HOUSE LABOR AND COMMERCE STANDING COMMITTEE October 21, 1999 10:40 a.m. MEMBERS PRESENT Representative Norman Rokeberg, Chairman Representative Andrew Halcro, Vice Chairman Representative Tom Brice Representative Sharon Cissna MEMBERS ABSENT Representative Jerry Sanders Representative Lisa Murkowski Representative John Harris COMMITTEE CALENDAR HOUSE BILL NO. 207 "An Act relating to the registration of persons who perform home inspections; and providing for an effective date." - HEARD AND HELD PREVIOUS ACTION BILL: HB 207 SHORT TITLE: LICENSE HOME INSPECTORS Jrn-Date Jrn-Page Action 4/21/99 900 (H) READ THE FIRST TIME - REFERRAL(S) 4/21/99 900 (H) L&C, JUD, FIN 10/21/99 (H) L&C AT 10:00 AM ANCHORAGE LIO WITNESS REGISTER WILLIAM BRUU International Conference of Building Officials (ICBO) Dwelling Inspector Energy Rater Home Inspector 165 East Parks Highway, Suite 207 Wasilla, Alaska 99654 POSITION STATEMENT: Testified in support of HB 207. MIKE TAURIAINEN Consulting Civil Engineer P.O. Box 937 Soldotna, Alaska 99669 POSITION STATEMENT: Testified in opposition of HB 207. RON JOHNSON Realtor 610 Attla Way, Suite 6 Kenai, Alaska 99611 POSITION STATEMENT: Testified on HB 207. MARK LEWIS Registered Civil Engineer P.O. Box 211021 Anchorage, Alaska 99516 POSITION STATEMENT: Testified on HB 207. BARBARA GABIER Program Coordinator Division of Occupational Licensing Department of Community and Economic Development P.O. Box 110806 Juneau, Alaska 99811-0806 POSITION STATEMENT: Testified on HB 207. TIM HOYT ICBO Certified Home Inspector House Master Home Inspection Service 6000 Yukon Anchorage, Alaska 99516 POSITION STATEMENT: Testified on HB 207. LAMAR STEEN Abacus Home Inspection Service P.O. Box 112765 Anchorage, Alaska 99511 POSITION STATEMENT: Testified on HB 207. JOHN BITNEY Legislative Liaison Alaska Housing Finance Corporation (AHFC) 4300 Boniface Anchorage, Alaska 99510 POSITION STATEMENT: Testified on HB 207. ACTION NARRATIVE TAPE 99-62, SIDE A Number 0001 CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce Standing Committee meeting to order at 10:40 a.m. Members present at the call to order were Representatives Rokeberg, Halcro, and Brice. Representative Cissna joined the meeting as it was in progress. Representatives Sanders, Murkowski and Harris were absent. HB 207-LICENSE HOME INSPECTORS Number 0053 CHAIRMAN ROKEBERG announced the committee's first order of business is HOUSE BILL NO. 207, "An Act relating to the registration of persons who perform home inspections; and providing for an effective date." CHAIRMAN ROKEBERG stated he became aware of the need for regulatory requirement of home inspections due to the number of difficulties experienced by real estate licensees with home buyers-sellers and home inspectors in Alaska. It was his understanding there was no licensing requirements, and that any person can establish a home inspection business without regulation. Based on his experience as a member of the Anchorage business community, he is reluctant to take up any undue business regulation. He stated numerous comments and letters of support were received from the Matanuska-Susitna area (Mat-Su) after the bill was introduced. The Mat-Su area currently has no building inspection requirements. There seems to be a rash of problems occurring in that area, particularly in new home/real estate development. There also seems to be a reliance on home inspectors to fill the gap for municipally based inspections for new residential development in rural areas. He said there are a number of areas that relate to the responsibilities of the principal relationship between real estate practitioners and licensees. CHAIRMAN ROKEBERG further indicated there is a growing shift in the marketplace that differentiates between a buyer's and seller's broker. This sets up somewhat of an adversarial or consumer-oriented relationship than has historically been proven. He stated there are a number of issues regarding who has the right and ability to see a home inspection report. He informed the committee a number of states have already adopted statutory and regulatory schemes to review the home inspection industry. He feels there is a greater reliance in the marketplace upon home inspectors to be a part of the real estate transaction. It was his belief, in spite of his lack of desire to regulate business, that the failure to properly regulate home inspectors could have a negative impact on affordability issues and several other transactions. Number 0076 CHAIRMAN ROKEBERG stated the committee will be working from a proposed committee substitute for HB 207, version 1-LS0132\K. Lauterbach, 10/19/99. The proposed committee substitute is the result of a work session with the home inspection community and a number of the recommendations from the work session were adopted. He cautioned everybody that this version is merely a draft. He indicated there is an overwhelming consensus within the business community to have a formal board rather than rely on the Department of Community and Economic Development for regulation. This inclusion would increase the fiscal note associated with the bill and the biennial licensing fee. CHAIRMAN ROKEBERG indicated he wants to identify a few important issues for the committee. One issue relates to the liability associated with the formatting between the board, the licensing overview by the department, and the bringing in of the ICBO in sectors that primarily work in the rural parts of the community. The proposed committee substitute prohibits the ability to limit the liability of inspectors to the amount of their fee. It also provides for errors and omissions insurance to the level of $250,000. He is not sure the liability issue has been solved with the proposed committee substitute. He is under the impression the courts will not truly enforce the contract provisions for limitations. Another issue is whether or not engineers and appraisers can do the work of a home inspector without having the necessary training requirements. Number 0117 CHAIRMAN ROKEBERG reiterated one of the key issues is how long a home inspection report is valid. There was a good deal of debate in the last work session regarding this issue. The proposed committee substitute sets a one year cap on the length of the validity of the home inspector's report. He feels it is a good idea to shorten the amount of time a report is valid for because of the impacts weather in Alaska has on physical structures. The proposed committee substitute indicates the client who pays for the bill or their legal representative is privy to the home inspector's report. He assumes this person can be a real estate broker, but is concerned with the way a real estate broker might deal with the possession of a report. It is clear to him whoever pays for the inspection has the right to give the report to anybody. The presumed buyer who pays for the report would provide it to his lender. CHAIRMAN ROKEBERG explained there is a growing amount of arbitration against home sellers regarding structural defects that are disclosed. He looked at a prototype home inspection statute from Nevada which includes a provision limiting liability if any potential problem or defect is disclosed in a home inspection report. The liability would be limited on the part of the seller, the home inspector, and even the real estate licensee. The buyer would be prohibited from coming back if there has been a disclosure. Number 0182 WILLIAM BRUU, International Conference of Building Officials(ICBO) Combination Dwelling Inspector, Energy Rater, and Home Inspector, came forward to testify. He explained AHFC is in the process of setting up the ICBO inspections. There is difficulty finding people in the rural areas who are willing to pay to become certified Combination Dwelling Inspectors. He specified this was the origin of the provision within the Alaska housing statutes that allow engineers and architects to do inspections in the rural areas. He feels this is one of the concerns the proposed committee substitute