MINUTES OF THE
SENATE Committee on Commerce and Labor
Seventy-second Session
March 20, 2003
The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 7:00 a.m., on Thursday, March 20, 2003, in Room 2135 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer State Office Building, Room 4412, 555 East Washington Avenue, Las Vegas, 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 Warren B. Hardy II, Vice Chairman
Senator Ann O'Connell
Senator Raymond C. Shaffer
Senator Joseph Neal
Senator Michael Schneider
Senator Maggie Carlton
GUEST LEGISLATORS PRESENT:
Assemblyman Lynn C. Hettrick, Assembly District No. 39
STAFF MEMBERS PRESENT:
Scott Young, Committee Policy Analyst
Laura Adler, Committee Secretary
Maryann Elorreaga, Committee Secretary
OTHERS PRESENT:
Steven D. Hill, Lobbyist, Coalition for Fairness in Construction
Steve G. Holloway, Lobbyist, Associated General Contractors
James L. Wadhams, Lobbyist
Bruce Robb, Counsel, State Contractors' Board
Margi A. Grein, Lobbyist, Executive Officer, State Contractors' Board
Robert C. Maddox, Lobbyist, Nevada Trial Lawyers Association
Scott K. Canepa, Lobbyist, Nevada Trial Lawyers Association
Ronald L. Lynn, Lobbyist, Clark County and Nevada Organization of Building Officials
Dan Musgrove, Lobbyist, Clark County
Madelyn Shipman, Lobbyist, Washoe County
Dave Durista, Safe Homes Nevada
Thomas H. Gallagher, President and Chief Executive Officer, Summit Engineering Corporation
Shari O'Donnell, Signature Homes
Jake L. Parmer, Lobbyist, State Contractors' Board
Chairman Townsend opened the hearing and introduced Bill Draft Request
(BDR) BDR 52-429.
BILL DRAFT REQUEST 52-429: Revises provisions governing trade practices and resident agents. (Later introduced as Senate Bill 399.)
SENATOR HARDY MOVED TO INTRODUCE BDR 52-429.
SENATOR O'CONNELL SECONDED THE MOTION.
THE MOTION CARRIED. (SENATORS SCHNEIDER AND CARLTON WERE ABSENT FOR THE VOTE.)
*****
Chairman Townsend opened the hearing on Senate Bill (S.B.) 241.
SENATE BILL 241: Makes various changes to provisions governing certain claims for constructional defects. (BDR 3-156)
Steven D. Hill, Lobbyist, Coalition for Fairness in Construction, said the Nevada Supreme Court had asked for section 21 to be removed from the bill and the coalition agreed.
Steve G. Holloway, Lobbyist, Associated General Contractors, said several things in section 31 should be clarified. The State Contractors' Board should be limited to mediation in the right to repair matters. The board should not be responsible for ensuring compliance with the statute.
Chairman Townsend asked Mr. Wadhams to come forward and explain if section 31 had been amended to remove investigative authority from the State Contractors' Board.
James L. Wadhams, Lobbyist, Coalition for Fairness in Construction, said section 31 of the bill would allow any home owner, contractor, or subcontractor to approach the State Contractors' Board for advice on the method and manner of repairs. He said section 31 was acceptable as written.
Bruce Robb, Counsel, State Contractors' Board, said the State Contractors' Board wanted immunity from civil litigation, should the board become involved in a dispute between a contractor and a home owner.
Chairman Townsend asked if the bill did not contain a statement of immunity, would board members be capped at the $50,000 rate for government employees. Mr. Robb said the members of the board would be capped, but it was not clear if the cap would apply to employees.
Senator Neal referred to section 31, subsection 3 paragraph (a) and asked if the provisions listed protected the board from lawsuit. Mr. Robb said the provisions were not sufficient because they did not address the liability of individual board members or employees. He stated the purpose of S.B. 241 was to minimize litigation. Granting immunity to the State Contractors' Board would further that effort.
