01/31/2001 03:49 PM House L&C
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
January 31, 2001
3:49 p.m.
MEMBERS PRESENT
Representative Lisa Murkowski, Chair
Representative Andrew Halcro, Vice Chair
Representative Kevin Meyer
Representative Pete Kott
Representative Norman Rokeberg
Representative Harry Crawford
Representative Joe Hayes
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 27
"An Act relating to the licensure and registration of
individuals who perform home inspections; 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 providing for
an effective date."
- HEARD AND HELD
HOUSE BILL NO. 70
"An Act extending the termination date of the State Physical
Therapy and Occupational Therapy Board."
- SCHEDULED BUT NOT HEARD
PREVIOUS ACTION
BILL: HB 27
SHORT TITLE: LICENSE HOME INSPECTORS
SPONSOR(S): REPRESENTATIVE(S)ROKEBERG
Jrn-Date Jrn-Page Action
01/08/01 0031 (H) PREFILE RELEASED 1/5/01
01/08/01 0031 (H) READ THE FIRST TIME -
REFERRALS
01/08/01 0031 (H) L&C, JUD, FIN
01/31/01 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
JANET SEITZ, Staff
to Representative Rokeberg
Alaska State Legislature
Capitol Building, Room 118
Juneau, Alaska 99801
POSITION STATEMENT: Introduced HB 27 for the sponsor,
Representative Rokeberg.
WILLIAM BRUU, Owner
Ti-Le-An Management Inc.
165 East Parks Highway, Suite 207
Wasilla, Alaska 99654
POSITION STATEMENT: Testified on HB 27.
BARB NORD, Chair
Kenai Peninsula Realtors
Industry Issues
690 Sycamore
Kenai, Alaska 99611
POSITION STATEMENT: Testified on HB 27 and supports the concept
of licensing home inspectors.
RON JOHNSON, Broker
610 Attla Way Street 10
Kenai, Alaska 99611
POSITION STATEMENT: Testified on HB 27.
TED VEAL, Home Inspector/Energy Rater
539 Elderberry
Homer, Alaska 99603
POSITION STATEMENT: Testified on HB 27.
FRANKO VENUTI, Certified Combination Dwelling Inspector
P.O. Box 3652
Homer, Alaska 99603
POSITION STATEMENT: Testified on HB 27.
ROBERT PANKRATZ, Licensed ICBO Inspector
P.O. Box 1856
Homer, Alaska 99603
POSITION STATEMENT: Testified on HB 27.
BILL BRADY, President
Alaska Association of Realtors
P.O. Box 110101
Anchorage, Alaska 99511
POSITION STATEMENT: Testified on HB 27.
JOHN BITNEY, Legislative Liaison
Alaska Housing Finance Corporation (AHFC)
4300 Boniface Parkway
Anchorage, Alaska 99510
POSITION STATEMENT: Testified for AHFC in favor of HB 27.
AMY DAUGHERTY, Lobbyist
Alaska Professional Design Council (APDC)
327 West 11th Street
Juneau, Alaska 99801
POSITION STATEMENT: Testified for APDC on HB 27.
CATHERINE REARDON, Director
Division of Occupational Licensing
Department of Community and Economic Development (DCED)
P.O. Box 110806
Juneau, Alaska 99811
POSITION STATEMENT: Spoke on HB 27 for the division.
ACTION NARRATIVE
TAPE 01-10, SIDE A
Number 0001
CHAIR LISA MURKOWSKI reconvened the House Labor and Commerce
Standing Committee meeting at 3:49 p.m. [The minutes for the AK
State Hospital & Nursing Home Association overview are found in
the 3:20 p.m. cover sheet for the same date.]
HB 27-LICENSE HOME INSPECTORS
Number 0067
CHAIR MURKOWSKI stated that the bill to be heard today would be
HOUSE BILL NO. 27, "An Act relating to the licensure and
registration of individuals who perform home inspections;
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
providing for an effective date."
Number 0067
JANET SEITZ, Staff to Representative Rokeberg, Alaska State
Legislature, introduced HB 27 on behalf of the sponsor,
Representative Rokeberg. She said the bill sets up a system for
licensing home inspectors and [establishes] professional
standards for the board. She said it requires education for
licensure to protect the consumer. She pointed out that
Representative Rokeberg's concern was that currently anyone
could get a license and say he or she is a home inspector.
MS. SEITZ explained that consumers are relying on people who are
not qualified and problems are occurring in the industry. She
said Representative Rokeberg introduced the bill at the request
of the real estate industry and active home inspectors, who
helped develop the bill.
MS. SEITZ said the sponsor presented a proposed committee
substitute (CS), Version F, to committee members on January 30,
2001. She said it includes suggestions from Alaska Housing
Finance Corporation (AHFC) and the legislative drafter.
REPRESENTATIVE KOTT made a motion to adopt Version F [22-
LS0136\F] as a work draft.