will have to look at. It is his impression that the minimum number of inspections that a person must accomplish to become a home inspector is ludicrous. He said it would be impossible for a home inspector in Bethel to ever do 500 inspections in order to become certified. CHAIRMAN ROKEBERG interjected and stated that is an area of great unsettlement. He appreciates Mr. Bruu's input on that subject. He indicated the committee is aware of the dilemma and needs some input. Number 0212 MR. BRUU replied he has no quick answers for that problem. He referred to page 10, line 21 of the proposed committee substitute and stated that AHFC is currently the certifying agency for accepting reports by individuals who are Combination Dwelling Inspectors certified by the ICBO. As it is proposed in the committee substitute, he views this as a second level of certification. Number 0221 CHAIRMAN ROKEBERG clarified there is the inclusion of "or" on line 24 which means that a person can meet any one of the four requirements. MR. BRUU stated he does not read it that way. He pointed out the absence of the word "or" after paragraphs (1) and (2) on lines 19 and 21, respectively. He interprets these as absolute requirements. CHAIRMAN ROKEBERG stated the intention is to make each one of the four elements listed as the basis for [indisc.]. He wonders if the examination referred to in paragraph (2) was given by the ICBO or if AHFC certifies it. MR. BRUU said the certification comes from the ICBO. He explained that a person needs to reapply for recertification every three years. Once a person is certified by the ICBO then they can apply to AHFC. CHAIRMAN ROKEBERG said it is the intention that that would be adequate. He wonders if this needs to be statutorily mandated as an entry point so the board cannot take it away. MR. BRUU informed the committee that in existing statute ICBO inspectors are protected by at least one provision that states an ICBO inspector is exempt from any kind of liability as long as he is doing his job without intentional misconduct. He believes the proposed committee substitute changes that and needs to be addressed. CHAIRMAN ROKEBERG asked if that is in statute. MR. BRUU indicated that it is in statute and does exempt the last ICBO inspectors. He said it does not remove them from total liability, but provides the limits of their liability. He stated he has a problem with the proposed committee substitute limiting inspectors to a visual, non-intrusive inspection. He pointed out that FHA's definition of a visual, non-intrusive inspection is one which is done without any tools. He noted that FHA has appraisers do certain procedures such as the certification of a roof, an electrical system, or a mechanical system in a house which require the use of tools. He does not believe there are any inspectors in the room who would certify any of these procedures without the use of a tool. He feels this particular piece of legislation is limiting in terms of what a home inspector can actually look at. CHAIRMAN ROKEBERG agreed that is a valid point. He thinks a home inspector should be able to expand his scope of work and charge for it as well. Number 0295 MR. BRUU stated he consistently encounters the question of who is the authority. He explained he might do an inspection on an existing home and find a life safety item. He said, "I get asked to go back and do a reinspection on that same property after, supposedly, all the conditions have been met on the property and there is that life safety item still in existence and I question it and I get told, 'Don't worry about it. Somebody's signed off on it'". He feels the proposed committee substitute does not address this problem. It is his opinion that somebody has to be the authority in these situations. With respect to a safety situation, there needs to be citation to a particular code and a clear line of authority who can decide whether a certain write-up is valid or not. CHAIRMAN ROKEBERG called a brief at-ease. CHAIRMAN ROKEBERG reconvened the House Labor and Commerce Committee and noted there was now a quorum. REPRESENTATIVE HALCRO made a motion for the committee to adopt the proposed committee substitute for HB 207, version 1-LS0132\K. Lauterbach, 10/19/99 as a working document. CHAIRMAN ROKEBERG asked if there are any objections to the adoption of the proposed committee substitute. He asked Representative Brice if he is going to vote positively. REPRESENTATIVE BRICE responded that he would. Number 0322 REPRESENTATIVE HALCRO asked Mr. Bruu for clarification regarding who signs off on life safety items. MR. BRUU responded that many times an appraiser is the person who signs off on those items. He added it is sometimes the bank or sometimes it is a nebulous decision that no one particular individual attributes to themselves. He stated an appraiser's job is to determine the value of a property, but he feels this is sometimes misinterpreted. He said, If the general public is willing to move into a house with a deck on it without guardrails, and doesn't demand a change in the price of the house then the appraiser says that lack of a guardrail has no value. So, he doesn't mention it in his report. And the bank says, 'It doesn't exist. It's not a problem...It doesn't show up in the appraisal report.' So, I've written it up that this house has a deck with no guardrail, or it needs the guardrail upgraded. The appraiser says there is no value to that. The bank says 'We accept the appraisal.'...so it doesn't have to be fixed. CHAIRMAN ROKEBERG asked, "Is it life threatening because it would be under a normal building code requirement?" MR. BRUU replied, "Sure. Most certainly. My buyer is a young couple with three small children...under the age of eight." CHAIRMAN ROKEBERG pointed out that guardrails for infants are different than those for adults. He asked, "How do you handle that?" MR. BRUU said, "No they're not. Guardrails for infants and adults are different?" CHAIRMAN ROKEBERG wondered, "Aren't they?" MR. BRUU responded, "No. Not in the code. Not whatsoever. No. Absolutely not." Number 0351 REPRESENTATIVE HALCRO asked Mr.Bruu if it is correct that there are no building codes in the Mat-Su Valley. MR. BRUU stated that is correct. REPRESENTATIVE HALCRO wondered if Mr. Bruu is referring to homes in the Mat-Su Valley or in Anchorage that fall under a set building code. MR. BRUU replied he is referring to all buildings. He explained, When we talk about existing homes, even though there are building codes in Anchorage, nobody from the city building department comes out and looks at a house when it's transferring from one person to another to see whether or not it still complies with code or anything along that line. And, in fact,...the application of building codes within the city limits of Anchorage are limited. When you head north out of here you go through Fort Richardson...The city building department no longer has authority to apply building codes. Eagle River, Chugiak...the old City of Anchorage is the limit to the building department's authority. Number 0371 CHAIRMAN ROKEBERG asked Mr. Bruu to explain the state building and its applicability in those areas. MR. BRUU explained there are three agencies that have basically adopted different codes for the State of Alaska. He said, For instance, the state fire marshall is the responsible agency for the building code. Each jurisdiction is limited by statute to building fourplexes and above, and commercial buildings of a thousand square feet and above. So, he doesn't even look at single-family homes. He doesn't look at duplexes or triplexes. And if he is not informed, or the office is not informed, that a fourplex is being built or a commercial building of more than a thousand square feet is being built, they don't even go out and look...and if they are informed, they are limited to life safety items and basically fire provisions of the code and that's as far as they go. They don't look at structural. They don't look at...a way to get out of the building in