DOS-14-10-00008-P Standards of Practice and Code of Ethics for Home Inspectors

4/7/10 N.Y. St. Reg. DOS-14-10-00008-P

NEW YORK STATE REGISTER

VOLUME XXXII, ISSUE 14

April 07, 2010

RULE MAKING ACTIVITIES

DEPARTMENT OF STATE

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. DOS-14-10-00008-P

Standards of Practice and Code of Ethics for Home Inspectors

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:

Proposed Action:

Addition of Subparts 197-4 and 197-5 to Title 19 NYCRR.

Statutory authority:

Real Property Law, section 444-c

Subject:

Standards of Practice and Code of Ethics for home inspectors.

Purpose:

To adopt Standards of Practice and a Code of Ethics for home inspectors.

Substance of proposed rule (full text is posted at the following State website: www.dos.state.ny.us):

Subpart 198-4 Code of Ethics for Home Inspectors

Section 197-4.1 Fundamental Rules

Home inspectors are expected to exhibit honesty and integrity and adhere to the provisions of Article 12-B of the Real Property Law and all regulations. Home inspectors are also required to cooperate with investigations by the Department of State.

Section 197-4.2 Written Contracts

Home inspectors are required to provide written, pre-inspection agreements that clearly and fully describe the scope and cost of services to be provided. This agreement must contain a specific statement advising that home inspectors are licensed by the Department of State and describing the scope of services permitted by statute.

Section 197-4.3 Non-Disclosure

Home inspectors may not disclose the contents of a report without the prior consent of the client.

Section 197-4.4 Unlicensed and Unlawful Activity

Home inspectors may not knowingly permit or aid and abet any activity that is a violation of Article 12-B of the Real Property Law. Home inspections shall not determine the property's market value, property boundary lines, easements, limitation of property use, or the property's compliance with law.

Section 197-4.5 Competency

Home inspections shall conduct home inspections in compliance with the Standards of Practice and shall ensure that home inspections are performed by persons with competence.

Section 197-4.6 Written Reports

Home inspectors shall provide written reports containing the results of the home inspection. Reports shall not contain false or misleading information and shall describe the services provided.

Section 197-4.7 Conflicts of Interests

Home inspectors shall avoid conflicts of interest.

Section 197-4.8 Fraud, Misrepresentation and Dishonesty

Home inspectors shall not engage in this type of behavior.

Section 197-4.9 Promotion and Advertising

Advertisements shall be truthful and shall not be false, misleading or deceptive. Inspectors shall maintain copies of advertisements for one year following the advertisement's last publication.

Subpart 197-5 Standards of Practice for Home Inspectors

Section 197-5.1 Definitions

This section defines the following terms: alarm systems, automatic safety controls, central air conditioning, component, cross connection, dangerous or adverse situation, decorative, dismantle, engineering, engineering study, functional drainage, functional flow, further evaluation, household appliances, inspect, installed, normal operating controls, observable, observe, onsite water supply quantity, operate, primary windows and doors, readily accessible, readily operable access panel, recreational facilities, report, representative number, roof drainage systems, safe access, safety glazing, shut down, solid fuel heating device, structural component, system, technically exhaustive, under floor crawl space, unsafe and water supply quality.

Section 197-5.2 Purpose and Scope

The Standards of Practice establish minimum standards for home inspectors. Home inspectors may observe and report upon other systems and components not required by the Standards. Home inspectors may also provide limited reports that do not meet the minimum requirements of the Standards so long as the home inspection report describes the scope of work and services provided.

Section 197-5.3 Minimum Requirements

Home inspectors shall observe and report on the systems and components set forth in the Standards of Practice including those that are deficient, not functioning properly and/or unsafe. If a particular system or component is not observed, the inspection report shall so indicate.

Section 197-5.4 Site Conditions

Home inspectors shall observe and report on the site conditions set forth in this section. They are not required to report on fences and privacy walls or the health/condition of trees, shrubs and other vegetation.

Section 197.5.5 Structural Systems

Home inspectors shall observe and report on the structural systems set forth in this section.

Section 197-5.6 Exterior

Home inspectors shall observe and report on the exterior components and systems set forth in this section. They are not required to observe and report on the exterior components and systems delineated.

Section 197-5.7 Roof Systems

The roofing systems and components which home inspectors are and are not required to observe and report upon are set forth in this section.

Section 197-5.8 Plumbing Systems

The plumbing systems and components which home inspectors are and are not required to observe and report upon are set forth in this section.

Section 197.5.9 Electrical System

The electrical systems and components which home inspectors are and are not required to observe and report upon are set forth in this section.

Section 197-5.10 Heating System

The heating systems and components which home inspectors are and are not required to observe and report upon are set forth in this section.

Section 197-5.11 Air Conditioning System

The air conditioning systems and components which home inspectors are and are not required to observe and report upon are set forth in this section.

Section 197-5.12 Interior

The interior systems and components which home inspectors are and are not required to observe and report upon are set forth in this section.

Section 197-5.13 Insulation and Ventilation

The insulation and ventilation systems and components which home inspectors are and are not required to observe and report upon are set forth in this section.

