How the July 1 home inspector licensing requirements impact REALTORS
Source: Jun 25, 2021
By Peg Ritenour, Ohio REALTORS Vice President of Legal Services, Full Article Click Here
In 2019, legislation was passed to require home inspectors to be licensed by the Ohio Division of Real Estate and Professional Licensing. Although many inspectors qualified for a license through the grandfathering provisions in the bill, the complete licensing program was not able to be put in place by the Division until just recently.
Now that the program is up and running, the Division has recently announced that effective July 1, it will begin enforcing the requirement that a home inspector be licensed to conduct an inspection of a residential property in Ohio. It will also begin enforcing other provisions regarding real estate licensees who provide the names of home inspectors to their clients.
So, what does this mean for you and your clients? The following are the key things REALTORS need to know:
Any inspection done on or after July 1 must be performed by a home inspector who is licensed by the Ohio Division of Real Estate and Professional Licensing, unless the individual is exempt under the statutory provisions. Currently approximately 1,000 inspectors have been licensed by the Division.
Moreover, licensed home inspectors are required to have a written agreement with their client and provide a written inspection report to that client following the inspection.
Exemptions from Licensure
Under the new inspector law there are certain instances where an individual is exempt from being licensed as a home inspector by the Ohio Division of Real Estate. These are explained below.
The individual is specifically exempted in the statute.
The inspection licensing provisions list certain professionals who are exempt from the requirement to be licensed. However, this exemption is limited to activity the professional is performing when acting within the scope of their specialty. These professionals are:
-state or local building code officials
-registered professional engineers
-licensed or registered HVAC contractors, refrigeration contractors, electrical contractors, plumbing contractors or hydronics contractors
-certified insurance adjusters
-licensed pesticide applicators
It is important to understand that this exemption does not allow these individuals to perform a “whole house” inspection or one that goes beyond the scope of their professional credential. Instead, they are only exempt when performing an inspection under their specialized area of work. For example, a registered professional engineer would not need to be licensed as a home inspector to conduct only a structural inspection of the property. However, if the engineer is going to inspect any other areas or components of the property or conduct any part of a home inspection they would need to be licensed as a home inspector.
Professionals who are only inspecting a single component of the property. Under ORC section 4764.01, a home inspection is defined as the process by which a home inspector conducts a visual examination of the readily accessible components of a residential building. Therefore, if a person is hired to only inspect one component, such as the chimney or the swimming pool, the Division of Real Estate has indicated this would not fall under the definition of a home inspection and licensure would not be required to perform that limited function. Also, it should be noted that the Ohio Home Inspector Board has determined that a person may NOT do a “partial” or “walk-through” inspection unless that person holds a home inspector license.
The person performing the inspection is not compensated in any way. Under the new home inspector regulations, a license is required to perform a home inspection for compensation or any other valuable consideration. Therefore, an unlicensed person such as a buyer’s friend or relative can only legally perform a home inspection if that person is not receiving anything of value for performing the inspection. The same is true of a contractor. Unless the contractor is doing the home inspection for free, they must be licensed beginning July 1.
It is important to note that a purchase contract may contain language requiring the buyer to use an Ohio licensed home inspector. If such language appears in the contract, a buyer would be precluded by the terms of that contract from using an unlicensed person to conduct the home inspection, regardless of whether they are being compensated.
Purchase Contract Language
To comply with the requirement that inspectors be licensed, it is recommended local Boards and brokerages amend the language in their purchase contract to require that the inspection be performed by a home inspector licensed in the state of Ohio. This can simply be done by specifying “Ohio licensed home inspector” in your inspection clause. To address the professionals who are specifically exempted in the statute from the requirement to hold a home inspector license when acting within the scope of that credential, the inspection clause could also include the following additional language:
“Inspections or tests made with respect to a specific condition or component may be performed by a qualified professional exempt from the home inspector licensing requirements under ORC chapter 4764.”
Providing the Names of Licensed Inspectors
Although not required by law, licensees typically provide the names of home inspectors to buyers or sellers. Under the new regulations, if a real estate licensee or brokerage chooses to provide such information to either a buyer or seller, the names of at least three actively licensed home inspectors must be provided. This requirement will be enforced by the Division beginning on July 1.
Statutory Protections from Liability
Ohio REALTORS successfully lobbied for language in the home inspector bill to protect licensees from liability when providing a buyer or seller with a list of inspectors. The license law now specifically states that no cause of action (i.e., a lawsuit involving a negligent referral or breach of fiduciary duty claim) shall arise against a real estate licensee for providing the names of licensed home inspectors or information on home inspectors. This language also bars a lawsuit against a licensee for failing to provide a list of home inspectors or their services. Finally, the new legislation affirmatively states that merely providing the names of licensed home inspectors does not constitute an endorsement or recommendation of those inspectors by a real estate licensee. To qualify for these new statutory protections, REALTORS should not identify which of the inspectors on the list is considered to be the “best” or most qualified. Instead, it should be made clear that it is the responsibility of the buyer or seller to exercise whatever due diligence they feel is necessary to ascertain the inspector’s qualification and reputation before entering into a home inspection contract.
Because real estate licensees can only provide clients with the names of inspectors licensed by the Division, you can search the License Look-Up page on the Division’s website and search by name. You may also search by county and download a list of licensed inspectors in the counties in which you work. When you check the Division’s website, pay close attention to the individual’s status, because the applications of some of the inspectors are still pending and they are not licensed yet.
