Gathering in Austin - considering going

A rather alarming email came to me (and other Texas inspectors, I’m sure) from Andrea Barnard inviting inspectors to come to a meeting in Austin on August 13th. It reads as follows:

"The Texas Real Estate Commission staff thinks that you should not be able to limit your liability and that your insurance should not cover your cost to defend yourself when you are sued.

We need you to come to AUSTIN on MONDAY, AUGUST 13, 2018 at 10:00 a.m. and let the commission know your thoughts on this matter.

Mark your calendar NOW! Yes, this means that you won’t be inspecting that day, but sometimes standing up for what is right is more important than a few hundred dollars.

Be on the lookout for more information in the next week. We need you to step up and speak to the commission! We will provide you with more information soon."

Meeting Agenda

I would like to hear the thoughts of other Texas inspectors on this subject.

I would strongly recommend that you read the IAC recommendation. See attached:

I recieved the same email. I don’t know any more than what is stated in that email & what has been posted in this section. Considering my limited knowledge & understanding of this subject, I am very concerned.

I am much less established than others & a one man company. Even if I did such a good job inspecting as to prevent levelheaded clients from wanting to sue me, we all know there are folks that will file frivolous suits simply out of spite.
So, if infact I can no longer limit my liability or have my insurance pay for defense than I am afraid continuing as I am would not be a very good business decision.

My fears are:
-Dramatic increase in insurance premiums
-Needing to charge an amount for services that are so high, that nobody will actually hire me.
-Inspectors/companies modeled much like mine will drop off leaving only large or corporate inspections businesses the only ones financially capable to sustain business operations.

Since I live just outside of Austin, I plan to attend simply to learn more about what is going on & just how it is likely to impact my future.

Answers and a question in blue above that is not meant to be rhetorical.

TREC and the IAC will do what they want to do regardless of what anyone else believes or thinks. Preventing the limiting of liability is a very real possibility. However the “Defense within limits” issue is a serious thing that they will have a great deal of difficulty forcing. I don’t believe that will happen.

FWIW the last I heard the answers coming from TREC were to actually allow limiting liability and allowing Defense Within Limits but increasing the amount of required E&O as well as requiring GL insurance.

This is somewhat the history. Started about a year ago.

1 - TREC lawyer (TL) told Inspector Committee (IC) that they received inquiries about “cost of defense” coming out of the $100,000 insurance. TL said that it cannot be done because statute intends the $100k to protect the public. TL recommends a Rule that says “cost of defense” cannot come from $100k.
2 - IC says OK and proposes Rule for Commissioners.
3 - Commissioners say OK and post Rule for public comment.
4 - Someone uses “Open Records” and ask TL for names of people complaining. In other words “who started this”.
5 - TL responds to Open Records with “there is no record”.
6 - IC is surprised by lack of justification and recommends Commissioners retract posted Rule change.
7 - Commissioners oblige and ask IC to investigate.
8 - IC posts meeting agenda suggesting a TL suggestion to increase insurance to 300K may resolve TL concern regarding “cost of defense”.
9 - Someone asks the IC to disclose if their contracts limit liability. The logic is “why increase insurance if a limit of liability diminishes it”.
10 - IC meeting agenda item is taken to an executive session (non-public).
11 - IC committee returns from the executive session without a resolution, however, TL emphatically states “inspectors cannot limit liability”.
12 - Someone explains “Head vs US Inspect” case that allowed limits of liability.
13 - TL lawyer says the statute came after Head v US Inspect and the intent of statute supersedes prior court decisions. Inspector cannot limit liability.
14 - IC tells Commissioners they cannot make a decision. Commissioners tell IC to go back and discuss.
15 - In March someone requests TREC General Counsel to submit a request for an interpretation regarding the statute to the Attorney General. General Counsel refuses to submit a request.
16 - An Inspector and IC workshop meeting is scheduled. Lots of public comment. Many inspectors explaining it is impossible to guarantee all defects can be found under current model and pricing.
17 - TREC Executive Director explains that the statute is written without clear direction. It does not say you can or cannot. He suggests legislative changes can help define the expectation.
18 - IC meets again. They propose to the Commissioners: Retain the financial responsibility requirements in Tex. Occ. Code §1102.1141 as
follows: 1 - Add language clarifying that the insurance policy required by the statute must provide both general liability (GL) and errors and omissions (E&O) insurance 2- Retain the per occurrence and aggregate policy limits of $100,000 3 - Add language clarifying that “defense within limits” insurance policies are acceptable to satisfy the insurance requirement 4 - Add language allowing inspectors to include a limitation of liability clause in their
contracts with consumers
19 - The proposal is in agreement with the Executive Directors suggestion to make recommendations that can be implemented into the statute and result in a clear understanding of the requirements.
20 - The proposal conflicts with the efforts of the TREC lawyers to reconstruct the interpretation of insurance requirements.
21 - 10 days before the Commissioners meet (Aug 13) the TREC lawyers indicate they will oppose the IC recommendations to the Commissioners.
22 - The IC is disadvantaged because they do not have time to schedule a meeting to discuss TREC staffs actions. The IC is prevented by Open Meetings from deliberating on the topic between themselves.

