Legislature(2003 - 2004)

02/12/2003 01:44 PM FIN

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

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