pay for someone's roof. The inspections typically cost about
$350.
People don't understand what constitutes the inspection
report and what liability arrives from these
situations. Heretofore the inspectors have tried to
limit their liability to the amount of the fees, but
the courts in the state of Alaska found them void.
They're not enforceable contracts because they're
against public policy. This particular bill outlaws
that explicitly in the black letter law. But to find
that we need to have the home inspectors by omission as
a matter of factual evidence is a matter that could be
played out in a court. We shouldn't be looking to them
to right all the ills of a particular transaction.
MR. TOM MARTIN, Kodiak Board of Realtors, said he also represents
the Alaska Association of Realtors and they support HB 27.
MR. BILL BRADY, Chairman, Legislative Committee, Alaska
Association Anchorage Board of Realtors, said he is also the
former President of the Alaska Association of Realtors and that
they support HB 27. They strongly believe it is a consumer
protection bill and hope they pass it out of committee today.
MR. FRANCO VENUTI, Certified Combination Building Inspector, said
he has performed in excess of 3,000 inspections and although he
supported HB 27, he had some questions with section 33 that
allows engineers and architects to inspect rural areas for Alaska
Housing Finance Corporation loans. He understands that there is
no insurance requirement for engineers or architects and
inspectors are required to be insured. He was also concerned with
AS 08.18.156, which is the extension for home inspections. Item 8
effectively eliminates the requirement for energy raters to be
licensed under this bill, but energy ratings are a very important
part of the process and they should be held just as responsible
for them as the inspector.
Section 41, the transitional licensing provisions, is also
troublesome because it states that licenses would be offered to
someone who has been in the home inspection business in the state
on October 1, 2001 and has passed the Building Inspector
Examination or Property Maintenance and Housing Inspector
Examination given by the International Conference of Building
Officials (ICBO).
Most of the ICBO inspectors who have been doing Alaska
Housing Finance Corporation inspection for properties
are certified combination dwelling inspectors. That was
the certification required when this process went into
effect back in '92. My question on this requirement is
if we hold the combination dwelling inspector
certification that some of us in the business view as
requiring a higher degree of knowledge than a building
inspector exam, I'm wondering why they've reduced that
requirement to only be a building inspector exam.
MR. VENUTTI said he had another concern with section 22 and the
requirement for insurance in AS 08.18.010(1), which is not clear.
It talks about requiring a $20,000 property damage, $50,000
injury including death for one person and $100,000 for injury,
including death for one or more people and he was wondering if
that is the insurance requirement for this bill.
REPRESENTATIVE ROKEBERG replied yes. They are just requiring very
limited liability insurance that any business should have.
The examination that that gentleman has passed is
certainly going to be adequate. The home inspector
examination given by ICBO is meant to be an inclusive
term of art to include the different categories that
the ICBO provides examinations on. So, that should not
be a problem.
He said they considered bringing the energy raters underneath the
bill, but because they don't have the breadth of knowledge, they
were determined to be in a separate category not regulated by
this particular bill. The architects and engineers insurance is
in existing law right now and is up to Alaska Housing. "The
insurance requirements are almost diminimous here, so I don't
think there's any problem."
SENATOR TORGERSON asked if it would hurt to put "equivalent"
after "International Conference of Building Officials."
REPRESENTATIVE ROKEBERG said stated to "pass the building home
inspector examination or property maintenance…" and those would
be established by regulation. There are various types of exams
the ICBO gives.
SENATOR TORGERSON asked Mr. Venuti if he was satisfied that the
language is broad enough to cover an examination that he might
have taken.
MR. VENUTI replied that he wasn't. He wanted to see it in writing
so it wouldn't be interpreted wrong by someone else.
CHAIRMAN STEVENS asked him what he was licensed as.
MR. VENUTI replied that he is a combination building dwelling
inspector. This is the certification that most people now have
who do Alaska Housing Finance Corporation inspections.
SENATOR TORGERSON asked who actually issued the license.
MR. VENUTI replied, "The International Conference of Building
Officials," and added that the examinations in the bill are
entirely different.
