First Regular Session Seventieth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 15-0641.01 Yelana Love x2295 SENATE BILL 15-140 SENATE SPONSORSHIP Todd, HOUSE SPONSORSHIP (None), Senate Committees House Committees Business, Labor, & Technology A BILL FOR AN ACT Concerning the regulation of home inspectors. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) Under current law, home inspectors are not subject to regulation by any state agency. Section 1 of the bill creates the "Home Inspector Licensure Act", which requires home inspectors to obtain a license to perform home inspections in Colorado. The bill creates the home inspector's licensing board (board) in the division of professions and occupations in the department of regulatory agencies. The board is required to establish standards and procedures for the licensure, examination, suspension, revocation, and renewal of licensure of home inspectors. The board is also required to establish application, examination, and renewal fees. The bill requires a person seeking a license as a home inspector to submit application materials and an application fee to the board. A home inspector's license is valid for 2 years and renewable upon application and completion of continuing education approved by the board. Section 2 requires a review of the board's duties and functions in licensing home inspectors after 6 years under the existing sunset laws. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. In Colorado Revised Statutes, add article 28.5 to title 12 as follows: ARTICLE 28.5 Home Inspectors 12-28.5-101. Short title. This article shall be known and may be cited as the "Home Inspector Licensure Act". 12-28.5-102. Definitions. As used in this article, unless the context otherwise requires: (1) "Board" means the home inspector licensing board created in section 12-28.5-104. (2) "Client" means a person or entity who contracts, for compensation, the services of a home inspector for the purpose of obtaining a home inspection of a residential building. (3) "Director" means the director of the division of professions and occupations, created in section 24-1-122 (2) (g), C.R.S. (4) "Engage in home inspection" means to provide or offer to provide a home inspection for compensation or other valuable consideration or to hold oneself out to the public as qualified to provide home inspection services. (5) "Home inspection" means a limited visual survey of the components of a residential building according to the board-approved standards of practice, which components include: Heating systems; cooling systems; plumbing systems; electrical systems; structural systems, including exterior and interior surfaces; foundation; and roof. (6) (a) "Home inspector" means a person who is engaged in home inspections. (b) "Home inspector" does not include the following professionals acting within the scope of their professions: (I) Professional engineers; (II) Architects; (III) State municipal or county code inspectors; (IV) Property maintenance inspectors; (V) Plumbers; (VI) Electricians; (VII) Roofers; (VIII) HVAC technicians; (IX) Insurance adjusters; or (X) Appraisers. (7) "National home inspector association" means a home inspector association that: (a) Is operated on a nonprofit basis; (b) Has members in at least ten states; (c) Requires members to pass an examination that tests knowledge of proper procedures for conducting a home inspection; and (d) Requires members to comply with a code of ethics. (8) "Residential building" means a structure that is intended to be, or is in fact, used as a residence and that comprises from one to four family dwelling units. The term does not include commercial use space, commercial units, or common areas. (9) "Standard of practice" means the standard of practice for home inspection adopted by the board. 12-28.5-103. Rule-making authority. The director, under the direction of the board, shall promulgate rules as necessary to carry out the board's duties under this article, including but not limited to: (a) The establishment of an application process for a person seeking licensure as a home inspector; (b) The publication of the standards of practice for home inspectors; (c) The creation, maintenance, and publication of a list of home inspectors licensed in the state; and (d) Any other rules necessary to implement this article. 12-28.5-104. Home inspector licensing board. (1) There is hereby created in the division of professions and occupations the home inspector licensing board. The board consists of the following five members appointed by the governor: (a) Three members who are licensed home inspectors in Colorado. Initial members need not be licensed but must be licensed by July 1, 2016. Of these three inspectors, no more than one licensed home inspector shall be from any one state or national home inspector organization; and (b) Two members from the public who own a residential building in Colorado. (2) (a) Except as provided in paragraph (b) of this subsection (2), each member of the board shall serve a three-year term and may be appointed for no more than two consecutive terms unless their initial term