BILL ANALYSIS
AB 293
Page 1
Date of Hearing: April 12, 2005
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Gloria Negrete McLeod, Chair
AB 293 (Maze) - As Amended: March 17, 2005
SUBJECT : Home inspections.
SUMMARY : Requires home inspectors and real estate salespersons
to provide specified written disclosures to customers. Also
requires the Department of Consumer Affairs (DCA) to establish a
toll-free telephone number for consumers to record complaints
regarding home inspectors. Specifically, this bill :
1)Clarifies the application of existing law related to
unlicensed persons soliciting pest control work on behalf of a
licensed pest control company.
2)Clarifies that a home inspector may name a home seller, real
estate broker or salesperson, as an additional insured in a
liability insurance policy.
3)Requires a home inspector to provide, prior to commencing a
home inspection and as soon it is commercially feasible, the
following written disclosures to their customers:
a) Whether the home inspector maintains professional
liability insurance or maintains a minimum bond of $5,000.
b) Whether the home inspector maintains general business
liability insurance.
c) The approximate number of home inspections the home
inspector has performed for a fee, or a statement of the
home inspector's experience and education, including the
number of years of his or her experience as a home
inspector, and his or her education related to home
inspection, specifically including the number of
educational hours completed and the educational facility or
facilities he or she attended.
d) Whether the home inspector maintains a contractor's
license or any other type of professional license issued by
the State of California.
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e) A statement that home inspections are not required by
law in order to complete a property transfer.
f) A statement that home inspectors are not regulated by
any state agency.
g) Information on how to contact DCA to file a complaint.
4)Requires DCA to establish a toll-free telephone number for the
purposes of collecting data and preparing a report to the
Legislature that will help determine whether there is a need
to create a regulatory scheme for home inspectors.
EXISTING LAW defines various terms and establishes various
unfair business practices related to home inspection.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "Home
inspectors in California are not regulated, or subject to any
disclosure laws. However, the overwhelming majority of real estate
transactions are contingent upon or otherwise significantly impacted
by the results of a home inspection. As home inspectors are not
regulated, there is no industry standard to which all home
inspectors must comply. There do exist some associations with
standards of practice. However, no home inspector is required to
belong to one, and therefore, unknowing homeowners or prospective
owners play a 'home inspector' lottery when selecting a home
inspector to conduct an inspection before making what is
traditionally the biggest investment in their life.
"There are no educational or professional requirements to be a
home inspector. Clearly, if an individual is going to be
certifying that a home is structurally safe and sound, a
background or extensive knowledge in home construction and/or
engineering is required. Disclosure requirements will give a
prospective home buyer the knowledge necessary to select the
most competent home inspector, who in turn will be making claims
regarding very important and critical components of the
structure.
"Furthermore, nearly all other professionals involved in a real
estate transaction are licensed: termite inspectors, realtors,
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roof inspectors, pool and spa professionals and real estate
appraisers. While it is evident that full licensure is not the
will of the Legislature at this time, it is clear that some
steps must be taken to protect consumers and give them the most
information possible when selecting a home inspector."
Opposition . The California Coalition of Home Inspectors (CCHI)
opposes this bill because they disagree with some of the
disclosure requirements, and the requirement for DCA to
establish a toll-free telephone to receive, but not investigate,
complaints about home inspectors. With respect to the
disclosure requirements, CCHI believes that:
1)Surety bonds are not available to home inspectors and it "is
unfair to require a home inspector to disclose that he or she
does not maintain a bond if, in fact, no bonds are available
for purchase."
2)With respect to disclosing whether a home inspector maintains
a contractor's license, "?there is no connection between
performing a home inspection and performing the services
normally associated with these licensed professions. Merely
because someone is a licensed contractor does not make him or
her inherently a better home inspector" and "Since a
contractor's license is immaterial to the performance of a
competent home inspection, it is prejudicial to require a home
inspector to disclose his or her licensure status."
3)With respect to disclosing that a home inspection is not
required by law, "the decision to request a home inspection is
made before the home inspector is contacted, so the timing of
the disclosure you propose comes too late in the normal
process to have any significant benefit."
4)With respect to disclosing that home inspectors are not
regulated by any state agency, "This disclosure is inaccurate
and prejudicial. First, the business practices of home
inspectors are subject to Business and Professions Code
Section 17200 which is enforced by the California Department
of Justice. Judges, at least at the appellate level, are
state regulators and they enforce the provisions of Business
and Professions Code 7195-7199. Many other businesses in
California are not specifically regulated by any state agency
and they are not required to make a similar pejorative
disclosure."