MS. SEITZ responded to a question from Representative Halcro
about why after July 1, 2002, the AHFC representative would be a
non-voting member. She said AHFC suggested the [bill] language;
they wanted the executive director to be a voting member during
the transitional period, to lend expertise to the board. After
that period, the executive director would perform as a non-
voting, ex officio member on the board.
REPRESENTATIVE ROKEBERG said the Legislative Information Offices
(LIOs) had been sent copies of the proposed CS, Version F of the
bill.
Number 0383
CHAIR MURKOWSKI reported that [there being no objection] the
committee had adopted Version F of HB 27 as the work draft.
WILLIAM BRUU, Owner, Ti-Le-An Management Inc., an inspection
firm in the Mat-Su Valley, said he is an International
Conference of Building Officials (ICBO) inspector and a
certified energy rater for the State of Alaska, and also does
home inspections. He had three questions about Version F for
the committee.
MR. BRUU relayed that the definition of home inspector in the
bill does not differentiate between [types of] inspectors. He
said one is certified by a national organization to do
inspections using a set of standards on new construction -
specifically building codes. He said the level that this
individual has to obtain, prior to actually certifying to AHFC
that a home has met inspection standards, is much greater than
that of a home inspector who is looking at old construction and
is providing an opinion of condition to a potential buyer.
MR. BRUU said he would like to see the bill make a more
distinctive definition for home inspector, and [add] an
additional definition for a certified inspector who does
specific code inspections on new construction.
MR. BRUU referred to Version F, page 11, lines 30-31, and page
12, lines 1-2, and asked how the deletion protects the consumer.
He said deleting that particular provision of the existing
statute allows the builder to find anyone with a business
license that says that he or she is a home inspector to do
inspections on new construction - code compliance inspections -
when "they" are not certified by any national agency.
MR. BRUU directed the committee to Version F, page 9, lines 26-
27. He said in order for him to submit an energy rating to AHFC
for certification of a home, he has to have gone through an
education program provided by one or more agencies, a program
approved by AHFC as an instruction program. He said liabilities
have to be checked and certified by an agency. A person
literally has to go out and perform a series of energy ratings
and be qualified via this method, and then AHFC would issue
final approval by sending a letter. He said if that is not a
certification process, he doesn't know what is.
MR. BRUU referred to a memorandum from Terri Lauterbach,
Legislative Counsel, Legislative Legal and Research Services,
dated January 30, 2001, regarding Version F of HB 27, attached
to Version F when it was sent to the LIOs. He said paragraph 4
of the memorandum indicates that the energy rater is not
certified as an energy rater. He said he would like the
committee to understand that some of the provisions, if
implemented, especially those that remove the ICBO requirement,
would take away 60 percent of his business.
Number 0746
REPRESENTATIVE ROKEBERG responded by saying that some of the
things Mr. Bruu brought up had to do with the way the drafter
recommended that the bill be drafted. He assured him that none
of his fears were founded.
REPRESENTATIVE ROKEBERG said the distinctions between the new
and existing home construction are part of the provisional
transition agreements of getting a license. He said it then
becomes a matter for the board to establish the standards
between new and existing construction.
REPRESENTATIVE ROKEBERG explained that the language in Version
F, Section 5, page 11, was in the former bill at the request of
AHFC. He referred back to Section 4, which puts the home
licensees in place. He said there is a delayed effective date.
He said it is a little complicated because Section 5 isn't
effective until after Section 4 [is in place], and the
inspectors are licensed.
Number 0858
MR. BRUU said he doesn't see this specifically in the bill.
REPRESENTATIVE ROKEBERG directed his attention to Version F,
page 14, line 22, "* Sec.12. Section 5 of this Act takes effect
January 1, 2003." He said there is a delayed effective date for
that section and the new board would have implemented the
licensure of new and existing inspectors at that time. He said
the law requires that it be written this way in order for it to
be done.
REPRESENTATIVE ROKEBERG explained that Section 4 is in effect
and then Section 5 comes into place.
REPRESENTATIVE ROKEBERG referred to the exemptions changed in
Version F and said it exempted architects and engineers. He
asked Mr. Bruu to explain the third point he raised.
Number 0949
MR. BRUU reiterated that AHFC's statement in the memorandum,
page 2, paragraph 5, says:
The exemption listed in paragraph (8) on page 9 has
been rewritten because, according to AHFC, there is no
state certification program for energy raters.
MR. BRUU emphasized that his concern was about energy raters.
He said becoming an energy rater is a lengthy process that has
been approved and established by AHFC. [A person must go
through this process] in order to be able to submit certifiable
energy ratings to AHFC. He said if the process that a person
goes through these days to become an energy rater is not a
certification process, then he has a hard time deciding what a
certification process is.
REPRESENTATIVE ROKEBERG explained that all that section does is
exempt energy raters, whether certified or not. He said it
doesn't affect the bill.
