Minutes of the North Carolina Home Inspector Licensure Board April 8, 2016 The meeting of the North Carolina Home Inspector Licensure Board (HILB) was held at 9:00 AM, Friday, April 8, 2016 in Raleigh, North Carolina. The following members of the North Carolina Licensure Board were present: Fred Herndon Tony Jarrett Arthur Hall Marion Peeples Harold Upton Chris Noles Board members Waverly Sawyer and Joe Ramsey were absent. Department of Insurance staff members Mike Hejduk, Jennifer Hollyfield, Terri Tart and Phil Joyner were in attendance. Board Attorney Denise Stanford was in attendance. Chairman Herndon welcomed visitors Wilson Fausel, President of the North Carolina Licensed Home Inspector Association (NCLHIA), and Seth Palmer, Local Government Affairs Director of the North Carolina Association of Realtors (NCAR). Agenda Chairman Herndon opened the meeting and turned the meeting over to Vice Chairman Tony Jarrett. Jarrett reminded all Board members of the State Government Ethics Act provisions to avoid conflicts of interest, the appearance of conflicts of interest, and the potential for conflicts of interest. Jarrett reminded members of the Board who are licensed home inspectors that they have the potential for a conflict of interest because they serve on the Board that licenses them. Jarrett asked the members if anyone needed to recuse themselves. None noted. Approval of February 26, 2016 Minutes Fred Herndon suggested that staff email the minutes to all Board members prior to the meeting to allow more time to review. Butch Upton made a motion to approve the minutes as written. Chris Noles seconded the motion. The minutes were approved by voice vote unanimously. Staff Reports - Director Director Hejduk reported that the Board sets goals annually and progress is tracked by an Action Item list. For the current fiscal year FY 2015-2016, one priority is the Board-developed Update Course for FY 2016-2017. Hejduk reported that staff did not receive any bids in response to the Invitation For Bid ( IFB ) for the update course. The Education Committee decided to repost the IFB. Hejduk reported that the State Exam would be available in a computer based format and that staff will do a demonstration during the Exam Committee report. Hejduk reported that Board s legal counsel, Denise Stanford, has volunteered to begin the rules review process required by the Rules Review Commission before November 2017 [Details are in the Standards of Practice Committee Report of these minutes]. Hejduk stated that the Education Committee identified that the update course for FY 2017-2018 would be on Building Code changes. Hejduk stated that the budget preparation FY 2016-2017 would be discussed during the Finance Committee report. Page 1 of 9
Fred Herndon, Chairman of the Report Review Advisory Committee, addressed the Committee s consideration of outsourcing the review of reports from new licensees. Hejduk reported that staff and Committee members would discuss contracting with outside sources for these reviews. Hejduk stated that the insurance requirements for surety bonds were also discussed during the Committee meeting. Hejduk reported that the annual budget preparation and execution process allows the Board to determine what funds are available and what may be spent. Some of the cash that the Board has is allotted to contracting with third parties. The Board has three recurring items that it normally contracts with third parties to perform. These are; 1.) the annual audit, 2.) a field inspector that helps with complaint investigations in the western part of the State, and 3.) the majority of Board-developed update courses. Hejduk stated that going forward staff will be preparing an invitation for bid on the update course instead of a personnel services agreement (contract) in accordance with revised State policy. Tony Jarrett stated there is also an issue regarding videotaping home inspectors in homes during inspections. Jarrett mentioned that this action item should be sent to the Forms Committee of the North Carolina Association of Realtors. Jarrett stated that he could help connect staff with the Chairman of the Forms Committee. Visitor Seth Palmer stated Will Martin of NCAR is legal counsel to the Forms Committee. When addressing the action items list, Butch Upton stated that recommended language addressing failed thermal seals on windows could be removed. After futher discussion with members of the industry, standardized language does not seem to be needed. An action item from the Charlotte area regarding a concern for payment for services at the house closing was discussed. Butch Upton felt that that payment at closing should not be a problem. Board attorney Denise Stanford addressed a concern by reading.1116(j) Code of Ethics; licensees shall not inspect properties under contingent arrangements whereby any compensation or future referrals are dependent on reported findings or on the sale of the property. Herndon stated that payment at closing would need to be discussed in the Standards and Rules Committee to determine if the Board should consider this a Code of Ethics violation or whether a rule change may be