is less than three years. (b) Three members shall serve initial terms of two years. The governor shall determine which appointees will serve an initial two-year term. (c) Any vacancy occurring during a term shall be filled by appointment by the governor for the unexpired term. (3) Each member shall be a resident of Colorado. The three members who are home inspectors shall: (a) Be licensed to perform home inspections in Colorado, except for the initial board members who shall be licensed by July 1, 2016; (b) Have experience performing home inspections for five years immediately preceding their appointment; and (c) Have completed at least one thousand home inspections for compensation. (4) No later than thirty days after all members have been appointed to the board, and annually thereafter, the board shall meet for the purpose of organizing and electing officers as the board deems necessary. The board shall meet on a quarterly basis, at times and places as the board shall determine, and at other times and places as may be specified upon the call of the chairperson or a majority of the board members. (5) A majority of board members is required to conduct business. (6) Any member who is absent for three consecutive meetings or who fails to attend fifty percent of all meetings during any calendar year is deemed to have resigned from the board. (7) The governor may remove a member of the board for misconduct, neglect of duty, or incompetence. Removal by the governor is final and not subject to review. (8) Each member of the board shall receive the same compensation and reimbursement of expenses as is provided for members of boards and commissions in the division of professions and occupations pursuant to section 24-34-102 (13), C.R.S. Payment for all per diem compensation and expenses shall be made out of annual appropriations from the division of professions and occupations cash fund provided for in section 24-34-105, C.R.S. (9) A member of the board or the board's staff, a person acting as a witness or consultant to the board, and a witness testifying in a proceeding authorized under this article is immune from liability in a civil action for acts occurring while acting in his or her capacity as a board member, member of the board's staff, consultant, or witness if the person is acting in good faith within the scope of his or her respective capacity, made a reasonable effort to obtain the facts of the matter as to which he or she acted, and acted with the reasonable belief that the action was warranted by the facts. 12-28.5-105. Powers and duties of board. (1) The board shall, at a minimum: (a) Establish qualifications for the licensure of home inspectors as the board finds necessary, in addition to the requirements in sections 12-28.5-107 to 12-28.5-109; (b) Establish requirements for training programs and continuing education providers, and maintain and publish a list of approved training programs and continuing education providers; (c) Establish procedures for disciplining a home inspector; (d) Grant the licenses of duly qualified home inspector applicants in accordance with this article; (e) Examine license applicants for qualifications; (f) Establish fees for home inspection applications and examinations. The amount of the application fee, together with any associated renewal, reciprocity, and examination fees, shall be the minimum amount necessary to pay for the direct costs associated with the administration of this article related to the regulation of home inspectors; (g) Prescribe the forms to be used for applications for home inspector licenses; and (h) Adopt rules necessary to administer this article. 12-28.5-106. Unlawful acts - penalties. (1) After June 30, 2016, it is unlawful for a person to: (a) Engage in home inspections, for compensation, without a valid license issued by the home inspector licensing board; (b) Knowingly employ, or knowingly supply for employment, a person to perform home inspection services who does not possess a home inspection license; (c) Falsely hold oneself out as qualified to conduct home inspections; or (d) Violate any other provision of this article. (2) Any person who violates subsection (1) of this section commits a class 1 misdemeanor and shall be punished as provided in section 18-1.3-501, C.R.S. Any person who subsequently violates any provision of subsection (1) of this section within five years after the date of a conviction for a violation of subsection (1) of this section commits a class 5 felony and shall be punished as provided in section 18-1.3-401, C.R.S. (3) A licensed home inspector shall carry the home inspector's license while engaging in work as a home inspector and shall show the license to any client upon request. 