Senator O'Connell asked if the liability of the State Contractors' Board would be different from that of the Board of Medical Examiners. Mr. Wadhams said he was not prepared to answer that question directly, but thought there was confusion about the provisions in subsection 3. He said the purpose of the subsection was to create opportunity for a State Contractors' Board inspector to advise a concerned party if a repair was adequate. He said representatives of the board had raised a question regarding the ambiguity of the status of employees of the board, which was independent of the issue addressed in the bill.
Senator Hardy asked if the wording in the bill should be changed from "the State Contractors' Board shall … render a decision" to "render an opinion." Mr. Robb said the board wanted to protect board members and staff from litigation resulting from problem-solving actions of the State Contractors' Board.
Senator Hardy said the State Contractors' Board should be able to defend its decisions. Mr. Robb said the intent of section 31 was to allow the board to give an advisory opinion, not render a binding decision.
Chairman Townsend said section 31, subsection 3, paragraph (a) prohibited judicial review of a decision of the board, but paragraph (b) said the decision would be admissible if litigation occurred. Mr. Wadhams said the intent of the proposal was to provide independent advice, not binding decisions, to be considered by contractors or home owners.
Senator Neal asked why anyone would want the State Contractors' Board to render decisions that were nonbinding. Mr. Wadhams said, under the bill, the board would not be rendering binding decisions, it would be offering advice. The home owner or contractor could either take the advice or proceed with litigation.
Senator Hardy asked if a home owner requested an inspection and opinion on workmanship, would the State Contractors' Board render a decision based on the inspection.
Margi A. Grein, Lobbyist, Executive Officer, State Contractors' Board, said members of the staff did not make decisions; only the board decided formal matters. Senator Hardy asked if the board made decisions based on recommendations of staff members. Ms. Grein said that was correct. Senator Hardy said he could not see the distinction between recommendations based on inspection of new construction and recommendations based on inspection of a repair.
Chairman Townsend referred to section 31 of the bill and said if a claimant disputed the method or adequacy of repairs, the party who performed or ordered the repairs could submit the dispute to the State Contractors' Board. The board must investigate the claim and render a decision concerning the adequacy of the repair. That decision would not be subject to judicial review, but would be admissible in any action brought pursuant to the provisions of the chapter. He said the State Contractors' Board was charged with protecting the public interests first, the licensees second. If appropriate standards were not met, discipline would have to be administered. He suggested new licensing be held in abeyance for 2 years. The board could devote more time to investigating complaints and determining standards were being met on new construction.
Mr. Robb said the State Contractors' Board was having disciplinary hearings before a hearing officer, rather than the full board. They have been able to significantly address the backlog of complaints.
Chairman Townsend addressed the proposed amendment submitted by Mr. Robb (Exhibit C) and specifically referenced authority to adopt regulations and recover costs from contractors incurred as a result of investigations. He asked if the Coalition for Fairness in Construction had any objections. Mr. Wadhams said there were none. He said the coalition commended the board on its work of weeding out bad contractors in the last 2 or 3 years. It was important the board have the resources it needed to continue that effort.
Robert C. Maddox, Lobbyist, Nevada Trial Lawyers Association, said section 31 did not provide for a claimant to submit a dispute to the State Contractors' Board. That was another obstacle that prevented home owners from bringing claims against contractors. Chairman Townsend asked if it would be better if the amendment were changed to allow the claimant to submit the dispute, rather than the contractor. Mr. Maddox said the wording would make more sense.
Mr. Wadhams said the coalition would not disagree with a change in the wording, although they thought it was implicit in the statute a claimant could bring a dispute to the State Contractors' Board. He said that had been the opinion of the bill drafters.
Senator Neal asked if a contractor did not take a dispute to the board, would the matter go directly to court. Mr. Maddox said the matter would have to go to mandatory mediation before it could go to court.