Adjusting Your Inspection Deadline
Because it is possible that there may be fewer home inspectors licensed in your area, it may take longer to have an inspection performed. As a result, REALTORS may need to provide for a longer inspection time in an offer to purchase. For this reason, it is recommended that REALTORS check with inspectors in their area to see how long it will take to get on their schedule and adjust the inspection period in the offer accordingly. Otherwise, you may be forced to ask for an extension which the seller may not grant.
Frequently Asked Questions
Below are some FAQ’s on the new home inspector licensing requirements:
Q: If a purchase contract was written in June, but the inspection will be done on or after July 1, must it be performed by a licensed home inspector?
Q: Is a home inspector license required to inspect a commercial building?
A: No. The home inspector license is only required to perform an inspection on a residential building.
Q: Are multi-family buildings considered a “residential building?”
A: The pertinent section of the Revised Code defines a residential building as “a one-family, two-family, or three-family dwelling house, and any accessory structure incidental to that dwelling house.” It also includes the individual dwelling units within an apartment or condominium complex containing four or more dwelling units. Therefore, a license is required to inspect these structures or any individual unit therein.
Q: Is a HVAC contractor, pest inspector, electrician or plumber required to be licensed as a home inspector?
A: The requirement to have a license to perform home inspections does not apply to the following list of individuals acting within the scope of practice of the individual’s respective profession: state or local building code officials; certified architects; registered professional engineers; licensed or registered HVAC contractors, refrigeration contractors, electrical contractors, plumbing contractors or hydronics contractors; real estate licensees; licensed appraisers; certified insurance adjusters; licensed pesticide applicators and pest inspectors. This section clarifies that the listed professionals are not required to be licensed as a home inspector to perform the services they are licensed to perform.
Q: Often an inspector will recommend that another professional be contacted to look at a specific issue, such as the roof or the septic system. Or the purchase contract may provide for a radon inspection. Are those professionals required to have a home inspector’s license to inspect only that one area of concern?
A: If, as a part of that individual’s regular business, the individual is hired to only assess a single component of the property, a home inspector license would not be required.
Q: Should purchase contracts require that an inspection be performed by a licensed home inspector?
A: To protect against an inspection by an unqualified individual it is recommended that purchase contracts specifically require a licensed home inspector. Not only is this in the best interests of both the buyer and the seller, but as of July 1 it is required under Ohio law.
Q: I represent a buyer who wants his relative to do the inspection. That family member is not a licensed home inspector. Will that still be permitted after July 1?
A: The home inspector regulations require a license to perform a home inspection for compensation or any other valuable consideration. If the buyer’s relative is not compensated in any manner for performing the inspection, that person does not need to be licensed as a home inspector. However, it is important to read the purchase contract language carefully, as it may provide that the inspection be performed by a licensed home inspector. In that case the buyer would need to strike that licensing requirement in their offer. Of course, the seller could counter back requiring a licensed inspector.
Q: Assuming the buyer’s unlicensed relative is not being compensated and the seller agrees to allow that person to perform the inspection, can any defects the relative identifies be a basis for the buyer to cancel the terms of the contract?
A: Unless there is language to the contrary in the purchase contract, such defects may be a basis for the buyer to terminate the contract. On the other hand, if the contract required the inspection to be done by a licensed home inspector and the seller did not subsequently agree otherwise, a report from an unlicensed person may not be a basis for the buyer to terminate since they failed to comply with this term. In this case the seller and buyer should be referred to their own attorney.
Q: Does the new law require a real estate licensee to provide the names of home inspectors to a buyer?
A: No, a real estate licensee is not required to provide the names of home inspectors. However, if a licensee chooses to do so, the law requires at least three names be provided. Those individuals must be licensed home inspectors.
Q: Can a real estate licensee provide the names of more than three licensed home inspectors?
A: Yes, a real estate licensee can provide more than three names, but all of those individuals must be licensed home inspectors.
Q: Does a licensee have to provide the names in writing?
A: No. However, it is recommended that the names be provided in writing so that a licensee can prove at least three names of licensed home inspectors were provided. If a real estate licensee provides any names, failure to provide at least three names of actively licensed inspectors may result in disciplinary action by the Real Estate Commission.
Q: Can a real estate licensee be held liable for providing the name of a licensed home inspector who subsequently is found to have negligently performed the inspection?
A: Ohio real estate license law provides that merely providing the names of licensed home inspectors does not constitute an endorsement or recommendation of those inspectors. It also provides that no cause of action shall arise against a real estate licensee for providing the names of licensed home inspectors or information on home inspection services. Thus, a real estate licensee’s liability is greatly reduced as long as the licensee provides at least three names, those individuals are properly licensed, and the responsibility is placed on the buyer or seller to exercise whatever due diligence he or she feels necessary to ascertain the inspector’s qualification and reputation before entering into a home inspection contract.
Q: My buyer hired a home inspector. During the inspection, the inspector found a problem with the furnace and offered to repair it for $500. Can a home inspector offer to repair a problem he finds during an inspection?
A: Under the new home inspector provisions, such conduct is considered a conflict of interest and is prohibited. The relevant statute states that following the completion of a home inspection, an inspector cannot solicit to repair, replace, or upgrade any systems or components in a residential building they inspected. Not until after the transaction has closed, can the inspector solicit such work.
Q: What happens if an unlicensed home inspector performs a home inspection after July 1?
A: A complaint can be filed with the Ohio Division of Real Estate and Professional Licensing. If found to have engaged in conduct requiring a home inspector license, a civil penalty of up to $500 per violation can be assessed. Each day a violation occurs or continues is a separate violation. This conduct also constitutes a first-degree misdemeanor and can be referred by the Ohio Home Inspector Board for criminal prosecution.
Legal articles provided in the Ohio REALTORS Buzz are intended to provide broad, general information about the law and is not intended to be legal advice. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.
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