HOUSE BILL NO. 207 An Act relating to the registration of persons who perform home inspections; and providing for an effective date. REPRESENTATIVE NORMAN ROKEBERG stated that HB 207 would protect consumers and the home inspection industry by licensing home inspectors in Alaska. He noted that consumers deserve assurance that the home inspector that they hire is competent and that they have recourse against inspectors that are not. HB 207 would accomplish that by establishing licensing qualifications such as registration, insurance, and proof of competency via a written and practical examination. Home inspectors will also be required to provide consumers with an inspection report, using a standardized checklist comprised of elements deemed necessary by the industry for a thorough home inspection. Representative Rokeberg commented that a faulty inspection could have serious consequences for consumers, particularly when they are buying or selling a home. Common sense dictates that home inspectors must be held accountable for their work. The legislation would limit legal actions against a licensed and registered home inspector to a written home inspection report not more than one year old and/or lawfully disclosed. Also, the penalty the court may impose is not more than $500 for each violation. Co-Chair Mulder noted the language shifts between the various committee substitutes. He questioned why the State should create another board. Representative Rokeberg responded that there would be more enforcement while protecting the consumer. Additionally, it was not the intent, to write the regulations into the statute. He believed that to draft the regulations is warranted, as it would specify an examination. He stated that they would have failed in the effort to provide the sounding board without a board. Representative Austerman voiced concern with the qualifications outlined for the inspectors. Representative Rokeberg replied that the home inspectors would not be inspecting the new homes. Additionally, those home inspectors should be providing nothing more than a "visual inspection" of the home. He noted that there would be a liability associated with the inspection. Representative Austerman asked if the liability would be terminated after a one-year inspection. Representative Austerman disagreed with that concept. Representative Rokeberg replied that it would not be shifted. Representative Austerman questioned how much liability would need to be purchased. Representative Rokeberg replied. (Testimony inaudible). Representative G. Davis questioned the reason for the legislation. Representative Rokeberg spoke about the reporting fee. (Testimony inaudible). He noted that there could be a limitation to that damage. He added that people are reluctant to break their word by signing an agreement. Representative Rokeberg commented on the typical routine of an inspection. The State disclosure law "kicks" in and then it is bargained; however, he acknowledged that there are instances, when there are errors made in the report. He expounded that the idea of the bill was to relieve the liability of the real estate inspector. (Testimony inaudible). Co-Chair Mulder voiced concern when determining the home inspection business. Representative Rokeberg stated that in the statute, there are requirements for the examination. He stated that there would be a "flushing out". Co-Chair Mulder asked the amount of experience required. Representative Rokeberg responded that list was included in the legislation on Page 3, Line 11. Co-Chair Mulder voiced concern that this would create a "good old boy club" and would be very difficult for a new person to break into. He advised that he was reluctant to make rules that contain admission and exclusion. Home inspection is a very important function and qualified home inspectors are necessary. Representative Rokeberg replied that there are specific provisions listed on Page 2. Co- Chair Mulder argued that those provisions specify what is needed to become an associate inspector is that the person must work under an existing inspector. He reiterated that it would be difficult for a new person to get in. He emphasized that there would have to be an existing entity who would be willing to take you on. Co-Chair Mulder agreed that there would be too much power in the hands of the board. Representative G. Davis pointed out that engineers are also home inspectors. Those people could get out from under the "thumb" of the proposed board. Representative Rokeberg interjected that State law currently indicates that a person has to work two years as an engineer's assistant before they can take the examination. He suggested that any kind of professional license could be classified as a professional "guild". Co-Chair Mulder acknowledged that home inspection is not "rocket science". He noted that he would create a Letter of Intent to accompany the bill, to clarify that this should remain an open profession. Representative J. Davies asked if there was a sunset clause. Representative Austerman voiced his support of a sunset clause. (TAPE CHANGE, HFC 00 - 107, Side 2). Representative Austerman inquired the types of liability a realtor had which would be given up to the inspector. Representative Rokeberg spoke to the shifting around of the responsibility and the liability for a realtor. He noted that the standards are based on what you "should have known" given a reasonable basis. He added that most real estate brokers are not trained in inspecting. Co-Chair Therriault questioned language on Page 6, Line 5, "alleging & proving". CATHERINE REARDON, DIRECTOR, DIVISION OF LISCENSING, DEPARTMENT OF COMMUNITY & ECONOMIC DEVELOPMENT, explained that language was