case of a fire situation unless it's a large commercial building and then they start looking at that." MR. BRUU further explained that other codes, such as plumbing codes, electrical codes, and mechanical codes, are adopted and are applicable statewide for any building. He believed there are two plumbing inspectors for the entire state. The chances of those individuals getting out and seeing everything that is going on and having some authority is limited. CHAIRMAN ROKEBERG asked if there is any liability on the part of a contractor to meet the uniform building code that was adopted by the Department of Labor. MR. BRUU said the only liability a contractor has is if he does not meet the code. If a contractor does not obtain a signature from an ICBO inspector on an inspection sheet, the building will never be financed by AHFC. He stated, The statute does not apply to the general public. It applies specifically to AHFC. And it just tells AHFC that you will not participate in a mortgage or make a loan or use state funds in any way to finance that piece of property unless it has this certification by an ICBO inspector. MR. BRUU explained there is an additional statute which establishes the building energy efficiency standard (BEES) for Alaska. Energy raters are a part of the BEES program. They do decompression tests and energy ratings on houses and determine whether or not the house meets BEES. Part of that process is the issuance of a certificate that will star rate a house. The star program AHFC is used to provide interest rate reductions on mortgages. He said energy raters also test houses for airtightness and certify whether or not a house is properly ventilated. It is his opinion that this relates directly to the health of the buyer or seller and is a liability issue that needs to be looked at. CHAIRMAN ROKEBERG asked what the level of competency and normal background is of an energy rater in this state. MR. BRUU replied that energy raters are typically certified by an entity such as the Alaska Building Science Network (ABSN) and AHFC. He said they go through significant training that lasts about a week or a week and a half. They are tested, and then certified as energy raters. They become entrepreneurs and are able to perform such tests as a blow-a-door test. He said his firm has performed approximately 600 or 700 of these tests on houses in the last three or four years. It is his impression that there are many builders in Alaska who are building adequate homes that are tight, but are ignoring any ventilation provisions. CHAIRMAN ROKEBERG asked how much the blow-a-door test cost. MR. BRUU replied his firm charges $175. Number 0483 CHAIRMAN ROKEBERG inquired if Mr. Bruu supports the bill overall. MR. BRUU stated he does. Number 0499 MIKE TAURIAINEN, Consulting Civil Engineer, came forward to testify on the proposed committee substitute for HB 207. He said he has been in business for over twenty years and has been doing home inspections during that time. He has been a member on the board of Architects, Engineers, and Land Surveyors (AELS). He feels there are four things that licensing of home inspectors would ensure: a reduction of competition; an increase of fees; an increase in the state budget; and an increase in regulations. As a prior AELS board member he has had experience continuously dealing with the fine points of regulations and the restriction of competition. He feels the market is a great system for assuring competence and weeding out incompetence. He realizes it is not a perfect system. It is his opinion the industry, banks, realtors, etcetera, are very able to determine who is competent or incompetent to perform home inspections, and can advise clients accordingly. He does not feel licensing will prevent incompetence or fraud. He said the Department of Environmental Conservation (DEC) implemented a certified installers program several years ago, let it go by the boards, and then reinstituted it. He stated the program has certainly not eliminated incompetence and fraud in the installation of septic systems. He tests and inspects septic systems on a regular basis and knows who does a good job. He does recommend installers who do a good job to people who need a septic system put in their home. He does not feel licensing and certification will prevent the problems proposed committee substitute is attempting to resolve. He feels the current system is adequate. TAPE 99-62, SIDE B Number 0003 REPRESENTATIVE HALCRO asked Mr. Tauriainen if there is an association of home inspectors in Alaska. MR. TAURIAINEN stated he does not belong to an association, but noted several home inspection organizations exist nationally. REPRESENTATIVE HALCRO wondered where a home buyer would file a complaint against a home inspector. MR. TAURIAINEN stated, if there is a problem, a person should first approach the home inspector, then a lending agency, and, if necessary, the person could use the legal system. Number 0020 REPRESENTATIVE HALCRO referred to Mr. Tauriainen's example of a septic system. He asked if the contractor would be liable for a faulty septic system the contractor installs. He wondered if the contractor would have to reinstall the system or bear any of the costs associated. MR. TAURIAINEN replied the contractor would be liable, but he warned it does depend on the situation. REPRESENTATIVE HALCRO clarified he is referring to Mr. Tauriainen's specific example of a septic system with respect to fraudulent installation. He again wondered who is liable for repairing the system. MR. TAURIAINEN indicated the primary obligation falls upon the owner of the septic system, but the contractor is obligated to repair the septic system. In some cases, the contractor who installed the system may or may not be around any longer. REPRESENTATIVE HALCRO asked if the home owner is responsible if the contractor is not available. MR. TAURIAINEN replied, "Yes. That would be the case, whether in home inspections or home building or septic systems." Number 0034 REPRESENTATIVE CISSNA asked if a home owner is the person who contacts a home inspector. MR. TAURIAINEN answered that a home owner would contact a home inspector if there is a problem. REPRESENTATIVE CISSNA wondered if there is a contract that is used with the home owner. She asked Mr. Tauriainen to explain the provisions of the contract. MR. TAURIAINEN explained there is a contract with the home owner. The contract could be anything from a handshake to a formal contract that describes what will and will not be done and what the costs are. REPRESENTATIVE CISSNA asked if there is an "industry standard" of contract. Number 0043 MR. TAURIAINEN stated there is not. He said some of the home inspection organizations do have standard agreements and inspection forms. CHAIRMAN ROKEBERG asked if Mr. Tauriainen limited his liability to the amount of the fee in his contract as a rule. MR. TAURIAINEN said it is limited to some amount, but depends on the level of service that is provided. CHAIRMAN ROKEBERG wondered if Mr. Tauriainen makes a distinction between acting as an engineer and acting as a home inspector. MR. TAURIAINEN replied, "I don't know that...when I am inspecting a home that I can ever take off my engineering hat and responsibility." CHAIRMAN ROKEBERG asked if Mr. Tauriainen has a stamp engineering opinion that he gives on specific structural items. MR. TAURIAINEN said he would certify specific structural items, such as a septic system, as an engineer. The inspection report is sealed as a professional engineer. CHAIRMAN ROKEBERG asked if he deals with the liability issue as an engineer. He also wondered if Mr. Tauriainen has ever been sued. MR. TAURIAINEN replied he does deal with the liability issue. He stated he has only been sued once in 20 years. CHAIRMAN ROKEBERG inquired how the liability issue works for an engineer. MR. TAURIAINEN explained it is his opinion that an engineer has a greater liability than a home inspector or contractor. CHAIRMAN ROKEBERG asked if he had errors and