The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 7:15 a.m., on Wednesday, March 31, 1999, in Room 2135 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Randolph J. Townsend, Chairman

Senator Ann O’Connell, Vice Chairman

Senator Mark Amodei

Senator Dean A. Rhoads

Senator Raymond C. Shaffer

Senator Michael A. (Mike) Schneider

Senator Maggie Carlton

STAFF MEMBERS PRESENT:

Scott Young, Committee Policy Analyst

Kathryn Lawrence, Committee Secretary

OTHERS PRESENT:

Pat Coward, Lobbyist, Nevada Land Title Association

Barbara A. McKenzie, Lobbyist, City of Reno

Robert C. Maddox, Lobbyist, Nevada Trial Lawyers’ Association

James L. Wadhams, Lobbyist, Southern Nevada Home Builders Association

Jerry Newcomer, Concerned Citizen

Robert A. Barengo, Lobbyist, State Contractors’ Board

Jack Kenney, Lobbyist

Chairman Townsend opened the meeting with Senate Bill (S.B.) 423.

Ron L. Lynn, Lobbyist, Nevada Organization of Building Officials, submitted his Residential Certificate of Occupancy to the committee (Exhibit C) and stated this certificate was generated by Chairman Townsend’s request for final inspections. Chairman Towsend requested there be larger print in the form. Mr. Lynn explained the form becomes part of a permanent computer record on file in the Building Department, Clark County. He expressed concern if a homeowner received an original copy when purchasing a home and gives it to the next buyer. The form could disappear in the exchange of owners. Chairman Townsend stated he would like this form to be made a public record every time a residential structure is sold. Senator O’Connell suggested the second sentence in the exhibit, "This certificate of occupancy provides no warranty or guarantee either expressed or implied," be larger type than the rest so it will stand out. Mr. Lynn commented there is a national need for this form to be made a part of any real estate transaction, but he could not guarantee every city would adopt this form.

Chairman Townsend referred to his handout from Scott Young, Committee Policy Analyst, Research Division, Legislative Counsel Bureau, Nevada Revised Statutes (NRS) 278.573 (Exhibit D), and stated the general public should be made aware of the statute. Senator O’Connell referred to subsection 2, third paragraph, "Any person working on your building who is not licensed must work under your direct supervision and must be employed by you, which means that you must deduct FICA and withholding tax and provide industrial insurance. . .;" she requested this sentence be made to stand out. She stated many people only want to be paid in cash with no taxes taken out of their check. Chairman Townsend recognized there could be major problems with not providing workmen’s compensation.

Robert Canter, Concerned Citizen, submitted his exhibit to the committee (Exhibit E) and stated when he purchased a home in Nevada, the building inspector had not properly inspected it. He noted the contractor had not followed the plans he had submitted with the county and the subcontractors were not licensed in the state. He insisted the building department should not be issuing certificate of occupancies before a house has been properly inspected. Mr. Lynn asserted he believed the inspectors spend plenty of time inspecting a house; but agreed minimum standards of building codes could have been compromised.

Pat Coward, Lobbyist, Nevada Land Title Association, stressed the Residential Certificate of Occupancy (Exhibit C) would be issued at the time of inspection and would be given to any new owners of a house. Chairman Townsend surmised it would be beneficial for the realtor to advise the purchaser of the home to read the document at the time of closing.

Barbara A. McKenzie, Lobbyist, City of Reno, maintained she would be more comfortable meeting with the committee at another time to discuss any problems.

Robert C. Maddox, Lobbyist, Nevada Trial Lawyers’ Association, stated there needed to be some changes made with the attitudes of the building inspectors. He remarked he felt the building inspectors were not there for the consumer’s interests. He referred to Exhibit C, the wording "in substantial compliance . . .," and stated the word substantial could be questioned in a court case. Mr. Lynn stated their inspectors have over 250 national and international certifications and registrations. He pointed out their combination inspectors are the most highly trained, receiving over 100 hours of in-house training per year.

Mr. Maddox testified he had written articles that were published nationally and internationally on internal and external quality control. He agreed part of the problem is attitude, which has to be managed at a management level. He explained if the contractor sees an error in checking the plan, he is responsible to send the plans back to the architect or engineer and have it corrected. Senator O’Connell asked why not take the word "substantial" out, leaving the word "compliance." Mr. Lynn stated it is important to leave "substantial" in the document because it meets the philosophical and engineering intent of the code. He noted the word "compliance" would only meet the literal prescriptive elements of the code. Mr. Canter agreed the wording should be very precise.

Mr. Lynn stated the public has a different interpretation of minimum standard versus substantial compliance to engineering at performance elements. He claimed the public does not understand performance standards versus specification standards. He urged if the word "minimum" is used, it could be very difficult to monitor that all buildings would have no mistakes, and problems do arise.

Mr. Maddox stated if a building is designed by an engineer for supporting the structure and meets the minimum standards, there could be alternative standards to what is specifically required in the code. He urged that the alternatives must be at least as strong or safe as those required in the code. He remarked the builder should be required to meet the minimum standards of the code.

Mr. Lynn commented when an inspector walks away from a project, that inspector has no guarantee that building codes will be upheld. He concluded inspectors could not be present on the projects full-time in many of the situations.

James L. Wadhams, Lobbyist, Southern Nevada Home Builders Association, testified it is not the local government’s responsibility to have the inspection be guaranteed.

