Attorney General's Opinion to TREC Request

[Michael R. Boyett]

In June, TREC requested an opinion from the state Attorney General as to whether TREC has jurisdiction over inspectors who perform inspections for someone other than a Buyer or Seller of real property. The AG handed down his opinion today and the simple answer is No:

S U M M A R Y

The Texas Real Estate Commission does not have authority under section 1102.401(a), Occupations Code, to take disciplinary action against a person licensed under chapter 1102 if the person has not accepted employment to perform a real estate inspection for a buyer or seller of real property.

It is necessary to define the terms "buyer" and "seller" in the context of chapter 1102 in order to determine whether a person, in a particular factual context, constitutes a buyer or seller of real property for which a real estate inspector has accepted employment. As the agency charged with administering chapter 1102 and authorized to establish the standards of conduct and ethics for persons licensed under chapter 1102, the Commission must determine, in the first instance, the meaning of these terms.

Very truly yours,

GREG ABBOTT
Attorney General of Texas

The original request for opinion can be seen here: http://www.oag.state.tx.us/opinions/...f/RQ0804GA.pdf

And the AG’s complete response can be seen here: http://www.oag.state.tx.us/opinions/...pdf/ga0748.pdf

There's some history to this Request for Opinion and the resulting Opinion. While the AG's Opinion essentially supports how TREC has been operating all along this Opinion confirms TREC's position to-date. I'll explain the history of the request (as I know it if needed).

[Nick Gromicko]

So an unlicensed person may offer annual inspections?

[Michael R. Boyett]

Yes, it would seem that way for now since an annual inspection or an 11th month warranty inspection is not for a Buyer nor Seller or someone anticipating to buy or sell.

[Dominic J. Maricic]

Are you sure it's not just saying that disciplinary action can't be taken against an inspector who is licensed, but performing a 11th month or annual inspection?

[Chuck Evans]

Just saw the background that prompted this. Very interesting... Wish I knew who the parties were.

[Gary Farnsworth]

Missouri and Kansas are offering low cost loans for people upgrading homes to save energy; they are called energy audits. They may be similar to audits stated in the Cap and Trade Bill. I guess they may be performed as audits and not under any state regulation...???

[Bruce A. King]

Read it again, the attorney is saying that they do not regulate it but that could change once the definitions of buyer and seller are established as they pertain to this.

You will rarely see an attorney write something concrete, it always has gray areas that could be used as necessary later. They must teach them this technique since they all do it.

[Chuck Evans]

Builder was trying to get TREC to sanction an inspector because he didn't like what the inspector had to say about their house when the the person who bought their crappy product hired the inspector to do a 1 year warranty inspection.

Looks like the builder wound up buying the house back as part of settlement, then tried to construe the warranty inspection as falling under TREC jurisdiction because it resulted in the original buyer selling the house back to the original seller. "See, the inspection was related to the sale of real property."

[Michael R. Boyett]

Chuck, that is the first I've heard that particular scenario. Is it from a reliable 1st hand source or has that morphed over time thru numerous folks on the internet? I was at the Commission meeting back in the spring when the San Antonio area builder presented his complaint to the Commissioners and those details were not presented. I have heard two scenarios for the reason for the inspection, one that it was a 1 year warranty inspection and another that the owner had hired the inspector as an expert witness to document a lawsuit the owner was filing against the builder. In any case, the situation seemed to be one where the inspection occurred sometime after the closing which made the Buyer/Seller relationship very muddled. Here's something else to consider...Builder's are not considered "sellers" by TREC like a normal consumer is. At least they are not required to use TREC promulgated forms or contracts and are free to use their own versions. As TREC better defines "Buyer and Seller" then I hope the ambiguity gets cleared up.

[Chuck Evans]

Check your PMs

Really not sure if it was a warranty inspection or requested for the purpose of the client's action against the builder (don't think it really matters but I shouldn't have assumed it was a warranty inspection). That detail is not in the doc. According to the doc, the inspection was done after the sale. It also indicated that the builder's counsel extended an offer for the builder to buy the house back from the seller. The builder tried to construe this fact to retroactively make this a real estate inspection (i.e., sale related) and place it under TREC jurisdiction so that they could file complaints against the inspector.

I had not heard nor do I know the rational for not treating builders like other sellers for inspection (excluding QC inspections). I also have not seen it documented. For that matter, I still have not seen any documentation that exempts construction phase inspections performed for the consumer from the requirement to use the promulgated form, although that is the common understanding / practice. I think the practice is inconsistent with the SOP wording.

[Michael R. Boyett]

Thanks...I replied to the PM. I agree with everything in your 2nd paragraph also. I hope TREC can and will clarify all of those issues in the near future, well 6-9 months maybe.

[kweiss]

I tell clients that warranty inspections are not regulated - they own the home and are not a buyer or seller. But I do them the same way as a sale inspection - plus more quality control comments. Most clients ask about licensing - not sure that there is actually any unlicensed person out there trying to do these.

I do inspections on new construction before closing as a TREC inspection and will add some quality control comments, but generally stay away from cosmetic.

I don't mess with phase inspections, so don't get into that contradiction. Really don't get many requests for them.

Personally, I think the definition of "related to a sale" is fairly clear and straight forward - unlike much of wha the TREC puts forth.