Number 1041
MR. BRUU said the point he was trying to make is that energy
raters are, by definition, an inspector and a technician that
inspect and certify new or existing homes [to ensure] that
certain state standards are met. He said if licensure is
required of home inspectors and ICBO inspectors, then energy
raters should be included in that process along with other
inspectors in Alaska that are defined as specialty inspectors.
He said there are specific categories in areas where inspections
are performed. He said if this is a consumer protection bill,
then the consumer needs to be considered when looking at who is
encompassed in the bill.
REPRESENTATIVE ROKEBERG said he has had this discussion with Mr.
Bruu before and it comes down to a judgment call. He does not
deny that "those" people should be regulated, but said it goes
beyond the scope of the bill. He said, as the author of the
bill, he thought it would bring too many people under the new
board who wouldn't necessarily qualify to be there. He said Mr.
Bruu is a unique, multi-talented person who is certified to
inspect new homes, existing homes, and to conduct energy
ratings.
REPRESENTATIVE ROKEBERG said the committee might discuss Mr.
Bruu's points but he, as a matter of judgment, had decided it
would extend the bill beyond the scope of what he was trying to
do.
MR. BRUU said he had his questions answered. He said he would
probably be working with Representative Rokeberg throughout the
process to make some changes to the bill.
REPRESENTATIVE ROKEBERG said Mr. Bruu had been involved in the
process for three years and asked Mr. Bruu if he supports the
concept of the legislation.
Number 1184
MR. BRUU said he is satisfied with the concept of licensure for
inspectors in Alaska but is in a quandary as to how this will
affect Bush communities and the ability of AHFC and others to
finance property in Bush communities.
REPRESENTATIVE ROKEBERG said he shares Mr. Bruu's concerns. He
said Mr. Bitney from AHFC was here and they would continue to
focus on that issue.
Number 1227
BARB NORD, Chair, Industry Issues, Kenai Peninsula Realtors,
said "we" whole-heartedly agree with the concept of licensing
home inspectors. She said "we" feel that AHFC is not the only
financing corporation and the Act just relates to AHFC loans.
She referred to Version F, page 7, line 22, ["180 days old or
was unlawfully disclosed to the person bring the action."] She
said in the bill before, that period of time was one year. She
referred to page 8, line 11, and stated that this had been one
year too. She asked what had changed to make it a 180-day
limit.
MS. NORD referred to Version F, page 10, Section 3, "'home
inspection'", line 6, (B) "interior plumbing and electrical
systems;" She said much of plumbing is in the interior but
there is always plumbing on the outside of the house along with
other electrical [systems]. She wondered how much would be
covered [by the inspection], if the whole house is not covered.
She said if the exterior is not covered, [any] defects with the
plumbing and electrical systems is of concern. She referred
specifically to the word "interior" in (B).
Number 1348
REPRESENTATIVE ROKEBERG said Ms. Nord had a good point.
REPRESENTATIVE ROKEBERG said the one-year versus 180-day limit
refers to the length of time the [inspection] report is valid.
He said it is a concept of the liability (indisc.) by the
inspector and is a legal issue that has been debated - with some
controversy.
REPRESENTATIVE ROKEBERG said one of the reasons the legislation
is being formed is because of the standards of practice and past
events. He said in most situations, a homebuyer will retain the
services of a home inspector prior to making an offer on a home
- or [the prospective buyer] makes an offer, and part of the
contingency is that a home inspection be done.
REPRESENTATIVE ROKEBERG said the legislation attempts to
establish a fiduciary relationship between the inspector and the
client; therefore, the person paying for the report has
exclusive control over it. He said the client has the dominion
over the inspection report and can give it to whomever he or she
chooses. He said in the past, one of the problems had been that
the report was handed around to various people and oftentimes
copies were made.
REPRESENTATIVE ROKEBERG said the report is getting distributed
everywhere when, in fact, it is a report between the client and
the person who pays for it. He said there have been lawsuits
filed and claims made against home inspectors from people who
have copies of a report. He said oftentimes "they" don't even
know how they got a copy of it and then a deal falls through
because they saw the unauthorized report. He said this bill
controls that (indisc.).
Number 1499
REPRESENTATIVE ROKEBERG said home inspection in a northern
climate like Alaska's is a snapshot of the condition of the home
or building on that day, when the inspector completed the
report. He said going through the seasons, particularly in the
wintertime, there could be substantial differences. He said the
condition of a building changes over time. And, the debate has
been over the length of time the report should be valid.
REPRESENTATIVE ROKEBERG said this bill was also considered
before and set the length of time [for the validity of a report]
at one year. He said he decided that due to the seasonal
conditions [in Alaska], getting through a winter with a report
is lucky. He said in order to be fair to the inspectors, who
may have liabilities attached to the report, it should be
limited. He said the arguments on the opposing side have been
in relation to the statute of (indisc.) and the statute of
limitation for bringing liability actions - some are six years
in the state.
REPRESENTATIVE ROKEBERG said home inspectors don't design homes,
they just inspect them one day, and this is the condition in
which they found them on that day. He said completing a report
in October and allowing it to be valid in May is not fair. He
said this is where the decision was made [to limit the period of
time].