Jerry Newcomer, Concerned Citizen, explained he had been in contact with Surety Property Inspections in California and they were attempting to make the inspectors be more code compliant. He said they were attempting to make the homeowner more aware of the importance of inspections and was currently developing an "Inspection Public Awareness" campaign. He emphasized sometimes the realtor and the inspector will work together to agree a home is code compliant when it is not. Mr. Newcomer expressed he had an inspection of his own home and there were more code issues that were a concern to him. He submitted a letter (Exhibit F) to the committee.

Margi A. Grein, Lobbyist, Executive Officer, State Contractors’ Board, declared by the time problems are addressed to the board, the problems are outrageous. She pointed out an example to the committee of a home that sold for $324,000 that had serious problems such as doors and windows improperly installed; major drywall damage; and insulation required for the floors was not installed. She declared the roof vents were not cut and nailed properly; there were broken tiles; the felt on the roof was not properly installed; and the furnace was not located properly. Ms. Grein stressed this house received a certificate of occupancy. She explained the contractor lost his license, which is the ultimate penalty, but many contractors had not been overly concerned with losing their license. She claimed the client is then burdened with a court case, and usually by that time, the contractor has filed for bankruptcy. She submitted her proposed amendment to the Nevada Revised Statute (NRS) chapter 624 to the committee (Exhibit G).

Ms. Grein stated another example of a home that sold for $350,000; the contractor had not obtained a building permit. She surmised the homeowner had to obtain a building permit after the house was built.

Ms. Grein called attention to another home that had two code violations; and by the date of the court hearing, the home still remained uncorrected. She testified the homeowner had to obtain financing for a court hearing and had to purchase the building permit. She urged that plans had not been submitted to the contractor and nothing had been reviewed. She stressed the contractor had asked the building department to testify on his behalf in court, and they agreed. Ms. Grein noted the contractors’ board had asked why a contractor was allowed to start building a home before the building permit was issued. She said the building department replied it was due to staffing and timing. Ms. Grein expounded the building department had allowed excavation to begin before plans were submitted for a basement. She surmised in each case, the contractor notified the building department and had verbal permission from them. She defined a great deal of latitude is given to the contractor for the work to proceed, even though there are no permits.

Chairman Townsend questioned what discipline measures could be utilized with an inspector who does not perform their correct job duties. Mr. Lynn stated the inspector can be ultimately suspended, but first must be given a reprimand. He summarized if the counties allow the inspectors to perform on their own merits, there may not be much the county or city can do.

Jack Kenney, Lobbyist, suggested for the small counties to employ fee inspectors and add that fee to the building permit; then the fee inspectors can do the inspections. Mr. Lynn stated this was currently being done in Douglas County and Nye County; in the rural counties it is difficult getting qualified inspectors.

Ms. Grein read her proposed amendment to NRS chapter 624 (Exhibit H) and stated this amendment defines the board (State Contractors’ Board) to be responsible for the investigation of persons and activities in violation of NRS chapter 624. Mr. Lynn stated he disagreed with section 2, subsection 2; the second sentence reading "primary investigation . . . ." Ms. Grein stated she did not know if it should read "primary investigation" or "primary inspection." Senator Carlton stated the various projects in southern Nevada are having difficulty getting qualified inspectors; Mr. Lynn concurred.

Ms. Grein referred to her amendment (Exhibit I), stating the contractors’ board would be able to retrieve any investigative costs spent during the investigation. She stated section 2 establishes the citations and the penalty ranges which would be established by the board. She explained section 3 establishes the procedures for notifying the complainant and the respondent or licensee of the disposition of the case. She justified section 4 requires the contractors’ board to notify the Governor of any complaints and actions taken by the board.

Ms. Grein read her amendment (Exhibit J) to the committee that requires the board to develop guidelines and requirements. She surmised none of this information had been submitted to the contractors’ board. She submitted her proposal to the committee (Exhibit K).

Steve G. Holloway, Lobbyist, Associated General Contractors (AGC), Las Vegas Chapter, stated he agreed with the continuing education (Exhibit J), but suggested there be input from the industry. He stated the AGC provides training for contractors working with commercial buildings, which is one reason they have such a low complaint rate.

Chairman Townsend urged the best procedure for the licensee to build the best product is to have a high level of competence in the beginning, and to maintain a high level. He urged there should be a certification of the penalties and it should be noted when contractors take the exam that this is a privileged license and there are responsibilities. He noted the responsibilities should be listed, the contractor should be tested, and they should sign to clarify they are in agreement. Chairman Townsend stressed if the contractor is not maintaining his/her work ethics; the contractors’ board should take action. Ms. Grein stated the board is enhancing their examinations.

Irene E. Porter, Lobbyist, Nevada Home Builders Association, stated she wished the committee to consider if the building inspectors should have at least 6-hour classes annually in code compliance. She emphasized it should not be only required for the inspectors, but also for general superintendents, project managers and superintendents; so there would be continuing education with the changing building codes. She expounded this needs to occur for residential and commercial buildings. Senator Schneider agreed more training is necessary. Mr. Lynn stated when they offered a training program, plenty of contractors had signed up. He suggested having the contractors be recertified every 3 years.

There being no further discussion, Chairman Townsend adjourned the meeting at 10:15 a.m.

RESPECTFULLY SUBMITTED:

Kathryn Lawrence,

Committee Secretary

APPROVED BY:

Senator Randolph J. Townsend, Chairman

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