Legislature(2003 - 2004)
02/12/2003 01:44 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 9
"An Act relating to the registration of individuals who
perform home inspections; relating to regulation of
contractors; relating to registration fees for
specialty contractors, home inspectors, and associate
home inspectors; relating to home inspection
requirements for residential loans purchased or
approved by the Alaska Housing Finance Corporation;
relating to civil actions by and against home
inspectors and to civil actions arising from
residential unit inspections; and providing for an
effective date."
Co-Chair Williams provided the Committee with the proposed
Committee Substitute, Work Draft 23-LS0029\I 2/10/03. He
pointed out his intention to hold the bill, pending
incorporation of technical changes to the Proposed Committee
Substitute.
REPRESENTATIVE NORMAN ROKEBERG, SPONSOR, explained that HB 9
pertains to a number of residential real estate
transactions. He stated that all parties in these
transactions are subject to government oversight, with the
exception of home inspectors in this state. He noted that
it required little training to enter the market as a home
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inspector. He pointed out that the bill was in its 23
public hearing in five years. A Committee change placed
licensure under the special contractor license, lowering the
fiscal note and the cost to home inspectors, thereby passing
savings on to public. He acknowledged the substantial
controversy over the bill's repeal of immunity to new home
inspectors, known as ICBU inspectors, who work in
predominantly unregulated, rural areas. He expressed his
opinion that the bill balances and gives protection to
inspectors and to the public.
Co-Chair Harris asked for clarification of the issue that
not all inspectors are regulated under the bill.
Rep. Rokeberg responded that the bill was intended to
regulate those marketing themselves as residential home
inspectors. He referred to Section 08.18.161 which lists
Exemptions, and noted that the bill exempts those completing
an inspection of a component of the house. He emphasized
the need to examine the definition of home inspector. He
clarified that the intention of the bill is only to regulate
those individuals who charge money to inspect homes for the
public. He explained that it was not intended to regulate
those who are regulated elsewhere in statute. For example,
if an engineer was inspecting a portion of a house as part
of his engineering duties, this did not need to be
regulated. However, if he advertised his services as an
inspector to the public, this must be regulated. He noted
that not all work experiences were applicable to residential
home inspection.
Co-Chair Harris asked if the Alaska Housing Finance
Corporation (AHFC) supported the bill.
Representative Rokeberg responded that AHFC was supportive
and available for testimony via teleconference.
Representative Croft questioned the effect of Section,
listed on page 10, as to the purport to limit liability for
home inspectors (AS 08.18.181 or AS 0.10). He also
questioned which Committee Substitute would be moved.
Representative Rokeberg responded that an error in the
Proposed Committee Substitute would be corrected prior to
the movement of the bill.
Representative Croft continued to ask whether, if in a
period beyond one year after a home inspection, an error was
discovered in the inspection, any recourse was possible. He
also questioned if evidence existed to imply that the
inspector knowingly altered the inspection, whether recourse
was available.
Representative Rokeberg noted that, after a year, statute
would prohibit recourse. He expressed that he was uncertain
of the legal course to take if deliberate negligence was
implied.
He continued by explaining that, in Alaska, natural
conditions such as extreme weather can alter the findings of
an inspection even after one day. He stressed the
importance to limit liability to a reasonable period in
order to balance the public good with commerce. He stated
that some AHFC inspectors were within statutory immunity and
gave some examples. He pointed out that those who would be
damaged by a faulty report could easily file a grievance
with the inspector. He felt it necessary to limit the time
of liability. He stated that this was a policy decision,
balancing public protection with protection to the
practitioners. The bill pertains to a cursory visual
inspection of a home. A more in-depth inspection would
require the expertise of an engineer to properly analyze and
penetrate a component of construction. Representative
Rokeberg stressed that a separate issue would be raised if
an element surfaced that was not apparent in a visual
inspection and required invasive evaluation.
Representative Stoltze asked whether the bill pertained to
external elements of a home, such as septic systems.
Representative Rokeberg stated that the bill might apply to
a home inspector who possessed expertise in that area. He
stated that the goal of the bill was to obtain the best-
qualified inspector for the best price. He suggested that
time periods of liabilities were limited based on reasonable
periods as experienced by courts and developed into public
policy. He noted that insurance of licensure was not
regulated, thus creating potential problems, since home
buyers had insurable interest.
Co-Chair Williams reiterated that the bill would not be
moved out of committee today, but would be brought up again
the following week, and that further questions could be
answered at that time.