Section 197-5.14 Fireplaces

The fireplace systems and components which home inspectors are and are not required to observe and report upon are set forth in this section.

Section 197-5.15 Attics

The attic systems and components which home inspectors are and are not required to observe and report upon are set forth in this section.

Section 197-5.16 Limitations and Exclusions

The systems, components and conditions upon which home inspectors are not required to report are set forth in this section.

Text of proposed rule and any required statements and analyses may be obtained from:

Whitney Clark, NYS Department of State, Division of Licensing Services, Alfred E Smith Office Building, 80 South Swan Street, Albany, NY 12231, [phone], email: [e-mail]

Data, views or arguments may be submitted to:

Same as above.

Public comment will be received until:

45 days after publication of this notice.

This action was not under consideration at the time this agency's regulatory agenda was submitted.

Regulatory Impact Statement

1. Statutory authority:

Real Property Law section 444-l requires the Department of State, to establish rules and regulations necessary to implement the provisions of Article 12-B of the Real Property Law. Section 444-c(6) authorizes the Home Inspection Council to recommend regulations to the Secretary of State including a Code of Ethics and Standards of Practice. In accordance with this statutory authority, the Department of State is proposing this rule making.

2. Legislative objectives:

Real Property Law, Article 12-B, requires the Department of State to license and regulate home inspectors. The intent of the statute, as described in the supporting bill memorandum, is consumer protection. The rule advances the legislative objectives by prescribing ethical and professional standards for home inspectors.

3. Needs and benefits:

The rule will apply to licensed home inspectors. A new Article 12-B of the Real Property Law was recently enacted in Chapter 461 of the Laws of 2004 to require the Department of State to license and regulate home inspectors. In pertinent part, section 444-c(6) of the statute authorizes the Home Inspection Council to recommend regulations to the Secretary of State including a Code of Ethics and Standards of Practice for licensed home inspectors. The rule making seeks to adopt these statutorily permitted regulations.

The New York State Home Inspection Council is an advisory board established by Article 12-B of the Real Property Law. See section 444-c. The Council is composed of home inspection licensees and members of the public. It advises the Department of State on the administration and enforcement of the provisions of Article 12-B of the Real Property Law and recommends regulations to implement the provisions of Article 12-B, including a Code of Ethics and Standards of Practice. See section 444-c(6)(c). The Council has recommended this rule making and reported to the Secretary that the same is crucial for the protection of consumers and for meeting the legislative intent behind the enactment of the amendments to Article 12-B. In developing the proposed Code of Ethics and Standards of Practice, the Department considered existing industry documents and solicited comments from licensed home inspectors and the public. Once adopted, the Code of Ethics and Standards of Practice will establish uniform standards of conduct for home inspectors throughout the State, thereby protecting consumers and clarifying for licensees their duties in providing home inspection services to clients.

4. Costs:

a. Costs to regulated parties:

This rule will not impose any costs to regulated parties.

b. Costs to the Department of State:

The rule does not impose any costs to the agency, the State or local governments for the implementation and continuation of the rule.

5. Local government mandates:

The rule does not impose any program, service, duty or responsibility upon any county, city, town, village, school district or other special district.

6. Paperwork:

The rule requires licensees to maintain certain standard business records for a reasonable period of time to aid the Department of State in enforcing the provisions of the statute and regulations. The new recordkeeping requirements are minimal and reasonable. For example, the proposed Code of Ethics requires home inspectors to maintain, for a period of one year following last publication, copies of all advertisements. In developing this standard, the Department sought to impose a reasonable retention period so as to meet the Department's needs to ensure consumer protection and the licensee's needs to not maintain voluminous copies of paperwork for an extended duration of time.

7. Duplication:

This rule does not duplicate, overlap or conflict with any other state or federal requirement.

8. Alternatives:

The New York State Home Inspection Council formed a subcommittee to prepare the proposed Code of Ethics and Standards of Practice. In developing the proposed Code of Ethics and Standards of Practice, the Department considered existing industry documents. After the proposed regulations were approved by the entire Council, they were published on the Department of State's web-site for public review and comment. Numerous comments were received and considered. These comments were discussed with the Council at two open meetings, at which additional comments were received and entertained.

One topic which generated numerous comments was the proposal to require a disclaimer to the home inspection statement of services. Many licensed home inspectors felt that the language that was initially proposed would unduly limit the services which they provide to clients and alter the scope of services which home inspectors have historically provided to the public. In considering these comments, the Department considered alternative language that was suggested and revised the proposed language so as to address the expressed concerns.

Another comment considered was a suggestion to make the proposed Code of Ethics and Standards of Practice more closely resemble existing industry documents. Because the proposed Code of Ethics and Standards of Practice will be implemented by regulation, this comment could not be followed. In drafting the proposed regulations, however, the Department sought, in consultation with the Council, to adhere to existing industry standards of practice.

After due consideration of all suggested alternatives, the proposed regulations were modified as necessary and recommended to the Department of State by the Council. During the public comment period of this proposed rule, the Department of State and the New York State Home Inspection Council will receive and consider any additional recommended alternatives.

