Topic:
CONSUMER PROTECTION; LICENSING;
Location:
LICENSING;

OLR Research Report


October 2, 2003 98-R-0210

TO:

FROM: Dan Duffy, Principal Analyst

RE: Home Inspectors

You asked if other states regulate home inspectors.

SUMMARY

We identified seven states with laws regulating home inspectors. Maryland and Georgia have the simplest laws. They require home inspectors to disclose the extent and limit of the inspection. Alabama requires home inspectors to register. Applicants must show that they have met certain education and experience requirements but are not required to pass an examination. Tennessee restricts the field to those who hold certain state licenses or private certification; its law applies only to new structures. South Carolina requires home inspectors to pass a licensing examination. North Carolina licenses two levels of home inspectors, requires both to pass a licensing examination, and establishes a licensing board. California takes a completely different tack. It makes certain practices related to a home inspection an unfair trade practice.

The definition of Αhome inspector” establishes the scope of each states regulatory system. Maryland and Alabama have the most direct approach. A “home inspector” is anyone who provides, or offers to provide, home inspections for compensation. California, Georgia, South Carolina, and North Carolina all define “home inspector” in a way that provides an exemplary list of a home's systems or components examined by an inspector. In Tennessee, “new inspection services” means the examination and evaluation of the structural and aesthetic features of new buildings.

The disclosures required by Maryland and Alabama state the limits of a home inspector's inspection. Maryland requires the inspector to state, among other things, that the inspection is based on what is visible and apparent and is not intended to make any representation about concealed defects. Georgia also requires inspectors to disclose that their report is based on a visual inspection.

Georgia, North Carolina, and South Carolina explicitly require a home inspector's report to be written. Maryland implicitly does so by requiring a written disclosure to be a part of every home inspection report.

Alabama, Tennessee, and North Carolina set minimum qualifications in statute to register or take a licensing examination. Each establish alternative means to qualify. In Alabama, it is (1) membership in the American Society of Home Inspectors or an equivalent organization, (2) approval by certain governmental or professional organizations, or (3) a combination of a high school diploma and a year's experience. Tennessee requires licensure as a fire prevention or building official or certification by certain associations. North Carolina establishes a similar set of alternatives and a means to gain the year's experience by being licensed as an associate home inspector.

Alabama, South Carolina, and North Carolina generally exempt architects, professional engineers, code enforcement officials, and other licensed professionals and tradesmen.

There are certain other notable provisions. Maryland requires home inspectors to be insured. Alabama, Maryland, and North Carolina all require inspectors to have a minimum net worth or a bond in a like amount payable to the state. South Carolina prohibits home inspectors from (1) paying a referral fee, (2) accepting an assignment contingent on a predetermined opinion, and (3) performing a home improvement on a property that he has inspected within the previous 12 months. North Carolina requires an inspector, whenever alleging that a defect constitutes a building code violation, to use and refer to the code in effect at the time the building was constructed.

MARYLAND

Maryland requires home inspectors, defined as anyone offering or providing home inspections, to give prospective homebuyers a prescribed written disclosure before making an inspection. The disclosure states that the purpose of the inspection is to assist in the overall evaluation of the building, is based on observing its visible and apparent condition, is not intended to make any representation about latent or concealed defects, and that no warranty is expressed or implied (Md. Ann. Code 10-801).

GEORGIA

Georgia defines “home inspector” as anyone who, for employment, inspects and reports on the condition of a home, single-family residence, or on certain of its parts or systems for prospective purchasers. It requires home inspectors to disclose to customers (1) the scope of the inspection, (2) that the inspection is visual, and (3) that the inspector will submit a written report stating all noted defects with any recommendations concerning hiring experts to determine the extent and corrective action necessary to repair the defects (Ga. Code Ann. 8-3-330)

TENNESSEE

Tennessee defines “new inspection services” as the examination and evaluation of the structural and aesthetic features of new residential, commercial, or industrial buildings. Someone licensed as a contractor, fire prevention or building official, or who is certified by a professional building code organization may examine and evaluate all three types of new buildings. Someone who is certified by the American Society of Home Inspectors or the Home Inspectors of Tennessee Association may examine and evaluate new residential buildings (Tenn. Code Ann. 62-6-301).