omissions insurance and if it is affordable. MR. TUARIAINEN replied he does have insurance and that it is more affordable now than it had been previously. He said his limit of liability is $500,000. CHAIRMAN ROKEBERG wondered if Mr. Tauriainen has spoken with his underwriter about the home inspections he does. MR. TAURIAINEN said, "Yes." CHAIRMAN ROKEBERG asked if he makes a distinction between the fees charged as an engineer and those charged as a home inspector. MR. TAURIAINEN explained the fees charged depend on the effort involved. He said sometimes the fees are a lump sum or sometimes they are "time and expense". CHAIRMAN ROKEBERG asked if Mr. Tauriainen charges more for being required to make an engineering stamp and giving an opinion letter. MR. TAURIAINEN said most of the inspections he does do not require an engineering report. If an inspection requires an engineering report, it generally takes more time and therefore costs more. CHAIRMAN ROKEBERG inquired if Mr. Tauriainen gets involved in home inspections in the course of a normal real estate transaction. MR. TAURIAINEN replied that he does. CHAIRMAN ROKEBERG asked if the engineering stamp is placed on the report in that case. MR. TAURIAINEN responded affirmatively. CHAIRMAN ROKEBERG asked Mr. Tauriainen if he qualifies to be licensed as a home inspector under the provisions outlined in the proposed committee substitute. MR. TAURIAINEN indicated he does not qualify under the outlined provisions, but one of his engineers would. He feels some of the requirements are a bit onerous and very restrictive. CHAIRMAN ROKEBERG asked Mr. Tauriainen how long he has been in business. MR. TAURIAINEN replied, "Over twenty years." If the proposed committee substitute passes, he feels certain engineers should be included in the provision if they have done home inspections. CHAIRMAN ROKEBERG requested he get back to the committee with his recommendations. He asked Mr. Tauriainen to estimate the number of homes he has inspected. MR. TAURIAINEN answered, "More than 200, less than 500...Most of ours are existing construction that we inspect." Number 0109 REPRESENTATIVE BRICE asked Mr. Tauriainen if there are currently any requirements for home inspection. MR. TAURIAINEN said he is not aware of any. REPRESENTATIVE BRICE said, "You outlined fairly eloquently the protections that the buyer has...in terms of seeking redress if the inspector is doing whatever. What about the seller?...I understand traditionally it, within the real estate transaction, it's the...action of the buyer that initiates the home inspection. But that also has implications on the seller." MR. TAURIAINEN wondered if Representative Brice is referring to "frivolous comments". REPRESENTATIVE BRICE said, "Yes". MR. TAURIAINEN explained that is a problem, but, in large part, it is a judgement call. He does not feel this legislation would address that issue because it does not prevent someone from looking at a house for a friend or someone else. He explained the current laws for disclosure require anything brought out be disclosed. REPRESENTATIVE BRICE said, from his point of view, the proposed committee substitute establishes a baseline. Number 0132 CHAIRMAN ROKEBERG told Mr. Tauriainen he would be happy to know there were proposals to attach the proposed committee substitute to the Architects, Engineers, Land Surveyors, and Landscape Architects Board. Chairman Rokeberg said he was dissuaded from that. He wondered if the "culture" would be incompatible. MR. TAURIAINEN is not sure it would be incompatible, but feels it would unnecessarily bog down some of the workings of the board. CHAIRMAN ROKEBERG asked if the board would "take them under their wing." MR. TAURIAINEN replied, "If that was a law, they would." Number 0141 CHAIRMAN ROKEBERG asked if the board would even want to do that. He said, As I understand it...Senator Leman is working on a plan which I support; is, I call 'regulation light'. Because I have been looking for a way to establish boards and commissions that were not so heavy on the budget and on the legal requirements. I understand that board you were formally a member of is...stepping out from somewhat of the umbrella of the state. MR. TAURIAINEN stated that has been looked at several times. He believes it would be a step in the right direction. CHAIRMAN ROKEBERG said he is aware of that and does not think Mr. Tauriainen wants to add to that. He finds himself in a conundrum over this. He feels there is a need here. MR. TAURIAINEN suggested the industry look at regulating itself and establish a state home inspector's organization. CHAIRMAN ROKEBERG replied, I feel like the father with the shotgun, and this is a shotgun marriage. And that's the problem I find myself in. Plus we have a constitutional requirement that regards boards and commissions of state right in our constitution...Had there been an organization of home inspectors that was able to take that up, then perhaps we wouldn't have had to take this step of introducing this legislation. MR. TAURIAINEN believes the industry wants registration primarily for financial reasons rather than protection of the public. CHAIRMAN ROKEBERG interjected, "They couldn't qualify for federal contracts unless they had the state certification and (indisc.)." MR. TAURIAINEN noted that is only partially true. He explained home inspectors could be registered in other states and accomplish that. He said the industry wants the state to come in and establish some gates for them. CHAIRMAN ROKEBERG stated that Mr. Tauriainen's point was well taken. He said there could be a (indisc.) by the contract and a slight increase in cost. He understands affordability is really an issue. MR. TAURIAINEN indicated those same building inspectors could say, "Let's establish an organization and set our standards, and we can set them aside as we want." CHAIRMAN ROKEBERG asked, "But that hasn't happened?" MR. TAURIAINEN replied it has not happened. CHAIRMAN ROKEBERG hopes it will happen. Number 0176 REPRESENTATIVE HALCRO referred to Mr. Tauriainen's comment regarding his loss of business in the existing market due to new competitors. He wonders if these new competitors are above board and conduct themselves in a professional manner. MR. TAURIAINEN is not aware of any competitors who do not conduct themselves in a professional manner. He is sure there are some that are not as above board as he would like to see. He said this happens in other professions as well, such as with engineers, doctors, and attorneys. CHAIRMAN ROKEBERG asked if Mr. Tauriainen's competitors in the Kenai market are engineers. MR. TAURIAINEN stated most are not engineers. REPRESENTATIVE HALCRO said, The problem I see, and I dislike regulations in any form of business as much as the next guy, but the problem I see with voluntary compliance is that you have an association of home inspectors and a couple of these fly-by-nighters don't want to play...If it's not set in state statute, then realistically they don't have to play. And they're still able to go out there and create (indisc.) and sometimes dangerous situations in the market place while the rest of the respectable businesses are playing by the rules. Number 0195 MR. TAURIAINEN does not think licensing would prevent that. He explained that a home inspector would not create an unsafe condition. The home inspector may overlook an unsafe condition, but that could happen with himself or anyone else, especially if the unsafe condition is concealed and cannot be seen. He indicated that people can ask around to find out which home inspectors do a good job. CHAIRMAN ROKEBERG asked, "Don't realtors make about 90 percent of the referrals?" MR. TAURIAINEN answered, Sure, and I think that's a good thing because the realtors are working on a regular basis with these people and they know who does a good job. And the banks also...If they can figure out whether they can lend me money or lend you money, they can figure out who to hire to do a home inspection. Number 0212 RON JOHNSON, Realtor, testified