Number 1589
REPRESENTATIVE HALCRO said if he is buying a home, it's his
responsibility to have the home inspected prior to closing. He
said, "If he is given a report done eight months ago on the same
home, say, from the realtor, wouldn't he still, as a responsible
homebuyer, want to have his own opinion done?" He said he is
not quite sure if he understands the problem because from a
responsible homebuyer's standpoint, he would want to have his
own inspector and have him or her do an inspection.
REPRESENTATIVE ROKEBERG said that [home inspection] reports that
are a couple of years old have been used as leverage and/or
causes of action against home inspectors - which is not fair.
He said reports have been used and what they are trying to do is
to cut off their liability. He said the reports cost around
$350. When there is a defect in a home, the recent homeowner is
going to look for someone to sue. He said one of the reasons
they are involved in this issue is the liability shift from one
profession to another. He said it is the disgruntled homebuyer
who got a bad deal that is looking for "a pocket." And because
home inspectors recently became a part of the industry in the
urban areas, it's [become] a growing and newer phenomenon in
business.
REPRESENTATIVE ROKEBERG said if he was the seller of a home, he
would have a home inspection done and provide it to the buyer,
but if he were the buyer, he would get his own home inspector.
He said there was a question about why a home inspection reports
might last longer in some instances. He explained that realtors
might advise people to have a home inspection done that would be
valid for a longer period of time because if the house doesn't
sell in six months, another inspection would have to be done.
He said maybe that is good, but if it's been vacant for six
months, things happen to a vacant home more than one that is
occupied.
REPRESENTATIVE ROKEBERG said there was a concern about liability
shifting.
Number 1719
REPRESENTATIVE HALCRO asked, "Then wouldn't it be prudent, on
our behalf, to also incorporate the realtor in this circle of
liability?" He said if he is selling a home and providing the
buyer with a report, or suggesting someone who may or may not be
qualified to give an accurate home inspection, shouldn't he be
just as liable as the home inspector?
REPRESENTATIVE ROKEBERG said the realtor shouldn't be liable
because he or she doesn't do the work of the home inspector.
REPRESENTATIVE HALCRO said realtors have a vested interest in
the sale of a home, and if they provide the [client with the]
report, "shouldn't realtors be just as liable as the person who
did the report?"
REPRESENTATIVE ROKEBERG said the transfer of reports will be
made subject to law. He said the realtor shouldn't be handing
out reports without the consent of the person who paid for it.
Number 1795
MS. NORD said the one-year status, Version F, page 7, line 22,
was more along the lines of what she was referring to [in her
testimony]. She said she thought it would be better to have the
report every (indisc.). She said (indisc.) does not know, and
it may be months or years after that when he or she discovers
that the home inspection should have visually caught something
on the day the inspection was done. She said as a realtor she
has had this experience more than once.
Number 1824
RON JOHNSON, Broker, said he had some concerns, which he had
expressed in a letter to Representative Rokeberg, and some new
concerns too.
MR. JOHNSON said in reading the title of the Act - referring to
inspections for AHFC loans - he doesn't think this bill applies
to him because it says, "for residential loans purchased or
approved by the Alaska Housing Finance Corporation." He said he
didn't think the bill would affect his doing conventional or FHA
loan [inspections].
MR. JOHNSON referred to Version F, page 2, and said it took him
quite a while when reading the bill to realize that there's a
licensed home inspector and there's a registered associate home
inspector. And throughout the bill it alludes to the associate
home inspector as also being licensed.
MR. JOHNSON said, in his original letter [to Representative
Rokeberg], he recommended that the associate home inspector be
added to the definitions. He said he addressed it in his letter
but felt it was very important that the associate be
specifically addressed as registered, not licensed.
Number 1930
MR. JOHNSON referred to [Version F], page 5, line 8,
"inspector's name, mailing address, and license or registration
number." He said the business or the name of the business would
be the one that would have to be identified rather than [that
of] the individual. He asked what would happen to the
associates working under a licensed inspector employed by a
corporation or real estate office that had a franchise. He said
the associates could go along with the license or the licenses
could be replaced. He said his question is really about the
bills, checks, and payments that are made by the company. He
said he thinks it would be a legal trust but the real estate
commission still has to address this.
MR. JOHNSON referred to [Version F], page 7, line 19, Sec.
08.57.810, and said it should be deleted altogether. He said if
there is a complaint, then the courts should decide [the
outcome]. He said under statutes of fraud, the 180-day
[liability] "wouldn't fly anyway."
Number 1997
MR. JOHNSON said if it is going to be limited, then it should be
a year. He referred to page 8, line 4, (3), ["offer or deliver
compensation, an inducement, or a reward to the owner of the
inspected property, the broker, or the agent, for the referral
of business to the home inspector or the home inspector's
company;"]. He said he thought it was a violation of fair
trade, as he addressed in his letter [to Representative
Rokeberg].