appropriate. Hejduk stated that about seventy licensees have surety bonds. Hejduk had a call from an attorney who requested a surety bond template for the home inspector license. Hejduk reported that the Board did not have a template for a surety bond on the Board s website. Attorney Stanford stated that she had proposed language for the template. She requested that this item be discussed in executive session with the Board members. Herndon requested that this be discussed under new business. Terri Tart, License Administrator, reported for the quarter from January 1, 2016 ending March 31, 2016. The Board had 46 new licensees and stated there were 47 new licensees to date. Tart stated that there are currently 1,177 active home inspectors. Tart reported that during the prior year, 145 licenses were issued. Tart stated that there were 89 applications approved from January 1 st through March 31st. Tart stated that year to date, there were 92 applications approved. Tart reported that there were 241 applications approved during the previous year. Page 2 of 9
Tart stated that there are currently a total of 1,181 active licensees. Tart reported that there are seven licenses in her queue to issue. Tart report that this would make a total of 1,188 active licenses. Tart stated that her time spent administering the licensure examinations has increased from a half day to a full day. Tart reported that there are about 50-60 applicants signing up for each day examinations are scheduled. Tart stated that the failure rate is decreasing and the passing rate is increasing and that there are more applicants coming in through the pre-licensing program than from those qualifying to sit for the examination because they are general contractors. Tart reported that there were 54 applicants signed up for the next examination. Tart reported that all active licensees can be found on the Board s web-site. Tart stated that she had never been on a home inspection. Tart stated that Mike Hejduk and Chris Noles approved her to go on one with prior Board Chairman Talmadge Jones in the Manteo, N.C. area. Tart reported that she was impressed with the extent of effort involved in conducting a home inspection. Tart stated that she also had the opportunity to visit the local building inspection department in Manteo, N.C since she also certifies code enforcement officials. Director Hejduk turned the staff report over to Jennifer Hollyfield, Education Coordinator. Hollyfield reported that the Board has 36 active sponsors and 26 active instructors. Hollyfield stated that the Board has 49 active elective courses and that some of those are offered online. Hollyfield reported that as of January 1, 2016 staff had 6 courses submitted for review. Six of the courses were approved and none were denied. There are 10 courses scheduled currently and 27 course rosters were submitted. Hollyfield reported that Eric Coates and Thomas Williams were working on scheduling their courses for the summer. Board rules require that courses be offered in all geographical areas. Chairman Herndon asked Hollyfield if the C.E. credit from the North Carolina Licensed Home Inspection Association (NCHLIA) conference in February was included. Hollyfield reported that David Hahn turned in the rosters and fees the prior day. Director Hejduk turned the staff report over to for Phil Joyner, Investigator. Joyner stated that the complaints are steadily coming in. Joyner stated that there was a hearing scheduled in July. Joyner reported that there were eight (8) investigations that the Investigation Review Committee will make recommendations on during the Investigation Review Committee report. Joyner stated that he had two (2) investigations requiring site visits. Joyner reported that would leave six (6) remaining investigations. Joyner also reported that there were two (2) more complaints that had come in during the prior week that were not on this report. Vice Chairman Jarrett questioned Joyner if the hearing was scheduled on July 14, 2016. Joyner stated that July 14, 2015 was the date the complaint was received. Joyner stated that the hearing was tentatively scheduled for Wednesday, July 13, 2016, committee meetings were scheduled for Thursday, July 14, 2016 and the regularly scheduled board meeting would be held on Friday, July 15, 2016. Chairman Herndon asked Joyner if the proposed consent agreement for complaint #619 Smith had been sent out. Joyner stated yes, that there had been some discussion between Hejduk and Smith. Joyner also stated that Smith wanted some modifications to the consent agreement. The modifications were discussed during the Investigation Review Committee meeting and the terms will be sent to Mr. Smith with the Committee s decision. Herndon asked Joyner if the proposed consent agreement had been sent out for complaint #631 Duncan. Joyner referred this question to Hejduk. Page 3 of 9