I anticipate the Commissioners will be requested to have General Counsel send an interpretation request to the Attorney General (see line 15). No matter what the AG decides all parties will be working to one interpretation.

What surprises me is that TREC staff seems oblivious to the damage their interpretation would cause. More surprising is the current model has been operating successfully for 10 years. I have no clue why TL is so persistent.

Will that happen? We will see.

Good question Manny. What fee would you charge and how long would the inspection take if page one of the report said

“The inspector has $100,000 insurance to pay for any error or omission of the TREC Standards of Practice. This public protection measure applies to the general public for a period of two years from the date of inspection.”

Assume a 40-year-old 2000 square foot slab home.

We need many inspectors to think about this and provide feedback. Otherwise, the impact of the changes are difficult to anticipate.

I’ll go first. 5 days and $4,000

All interesting but I do have a question. Have REA yet been required to maintain any E&O insurance? From the looks of the disciplinary actions page at TREC (Disciplinary Actions) the consumers would benefit greatly from REA being required to carry E&O.

My fees would not change as I am already on the high end for Inspectors in this area. As for time to inspect my inspection protocol would not change either. I take what time is needed to perform a thorough inspection and write a detailed report.

I fully understand the concerns that are out there. However IMO an Inspector should be worrying more about performing an exceptional inspection and charging an appropriate fee in the first place and less about being held liable for their errors. What I see now are Inspectors charging fees from pre-2000’s and still trying to make 2, 3, and some times 4 inspections every day to make up for the lowball fees they charge. Many of these same Inspectors are trying to up sell add on services that are handled by other professions and performing those services in the same time they did for their fly-by inspections alone in the past.

Certain Brokers need E&O but their agents do not. By Rule, most TREC real estate licensees do not have to have insurance. In actual practice most do.

But they are not being forced to have E&O as the Inspectors are. From the appearances of the enforcement actions pages and pages and pages of incidents it certainly seems that consumers can benefit from the same protections against REA that the TREC has provided against Inspectors.

I won’t be able to attend the 08/13/18 meeting as I have a doctor’s appointment already scheduled.

However, I have written a letter of “input” to TREC Legal about what I call their “over reach” that is pretty much outlined in John’s list in this thread.

I’ve also traded close to a dozen messages with TREC Legal and the “magical appearance” of the TREC Logo on the inspection template and their not following their own rules to make changes to that document.

I’ve written another graf of “input” about that as well.

There is something or somebody driving the changes that TREC and TREC Legal are making and I’m not yet sure what the crux is. My usual comment is: “Follow the money.” … In this case it may not be “money”, but something is brewing under the covers and none of it bodes well for inspectors in Texas.

I recieved the same email. I don’t know any more than what is stated in that email & what has been posted in this section. Considering my limited knowledge & understanding of this subject, I am very concerned.

I am much less established than others & a one man company. Even if I did such a good job inspecting as to prevent levelheaded clients from wanting to sue me, we all know there are folks that will file frivolous suits simply out of spite.

No limit of liability clause will stop this from occurring.

True, however it allows the door to open wider. Similar to “A lock won’t stop a thief but helps to keep an honest man, honest”.

So, if infact I can no longer limit my liability or have my insurance pay for defense than I am afraid continuing as I am would not be a very good business decision.

The only ones that have anything to worry about are those that NEED an attempt to limit their liability.

Limiting liability takes many forms such as a persons education, the level of work they perform, the services they offer, time they spend on inspection, how they drive to an inspection, the words they use, etc., etc. While I don’t rely on someone else to limit my liability, I do take each & every form of limitation seriously.

My fears are:
-Dramatic increase in insurance premiums

Not going to happen. There is no need or impetus to raise E&O or GL rates unless large numbers of claims occur as with other types of insurance.

Insurance premiums of all kinds are largely based on risk not just claims. While a clean record is a factor for each individual, as a whole, no limitation ability will add greater risk on insurance companies. Therefore it is possible that their risk management team will increase rate to compensate their increased risk.

-Needing to charge an amount for services that are so high, that nobody will actually hire me.

Just what level of fee would you consider this to be?

In my agreement, I offer clients an alternative to the limitation of liability clause. They are not forced to into it. It states that I agree to perform without the clause for the sum of $4500 and the inspection will take as long as I feel necessary which may include but not limited to multiple days. This is my business decision based on my risk assessment.

-Inspectors/companies modeled much like mine will drop off leaving only large or corporate inspections businesses the only ones financially capable to sustain business operations.

Large multi-inspector firms will continue to grow with or without these changes. However they grow because of their business models which are not to the advantage or best interest of consumers who need this service. As a result these type of rule changes will affect them more than any good and honest single Inspector firm.

The more I think about this one…I completely agree. I don’t like the fact that a “bad” inspectors can do crappy or poor inspections for the consumer & keep on going because they can hide behind the limitation. I don’t hide behind it but do have it to protect me.