Representative Croft clarified that his intent was to
discuss public policy. He referred to the immunization of
AHFC inspectors by prior statute, and asked what percentage
of the market that represented.
Representative Rokeberg stated that the current practice was
for contracts limiting liability to the amount of the home
inspection, approximately $350. He suggested that the bill
provides consumer protection to current practice. He
pointed out that currently, many inspectors carried their
own insurance, but in the past inspectors had non-liability.
The bill does not limit liability except in regard to the
time factor.
Representative Croft concluded that he did not agree that
the issue was actionable when so broadly defined.
Co-Chair Harris referred to the fiscal note, which reflects
charges to newly licensed home inspectors for continuing
education.
Representative Rokeberg concurred that the inspectors were
self-supporting and presented no cost to the State.
Representative Joule clarified whether the bill would be
heard and moved a week from Thursday and that public process
would be included.
Co-Chair Williams noted that public testimony would conclude
in this session. He speculated that the Committee
Substitute would have little bearing on the bill.
BILL BRUU, WASILLA, owner of a private inspecting firm for
fifteen years, testified via teleconference and raised
concerns about the bill. He referred to fiscal note 4, from
the Labor and Commerce Committee, indicating that the change
in cost to inspectors was $126,200 for first biennial
period. He noted that this was based on 100 inspectors
statewide. He clarified that for the first two years, the
cost would be $1,200 for licensing fees alone, not including
travel costs, etc. He suggested that the Fiscal note be
recalculated to accurately reflect the total costs to
inspectors and eventually to the consumer.
Mr. Bruu also referred to Rep. Croft's question regarding
the percentage of [AHFC] inspectors that were involved in
the process. He stated that Sections 33 and 34 of the bill
affected every [AHFC] inspector. He also speculated that
the bill reduces the amount of consumer protection as
currently provided by AS 18.56.300. It substitutes a
nationally certified inspector (ICBO new home inspector)
with an Alaska certified inspector, with unknown criteria.
Representative Rokeberg confirmed the figure of $126,000,
but responded that licensure had been changed to a sub-
category of specialty contractors, as opposed to a home
inspection board, which would cost $1,500 per biennial. He
stated that the cost was actually only $246 per biennium.
He projected that the statute will affect 2,700 people.
ROBERT SPRINGER, KENAI, testified via teleconference. He
noted that he is a home inspector who works privately and
for AHFC. Mr. Springer spoke in favor of competency
requirements, but only in terms of examination by a third
party, and not through the State. He stated that he was not
in favor of bonding and insurance requirements, since it
will raise the cost to inspectors. He maintained that most
inspectors have insurance, and the cost of verification
should not be passed on to consumers. He expressed his
opinion that the bill would make his services more valuable,
but that he would have to pass on any additional costs to
the consumer.
TAPE HFC 03 - 17, Side B
TED VEAL, AN INTERNATIONAL CONFERENCE OF BUILDING OFFICIALS
(ICBO) INSPECTOR, HOMER, testified against aspects of the
bill. He commented that the bill appears to be directed
toward problems related to existing home inspections. He
observed that the ICBO inspectors were for some reason
grouped into the bill, and maintained that this is not a
good fit. He explained that existing home inspection is a
one time visual observation, whereas the ICBO inspection
requires five to eight sight inspections during the
construction of a new home. He requested that the ICBO
inspection process be removed from the bill. He supports
protecting consumers, but felt that there would be negative
impacts to the ICBO inspectors.
In response to a question by Representative Croft,
Representative Rokeberg explained that ICBO inspectors were
a nationally recognized group that administer education and
qualifying examinations. He also noted that the bill
provides new home inspectors with regulations adopting the
ICBO criterion as a qualifying exam. Existing homes are
covered under organizations like the American Society of
Home Inspectors.
BOB MILBY, ANCHORAGE, testified in opposition to the bill
via teleconference. He noted that he is a general
contractor with a residential endorsement in Alaska, and
ICBO inspector for new housing, reiterated his prior
Opposition to the bill. He acknowledged changes to the
bill, but still felt that it discriminates against the
private sector, taking away protection of municipalities.
Agreed that an engineer might not be qualified to inspect
all parts of a home. He suggested that AHFC could possibly
require an invasive home inspection on existing homes that
they refinance. He asserted that taking away a protection
clause would not take homes to closing more quickly, or pass
on savings to realtors.