MR. JOHNSON he said under the definitions, page 10, line 14,
(4):
[Put] home inspectors after that. [Then put] licensed
home inspectors means ... Then under that, change (5)
to (6), and put (5) ... [as] a registered associate
home inspector.
MR. JOHNSON said he agreed with Ms. Nord's comments about
Sections 4 and 5. He said if AHFC is taken out of the title,
then Sections 4 and 5 could easily be deleted. He said he did
not see the logic in having the executive director of AHFC on
the board of home inspectors.
CHAIR MURKOWSKI asked Mr. Johnson to please fax a copy of his
comments to the committee.
REPRESENTATIVE ROKEBERG addressed some of Mr. Johnson's concerns
by saying that the AHFC in the title refers to the ICBO new home
inspectors outside their own jurisdictions - and "they" are in
there. He said associate home inspectors are not licensed. He
said corporations and businesses are not licensed and
individuals have to be licensed. He said if there is an
incorporated home-inspection business, the associate works under
the principal licensee. He said only in the area of engineering
can a corporation be licensed in Alaska, just like a broker.
REPRESENTATIVE ROKEBERG said the 180-day [liability] is open for
argument. In response to Mr. Johnson's fair trade question, he
said, "Yes, if those things are done, they are in violation of
the Fair Trade Practices Act, and can be prosecuted."
Number 2115
TED VEAL, Home Inspector/Energy Rater, said he and Mr. Bruu do
similar work. He said "we" just received the latest copy of the
bill and he hasn't had an opportunity to review the changes.
MR. VEAL said he is not aware of the difficulties that would
require this legislation, so he has some reservation about the
passage of it because it would require more paperwork and costs
for the inspectors. He said he mostly does ICBO inspections for
new construction and energy ratings.
Number 2204
FRANKO VENUTI, Certified Combination Dwelling Inspector, with
the ICBO, and a member of the Federal Housing Authority (FHA)
inspection panel, said he has 30 years of experience working in
the industry and performs new inspections to ICBO standards for
the AHFC mortgage program and properties.
MR. VENUTI said he also performs inspections for buyers who are
interested in existing properties. He said he concurs with Mr.
Veal that "we" just received a copy of the revised bill [Version
F] and are not up to speed on what changes have been made.
Number 2256
CHAIR MURKOWSKI said people could submit testimony via the fax
machine and the bill would be taken back up again on Friday.
Number 2268
MR. VENUTI said he was concerned about the intent of the bill
and was not aware of the number of complaints that have been
generated.
MR. VENUTI referred to page 5, line 19, ["Sec. 08.57.310. Pre-
inspection document required"], and asked if it would apply to
new construction with AHFC. He referred to page 7, under
Article 7. General Provisions, lines 29-31, and said he has been
working in the building industry for a number of years and has
worked on properties that he has inspected. He said typically
the inspection happens, and then later the owner asks him to do
some property repairs. He said he does not feel he is alone in
his concern about the 12-month period. He said in many small
towns in Alaska there are people who do this.
MR. VENUTI said he agrees with the 180-day [liability]
provision, page 8, line 11, and asked how it would be financed.
He also asked who would pay for the cost of establishing the
board and how it would affect the bottom line for the homeowner.
He said he just doesn't see how the bill will help his
customers. He said he thinks the system works the way it is and
wonders who will gain from the institution of the bill.
MR. VENUTI said AHFC has some clear rules that inspectors follow
for properties financed through them. He said he is concerned
that there would be a duplication of effort.
Number 2439
MR. VENUTI said in looking at the rules provided through AHFC,
there is a portion that talks about liability of the inspector.
It says, "In accordance with AS 18.56.300 (c), a person may not
bring an action for damages against an ICBO inspector who has
inspected a residential unit unless the action is for damages
caused by gross negligence or intentional misconduct of the
inspector."
MR. VENUTI said he reads that to cover the intent of what this
bill is trying to do.
MR. VENUTI asked about the formulation of the board and whether
the state will be advertising for positions or if the members
will be appointed. He asked how one would apply to be on the
board.
REPRESENTATIVE ROKEBERG said the licensees would be paying for
[the board] and the governor would make appointments, if the
board were created.
TAPE 01-10, SIDE B
REPRESENTATIVE ROKEBERG said in larger urban areas of the state
people don't have the small hometown knowledge [like Mr. Venuti
spoke about]. He said the potential for boosting one's own
income in that capacity exists and he appreciated Mr. Venuti for
bringing it forward.
REPRESENTATIVE ROKEBERG responded to Mr. Venuti's point about
duplicating the efforts of AHFC and said that AHFC is supportive
of the bill and wants to see it put into place. He said other
than their regulatory scheme, there are no controls over the
activities of the ICBO inspectors in the state.
Number 2452
REPRESENTATIVE ROKEBERG asked Mr. Venuti if he takes continuing
education classes.
MR. VENUTI said he does.