12-28.5-107. Licensure by examination - fee. (1) The board shall prescribe the form and content of an examination to determine the qualifications of a person who applies for a license to engage in home inspection. The examination shall be designed to test the competence in home inspection practice and administered in accordance with nationally recognized psychometric standards in a manner acceptable to the board. To avoid conflicts of interest, the board shall establish and administer the examination independently of any home inspector membership association, training program, school, or franchise. The division, under direction of the board, may contract with a national independent testing service to provide and conduct the examinations. (2) A person seeking a license as a home inspector shall apply to the board in writing on forms prescribed by the board and shall provide the following: (a) The applicant's name, residence address, and business address; (b) A description of the applicant's qualifications to become a home inspector, including the length and nature of the applicant's experience; (c) Documentation of successful completion of high school or a high school equivalency program; (d) Documentation of successful completion of a classroom or on-line training program of not less than ninety hours that is approved by the board; (e) Proof of successful completion of an examination approved by the board; (f) Proof of completion of at least ten training inspections under the direct supervision of a training inspector approved by the board. The training inspector shall have a minimum of five years' experience and have completed one thousand paid home inspections or have met specific qualifications as determined by the board; (g) Proof that the applicant maintains errors and omissions insurance and general liability insurance in the minimum amount of one hundred thousand dollars; (h) A fingerprint-based criminal history record check conducted by the Colorado bureau of investigation; and (i) Other information the board requires. (3) Each application for a home inspector license shall be accompanied by a fee in the amount determined by the board. 12-28.5-108. Licensure by endorsement. Notwithstanding section 12-28.5-107, the board may issue a license to an applicant who holds a home inspector license in another state or jurisdiction that regulates home inspectors if the applicant provides proof that he or she possesses an active license in good standing from another state or jurisdiction that requires qualifications substantially equivalent to or exceeding the qualifications for licensure in Colorado, as determined by the board. An applicant under this section shall pay an application fee in the amount determined by the board. 12-28.5-109. License by prior practice. (1) Notwithstanding section 12-28.5-107, on or before July 1, 2016, the board shall issue a home inspector license to an individual who: (a) Completes an application on forms prescribed by the board; (b) Submits proof that he or she: (I) Has been engaged in the practice of home inspections for compensation for at least two years prior to application; (II) Has performed at least two hundred home inspections for compensation; and (III) Maintains errors and omissions insurance and general liability insurance in the minimum of one hundred thousand dollars; (c) Successfully completes a fingerprint-based criminal history record check conducted by the Colorado bureau of investigation; and (d) Pays an application fee in the amount established by the board. 12-28.5-110. License renewal - reinstatement - rules. (1) A home inspector license expires after two years and is renewable upon: (a) Completion of a renewal application form prescribed by the board; (b) Payment of a license renewal fee in the amount established by the board; and (c) Submitting documentation that the person has completed twenty hours of continuing education courses approved by the board. 12-28.5-111. Scope of home inspection. (1) The purpose of the home inspection is to give a limited visual evaluation of the condition of the residential building and its major components. The home inspection is neither intended nor represented to be technically exhaustive. The home inspection report must include any known deficiencies detected on the day of the inspection that in the sole judgment of the inspector are considered to adversely affect the function or integrity of specific items, components, or systems inspected as defined by the standards of practice. (2) (a) A home inspection is limited to readily accessible areas of the building and is based on observation of the apparent condition of the building and the area of inspection on the date of the inspection. (b) A home inspector is not required to make any representation regarding: (I) Latent or concealed defects that may exist; (II) A warranty or guarantee of any aspect of the inspection, unless specified in advance by written contract; or (III) An assessment of environmental hazards or pest infestations. (3) During a home inspection, a home inspector is not required to perform engineering tests or calculations. A home inspector is not required to evaluate proper sizing of loads or capacities nor compliance with applicable local, state, or national codes, regulations, or rules. (4) The home inspector is not required to inspect any area that, in the sole judgment of the inspector, could be considered harmful or dangerous to the inspector or may cause damage to the property in any way. The use of special instruments or testing devices by the home inspector is not required. 