BRYAN BUTCHER, LEGISLATIVE LIAISON, ALASKA HOUSING AND
FINANCE CORPORATION (AHFC) testified via teleconference to
AHFC's support for the bill. He noted that he had worked
with the Sponsor on the bill over the past several years.
DAVID R. OWENS, OWENS INSPECTION SERVICES, BOARD OF
DIRECTORS, MATANUSKA-SUSITNA HOME BUILDERS ASSOCIATION AND
THE AMERICAN SOCIETY OF HOME INSPECTORS, testified in
opposition to the legislation. He provided members with a
copy of testimony dated May 2002, which he submitted to the
Senate in 2002 (copy on file).
The proposed HB9 bill has not substantially changed
from last year. The drafter of this bill has failed
to insert any of our concerns with regards to new
construction that have been proposed to him over the
last five years. Please review the previous
testimonies.
This bill is not just a simple document to insure an
inspector is qualified and licensed. It is a
comp1icated and fragmented 23-page piece of
legislation that violates the Constitution of the
State of Alaska. Further more, it creates a
discrimination issue.
If this bill is passed in its current form, new home
inspectors as a group will file a lawsuit based on
the constitutionality and discrimination issues this
bill will pose.
Questions:
Why is Alaska Housing law being changed in an
Inspectors licensing bill? (I suggest you take any
reference to Alaska Housing out of this bill).
Why is it that all inspectors doing business in
the State are not being regulated and licensed
under this bill?
Why do we need 23 pages? (I suggest we make this a
simple requirement to get a license and provide
proof of your qualifications to be an inspector).
Personally I would like to know why the Anchorage
Real Estate Association is so intent on only
regulating the residential side of this business?
Owens Inspection Services current inspection team
consists of
3 New and existing home inspectors
1 Energy Rater
2 Commercial Inspectors (Including myself)
50 Percent of my current team will require
regulation. The others will not.
The Liability:
The repeal of Article 40 page 21 line 29 will
substantially increase the new home inspection
liability. This article that we currently have in
p1ace under Alaska Statute 18.56.3OO allows a
reasonable level of protection for the purpose of
Alaska Housing new home inspections. New home
inspectors only want the same level of protection
under the law as the State and Municipal inspectors
have.
(See attached references from the International
Building Code, International Residential Code,
Uniform Plumbing Code, and International Electrical
Code. Exbibit A, B, C, & D. The type of language
mentioned in the above references should be included
in this bill)
The cost:
If this bill is passed as is, our firm will double or
triple our fees in the next 2 to 3 years. This will
be due in part from added insurance costs;
administrative costs and a. large part will be due to
additional re-inspections to prevent the possibility
of frivolous lawsuits. These costs will be
transferred to the client, or contractor, but will
eventually cost the consumer in the long run. I
believe the consumer wants a good quality new home
inspection at a reasonable price and I believe it is
one of his rights to expect this. Currently new home
inspections range from $750.00 to $1500.00 depending
on the level of service requested. The consumer who
builds his own home would take the brunt of this
increase in cost due to their lack of construction
experience.
Time delays. Time is money, as we all know.
As you tighten the regulations on new home inspectors
this will transfer to the field. Due to the
possibility of frivolous law suits stemming from this
legislation any small detail on an inspection report
will have to be completed and re-inspected prior to
giving the contractor a go ahead to the next phase of
construction. This type of over zealous inspection
activity will cause time delays for the contractor,
real estate agent and eventually the homebuyer.
Again, the consumer will be the party that is
impacted the most.
The code:
It is unfortunate that here we are in the year 2003
and the State Of Alaska has not adopted a minimum
code standard for new construction. It is further
unfortunate that it has been left up to the lenders
to write regulations to protect their investment in
these properties. For example FHA, VA and AHFC have
their own regulations for inspection and construction
of new homes. Again there is no code for new
construction in the State of Alaska.
How can you tell a new home inspector or a general
contractor he did not do his job properly if the
State does not have a minimum standard to compare his
work to?
In Summary:
I do support the concept of fair and equal regulation
of the inspection Industry. In my opinion the concept
of regulating new home inspectors has occurred too
soon in the legal process of protecting the consumer.
I do not support this bill as written.
Co-Chair Williams concluded public testimony. He noted
that, if further testimony were desired, it would be by
invitation only, and would occur next week.
HB 9 was HEARD and HELD in Committee for further
consideration.
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