Number 2440
CHAIR MURKOWSKI said Mr. Venuti wasn't entirely sure what was
driving the need to establish [the board] and Ms. Seitz, Staff
to Representative Rokeberg, indicated that it came about because
there were some problems. She asked Representative Rokeberg to
explain the problems within the industry.
Number 2425
REPRESENTATIVE ROKEBERG said anyone could be a home inspector in
this state but not an ICBO inspector. The people in the outer
areas [of the state] doing work for AHFC have to go through a
program to receive their certifications. He said there is no
organization other than AHFC that can administer it. He said
that is why AHFC requested to be put into the bill so there is
an umbrella organization on home inspection and it can be
regulated in the state.
REPRESENTATIVE ROKEBERG said the biggest problem area is in home
inspection, where there are no requirements; anyone can call
himself or herself a home inspector without any training. He
said there is no oversight or way to regulate the quality of the
work being done throughout the state.
REPRESENTATIVE ROKEBERG said home inspectors came about because
of the disclosure form that the state legislature and property
[entities] put into place. Now when a home is sold, any defects
have to be disclosed. He said people are concerned about full
disclosure, since most homeowners don't even know they have a
problem. He said if a home inspector is hired, the report could
be used to fill out the disclosure form. He said that way there
isn't culpability if a person fully discloses any defect in the
home.
REPRESENTATIVE ROKEBERG said in the real estate industry there
has been a lot of case law in the last couple of decades to
determine who was liable for certain defects, or defects they
should have known about. He said the real estate industry is
very interested in the bill because it helps establish areas of
responsibility and liability in a real estate transaction.
REPRESENTATIVE ROKEBERG said there is a fundamental need to
regulate the activities of the home inspectors. He said "we"
need to be able to establish standards of practice that fit in
and mesh with other regulated areas such as: banks, insurance
companies, lenders, real estate brokers, and real estate
appraisers.
Number 2333
REPRESENTATIVE ROKEBERG said two years ago, former Secretary of
Housing and Urban Development (HUD), [Mario] Cuomo, promulgated
regulations. For a federal mortgage, a person would have to
have a real estate appraiser inspect the home. He said real
estate appraisers in Alaska are licensed professionals but are
not trained as home inspectors. He said the federal regulation
requires an appraiser to do work that he or she is not even
qualified to do. He said he has been in contact with U.S.
Senator Ted Stevens' office and "we" have a moratorium on the
enactment of this for Alaska. He said he would check back into
this.
REPRESENTATIVE ROKEBERG said the implementation of the state
regulation allows "us" to go back to the federal government and
tell them to stay out of this business. He said "we" need to be
able to conduct our own regulations locally and adapt our
methods, particularly in Alaska. He said the people who do this
work need to have experience, and building construction
practices in Alaska are different than in the Lower 48 because
of the climate.
REPRESENTATIVE ROKEBERG said there is a litany of reasons why he
thinks a strong case can be made for regulating the industry.
Number 2234
REPRESENTATIVE HAYES asked what legal cases Representative
Rokeberg could cite as actual problems, in relation to the bill.
REPRESENTATIVE ROKEBERG said there have been a number of uses of
the realtor-grievance procedure. He said there is a dispute-
resolution procedure that the real estate industry has adopted,
in large part, to stay out of court. He said a number of the
cases that have come before the grievance-complaint committee
have centered on the shifting of liability. He mentioned that
the real estate industry wants this bill but cautioned the
legislative members to keep in mind that the realtors want to
shift liability. He cautioned them to look out for it and be
aware when people are trying to shift liability off themselves
and on to someone else.
REPRESENTATIVE ROKEBERG said the discussion about the one-year
versus the 180-day [liability] is at the root of this, since the
length of time the report is good for makes a big difference to
"them" - in terms of their practice.
Number 2166
ROBERT PANKRATZ, Licensed ICBO Inspector, said the working draft
was just received a few minutes ago, so he couldn't be specific.
He said in general, he inspects new construction for ICBO
certification for AHFC. He said he doesn't see a problem in
that area; he doesn't think anything is broken, and it seems
they are being thrown in to solve another problem with the
existing home inspectors.
Number 2124
BILL BRADY, President, Alaska Association of Realtors, and
Chairman of the Anchorage Legislative Committee, said "we"
worked closely with Representative Rokeberg on the legislation,
and he had sent a letter in from the State of Alaska stating
that "they" agree in concept with the bill - that there needs to
be some minimum requirements for licensing, testing, continuing
education, and [limiting] liability.
MR. BRADY said the board needs to be set up to start governing
and regulating itself, and figure out who needs to be brought
into the process.
MR. BRADY said he has been a realtor for six years and has not
seen a client sue someone without including the realtor because
"they" have some liability too. He wanted to assure
Representative Halcro that "they" are almost always named in any
type of suit, whether it is warranted or not. He said it is not
really shifting liability; it's a shift in thinking. He said it
is a new profession that has become very popular in the last
four and five years - they are being brought in on almost every
home-buying decision that a consumer makes.