Herndon asked Joyner if the proposed consent agreement for complaint #629 Sabol had been signed. Joyner stated that the consent agreement was in the Chairman s book for his signature today. Herndon stated that complaint #628 Blalock was to dismiss with a letter of caution. Herndon asked Joyner how far along was he on complaint #640 Lee. Joyner stated that complaint #640 did not require a site visit. Joyner reported that complaint #632 King was set to schedule a site visit. Butch Upton asked what criteria was used to determine the need for a site visit. Joyner stated that he makes the initial determination on whether or not a site visit is needed. Joyner also stated that he discusses each complaint with Hejduk to determine whether a site visit is needed or not. Chris Noles asked how many site visits should be performed a year. Joyner stated that two out of ten complaints require site visits. Joyner reported that there have been about 25 complaints since July of 2015. Herndon asked Joyner about complaint #635 and #636 in which the responses were received 12/28/2015. Joyner stated that the complaints came in from the realtor. Joyner reported that complaint #639 needed more information to complete. Joyner stated that he just received the response on complaints #642 and #644 from the licensees. Director Hejduk stated that the next Board meetings will be held July 15 and October 7, 2016. Hejduk stated that Marion Peeples term expires in July. Hejduk reported that staff has not received any news about the Governor s appointments. Hejduk stated that all Board members are up to date on their ethics training. Herndon asked Board counsel if the Notice of Hearing had been sent out yet. Stanford stated that the notice would go out during the next week providing a month s advance notice. Committee Reports Application Committee Herndon reported that Waverly Sawyer was in Duke Hospital for a heart procedure. Herndon asked all Board members and staff to keep Mr. Sawyer and his family in their thoughts and prayers. Examination Committee Chris Noles reported that the Committee met on April 7, 2016. Noles stated that staff was working on Computer Based Testing (CBT). Hejduk demonstrated the CBT so that the Board members could view the format for themselves. CBT could be administered in the NCDOI regional offices in New Bern, Asheville and Charlotte. The CBT is timed and graded after the exam is taken. Hejduk stated that the exam would be provided on a limited voluntary basis initially. Hejduk stated that the CBT would be another option in addition to taking the booklet exam. Hejduk reported that the Moodle software would allow a mixture of questions to develop different exams. We currently have three exams. Peeples asked Hejduk how many of the exams have been uploaded in Moodle. Hejduk reported that exam 805 was uploaded in its entirety. Hollyfield reported that she is currently uploading exam 806. Hejduk stated that the HILB maintenance window would be July through September. Peeples thanked Hejduk and staff for all the hard work. Hejduk reported that he met with legal counsel and he was told to post signage that the applicant is subject to remote video monitoring. Hejduk reported that not only does Moodle offer exams but also could allow for taking continuing education courses. Herndon asked Hejduk to have a couple of people take the exam and report back to the oard in July. Page 4 of 9
Finance Committee Tony Jarrett gave a brief review on the budget year and the basis for the budget. The Fiscal Year runs July 1 st thru June 30 th. Jarrett reported revenues for July 1, 2015 through March 31, 2016. License Fee revenues were $228,760 and Education Fee revenues were $57,345 for a total of $286,175 Expenditures were $139,846 and the Fund Balance was $755,115. Jarrett reported that revenues exceeded expenses. Jarrett stated that this is probably one of the Board s best years. Jarrett reported that the Board needed at least two years of reserves. The Board is ahead of schedule with the budget. Jarrett stated that the only unknown is the lease. Jarrett stated that maybe the Board can travel once again now that revenues are up. Visitor Wilson Fausel stated that there may be a conference in February of 2017. Hejduk stated that the Gregory Enterprises facility in Burlington, N.C. would be a centrally located facility for a Board meeting. Jarrett stated that the real estate community could have a good venue for a meeting facility. Herndon stated that there are funds available to contract with tird parties to perform some of the report reviews. Legislative Committee Tony Jarrett stated that there was no meeting. Chris Noles reported that the next legislative session is in April. The only issue Noles is aware of is the ongoing effect of the Program Evaluation Division (PED) study recommendations on occupational licensing boards. To date, there has been no discussion about the NCHILB. Noles will keep the Board updated if something develops. Education Committee Butch Upton reported that the IFB would be reposted and extended to April 15, 2016 for bids to be in. Noles stated that July 14, 2016 would be the completion date for the course. Herndon stated that Gregory would not have a problem with meeting the deadline date. Upton stated that next year update would be on code changes. Upton asked is there someone who could help with next year s update course. Noles stated that there was a code consultant