SENATOR TORGERSON said that didn't appear to be the case and
asked if they had changed the process or if he was looking at the
same version of the bill. He said that Mr. Venuti referenced
section 41, but he actually was referencing section 43, which
says, "Pass the building inspectors examination on property
maintenance and home inspection issued by the ICBO."
MR. VENUTI responded that those are entirely different
certifications than a combination dwelling inspector, which
includes building inspections, electrical inspections, plumbing
and mechanical inspections.
REPRESENTATIVE ROKEBERG commented, "The housing inspector
examination, as given by the ICBO, are meant to be generic so
they would include all those examinations that are appropriately
given by the ICBO."
He appreciated Mr. Venuti's concern, but the language is meant to
be inclusive.
CHAIRMAN STEVENS asked if his concerns could be addressed in
section 31, the exemptions.
REPRESENTATIVE ROKEBERG replied that he didn't think so. He
referred to section 7 on page 4 and said the language is intended
to be vague.
CHAIRMAN STEVENS asked Mr. Venuti to write his concerns down and
fax them in to his office.
MS. CAROL PERKINS, Partner, Active Inspections and Energy Rating,
said she does new and existing construction and energy ratings
and that she has some questions with the bill. She wanted to know
if the language on page 5, line 21, AS 08.18.023, applied to all
inspections.
REPRESENTATIVE ROKEBERGY replied yes.
MS. PERKINS continued her questioning asking, if that is the
case, it refers to a report that goes back to section under
definitions of reports where it says they have to notify the
purchaser of the inspection as to the limitations of their report
and their coverage.
REPRESENTATIVE ROKEBERG said he wasn't used to being interrogated
by a witness.
MS. PERKINS clarified her question saying that section 32 says
home inspection means a legal examination performed in accordance
with standards of practice adopted by the department…readily
visible heating, plumbing etc. She explained that all new
construction has to be readily visible before they inspect it.
Then there is a list of inspections they are supposed to do for
Alaska Housing and notification they are supposed to give
regarding defects, which relates more to existing housing than it
does to new construction. Other language also applies to existing
construction more than to new construction. She thought that
references to new construction and existing construction needed
to be clarified. She also questioned what was meant by "valid" in
the section regarding the length of time the reports are good.
CHAIRMAN STEVENS said he thought "valid" referred to the
timeframe for any recourse.
REPRESENTATIVE ROKEBERG said he had talked with Ms. Perkins for a
long time and had answered all of her questions before.
MR. WILLIAM BRUU, Owner, Ti-Le-An Management Incorporated, an
inspection firm that has been doing inspections of all types in
the Valley for almost 15 years, he said that he faxed his concern
to the sponsor, but he absolutely refuses to see his point.
There are two types of inspections here that are trying
to be legislated or regulated by one regulation and it
just doesn't work. The home inspector goes out and
looks at an existing home for two to three hours on one
day and he's done. He never goes back. In the meantime,
a new construction inspector goes to a dwelling that is
being constructed from the time the plans are provided
to him until the time the house is finished. He may be
on-site anywhere up to 15 times at that house. Not only
that, but when he provides his final inspection and he
signs off on the paperwork as required by Alaska
Housing, the paperwork becomes a recorded legal
document. His name is attached to that dwelling in
perpetuity. This bill just is so confusing to people
who are inspectors as to where their liabilities are
going to be, what they are going to have to insure
against as far as liabilities are concerned and the
cost as indicated in the fiscal note that's attached to
this is - and I think the sponsor misspoke when he said
the licensing fees would be approximately $250 per
year. Our best estimate for the population of
inspectors that would be licensed in the state of
Alaska is just above 100 people. And if you take the
first year cost of $16,500 as indicated in the fiscal
note and you divide that by 100 people, that drives the
licensing cost to over $800 per person. Not only that,
but you add on top of that that now requires bonding -
and what you've done is you've driven the overhead cost
for an inspector to well over $1,000 per year. That
money is going to have to be paid for by somebody and
it will be the consumers and I don't see how driving
the cost of obtaining a house up significantly for a
consumer is a protection item.
