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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