that we could use. Herndon stated that home inspectors do need knowledge of the code. Herndon asked how you apply DDID to code changes. Noles reported that the code changes are now on a six year cycle. Noles stated that changes still occur as Building Code Council approved amendments during the six year cycle. Noles reported that an attorney would have to teach any law course. Noles reported that home inspectors don t get that much exposure to code. Hejduk reported that NCDOI would be able to offer more continuing education course through Moodle. Hejduk reported that we are not quite there yet to offer these courses. Upton asked if we could allow sponsors to choose what course they would want to teach for the update course. Hejduk stated that the committee would need to make that decision. Hollyfield stated that the inspectors taking such courses could not take the same course in a three year period. Investigation Review Committee Marion Peeples reported that there was a hearing scheduled for July 13, 2016 for Complaint # 620 Harmon (License No. 502). Peeples made a motion for the consent agreement be approved for complaint #629 Sabol (License No.3345). Upton seconded the motion. The motion was approved unanimously. Peeples made a motion to dismiss Page 5 of 9
with a letter of caution for complaint #628 Blalock (License No. 3494). The motion was seconded by Noles. The motion was approved unanimously. Peeples made a motion to dismiss the following complaints. Dismiss 617 Hessler #3371 (Poore) 624 Bently #142 (Lewis) 643 Canney #3395 (Nguyen) Tony Jarrett seconded the motion. The motion was approved unanimously. Peeples made a motion to approve issuance of a cease unlicensed activity letter for Complaint #637 Hanna. The motion was seconded by Noles. The motion was approved unanimously. Stanford stated that she will draft and or review the letter before staff sends it out. Standards of Practice / Rules & Interpretations Committee Butch Upton stated that he would have Board legal counsel report. Stanford stated that the Board is required to review its rules every ten years. Stanford reported that every rule would have to be reviewed and the Board would need to report to the Rules Review Commission if there were any public comments submitted at the time rulemaking was enacted. Stanford stated that these rules would need to be submitted. Stanford reported that this would have to be done by November 15, 2017. Stanford stated that there would be a 60 day public comment period. Stanford reported that we would need to be on the October 15, 2017 docket. Stanford will report back to the board in July. Stanford read the definitions for section, 150B-21.3 A. (1) Commission Means the Rules Review Commission. (2) Committee Means the Joint Legislative Administrative Procedure Oversight Committee. (3) Necessary with substantive public interest. Means any rule for which the agency has received public comments within the past two years. A rule is also necessary with substantive public interest if the rule affects the property interest of the regulated public and the agency knows or suspects that any person may object to the rule. (4) Necessary without substantive public interest. Means a rule for which the agency has not received a public comment concerning the rule within the past two years. A necessary without substantive public interest rule includes a rule that merely identifies information that is readily available to the public, such as an address or telephone number. (5) Public comment. Means written comments objecting to the rule, in whole or in part, received by an agency from any member of the public, including an association or other organization representing the regulated community or other members of the public. (6) Unnecessary rule. Means a rule that the agency determines to be obsolete, redundant, or otherwise not needed. Stanford stated the report shall include the following items: a. The agency initial determination. Page 6 of 9
b. All public comments received in response to the agency s initial determination. c. The agency s response to the public comments. d. A summary of the Commission s determinations regarding public comments. e. A determination that all rules that the agency determined to be necessary and without substantive public interest and for which the Commission determined that the public comment was without merit be allowed to remain in effect without further action. f. A determination that all rules that the agency determined to be unnecessary and for which no public comment was received or for which the Commission determined that the public comment was without merit shall expire on the first day of the month following the date the report becomes effective in accordance with this section. g. A determination that all rules that the agency determined to be necessary with substantive public interest or that the Commission designated as necessary with public interest as provided in this subdivision shall be readopted as though the rules were new rules in accordance with this Article. Stanford stated that she would report back to the Board in July. Personnel Committee Chairman Herndon