Scott K. Canepa, Lobbyist, Nevada Trial Lawyers Association, said he was not aware of any lawsuits brought by home owners because of dissatisfaction with repairs. There have only been lawsuits against contractors that have refused to make repairs. He said the bill applied to both licensees and those unlicensed; the State Contractors' Board had no jurisdiction over those unlicensed. He pointed out the bill did not establish fines or deadlines. Mr. Canepa said lack of judicial review would be a violation of a homeowner's due process. He said if an inspector took a bribe, did not properly evaluate a repair, and reported the repair as adequate, a contractor could take that report to court as evidence a repair had been properly done and had passed inspection.
Senator Shaffer said inspectors, not the State Contractors' Board, were responsible for determining the safety and adequacy of a repair. Mr. Canepa said municipal building departments records all reflected inspection and approval of new construction. Since those departments had immunity, the inspectors could testify in court they had negligently inspected and approved defective new construction, or negligently approved uninspected construction, and not be held liable. He said depositions had been taken of various building department officials and they had testified their inspections did not mean a house was free of construction defects, including life-safety defects. Home owners involved in this process were living in homes with defects, yet each had a building department approval.
Senator Shaffer asked if Mr. Canepa was suggesting public-entity employees were dishonest and unqualified and inspectors with the State Contractors' Board were receiving bribes. Mr. Canepa said he did not mean to impugn anyone; he was citing sworn testimony of building inspectors. He said they inspected 1 to 2 percent of the total construction of a house and could not control what a contractor did after an inspection. He said his concern was abuse of the law by some contractors.
Senator Schneider asked if inspectors had testified under oath that they do not conduct life-safety inspections. Mr. Canepa said inspectors had testified under oath they could not guarantee life-safety defects did not exist in inspected residences.
Chairman Townsend asked for clarification regarding the testimony of the inspectors.
Ronald L. Lynn, Lobbyist, Clark County, and Nevada Organization of Building Officials, gave a brief explanation of the inspection process. He said building inspectors determined if life-safety and structural components were in place, but did not guarantee the quality of the overall workmanship. Sometimes damage occurred after an inspection had taken place. If the damage were the result of a deliberate act, the information would be given to the district attorney and the attorney general, with mixed results. He said the inspectors had conducted over 651,000 inspections last year and had overwhelmingly met the criteria of assuring the buildings were structurally safe and life-safety components were in place. Mr. Lynn said some of the most serious home construction concerns were related to soil, and building inspectors did not do soil inspections. He said Clark County had started a soil certification and apprenticeship program for inspectors.
Chairman Townsend asked what could be done to alleviate the problems with soil inspections. Mr. Lynn said continued support for the certification program, and some areas should be designated no-build areas.
Chairman Townsend asked what questions the county commissioners would ask a potential developer about soil when considering authorization of the development of an area.
Dan Musgrove, Lobbyist, Clark County, said Clark County Development Services made all the plans for growth. When doing that, they considered land availability, needs for public services such as law enforcement, firefighters, water, sewers, parks, schools, and the impact on the environment. He said he did not know specifically how soil was studied, but it was part of the consideration.
Senator O'Connell asked what disciplinary action would be taken if an inspector was not conducting safety inspections. Mr. Lynn said the employee would be given training to be sure he understood his duties. His work would be closely audited. He said he could also make recommendations to the union such as demotion, suspension, and termination. Such actions would be handled through the county union contract hearing process.
Senator Schneider asked Mr. Lynn to confirm that every house or condominium released to the public had been inspected for life-safety issues. Mr. Lynn said they all have life-safety and structural-integrity inspections, that information was noted in the certificate of occupancy. Senator Schneider asked Mr. Lynn if he was aware that every construction defect case in Las Vegas was based on life-safety issues. Mr. Lynn said he was not aware that every case was life safety; many of those he had seen dealt with such things as garage floors, which were not life-safety issues, nor were they covered by the code.
Senator Hardy referred to Mr. Lynn's comments about establishing no-build zones and expressed concern that homes were being built in inappropriate areas. Mr. Lynn said his office had maps of areas that were more critical, but site-by-site analyses gave better details about what could be done to remediate the problems. He said if he were to recommend an area not be used for residential construction, it was unlikely the county would prohibit building there. It would be left up to an engineer to make an appropriate design.