Number 2050
MR. BRADY said "they" are an important part of the process and
there needs to be some minimum standards which will protect the
consumer. He said there have been many problems with home
inspections but there has been nowhere to go to have them heard.
He said there is no body that governs home inspectors, which is
what this [legislation] does. He said if there is a sanction
against a home inspector, the board could pull the inspector's
license, fine him or her, or do [other] sanctions.
MR. BRADY reiterated that the bill allows them to set up their
own board so they can govern themselves.
REPRESENTATIVE ROKEBERG said Mr. Brady spoke about the need for
there to be a place where problems can be heard. He asked Mr.
Brady to give them some examples of why "they" need to have this
[legislation].
Number 1990
MR. BRADY said he thinks it is a double-edged sword: not only
does it protect the consumer but it also protects the home
inspectors. He said a lot of home inspectors are trying to
limit their liability to the price of the home inspection. He
said home inspections range from $250 on up, and $250 doesn't
cover much in a house these days.
MR. BRADY said a house is probably the biggest purchase a
consumer will make in his or her lifetime. He said having that
limited to a $250 liability is ludicrous, in his view.
MR. BRADY said he is not sure if the 180-day or the 12-month
[liability] really matters. A home inspector who has been
negligent or has done fraudulent work falls under the same law
that states that six years from that defect or knowing about a
fraudulent act, and can still be sued.
MR. BRADY said the Anchorage Board of Realtors does mediations
between members and clients. He said the problem with this is
that it is voluntary; home inspectors are just not willing to
come in and do mediation over problems like this.
MR. BRADY said if issues go through a board it would benefit the
consumer because the situation could be rectified much more
quickly, and with a lawsuit something might be missed.
Number 1895
REPRESENTATIVE HALCRO asked Mr. Brady if he's seen a trend in
the last few years where more liability cases are popping up
because home inspectors have issued faulty reports and
homebuyers are coming back to seek compensation.
Number 1877
MR. BRADY said "absolutely" and consumers are not coming back on
the home inspector first. He differentiated between the two
people in a real-estate transaction: a realtor who belongs to a
national organization, and a licensee. He said consumers are
coming back to both groups, and back to the home inspector
trying to get the problem rectified. He said the number of
complaints is increasing because of the amount of home
inspections being done now. He said 99.9 percent of the time,
home inspections are being done for the purchase of a home. He
said he hopes he has all of his buyers and some sellers doing
home inspection up front. He said some are not willing to do
that and have signed a waiver saying "they" had the opportunity
to have a home inspection, and have waived that right.
MR. BRADY said it is a big part of the transaction today. He
said he can go through a home and catch certain things but he is
not qualified to the extent that "these" people are, which is
why the bill is needed. He is not qualified to do a home
inspection, but tomorrow he could get a license to do one. He
said the comment has always been made that the market will weed
those people out, but that is not necessarily true.
MR. BRADY asked how long it would take to weed a person out, and
how many people does that home inspector have to hurt before he
or she is weeded out of the system. He said if one person is
hurt, and has his or her dream of owning a home destroyed, then
that is one person too many.
Number 1791
REPRESENTATIVE HALCRO asked Mr. Brady if the Board of Realtors
has any internal safeguards, such as a list of inspectors who
have performed shoddy work. He asked if there was anything
along those lines that circulates.
MR. BRADY said it would put them in a jam because individual
agents would talk amongst themselves about who is trustworthy
and does good work. He said he wouldn't have someone do a home
inspection unless he or she is certified by one of the two
national bodies, and has liability and errors and omissions
(E&O) insurance.
Number 1693
JOHN BITNEY, Legislative Liaison, Alaska Housing Finance
Corporation (AHFC), spoke in favor of HB 27 because it provides
some consumer protection. He said AHFC is in the bill out of
necessity because it is a creature of state statute. He said
AHFC currently has a home inspection system in statute.
Number 1638
MR. BITNEY said [coming] out of the 1980s, there were concerns
in the state about the quality of inventory in the housing
market. He said the legislature at the time began to embark on
measures to address this. He said the first one was in 1989 and
required additional educational requirements for homebuilder
licenses. He said there were programs put in place such as the
Alaska Craftsman Program and attempts to address some energy
efficiency issues in home construction.
MR. BITNEY said AHFC went through a major merger in 1992; a
piece of legislation brought all of the state's housing
functions, and public housing for rural loans under AHFC. He
said part of the AS 18.56.300 legislation was put into AHFC. It
says that in order for a home built after July 1, 1992, to be
financed by AHFC, it had to have been inspected by an individual
certified by the ICBO, an independent, international-trade
association and not AHFC.