via teleconference from Kenai. He said, "You don't need this bill because it's way too big." He referred to page 1, line 11 of the proposed committee substitute and suggested deleting "or" and adding "and" after "a licensed real estate broker". He feels it is necessary to have both a real estate broker and a certified real estate appraiser because both are significantly impacted by this. He further suggested changing the number of members on the proposed Board of Home Inspectors from five to seven; three of which would be inspectors, a real estate broker, an appraiser, and two public members. He indicated the AHFC Board was originally created in such a way that a member of the real estate agency is on the board. He said there has not been a member of the real estate agency on the board in the past few years. The Home Builder's Association has taken over the position of AHFC in directives. This is having significant impacts on the real estate community. Mr. Johnson seems to think it would be wise to follow the real estate license law in order to establish a surety fund. Number 0231 MR. JOHNSON referred to page 6, line 26 of the proposed committee substitute regarding home inspector's compensation for performing a home inspection. He feels the requirement of who to pay should not be legislated. CHAIRMAN ROKEBERG wondered if compensation is collected for at the time of closing. MR. JOHNSON replied that compensation is collected in many cases at the time of closing. He said there are some inspectors who require payment up front because they know the inspection will be challenged. In the past there have been home inspectors who have limited their liability to the amount of the payment. It is his opinion this is ludicrous. CHAIRMAN ROKEBERG asked if he noticed that it is spoken to in the bill. MR. JOHNSON said he did. He suggested creating a statutory requirement that builds liability into the license. This would eliminate the need for the boards and commissions because the business license would have specific requirements. He stated, I see in this bill where the board has the authority to issue tickets. The Department of Labor has the authority to issue tickets for money. I speak from experience on the real estate commission. We passed that law and the Department of Law came in and said, 'No you don't'. So, that's probably not a workable situation. CHAIRMAN ROKEBERG feels the proposed committee substitute could be simplified to address specifically what the requirements are for being licensed by a business license. CHAIRMAN ROKEBERG pointed out to the committee that Mr. Johnson formerly served as the chairman of the Alaska Real Estate Commission and has had a good deal of experience with these issues. With respect to the number of people on the proposed Board of Home Inspectors, he stated, "The folks in the business are acutely aware there may be only about a hundred people, not 2,000, like there is in a real estate community. So, they're having trouble supporting a larger board. We talked about three members, but we informed them that really isn't workable." He noted from the fiscal note there would be almost $1,000 biennially to start the board. MR. JOHNSON addressed that issue. It is his opinion that the real estate commission needs to have more public members and fewer members from the industry because people tend to become self-serving. He thinks a case should be presented in a manner that convinces members of the public or members of other industries who are impacted. He feels three members would be reasonable as long as one is a public member. CHAIRMAN ROKEBERG asked Mr. Johnson to clarify from his previous testimony what exactly the Department of Law had objected to. MR. JOHNSON explained the intent under HB 33 was to allow the Real Estate Commission to issue tickets for wrongdoing and unlicensed activity. The Department of Law objected to this stating it was their responsibility. He said, "I don't believe we have improved our ability to police our own workings by HB 33." CHAIRMAN ROKEBERG asked, "You mean the investigator can't issue the violation?" MR. JOHNSON stated that is the position of the Department of Law. CHAIRMAN ROKEBERG said, "You're kidding." MR. JOHNSON replied he is not. CHAIRMAN ROKEBERG wondered if Mr. Johnson was on any of the board legislative committees. MR. JOHNSON stated he is not. Number 0301 MARK LEWIS, Registered Civil Engineer, Home Inspection Service, came forward to testify. He feels there are were a number of issues that were not addressed. He feels the establishment and adoption of a checklist is impractical because there are so many different types of inspections involved especially in new construction. CHAIRMAN ROKEBERG stated he also has some questions regarding that. MR. LEWIS reiterated that a checklist is impractical. He said the Municipality of Anchorage does not even use a checklist and they deal primarily with new construction. CHAIRMAN ROKEBERG asked Mr. Lewis to speak generically about the proposed committee substitute, but requested he submit specific criticisms in writing. It is his intention to draft another committee substitute after the meeting. It is possible there will be another meeting regarding this legislation prior to the legislative session. MR. LEWIS believes the board should establish reporting standards that allow for narrative checklists. He said it restricts free markets and the ability for an inspection to be performed for the benefit of the client. CHAIRMAN ROKEBERG answered, "I agree. That's gone." MR. LEWIS indicated he is somewhat in favor of this type of legislation. He believes there should be something that helps establish some standard performance criteria. He stated he is a member of American Society of Home Inspectors (ASHI) and is in the process of forming a new chapter. He is offended by the notion that home inspectors are trying to cover something up because they collect a fee up front. Home inspectors get paid at the time services are performed which is generally at the time of the inspection when the client is there. Otherwise, it can be difficult, if not impossible, to collect money for services that are performed. MR. LEWIS said, "In fact, when you go into surgery, a doctor...in a hospital will limit their liability...to zero. And this is a major surgery on you...yet when we're talking about a home inspection we can't limit our liability. I think it's interesting." CHAIRMAN ROKEBERG replied, "I'm not sure the dying patient whatever he signs is going to protect (indisc.)." MR. LEWIS stated, "You can always contest it in the courts, and that's what the legal system is for...it seems to work to a large extent." He said there is no experience requirement for licensing except for the initial grand fathering or transitional licensing. It is his feeling that if a person takes the exam then they will become licensed. CHAIRMAN ROKEBERG said, "It spells out the transition requirements, but leaves up to the board (indisc.)." He wondered if that is a defect. MR. LEWIS agreed it is a defect that needs to be addressed. He referred to Sec.9 relating to transitional licensing provisions and recommended that the paragraphing be 1 and 3, or 2 and 4, respectively. This is his understanding of the discussion during the last meeting. CHAIRMAN ROKEBERG said, "We've heard some testimony today about the level of figuring rural home inspections and dropping these down create too low of a (indisc.)?" MR. LEWIS stated that is an interesting problem that is dealt with all the time in Alaska. He did not have any good ideas about how to deal with that. One idea is to possibly have a licensed home inspector review a report generated by someone in the field to ensure that it complies. The person in the field would not necessarily have to be a licensed home inspector. CHAIRMAN ROKEBERG pointed out there is no provision for associate inspectors in the transition period. MR. LEWIS stated the only provision is for a person to work for a licensed home inspector who would be liable for all of that person's work. CHAIRMAN ROKEBERG asked, "Does that work (indisc.)