Senator Carlton asked if the reports concerning a proposed building site were submitted to the planning commission when a contractor sought approval for developing the site. Mr. Lynn said many things would be brought forward at that time; however, complete soil analysis reports were not always available. Senator Carlton asked if the reports would be public record. Mr. Lynn said any information they had would be available for review.
Senator Hardy asked Mr. Lynn to expound on his previous statement about getting mixed results when reporting violations to the attorney general and district attorney. Mr. Lynn said sometimes there were mitigating circumstances; the contractor may be able to answer questions, there may be provisions in the law, which may prevent effective prosecution, sometimes the district attorney considered voluntary sanctions a better solution than going to court. He said reportable violations are rare. Most contractors are reputable and do not commit violations. Senator Hardy said he wanted to be sure the district attorney and attorney general were not ignoring the issues.
Senator Hardy asked Mr. Lynn if he would respond to the assertion the public lacked of confidence in the work of building inspectors. Mr. Lynn said he did not believe there was a general lack of confidence. There could be people who had suffered through construction defect that felt the city or county inspectors had not done their job.
Senator Hardy asked if there were other entities that had designated no-build zones. Mr. Lynn said Clark County had recently adopted an act that established no-build zones near faults.
Senator Neal asked if there were soils maps of Clark County available to builders. Mr. Lynn said such maps were available but were inadequate for construction purposes. They did not take into account the engineering coefficiency characteristics of the soil necessary for bearing capacity for buildings. He said professors at University of Nevada, Reno had done extensive additional research and their findings were on the soils map. Mr. Lynn said no matter how good a generalized analysis was, site-specific data was better.
Senator Neal asked what was required of builders who sought approval to build near faults. Mr. Lynn said additional studies, within 2000 feet of a fault line, would be required to determine if there were any debilitating conditions present. No habitable structure could be built on a fault line.
Senator Hardy said he was aware of incidents when one builder conducted an analysis and decided not to build on a site and another builder made a decision to construct on the same site. He said a no-build zone concept should be pursued.
Madelyn Shipman, Lobbyist, Washoe County, said Washoe County did not allow a habitable structure within 50 feet of a fault line. In 1995, Washoe County started requiring soil certification of a geotechnical engineer as part of plan checks for tentative maps. The recommendation of the engineer was usually to remove the soil and replace it with proper soil. If a builder chose to replace the soil, another certification would be necessary to ascertain proper soil had been used.
Dave Durista, Safe Homes Nevada, asked how long reports concerning a proposed building site remained available. Mr. Lynn said in 1992, Clark County began keeping all reports concerning residential construction indefinitely.
Chairman Townsend suggested a joint venture between Clark County and University of Nevada, Las Vegas to gather information about developable land and maintain that information in a repository. Prospective home buyers could review the information and consider it when making a decision about purchasing a home.
Chairman Townsend closed the hearing on S.B. 241 and recessed the meeting at 8:56 a.m.
Chairman Townsend reconvened the meeting at 9:24 a.m. and opened the hearing on S.B. 273.
SENATE BILL 273: Requires contractor or his representative to be present at certain inspections conducted at residence or appurtenance that is subject of claim for constructional defect. (BDR 3-252)
Assemblyman Lynn C. Hettrick, Assembly District No. 39, spoke about an experience he had as the owner of two condominiums. The property manager requested an inspection of the complex to determine if there were any construction defects present. At a board meeting, an inspector reported there were construction defects. Members of a law firm were also at the meeting and told the home owners they could not sell their property until they repaired the defects. The attorneys offered to file a suit against the builder of the complex to recover money to repair the defects.
Chairman Townsend asked if there had been complaints from the home owners that prompted the inspection. Assemblyman Hettrick said there had been no complaints. The property manager had suggested to the board that the inspection would be useful in determining if there were any construction defects on the property, which would be addressable in a lawsuit. Once the inspection was completed, the attorneys advised the home owners they had to either join in the lawsuit or make the repairs at their own expense.