REPRESENTATIVE ROKEBERG interrupted to say the Mr. Bruu has the
wrong information and testimony from the last three people are
from people he has been dealing with for three or four years.
Frankly, I don't think anything will satisfy these
people. As my testimony indicated, this approximate
$250 is going to be spread over 2,100 - 2,200 specialty
contractors. We've changed the bill. He's referring to
an old version - and the fact of the matter is the
distinctions between new construction and existing
construction is understood by me and is accommodated in
this bill. 'The requirements of a homeowner or a lender
will set the requirements for the nature of the
inspection and/or the individual inspector does.' All
he has is the requirement that it be written.
CHAIRMAN STEVENS said he didn't receive Mr. Bruu's fax and asked
him to send it again.
MR. DAVID R. OWENS, Owner, Owens Inspection Services, said he
lived in Alaska since 1962 and had been a building inspector
since 1983. He currently opposed the bill as written and agreed
with the previous speakers regarding further clarification
needing to be done to separate existing inspection and new
construction. He further agreed with Mr. Venuti who pointed out
that it is important to clarify what examination was required for
new construction and for existing construction, because they are
quite different. The combination dwelling inspection test that
ICBO puts out is a more appropriate one for new construction and
that is an important point.
MR. OWENS said that he is also opposed to repealing AS
18.56.300(c), which has important protection language for the
inspector. It was put there 10 years ago by Alaska Housing so
they wouldn't be afraid to do their jobs on new construction by
being bothered with frivolous lawsuits from a minor oversight.
MS. ROBIN WARD, Alaska State Homebuilders Association, explained
that this is a compromise document that industry has worked on
for the past three or four years. She believed this is a good
document. "The industries are equally uncomfortable, but there is
a public benefit to the consumer by this legislation."
TAPE 02-26, SIDE B
SENATOR AUSTERMAN asked why they limited the validity of the
inspections to six months.
REPERESENTATIVE ROKEBERG said the concern is that changing
weather conditions with the seasons could have an impact on the
house. "They are trying to put people on notice that there is not
a length of time to the report."
SENATOR AUSTERMAN asked who he introduced the bill for.
REPRESENTATIVE ROKEBERG replied, "For the people of the state of
Alaska."
He explained that they are repealing immunity that the inspectors
are granted under the law now under the Alaska Housing Finance
Corporation.
Naturally they don't want to loose that. That's what we
heard today. That's where the squeak is, because we're
removing some of the immunities people are operating
under to make sure they are responsible to the public.
REPRESENTATIVE ROKEBERG said that Alaska Housing has supported
this bill over the years.
SENATOR LEMAN asked on page 14, line 12 and on, regarding any
prohibition on an offer to deliver compensation as inducement or
reward to the owner of the property, if that would prohibit
someone from engaging in traditional business of buying lunch or
giving a trinket.
REPRESENTATIVE ROKEBERG replied that it wouldn't.
SENATOR AUSTERMAN asked if there was a current law that requires
home inspectors.
REPRESENTATIVE ROKEBERG replied that required inspections are for
local building codes and Alaska Housing for new construction, not
for existing.
MR. OWENS said they are trying to regulate an activity,
inspection, but he thought the question is are they really
regulating the whole activity or just taking bits and pieces of
it.
That's what we're doing in this bill. We're not
regulating all people that do inspection work. A good
percentage of them, I'd say more than 50%, are going
unregulated. It's just the people who do existing home
inspections and new home inspections under Alaska
Housing and I'm a little bit unclear whether it would
include other new home inspectors. And commercial
inspectors are left completely out of this, but you
want to regulate an activity, you should regulate the
whole group of people who do inspection work.
CHAIRMAN STEVENS said it was his intent to move this bill on with
stated concerns to the Judiciary Committee.
2:40 pm
SENATOR LEMAN moved to pass CSHB 27(FIN) from committee with
individual recommendations. There were no objections and it was
so ordered.
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