stated he had no report at this time. Advisory Committee / New Licensee Report Reviews Chairman Herndon stated that the Board may need to contract to perform review of reports submitted by new licensees. Mike Hejduk stated that the State Controller s Office has cautioned about excessive use of Personnel Service Agreements (Contracts) and has urged alternate contract vehicles such as Invitation for Bid (IFB) to promote greater competition and cost savings. Herndon asked who our target audience is. Hejduk stated that he can email the IFB to anyone. Hejduk stated that he would draft an IFB for consideration and that establishing candidate selection criteria would be a major concern. Public Comments Chairman Herndon stated that no one had any public comments. Unfinished Business Fred Herndon stated that sellers are remotely videoing and recording the inspections using home cameras and nanny cams without consent of the parties to the inspection. Herndon said that it was illegal to record a conversation without at least one of the participant s knowledge. Denise Stanford, Board legal counsel, agreed with Herndon and stated if the parties are not recording sound, but images, it should be disclosed to the parties. Herndon stated that this would be discussed at the next Standards of Practice Committee meeting. Mike Hejduk stated that we have a prior advisory opinion on a home inspector videotaping their own inspections. Chris Noles asked if this was a potential rule change or an interpretation and whether public comment might be appropriate. Hejduk noted that the majority of inspections are performed pursuant an NC Association of REALTORS / NC Bar Association Offer to Purchase and Contract and that the Due Diligence provisions of these contracts could be a place to start. Stanford agreed that the Due Diligence clause could provide an opportunity to address this. Page 7 of 9
Herndon asked, What may be the use of home inspection reports by other parties? Stanford stated that suggested language should be developed for limiting use by third parties within the contract because the inspector has lost control once the report has been sent to a third party. Stanford read some suggested language to add to the contract and perhaps even to the end of the report to make it clear a third party is not entitled to rely on it. The report is for the benefit of the client only and this language would state the inspection report provided to the client is being prepared per the client request and benefit of the client only. The language could include the following provisions: Third parties are not entitled to use or rely upon the inspection report or the terms of this contract. The client recognizes that this report is solely for the benefit of the client and that any person designated by the client to receive information in this report shall be subject to the terms and conditions contained herein. Such designation shall be provided in writing to the inspector. The inspection report shall be the confidential property of the inspector and the client and neither shall disclose or permit use by third parties without the other s written permission. Herndon stated that the language could be put on the Board s website. Herndon requested to add this item to the agenda of the next Standards of Practice committee meeting. Jarrett stated that this issue would need to be sent to the Joint Forms Committee. Jarrett stated that he would connect Mrs. Stanford with Will Martin with the NC Association of REALTORS New Business Peeples stated that mold in the crawl space should be sent to a mold expert. Jarrett asked if inspectors can report this in their report without tangible evidence. Peeples stated that inspectors may or may not report the issue of mold in the crawl space and refer to an expert for further evaluation. Peeples just wanted to bring this issue up with the Board members. Chairman Herndon asked that the Board go into closed session at 11:59 AM. to meet with legal counsel pursuant to N.C. Gen. Stat. 143-318.11(a)(3). Herndon requested that the Board reconvene in open session at 12:25 PM. Herndon asked for a motion to approve the surety bond template language drafted by legal counsel and to post the template language on the Board s website. Arthur Hall seconded the motion. The motion passed unanimously. Peeples made a motion upon initial licensure or renewal that this form remain on file with the NC Home Inspector Licensure Board. Upton seconded the motion. The motion passed unanimously. Peeples amended his motion. Peeples stated that a copy of this surety bond should remain on file with the NC Home Inspector Licensure Board. Upton seconded the motion. The motion passed unanimously. Adjournment Marion Peeples made a motion to adjourn the meeting. The motion was seconded by Chris Noles. The motion was passed unanimously. Page 8 of 9
Respectfully submitted, Christian Noles, P.E. Secretary Note: This meeting has been recorded on CD. Anyone desiring copies should contact the NC Department of Insurance, Engineering Division, Qualification Assurance Section, for reproduction costs. [G:\Public Folder\RPD File Exchange\NCHILB] Page 9 of 9