12-28.5-112. Consumer protection - prohibited activities. (1) A home inspector shall present the results of a home inspection in a written report, which may be in the form of a checklist, narrative, or combination thereof. Each home inspection is a nontransferable, confidential report from the home inspector to the client. The client waives confidentiality regarding the report by sharing the report or its contents with any third party. (2) In order to protect consumers, a home inspector shall: (a) Act in good faith in the performance of a home inspection, which includes reporting conditions of the home inspection that may include offering opinions; (b) Remain objective and base opinions on the inspector's areas of education, training, or experience; and (c) Avoid conflicts of interest or activities that compromise professional independence, objectivity, or inspection integrity, including the inspection of properties for compensation in which a home inspector has, or expects to have, a financial interest. (3) Home inspectors shall not: (a) Disclose inspection results or client information without client approval; however, home inspectors may disclose immediate safety hazards to the occupants; (b) Accept any compensation or future referrals that are dependent on reporting specific findings or on the sale of property; (c) Directly or indirectly compensate any party having a financial interest in closing or settlement of real estate transactions for the referral of inspections or for inclusion on a list of recommended inspectors, preferred providers, or similar arrangements; (d) Accept compensation, directly or indirectly, for recommending contractors, services, or products to inspection clients or other parties having an interest in inspected properties; or (e) Accept compensation to repair, replace, or upgrade, any systems or components covered in a home inspection for one year after the inspection. 12-28.5-113. Liability - statute of limitations. (1) An action to recover damages for any error or omission of a home inspector relating to a home inspection that he or she conducts can only be commenced within one year after the date the home inspection is completed. (2) Only a client may recover damages arising from a home inspection or a home inspection report. 12-28.5-114. Discipline procedures. (1) A home inspector is in violation of this article if the inspector: (a) Has been convicted of a felony or has had accepted by a court a plea of guilty or nolo contendere to a felony if the felony is related to the ability to act as a home inspector. A certified copy of the judgment of a court of competent jurisdiction of the conviction or plea is conclusive evidence of the conviction or plea. In considering the disciplinary action, the board shall be governed by the provisions of section 24-5-101, C.R.S. (b) Has violated, or attempted to violate, directly or indirectly, or assisted in or abetted the violation of, or conspired to violate this article, a rule promulgated pursuant to this article, or an order of the board issued pursuant to this article; (c) Has accepted any fees, compensation, or other valuable consideration to influence the outcome of a home inspection; (d) Has used advertising that is misleading, deceptive, or false; (e) Has used fraud or misrepresentation in obtaining a license under this article; (f) Has conducted a home inspection in a fraudulent manner or used misrepresentation in any such activity; (g) Has acted in a manner that does not meet, or failed to act in a manner that meets, the standards of professional home inspecting as adopted by the board by rule. A certified copy of a malpractice judgment of a court of competent jurisdiction is conclusive evidence of the act or omission, but evidence of the act or omission is not limited to a malpractice judgment. (h) Has performed home inspection services beyond his or her level of competency; or (i) Has been subject to an adverse or disciplinary action in another state, territory, or country relating to a license, certificate, or other authorization to practice as a home inspector. A disciplinary action relating to a license or certificate as a home inspector licensed or certified under this article or any related occupation in any other state, territory, or country for disciplinary reasons is prima facie evidence of grounds for disciplinary action or denial of licensure by the board. This paragraph (i) applies only to violations based upon acts or omissions in the other state, territory, or country that are also violations of this article. (2) If an applicant or licensee has violated any provision of this section, the board may deny or refuse to renew the license, or, as specified in subsections (3) and (6) of this section, revoke or suspend the license, issue a letter of admonition to a licensee, or place a licensee on probation. (3) When a complaint or an investigation discloses an instance of misconduct by a licensed home inspector that, in the opinion of the board, does not warrant formal action by the board but should not be dismissed as being without