? You need to be able to hire new people that come on into the business." MR. LEWIS responded, "It drives the cost up." Number 0412 MR. BRUU explained that an associate inspector will drive the cost up for the buyer. MR. LEWIS clarified that a licensed home inspector would have to compensate for the additional liability created by sending an associate inspector into the field unsupervised. This means the licensed home inspector's liability would inherently increase. CHAIRMAN ROKEBERG stated there was an issue in Texas where there was a problem having an apprenticeship in the statutes. After the statute was passed in the regulations, there was an inability for people to obtain the apprenticeship positions. MR. LEWIS said there is no incentive to hire associate inspectors right now. CHAIRMAN ROKEBERG interjected there would not be an incentive if a person wants to expand their business. MR. LEWIS agreed. He indicated it could possibly be detrimental to the growth of a business if a person is sued and loses everything. CHAIRMAN ROKEBERG commented there seems to be a problem. MR. LEWIS explained the way it is dealt with in ASHI is by taking the test, but then a person would not get their membership until they complete the work. CHAIRMAN ROKEBERG asked how a person would complete the work if someone does not want to hire that person and that person is unable to do an inspection unless a certified inspector is there. MR. LEWIS said, When I started up here working for someone else, there was a probationary period where I followed that person along. I was paid not nearly as much, but I was paid for following them along. They absorb that cost as a training period which any business owner will have to do. CHAIRMAN ROKEBERG stated he is interested in cleaning up that issue before moving on to the next version of the bill. He does not want to create a situation that drives up cost and restricts entry into the business. He wants to help the business grow. Number 0451 MR. LEWIS replied there will always be a demand. He referred to page 4, lines 3 through 7, of the proposed committee substitute which states that all documentation prepared by a home inspector must include their name, mailing address, and license number. He does not believe there are any other regulated professions that have this requirement. He feels it is a limitation. He suggests including a home inspector's name and license number. CHAIRMAN ROKEBERG said, "This comes from years of experience in dealing with license (indisc.)." MR. LEWIS responded that it may be a requirement for some contractors, but he is not sure that means they actually do it. He reiterated that the inclusion of the home inspector's name and license number is the way to go. He feels it would be cumbersome to include any other information. He also does not think the time when a payment is due should be statutorily required. MR. LEWIS, in general, feels the proposed committee substitute is a step forward. He stated, There's another issue about the liability of the inspector towards the person who receives the report. Does this allow a report to be sold? If somebody decides they're going to buy a house they have an inspection done, they decide not to buy the house, they can then possibly sell that report to somebody else. MR. LEWIS continued, As I've stated previously, we as home inspectors should not be liable to a third party because there are numerous things that I deal with in the course of an inspection that I'll state verbally or I'll point them out...As a required part of that inspection that that person be there. If they're not there, then it is in their interest, and it's stated in the report that they are highly encouraged to call and discuss anything that they don't understand. Now if somebody else calls back to us...and says, 'What do you mean by this?' This means that we have to get written permission from a seller to even talk to a contractor about the specific item that we identified in the inspection...when you talk about some of these liabilities,...as the report gets tossed and passed, I think it can be pretty difficult, and I think that our liability should be stopped at the person that pays for the inspection. CHAIRMAN ROKEBERG said, "I could see where that would happen. As a property manager wouldn't you go ahead, if a buyer DFT'd (defaulted) a deal,...and then wanted to sell. That does occur, I guess." MR. LEWIS answered, Well, they don't necessarily sell them, but...if a seller gets a copy of the report, then that seller uses and says (indisc.) there was already an inspection on the property, you don't need to go get another one.' Well, I disagree with that...Weather conditions change. There could be a rain event...three days after and it's been dry for a month and we didn't see anything. There are a number of things that can be missed. CHAIRMAN ROKEBERG asked if this is because of the way some inspectors conduct their business. He wondered if some inspectors give a walk-thru with the buyer to point out the problems. MR. LEWIS replied he always does a walk-thru if possible. CHAIRMAN ROKEBERG commented the problems are not necessarily in the report, but at least the buyer is informed of them verbally. MR. LEWIS referred to the checklist in Sec. 08.57.020, paragraph 5. He feels the items that should be included in the checklist are impractical because certain items such as "comfort and convenience" levels are subjective. He believes the market dictates that these items are allowed to be open so agents can recommend inspectors they feel are complete and reasonable. With respect to code compliance and safety, he said, Say a house was built in 1960, its electrical system is going to be different than what it is now. Does that mean it's unsafe? Not necessarily. It means it was built in 1960 and not 1999...Every three years or thereabouts, the municipality adopts a whole new set of codes...and if you were to say that a house needs to be brought into compliance with current, there is no way to draw a line. There is absolutely no way. You would have to rip the house down and rebuild it, foundation and all. TAPE 99-63, SIDE A Number 0002 BARBARA GABIER, Program Coordinator, Division of Occupational Licensing, Department of Community and Economic Development, came forward to testify on the proposed committee substitute for HB 207. She is unclear on the mechanics of how the actual licenses would be issued and how the registration of business names might be registered. Number 0017 TIM HOYT, ICBO Certified Home Inspector, House Master Home Inspection Service, came forward to testify on the proposed committee substitute for HB 207. He stated, A big concern of mine is the intermingling of ICBO requirements (indisc.) ASHI or other requirements. The ICBO combination dwelling inspector requirement with AHFC as required is for new home construction. This bill is basically addressing existing home inspections. Yes, there is some carryover. Apples and oranges are different, but...you can still eat both. But that's about as far as it goes. New home construction, the inspector is allowed a tremendous amount of viewing opportunities. Pre-existing homes, we don't have any knowledge of what is buried within a wall. I don't feel that an ICBO inspector necessarily would make a good pre-existing home inspector...It's not a guarantee since they're worlds apart in their responsibilities from the minute they inspect a home. MR. HOYT continued, My next concern is the cost of this...If an inspector is required to be both an ICBO combination dwelling inspector and an ASHI member...it might drive up that inspector's personal costs maybe as much as $3,800 a year. That obviously is going to have to be passed on to the consumer. Now the way I got these numbers was a lot of it concerned ASHI's continuing education requirements and the difficulties Alaska residents would have in getting the amount of continuing educations credits