Since I live just outside of Austin, I plan to attend simply to learn more about what is going on & just how it is likely to impact my future.
I may very well find out that its impact is not of great concern to an honest, hard working inspector & that it will weed out the fly-by guys. Again, educating myself further is the key here.

Do you plan to attend? Maybe you can offer me insight & help block out other’s hysteria.

As a licensed Realtor, I think it’s appropriate for me to comment on this.

In Texas, a Realtor acts as an agent under a licensed Broker, or as a Broker. The Broker carries the burden of liability, as well as a much higher level of required education, both prior and ongoing. I do not know of any broker in their right mind who would allow an agent to work under them without the benefit of an E&O policy. Either the agent pays for this directly, or the broker pays. In the latter case, the broker is likely taking a sizable percentage of the agent’s commission to cover the cost of the addition of an agent to their policy.

In Texas, the Professional Inspector is analogous to the Broker. He/she can have Apprentice Inspectors or Inspectors working under them, but bears the burden of liability.

I can see why certain players would not be opposed, or even would advocate for, more onerous legal and insurance burdens on the inspector community. This may be a misconception, but it seems to me that the greater the regulatory/insurance burden as a whole, the more competitive the multi-inspector firm becomes because of the economies of scale when it comes to managing compliance and purchasing insurance. For the regulatory agency (TREC, in this case), it might be an easier task managing licensing, discipline, and overall regulation of a handful of large companies as opposed to the thousands of individual “lone rangers” that we have now.

I agree that the public is better served when it has a more diverse pool of professionals to choose from, but bureaucracies are notorious for setting the welfare of their constituents aside when they can make their job a little easier.

John,

The more I read, the more I feel inclined to take that trip to Austin. Do you plan to attend? If not, could you provide some questions/talking points for those who might do so?

Thanks!

Good point Manny. Just do the best you can and don’t worry about the others. Occupational regulation and rules do not assure better inspections.

I’ll be there. Numbers are important.

Mandatory inspector insurance benefits real estate agents more than the public. They can refer whomever they desire and point to the insurance if there is a problem. In some cases, this promotes referrals of inexperienced inspectors doing several jobs a day. The better an inspector becomes the less marketable they are to many real estate agents.

Elimination of liability clauses has several debatable points. One thing for sure is if it is eliminated it will secure retirement work for many inspectors. (Better call Saul :>). Minimal inspections will be easy to go after. I think someone referred to it as “thinning the herd” at TREC.

All inspectors will quickly evolve vaguer standard text and referrals to other experts. This will result in less useful reports and real estate agent headaches.

Whatever the industry does inspectors will adapt or drop out. If I was looking at this business as a new candidate I would find other work. Occupational regulation has made this much more than reporting property conditions.

I feel like a heel for doing this, but I can’t make it. The wife and I are returning from a weekend trip to Portland (OR) Sunday evening, and I have a client who needs an inspection done that Monday morning ahead of his walk-through with the builder on Tuesday. Simply no way to reschedule it.

I will do the next best thing and write a letter, so Nolan or John, to whom should I direct my message, and any suggestions as to wording or content?

tony.slagle@trec.state.tx.us

Personally I think that writing to TREC is pretty much a waste of time, but I still do it.

I sent my e-mail of comments to Tony Slagle and JC provided his e-mail address. He should have received the e-mails today for them to have time to put in the meeting preparation package. I’ve heard it has a 7-day cutoff, but not sure.

I also sent a copy of my messages to the offices of Governor Abbott and the Sunset Commission. I just used their “contact me” links at their respective websites. I got ‘auto-replys’ indicating that they have been received.

I figure that more such copies to the Governor might get TREC to do something. Dunno for sure, but it can’t hurt.

Thanks, guys.

The 7 day cut off is so TREC can print a massive 200 page handout. I never let that stop me.

I send everything to each Commissioner. TREC Staff, Inspector Committee and Sunset.

Sunset (Very important)
kay.hricik@sunset.state.tx.us

The Texas Attorney General has a fax (512) 475-2994
They also have an online email form

Summary for all. Copy and paste this. Triple-click, copy paste, send

avis.wukasch@trec.texas.gov, adrian.arriaga@trec.texas.gov, thomas.turner@trec.texas.gov, jan.fitemiller@trec.texas.gov, bob.leonard@trec.texas.gov, rayito.stephens@trec.texas.gov, chart.westcott@trec.texas.gov, delora.wilkinson@trec.texas.gov, micheal.williams@trec.texas.gov, kerri.lewis@trec.texas.gov, tony.slagle@trec.texas.gov, douglas.oldmixon@trec.texas.gov, stevenrinehart@hot.rr.com; admin@dshomeinspection.com, bradp@homespec1.com, lee@prospectinspectors.com, shawn@houstoninspect.com, baevans@att.net, matt@barleypfeiffer.com, doyle@texcode.com, kay.hricik@sunset.state.tx.us

I say:

I am unsure if my public comments will make it into your handouts. Please consider the following. Thank you.