Number 1546
MR. BITNEY said there are roughly 100 individuals across Alaska,
since that time, who have gone and gotten their certification
and perform inspections in order for AHFC to comply with the
statute. He clarified that with respect to Representative
Rokeberg's idea of a overall state licensing system, AHFC
requested that if there were to be a licensing system, that
there not be a dual system in state statute, where state
licensing inspectors are out there performing and it is not
coordinated with AHFC. He said AHFC is included in the title of
the bill because AHFC statutes are amended. He said there was
the perception that somehow this [legislation] only dealt with
AHFC. He said it deals with setting up a state licensing board,
and as part of that, AHFC is included in part of the amendments.
He said AHFC would recognize those inspectors as part of its
process.
MR. BITNEY said he reads the bill to say that a person who is
ICBO certified is grandfathered in and the board is required to
grant grandfathering or set up some sort of a license. He said
six months after the effective date, the ICBO in statute is
removed. He said AHFC would like to see a good construction
standard put in place once the new system is intact. He said by
having ICBOs with AHFC, the quality of housing in the state has
improved, and he would like to see this maintained.
Number 1394
MR. BITNEY said that when the board is formed, the construction
standard would be up to them. He said there are various
standards out there that the board could adopt. He reiterated
AHFC's concern about having a good construction standard and
said they hope it is at least as good as ICBO's, or better. He
said if the bill is not going to set that standard, then AHFC
requested to at least be involved in the initial board with the
sole intent to be an advocate on the board for the initial
period. He said AHFC wants to get a standard established that
they are comfortable with, and also one they think is good,
because six months later, they are subject to whatever standard
the board adopts.
MR. BITNEY said the proposed committee substitute (CS) [Version
F], addressed their concerns; the bill allows the board to adopt
a standard and they will, as the CS is drafted, be a member of
the initial board. He reiterated that their intent is to ensure
that there is a good standard.
Number 1344
AMY DAUGHERTY, Lobbyist, Alaska Professional Design Council
(APDC), said the committee received a letter that expresses
APDC's view on HB 27. She said APDC is glad that the exemption
language is in there for engineers and architects. She said the
group has not been able to evaluate the proposed CS, so she
wasn't able to comment on it.
Number 1308
REPRESENTATIVE ROKEBERG asked Ms. Daugherty to let the 5,000-
plus APDC members know that the proposed CS is better because it
clarifies everything and allows every engineer and architect in
the state, not just civil engineers, to do home inspections.
They sign off on it [the home inspection] and have the liability
of their stamp behind their signature. He said it is even
redundant the way they have it [written in the bill], with both
their stamp and their signature. He said the standard of
practice is that it is signed, then "they" have to be liable for
it, and then it is up to them in how they conduct their
business. He said people can do it now, but they can't call
themselves home inspectors.
Number 1248
CATHERINE REARDON, Director, Division of Occupational Licensing,
Department of Community and Economic Development (DCED), said
her division would staff and assist with the administration of
the new law.
MS. REARDON said for the State Board of Registration for
Architects, Engineers, and Land Surveyors, another board she
serves on, she wanted to clarify that engineers and architects
are exempt and do not need to hold home inspection licenses.
She said she knows there has been some confusion about whether
they automatically qualify for the license, free of the bill.
She clarified that "they" are totally exempt.
MS. REARDON said the other issue was what engineers and
architects could call themselves since they can't call
themselves home inspectors. She said she was unclear about that
because it looked as if they couldn't call themselves licensed
home inspectors but the exemption language seemed to exempt them
(indisc.) from calling themselves home inspectors. She said she
doesn't have an opinion but wanted to bring it up incase others
did, as it looked that way to her.
MR. REARDON said due to the total exemption of the engineers and
architects, she assumes "they" are exempt from the other items
on page 7, line 13, which involve liability and legal actions:
that an individual can't bring an action for collection of
compensation for a home inspection without proving that he or
she has a license. She said this would not prevent engineers
from taking such an action because they were not compensated for
home inspections and are exempt from the entire bill. She also
said "they" could still be sued beyond the 180 days for the
content of their inspections.
Number 1104
REPRESENTATIVE HAYES asked Ms. Reardon if it is "noble" for
another group to request that a group form a board.
MS. REARDON said it is generally the profession that asks to be
regulated, but that is not always the case.
REPRESENTATIVE ROKEBERG said [home inspectors] are conspicuous
by their absence. He said he has been working with home
inspectors across the state for some time. He explained that
the bill went through two years of hearings in the last
legislature and came to a halt when he discovered that different
areas of the state had different ways of doing home inspections.
He said the SouthCentral market had a different definition of
home inspection. He said what he found in Juneau was that the
real estate community was hiring engineers to do the work and
getting a different type of form and report, from those in
Anchorage, the Matanuska Susitna Borough, and the Kenai area.
He said the Fairbanks area was a little different. He said he
stopped the bill because everyone was talking about a different
thing and it was causing a lot of controversy.
REPRESENTATIVE ROKEBERG asked Ms. Reardon if she could speak to
his office about the fiscal note, which had doubled from last
year.
Number 0942
CHAIR MURKOWSKI held over public testimony about the proposed
CS, Version F, to HB 27. [HB 27 was held over.]
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:15 p.m.
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