9. Federal standards:

There are no federal standards regulating the registration of real estate licensees. Consequently, this rule does not exceed any existing federal standard.

10. Compliance schedule:

Prospective licensees will be required to comply with the rule upon publication of the Notice of Adoption.

Regulatory Flexibility Analysis

1. Effect of rule:

The rule will apply to licensed home inspectors. Recently, a new Article 12-B of the Real Property Law was enacted in Chapter 461 of the Laws of 2004 to require the Department of State to license and regulate home inspectors. In pertinent part, the statute requires the Department of State, in consultation with the New York State Home Inspection Council, to adopt a Code of Ethics and Standards of Practice for home inspectors. In preparing the proposed regulations, the Department of State published the same for public review and comment. These comments were considered by the Department of State and the Council and the proposed documents were modified as necessary. The rule making proposes to adopt the statutorily required Code of Ethics and Standards of Practice and will apply to all licensed home inspectors.

The rule does not apply to local governments.

2. Compliance requirements:

The compliance requirements proposed by the rule are requirements that are consistent with Article 12-B of the Real Property Law, sound ethical practices and industry standards of practice. In preparing the proposed Code of Ethics and Standards of practice, the Department considered existing industry documents and solicited comments from licensed home inspectors and consumers. The rule proposes ethical principles and prescribes minimum standards of practice to be followed by home inspectors in furtherance of the statutory intent of consumer protection.

The rule does not impose any compliance requirements on local governments.

3. Professional services:

Home inspectors will not need to rely on any new professional services in order to comply with the rule. The recordkeeping requirements proposed by the rule are minimal and require the retention of standard business records for a reasonable amount of time so as to aid the Department of State with enforcement of the statute and regulations. The Code of Ethics and Standards of Practice merely prescribe ethical standards to be followed by home inspectors. These ethical requirements and professional standards have been drafted in consultation with the Home Inspection Council and after consideration of public comment. No comments were received indicating that licensees would require professional services to comply with the proposed regulations.

The rule does not impose any compliance requirements on local governments.

4. Compliance costs:

The proposed rule making merely prescribes ethical and professional standards for licensed home inspectors and will not result in any foreseeable compliance costs.

5. Economic and technological feasibility:

Since the rule making merely prescribes ethical and professional standards for licensed home inspectors it will be technologically feasible for licensees to comply with the rule.

6. Minimizing adverse impact:

The Department of State does not foresee that this rule will have any adverse economic impact.

7. Small business participation:

Prior to proposing the rule, the Department of State published the proposed regulations on its website and solicited comments from the public. Many comments were received, including many from small businesses. After receiving and considering the public comments, the Department of State discussed the comments with the Home Inspection Council at two public meetings, at which additional comments were received and considered. After considering all public comments, the proposed regulations were revised as necessary. The Notice of Proposed Rule Making will be published by the Department of State in the State Register. The publication of the rule in the State Register will provide additional notice to local governments and small businesses of the proposed rule making. Additional comments will be received and entertained.

Rural Area Flexibility Analysis

A rural flexibility analysis is not required because this rule does not impose any adverse economic impact on rural areas or any reporting, recordkeeping or other compliance requirements that will have an adverse effect on public or private entities in rural areas.

The compliance requirements provided by the rule making have been developed by the Department of State in consultation with the New York State Home Inspection Council. The Council consists of members of the home inspection profession, including members from rural areas of the State. The compliance requirements proposed by the rule are requirements that are consistent with the statute, sound ethical practices and industry standards of practice. The reporting and record-keeping requirements proposed by the rule either mirror requirements set forth in the statute or require the maintenance of standard business records for a reasonable amount of time so as to assist the Department of State with enforcement of the statute and regulations.

Prior to proposing the rule making, the Department of State published the proposed Code of Ethics and Standards of Practice for public review and comment. No comments were received indicating that the proposed regulations would impose adverse impacts on rural areas. Accordingly, the Department of State does not foresee the proposed rule making have any adverse economic impacts on rural areas or any reporting, recordkeeping or other compliance requirements that will have an adverse effect on public or private entities in rural areas.

Job Impact Statement

This rule will not have any substantial adverse impact on jobs or employment opportunities for licensed home inspectors. A new Article 12-B of the Real Property Law was recently adopted to require the Department of State to license and regulate home inspectors. In pertinent part, section 444-c of the statute requires the Department of State to adopt a Code of Ethics and Standards of Practice for licensed home inspectors. The rule making seeks to adopt these statutorily required regulations.

The proposed Code of Ethics sets forth ethical guidelines and practices for licensed home inspectors while the Standards of Practice prescribes minimum professional standards to be followed by home inspectors in preparing home inspection reports.

Prior to proposing the rule making, the Department of State published both documents for public review and comment. The public comments were reviewed and the documents revised to address public concerns, including that certain provisions would negatively impact upon jobs and employment opportunities for home inspectors. These provisions were either removed or revised in consideration of the public comments received. As drafted, the rule will not have any foreseeable substantial adverse impact on jobs or employment opportunities.