merit, the board may send a letter of admonition by certified mail to the home inspector against whom a complaint was made. The letter shall advise the home inspector of the right to make a written request, within twenty days after receipt of the letter of admonition, to the board to begin formal disciplinary proceedings as provided in this section to adjudicate the conduct or acts on which the letter was based. (4) The board may start a proceeding for discipline of a licensee when the board has reasonable grounds to believe that a licensee has committed any act or failed to act pursuant to the grounds established in subsection (1) of this section or when a request for a hearing is timely made under subsection (3) of this section. (5) Disciplinary proceedings shall be conducted in the manner prescribed by the "State Administrative Procedure Act", article 4 of title 24, C.R.S. (6) As authorized in subsection (2) of this section, disciplinary actions by the board may consist of the following: (a) Revocation of a license. (I) Revocation of a license by the board means that the licensed person shall surrender his or her license immediately to the board. (II) Any person whose license to practice is revoked is ineligible to apply for a license issued under this article until more than two years have elapsed from the date of surrender of the license. A reapplication after the two-year period is treated as a new application. (b) Suspension of a license. Suspension of a license by the board is for a period to be determined by the board. (c) Probationary status. The board may impose probationary status on a licensee. If the board places a licensee on probation, the board may include conditions for continued practice that the board deems appropriate to assure that the licensee is otherwise qualified to practice in accordance with generally accepted professional standards of professional home inspecting, as specified in board rules, including any or all of the following: (I) A requirement that the licensee take courses of training or education as needed to correct deficiencies found in the hearing; (II) A review or supervision of his or her practice as may be necessary to determine the quality of the practice and to correct deficiencies in the practice; and (III) The imposition of restrictions upon the nature of his or her home inspecting to assure that he or she does not practice beyond the limits of his or her capabilities. (7) In addition to any other discipline authorized pursuant to this section, the board may assess a fine of not more than two thousand five hundred dollars per violation against any person who violates this article, the rules promulgated pursuant to this article, or a board order. The board shall transmit any fines collected from a licensee to the state treasurer for deposit in the general fund. (8) A person participating in good faith in making a complaint or report or participating in an investigative or administrative proceeding before the board pursuant to this article is immune from any liability, civil or criminal, that otherwise might result by reason of the action. (9) A licensee who has direct knowledge that a person has violated this article shall report his or her knowledge to the board. (10) The board, on its own motion or upon application at any time after the imposition of discipline as provided in this section, may reconsider its prior action and reinstate or restore a license, terminate probation, or reduce the severity of its prior disciplinary action. The decision of whether to take any further action or hold a hearing with respect to a prior disciplinary action rests in the sole discretion of the board. 12-28.5-115. Hearings. The board may hold hearings on any matter arising under this article and the board shall conduct the hearings in accordance with article 4 of title 24, C.R.S. 12-28.5-116. Judicial review. Any person aggrieved by a final action or order of the board may seek judicial review pursuant to section 24-4-106, C.R.S. 12-28.5-117. Disposition of fees. The board shall transmit all fees collected pursuant to this article to the state treasurer, who shall credit the same to the division of professions and occupations cash fund, as established in section 24-34-105, C.R.S. 12-28.5-118. Repeal of part - review of functions. This article is repealed, effective September 1, 2021. Before the repeal, the department of regulatory agencies shall review the powers, duties, and functions of the board regarding the licensure of home inspectors as specified in this article, in accordance with section 24-34-104, C.R.S. SECTION 2. In Colorado Revised Statutes, 24-34-104, add (52.5) (d) as follows: 24-34-104. General assembly review of regulatory agencies and functions for termination, continuation, or reestablishment. (52.5) The following agencies, functions, or both, terminate on September 1, 2021: (d) The licensing of home inspectors by the home inspector licensing board in accordance with article 28.5 of title 12, C.R.S. SECTION 3. Effective date. This act takes effect July 1, 2015. SECTION 4. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.