ALABAMA

Alabama defines “home inspector” as anyone in the business of making home inspections for pay on behalf of another. Alabama requires home inspectors to register with the state. An applicant must provide identifying information and a certificate issued by an insurance company showing that he has public liability and property damage insurance covering his inspection business in at least the following amounts: $20,000 for property, $50,000 for injury to or death of one person, and $100,000 for injury to or death of more than one person. If applicable, the applicant must also show that he has workers' compensation coverage. In addition to insurance, applicants must show evidence of a positive net worth or a fidelity bond payable to the state of $10,000.

Applicants must also meet one of the following qualifications: (1) membership in the American Society of Home Inspectors or an equivalent organization; (2) approval or certification by (a) the federal Veterans Administration, (b) the federal Department of Housing and Urban Development, (c) the Southern Building Code Congress, or (d) the Council of American Building Officials; (3) a high school diploma, work experience for one year, and completion of 100 home inspections; or (4) current licensure as a general contractor, architect, structural engineer, or residential home builder.

Someone who fails to be properly registered may not sue to enforce a home inspection contract (Ala. Code 34-14B-1).

SOUTH CAROLINA

South Carolina defines “home inspection” as a report for compensation concerning the condition of a residence, including certain parts and systems. The law specifies that Αhome inspection” does not mean contracts or proposals to make home improvements. South Carolina requires home inspectors to be licensed. Applicants must pass a written examination. The statute does not set minimum qualifications for home inspectors, but instead authorizes the state licensing agency to set them.

All reports must be written on a form approved by the state or containing the same information as the approved form. The law does not require the inspector to complete each item on the approved form or prohibit him from inspecting and reporting on items not on the form.

In addition to grounds for discipline typical for most licensing laws (such as committing any act of fraud), South Carolina authorizes the state agency to discipline home inspectors for (1) paying a finder's fee for a referral; (2) accepting an assignment when it is contingent on reporting a predetermined estimate, analysis, or opinion; and (3) performing any home improvement work on a building on which an inspector wrote a home inspection report within the past 12 months. Unlicensed home inspectors are prohibited from suing to enforce the provisions of a home inspection contract.

Home inspectors must determine a building's construction date and apply the building code in effect at that time whenever alleging that a defect constitutes a building code violation (S.C. Code Ann. 40-59-200).

NORTH CAROLINA

North Carolina defines “home inspection” as a written evaluation of one or more of the following components of a residential building: heating system, cooling system, plumbing system, electrical system, structural components, foundation, roof, masonry structure, and other exterior and interior components. North Carolina requires home inspectors to be licensed and establishes two categories, home inspector and associate home inspector. The law establishes an eight-member Home Inspector Licensure Board to oversee the occupation. The board may set continuing education requirements.

Applicants for a home inspector license must meet one of the following: (1) have a high school diploma or equivalent, have been employed as an associate home inspector for one year, and have completed 100 inspections; (2) have equivalent education and experience as deemed by the board; or (3) be a licensed general contractor, architect, or professional engineer. Applicants must also have minimum net assets or a bond of $5,000 to $10,000, as determined by the board.

Applicants for an associate home inspector license must (1) have a high school diploma, (2) pass a licensing examination, and (3) be or have the intention to affiliate with a licensed home inspector.

Inspection reports must be written. Reports must be provided within three days of making the inspection or by a date specified in the written agreement (N.C. Gen. Stat. 143-151.43).

CALIFORNIA

California defines “home inspection” as a noninvasive, physical examination performed for a fee in connection with a sale or transfer of a home of the mechanical, electrical, or plumbing system or the structure and essential components of a residence with up to four units designed to identify material defects. A “material defect” is one that significantly affects the value, desirability, habitability, or safety of a dwelling. Style and aesthetics are specifically excluded.

Home inspectors are prohibited from performing an analysis of the systems, components, or structural integrity of a dwelling that constitutes the practice of civil, electrical, or mechanical engineering. Engineers, land surveyors, and licensed architects are exempt.

A home inspector who is not licensed as a general contractor, structural pest control operator, architect, or professional engineer must conduct an inspection with a reasonably prudent degree of care.

It is an unfair trade practice for a home inspector to (1) make repairs on a structure on which the inspector has reported for an additional fee; (2) inspect property in which he has an interest for a fee; (3) offer or give compensation to a property owner, broker, or agent for a referral; or (4) make an agreement to make a report in which the employment itself or the fee is contingent on conclusions in the report, preestablished findings, or the close of escrow.

The law makes invalid contractual provisions waiving the duty to exercise reasonably prudent care or limiting an inspector's liability to the cost of the report. It establishes a four-year deadline for beginning a legal action for breach of duty arising from a home inspection report beginning on the date of the inspection (Cal. Bus. & Prof. Code 7195).

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