we need. We would basically have to travel outside...I think you echo my concerns...are we doing good in driving up the costs? I think we're...gonna keep a few more people out of homes. On the other hand, hopefully some of the fly-by-nighters will (indisc.). We're precluding people from housing by doing this unfortunately...I work for a national franchise...Do they have to list my license number on every national commercial? I think that needs to be reworked, or, ideally, done away with. Number 0060 CHAIRMAN ROKEBERG, referring to continuing education requirements, asked if Mr. Hoyt is making the assumption that the board would require that. MR. HOYT said he is. He explained that if a person is to be a member of ASHI in good standing, that person would have to do their continuing education to renew their membership. CHAIRMAN ROKEBERG asked if a person had to join ASHI just to take the examination. MR. HOYT answered affirmatively. CHAIRMAN ROKEBERG wondered if a person could join ASHI, take the exam and then drop the affiliation unless it is a future requirement. MR. HOYT is not sure. He thinks that is side-stepping the intent. CHAIRMAN ROKEBERG said, Well, certainly there's encouragement there. As a property manager,...I would assume that it would get more people involved in the business in taking (indisc.)...You could allocate some of those costs, particularly if they were mandated continuing education requirements...I assume there would be costs which would include those classes...Maybe you could do your own continuing education up there. MR. HOYT replied it would certainly help. He indicated it is a very lengthy process to get a course approved by ASHI. CHAIRMAN ROKEBERG and Mr. Hoyt engaged in a brief dialogue that is indiscernible. MR. HOYT said, "We've got 20 ASHI members in the Anchorage/Mat-Su area to defer the costs of this one guy versus 2,000 realtors to defer the cost of this one guy." CHAIRMAN ROKEBERG stated he appreciates what Mr. Hoyt is saying. Number 0078 MR. BRUU indicated it would probably boil down to a cost per continuing education unit. He said he is not an ASHI member, but is working on becoming one. He commented, The way I read the continuing education requirements that are very difficult to achieve in great numbers, it basically reads you go to the national convention every year to earn enough credit hours. That wouldn't be a cheap proposition." CHAIRMAN ROKEBERG referred to the intermingling of ICBO and ASHI and stated Mr. Hoyt had said the technology and expertise were different because of new houses versus existing houses. MR. HOYT replied he had not said anything about the area of expertise between new and existing houses. He explained, Everything that is within the building is hidden away to the pre-existing inspection. I don't know what went on in this wall of this building if there's wire-splices or not. The ICBO inspector would have a schedule of inspections before the sheetrock was applied, before the installation was in place. They have a much fuller view of the building. CHAIRMAN ROKEBERG indicated he is concerned about that. MR. HOYT said he started out as an ICBO inspector and then branched out to pre-existing houses thinking he knew what he was doing. He stated he received quite an education because there is a big difference between inspecting pre-existing homes versus new homes. CHAIRMAN ROKEBERG asked if the proposed committee substitute should recognize the continuing differential because it currently does not. MR. HOYT agreed that it does not. Number 0121 LAMAR STEEN, Abacus Home Inspection Service, came forward to testify on the proposed committee substitute for HB 207. He stated he has been in the home inspection business for almost 10 years and has done over 3,000 inspections in the Anchorage, Mat-Su, Wasilla, Girdwood and Seward areas. He wondered where the statistics are coming from that show there is a problem with home inspectors. He said 90 percent or more of his business is directed to him through the real estate industry. It is his impression that most professional realtors control the quality of work they get. In the past he has participated in some of the ASHI forums and has been on some of the liaison committee between realtors and inspectors. MR. STEEN said the larger, recognized real estate companies have two requirements. In order to be on their list of approved inspectors a person has to first become a full ASHI member. Secondly, they need proof of errors and omissions insurance. He believes there are at least 20 states that have some kind of license and requirement. He said there is an apprenticeship program in Texas where a person has to pay to be an apprentice. He wants to avoid a similar situation in Alaska. CHAIRMAN ROKEBERG said there are no statistics, but there is evidence to indicate there is not a good relationship between the home inspection community and the licensed realtors in Alaska. MR. STEEN agreed. He does not feel that it is due to problems on the consumer's behalf. It is his impression that professional agents want home inspectors to do their very best job. He believes it is the fly-by-night real estate agents that are problematic because they get upset if a home inspector kills one of their deals. CHAIRMAN ROKEBERG said he agreed. He stated the other issue pertains to where the liability revolves around. He feels the relationship between all parties involved needs to be clarified so the chain of activities revolving around the transaction can move forward smoothly. He is concerned about affordability and overregulation. MR. STEEN said that is also his biggest concern. He spoke to the issue of collecting a home inspector's fee prior to the inspection. He said it is a national standard that the home fee be collected at the time of the inspection. With respect to ASHI continuing education credit, he indicated that a person does not have to leave the state to obtain credit. He provided a few examples of what types of continuing education classes are available for people within the state. He feels ASHI is probably the leader in standards for home inspectors because they have strict requirements for taking tests. MR. STEEN stated an ICBO inspector basically inspects for code items. A home inspector is there to not only look at code items, but also standards of practice. He gave the example that nowhere in the code does it say that a roof cannot leak. He mentioned there are several common sense items the code does not address. He said only a good licensed inspector with common sense would be able to see those things and know how to identify them. This ability comes with experience and common sense. He believes people with a background in construction would make good inspectors. MR STEEN further stated that, even though he is an engineer, approximately 90 percent of his experience in the inspection industry comes from his background in construction. He said it is tougher to pass the ASHI exam than the ICBO exam because the ASHI exam is a practical exam which requires a person to be able to identify problems. Identification of problems is something that generally comes from experience. He feels experience is critical. He realizes it is difficult to obtain enough experience in the bush areas of Alaska. He stressed getting experience is imperative. He hopes inspectors will form some type of group in order to self-regulate and set some standards of practice. Number 0266 CHAIRMAN ROKEBERG wants to keep in mind the requirement for affordability and the impact on transactions. He is concerned about what is happening. He asked if Mr. Steen is aware that sellers are changing or amending their disclosure statements. MR. STEEN indicated that happens quite often. He said he asks for a copy of the disclosure which he likes to have before he arrives at the site. He noted there are many cases where the disclosure has been changed after the inspection because of a discovery he has made. One of the biggest concerns he has relates to the ability of a seller to waive