a quote from the contractor's statute. Co-Chair Therriault questioned the exemptions listed on Page 7. He asked if all those persons would be excluded. Representative Rokeberg explained that was correct. Co-Chair Therriault pointed out the amendment proposed by Representative Rokeberg. [Copy on File]. Representative J. Davies commented that it "did not make sense" the way it was drafted. RON JOHNSON, (TESTIFIED VIA TELECONFERENCE), REAL ESTATE COMMISSION, KENAI, addressed a concern on Page 4, the identification requirements. He asked the reason for using the license number. He stated that appraisers are not now required to use their license numbers for advertising. He asked about using the title "license home inspector" even if the person was an engineer. Mr. Johnson noted that the major concern rests on Page 5, listing the types of insurance. He pointed out that there is no consumer protection in that language and he urged that section be removed from the bill. Mr. Johnson listed additional concerns with the proposed legislation. Mr. Johnson concluded, stating that in the fiscal note, most of money would be used for developing education material. He pointed out that there already exists a "wealth" of education material available on line. He recommended that inclusion should be reconsidered. In response to Mr. Johnson, Representative Rokeberg stated that the bill would not address his liability, but rather the one-year life of the report. DEAVE FEEKEN, (TESTIFIED VIA TELECONFERENCE), ALASKAN ASSOCIATION OF REALATORS, KENAI, observed that the concept for this legislation originated from complaints of buyers and sellers in the real estate industry from the home inspectors being used. He echoed concerns voiced by Mr. Johnson. BRUNO REHBEIN, (TESTIFIED VIA TELECONFERENCE), MAT-SU, stated that most of his concerns had been previously addressed. He observed that the legislation is going to cover new and pre-existing homes and that the costs would go up. He asked why the homebuilder was not being represented on the board. Mr. Rehbein inquired who was being protected through the legislation. BILL BRUU, (TESTIFIED VIA TELECONFERENCE), MAT-SU, commented that the purpose of the amendment is to assure that the home inspector's liability would not go on forever. Representative J. Davies questioned why the home inspector would have to give himself permission to do the repairs. Mr. Bruu responded that there is no other place in statute that addressees that concern. The home inspector needs to have control over the report and to be covered for long term liability. Representative J. Davies asked if it was the intent that the information received from the inspection be used without the written consent from the person who ordered it. Mr. Bruu explained that the intent was not to release it to anyone, subsequent other than those listed in Sections (A) & (B). The problem which has arisen, is that once the report is released by the home inspector to the buyer, a number of party's call for an interpretation of that document. He observed that they could receive as many as 6 to 8 calls with requests for information. He stressed the liability attached to the reports. DAVID OWENS, (TESTIFIED VIA TELECONFERENCE), OWENS INSPECTION SERVICES, PALMER, testified in opposition to the legislation. He added that the Mat-Su Homebuilders Association also opposes the legislation and that they would forward a letter stating their views on the concern. Ms. Reardon stated that the original version was modeled after the Construction Contractor statute, AS 08.18.151. She added that public liability insurance could have come from the Construction Contractor statute. Ms. Reardon referred to the fiscal note. She observed that the original note has $25 thousand dollars included for an examination. The current note removes the exam money. There continues to be a fiscal note that estimates an $800 dollar fee if there are 100 inspectors. She observed that it would be less if there were more inspectors. Ms. Reardon noted that there is a sunset date of 2004, established in Section #3, Page 9. JOHN BITNEY, LEGISLATIVE LIAISON, ALASKA HOUSING FINANCE CORPORATION (AHFC), ANCHORAGE, testified in support of the legislation. The current practice for AHFC would be changed under Sections 4 and 5. Currently, in all new construction, there is a standard for qualification of purchase with a home mortgage with AHFC. He pointed out that there is a five-step process that has to be signed off on. The bill would guarantee that these people are able to certify homes to qualify for purchase by AHFC. During the transition period, International Conference of Building Officials (ICBO) would be eliminated and only state home inspectors, on behalf of AHFC, would be recognized. Mr. Bitney continued that there are a number of circumstances where people have purchased homes. They have been told that the home had been inspected. In Alaska, that can mean different things depending on the individual sale. When something goes wrong with the home, the case is that the homebuyer is out a substantial investment and they want to sue everyone. He observed that AHFC has been called on for assistance and is concerned over the liability associated with that. The legislation would create a "level playing field" and would establish a more identifiable State standard. Representative J. Davies asked if the legislation would apply to energy raters. Mr. Bitney responded that it would not apply to energy raters. He noted that further on in the AHFC statutes, the energy efficiency standards are established. The bill does not address that statute. Co-Chair Therriault stated that HB 207 would be HELD in Committee for further consideration.