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CCHI also opposes the requirement for DCA to establish and
maintain a toll-free telephone line solely for the purposes of
collecting data on the number complaints related to home
inspectors and preparing a report to the Legislature that will
help determine whether there is a need to create a regulatory
scheme for home inspectors. CCHI believes that "The proposed
process for recording consumer complaints from the public is
inherently flawed and easily abused. It would permit a single
individual to flood the Department of Consumer Affairs hotline
with bogus, unsubstantiated complaints. To assess the true need
for regulation, there must be some mechanism to verify the
accuracy of the complaints and to give the accused an
opportunity to present rebuttal information to challenge the
complaint. AB 293 prohibits the Department of Consumer Affairs
from acting on any complaints. This prevents any authentication
of the validity of the complaints and vitiates the credibility
of any conclusions based upon such complaints. We have no fear
of the outcome of a properly conducted study, but the one
proposed by AB 293 appears to be a waste of time and precious
state resources."
The California Association of Realtors (CAR) opposes this bill
because of the requirement to disclose that home inspections are
not required by law, arguing that "...there are many common
inspections, such as a termite inspection, that are not required
in a real estate transaction." CAR also opposes the requirement
to provide customers with the toll free number to DCA.
Suggested amendment . The bill would require DCA to submit a
report to the Legislature, by January 1, 2007, on the number
complaints related to home inspectors that were recorded during
the 2006 calendar year. It would be appropriate to allow DCA
six months to prepare the report (i.e., a due date of July 1,
2007 for the report).
Previous legislation . The following bills reflect the various
efforts to address the consumer protection issues associated
with home inspectors:
AB 1976 (Maze) of 2004 would have required the Contractors State
License Board (CSLB) to develop a process for licensing home
inspectors, and would have made it unlawful to perform a home
inspection without a license. AB 1976 failed passage in the
Assembly Business and Professions Committee.
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SB 31 (Figueroa) of 2002 would have required, among other
things, a home inspector to make disclosures to consumers as to
his or her qualifications and whether the home inspector has
insurance. Subsequently, SB 31 was substantively amended for
another purpose.
SB 1332 (Figueroa) of 2002 would have provided title act
protection for home inspectors by making it an unfair business
practice for an individual to refer to himself or herself as a
"certified home inspector" unless he or she met specified
requirements. SB 1332 also required home inspectors to provide
specified disclosures prior to conducting a home inspection. SB
1332 was held in the Assembly Business and Professions
Committee.
SB 1216 (Hughes) of 1999 would have strengthened regulations for
persons who perform home inspections. It would have required a
person seeking to represent himself or herself as a "home
inspector" to disclose in writing to the person who ordered the
home inspection whether he or she has passed a home inspection
specific examination or has performed at least 250 home
inspections for which home inspection reports were issued. SB
1216 also would have made it unlawful for a person who fails to
make that disclosure to represent himself or herself as a "home
inspector," or to use other similar terms. A home inspector
would have been required to pass a home inspection specific
examination. SB 1216 was vetoed by Governor Davis.
SB 258 (O'Connell), Chapter 338, Statutes of 1996, was designed
to address the concerns of those who opposed AB 2780 (see
below). SB 258 was different from AB 2780 in a number of ways;
primarily it left out the formal state certification process and
requirements for certification. SB 258 reflects the current law
regulating home inspectors and home inspections.
AB 2780 (O'Connell) of 1994 would have set up a comprehensive
statutory scheme for certifying and regulating home inspectors.
It would have provided for the creation of a new statewide,
nonprofit organization to exclusively certify home inspectors.
AB 2780 failed passage on the Senate Floor.
SB 974 (Petris) of 1987 was introduced as a result of a study
completed by California State University, Sacramento, which
recommended that home inspectors meet certain qualifications and
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pass an examination. Under SB 974, home inspectors would have
been regulated and licensed by CSLB. SB 974 failed passage.
SB 2026 (Petris) of 1986 would have established specific
licensing requirements for home inspectors. However, this bill
was amended to only require a study by CSLB of problems relating
to home inspectors.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
California Coalition of Home Inspectors
California Association of Realtors
Analysis Prepared by : Ross Warren / B. & P. / (916) 319-3301