disclosure. If the seller is aware of a problem he should not be able to waive disclosure. CHAIRMAN ROKEBERG asked if waiver of disclosure is allowed in the statute. MR. STEEN stated he has not seen that in writing. He has been told on several occasions that the realtor has told them the disclosure has been waived because the owner did not occupy the property for many of years. He is not sure if it is by statute or not. CHAIRMAN ROKEBERG wondered if a person could be an absentee landlord and rent the property. MR. STEEN said, "Exactly." CHAIRMAN ROKEBERG said he is motivated by the whole issue that revolves around the disclosure statement. He views it as interrupting and potentially raising the cost. He said existing law requires an amendment to the disclosure statement. Number 0346 MR. STEEN asked if anyone has given Chairman Rokeberg any of the correspondence between ASHI and HUD. CHAIRMAN ROKEBERG said, "No." MR. STEEN stated he needs to be aware of that correspondence because there have been some meetings between ASHI and HUD. He explained that one of the letters indicated ASHI and HUD had not intended to make appraisers into inspectors. Apparently, some appraisers and real estate agents interpreted it otherwise. CHAIRMAN ROKEBERG said, They're doing a lot of back peddling and apparently there's a new handbook and they've really opened up Pandora's box, but, nevertheless, that needs to be taken care of, but it brings up the issue about this whole thing...there's a changing business practice as you are well aware of and your business has been expanding and increasing I take it...If I was selling homes, I wouldn't even consider making an offer until there had been an inspection...I think I'd be breaching my fiduciary duty if I did that now. MR. STEEN replied, "When I say professional... the professional realtors, I think I'll agree with them. I don't think any of them have a problem with that, and I think they look to do that." CHAIRMAN ROKEBERG said he looks at home inspectors now as vital and integral parts in a whole chain of the transaction. How one fits into a highly regulated area as an unregulated part of a link in that chain is one of his concerns. MR. STEEN is concerned about driving up the cost of the inspection. He has not raised his fees in five years. CHAIRMAN ROKEBERG assumed Mr.Steen's business has substantially increased because of changing practices. MR. STEEN said business had increased, but costs had also gone up. He feels a smaller committee would be better because it would help keep costs down. CHAIRMAN ROKEBERG asked Mr. Steen to speak on the issue of associate home inspectors. He thinks associates have to be included. MR. STEEN agreed. He is not sure how to address that issue entirely. He referred back to the problem in Texas where a person has to pay for apprenticeship. He was quoted a fee of $30,000 that had to be paid in order to attend inspections with a licensed inspector. CHAIRMAN ROKEBERG understands the law has been changed because of that. An apprentice is allowed to take an exam to become marketable in the business. He does not want to create that barrier. MR. STEEN agreed there has to be some type of transition to allow other people to come into the industry. Number 0412 CHAIRMAN ROKEBERG said that helps hold the cost down. He indicated he would like Mr. Steen to look over the proposed committee substitute. Number 0425 JOHN BITNEY, Legislative Liaison, Alaska Housing Finance Corporation (AHFC), came forward to testify on the proposed committee substitute for HB 207. He clarified he is not speaking on behalf of the Governor's Office or the administration, but noted AHFC is in support of the concept outlined in the proposed committee substitute. MR. BITNEY noted many previous speakers had commented that if there is a problem it will end up in court. He said, I guess that's our fear is that once it does go to court...where a judge is going to end up with a decision on this thing somewhere down the road...in the name of consumer protection...I mean we're seeing judges now getting into the appropriation process of the legislature, of schools and those kinds of things, while, we, Alaska Housing (AHFC), would be viewed, in some of these instances, as quite a deep pocket...Some of the folks pointed out here today that the inspection often times occurs during construction. MR. BITNEY continued, I think in some of the discussion here, there was kind of an impression, that often times that, for existing construction, you have a seller and a buyer, but in our case, in new construction, usually the inspection is incurred during the construction process and so the inspector was brought...into the home by the builder, and it just leads to discontent by the home owner if something does go wrong as far as who's at fault and who they're supposed to blame. We've been involved in potential litigation and litigations where, what the home buyer usually does in that situation is they paint a broad brush and they just sue everybody and it's the old saying, 'Let God sort it out.' So, our pleasure in the bill is trying to see that the state offer up some clear delineations for the liability. Number 0482 CHAIRMAN ROKEBERG said he has the March 3, 1999 letter from Dan Fauske [CEO/Executive Director, AHFC]. He wondered if Mr. Bitney had a chance to refresh him memory on that one. MR. BITNEY indicated he had read the bill at the time it went out, but it has been a while since he has looked at it. He referred to Section 4 of the proposed committee substitute which begins on page 8 and continues on page 9. He said this section would bring "these inspectors in an inspection that would qualify to do a home for us to finance." CHAIRMAN ROKEBERG stated there is an amendment which neglects to pick up the date change. Number 0499 MR. BITNEY responded, "Right...then that would do away with the ICBO. I think that there was some discussion, if I remember correctly, that ICBO is going to change its name or something along those lines." CHAIRMAN ROKEBERG said, "You might need a successor agency reference." He further stated there had been some discussion earlier in the meeting regarding the appropriateness of bringing the ICBO inspectors underneath this law. There seems to him to be a true issue about whether or not to include them. He asked Mr. Bitney to state if the ICBO inspectors should be covered. He also asked him to explain how the inspectors are certified and how they are employed. MR. BITNEY replied he does not know the specifics of what is involved in the ICBO. He clarified that ICBO is a separate organization. The statute requires an inspection on a structure that was built after 1992 in order for it to be financed. There are five different phases of construction that have to receive an inspection. Number 0534 CHAIRMAN ROKEBERG wonders why the date should be changed from 1992 to 2000. MR. BITNEY does not know the rationale behind the date change. He does not remember it as a significant issue. He explained the issue with AHFC is to "allow whatever licensed inspectors this bill sets up to do the inspections that the law requires that we need to have done in order to finance a home." CHAIRMAN ROKEBERG asked Mr. Bitney to come back to the next meeting on this legislation to provide a stronger rationale for the date change. He asked for a brief description of how certification works and how the examinations are administered. He referred to the request in Mr. Fauske's letter for the BEES program to be "taken underneath this particular bill". MR. BITNEY indicated it is AHFC's desire for that to happen with the BEES program, but he said, "I think that getting the bill is a more worthy goal." CHAIRMAN ROKEBERG wants further input on how the ICBO and the more traditional inspectors could fit together and how that would help AHFC. Number 0588 CHAIRMAN ROKEBERG recessed the House Labor and Commerce Standing Committee which will resume at 1:30 p.m. for a meeting on HOUSE BILL NO. 190, "An Act relating to viatical settlement contracts."