Senator Schneider conducted a PowerPoint presentation with photographs of people moving roof tiles and spraying highly pressurized water on a window to make it appear construction defects were present. He said it appeared there was collusion between property managers and opportunistic individuals seeking to profit from construction-defect litigation. Under S.B. 273, the builder, or his representative, would be required to be present during any inspections or testing for construction defects.
Senator O'Connell asked if there was information available regarding which property managers were involved in lawsuits. Senator Schneider said there appeared to be some property managers involved in several construction-defect lawsuits. Other property managers told him builders were cooperative when made aware of construction defects and made necessary repairs. He said it appeared some property managers were involved in construction-defect lawsuits for financial gain.
Senator O'Connell asked if the attorney general or district attorney had become involved in tracking which property managers were involved in the lawsuits. Senator Schneider said information had been submitted to the attorney general.
Senator Carlton asked how a home owner could proceed if a builder refused to attend an inspection or was no longer available to participate. Senator Schneider said a letter could be sent to the builder, advising of the pending inspection and the requirement of his presence. If the builder did not respond within a certain time frame, the inspection would take place without the builder being present.
Mr. Durista testified against the bill. He said requiring the builder to be present at an inspection was another roadblock to the home owner. He asked what would happen if the builder refused to participate in the inspection. Senator Schneider said he thought Senator Carlton addressed that issue and it was determined a letter of notification would go to the builder; if he did not respond, the inspection would go forward without him. He said the intent of the bill was to protect the consumer; home owners should not have to go to court to get repairs made
Thomas H. Gallagher, President and Chief Executive Officer, Summit Engineering Corporation, said he was in favor of the bill. If the contractor was involved in the initial inspection, the subcontractors would have some representation. If the contractor was no longer available, the subcontractors could agree on a representative to attend the inspection. In the past, they were not made aware of an inspection until after a lawsuit had been filed.
Senator Hardy asked if an investigation conducted on a residence that was the subject of a claim under chapter 40 of Nevada Revised Statutes was part of the discovery process.
Mr. Maddox said inspections were scheduled as part of the discovery process and all parties to a suit, or their representatives, were present for the inspection. Senator Hardy asked if a contractor would have opportunity to verify information found during an investigation conducted by a representative for a home owner. Mr. Maddox said the defendant would have the right to conduct his own investigation and tests.
A discussion between Senators Hardy, Carlton, and Schneider and Mr. Maddox established the wording in the bill limited the requirement of the presence of the contractor to an inspection of a residence, which was the subject of a claim. Senator Hardy said he did not think the bill, as written, would address inspections conducted prior to the filing of a lawsuit. Senator Schneider said he was open to suggestions for amendments.
Mr. Maddox read from a prepared statement (Exhibit D), which listed the reasons the Nevada Trial Lawyers Association opposed the bill.
Chairman Townsend said there was a common goal for homes to be better built and for any defects to be repaired quickly. He suggested the sponsor of the bill change the wording of the bill from, "A contractor or his representative must be present …" to "…must be notified …" He said the intent was to have all interested parties meet and solve problems.
Shari O'Donnell, Signature Homes, said their policy was to ask home owners, property managers, and home owners associations to advise Signature Homes of any problems that could possibly involve the builder. They would send out a representative to meet with the home owner and their representative to examine the problem. If it were apparent the builder was responsible, arrangements would be made to repair the defect, with no cost to the home owner.
Chairman Townsend asked for information about contractors involved in construction defect-litigation. Jake L. Parmer, Lobbyist, State Contractors' Board, said the information would be provided for the next meeting.
There being no further business before the committee, Chairman Townsend adjourned the meeting at 10:28 a.m.
RESPECTFULLY SUBMITTED:
Maryann Elorreaga,
Committee Secretary
APPROVED BY:
Senator Randolph J. Townsend, Chairman
DATE: