Chapter 29: Structural pest control reports and repairs

What is a Pest Control Certification?

-Certificate of clearance by Structural Pest Control company -indicating: property is free of pest infestation or infection in visible & accessible areas -commonly called a termite clearance.

What is a separated report?

-Report issued by a structural pest control company -which is divided into: Section I items- noting active infestations, & Section II items-noting adverse conditions which may lead to an infestation.

Failure to disclose before seller accepts buyer's offer is the result of one of 2 situations (2):

1. No one knows about the existence of termites or the damage they created because the readily available inspection & report was not ordered & discovery was not made before the property was put under contract w/ buyer. 2. Seller orseller's agent resorts to deceit as the existence of a condition which adversely affects value is known to seller or seller's agent & not disclosed before seller accepts buyer's purchase offer

The custom brought about by the bifurcated pest control handling through an addendum to purchase agreements supplied by the trade associations causes agents to request SPC company to prepare a separated report. SPC company is occasionally asked by seller's agents to separate their findings & recommendations into 2 categories (2):

1. Section I items, listing items w/ visible evidence of active infestations, infections, or conditions that have resulted in or from infestation or infection; and 2. Section II items, listing conditions deemed likely to lead to infestation or infection but where no visible evidence of infestation or infection was found.

** Each company must also have general liability insurance w/ a minimum of (2):

1.) $500,000 for bodily injury; and 2.) $500,000 for property damage per loss

Chapter 29 Key Terms (5):

1.) Structural Pest Control (SPC) report 2.) inaccessible areas 3.) Pest Control Certification 4.) separated report 5.) certificate of clearance*

Chapter 29 Learning Objectives (3):

1.) advise sellers & buyers on their respective responsibilities for pest removal & needed repairs** 2.) explain contents & consequences of info in Structural Pest Control (SPC) Report 3.) manage role of SPC provider in real estate transactions

An area is considered inaccessible if it cannot be inspected w/o opening the structure or removing the objects blocking the opening. Examples of inaccessible areas are (5):

1.) attics or areas w/o adequate crawl space 2.) slab foundations w/o openings to bathroom plumbing 3.) floors covered by carpeting 4.) wall interiors; and 5.) locked storage areas

Here, buyer's champion is buyer's agent. It is buyer's agent who is burdened w/ mission of fighting industry-wide seller bias by (3):

1.) ferreting out undisclosed facts known or readily available to seller & seller's agent 2.) determining veracity of disclosures they do receive; & 3.) reviewing due diligence checklist w/ buyer to make sure buyer takes necessary steps so buyer's purchase is, among other things, free of termites.

All SPC companies use a standardized inspection report form. An inspection report includes, among other elements (10):

1.) inspection date & name of the licensee making the inspection 2.) name & address of person ordering the report 3) address or location of the property 4.) general description of the building or premises inspected 5.) diagram detailing every part of the property checked for infestation or infections 6.) notation on the diagram of the location of any wood-destroying pests (termites, wood-boring beetles, etc.) or fungus present, & any resulting structural damage visible & accessible on the date of inspection, called Section I items if a separated report is requested 7.) notation on the diagram of the location of any conditions (excessive moisture, earth-to-wood contact, faulty grade levels, etc.) considered likely to lead to future wood-destroying pest infestations or infections, called Section II items if a separated report is requested 8.) statement of which areas have not been inspected due to inaccessibility w/ recommendations for further inspection of these areas if practical 9.) recommendations for treatment or repair; & 10.) that a reinspection will be performed if an estimate for making repairs is requested by the person ordering the original report.

An SPC company is only required to certify its inspection & repair work if requested by the person ordering the report. The company, after completing the inspection or work, will certify upon request that (3):

1.) inspection disclosed no evidence of active infestations or infections in the visible &accessible areas 2.) inspection disclosed evidence of active infestations or infections & that they have been corrected; or 3.) property is free of active infestations or infections in the visible and accessible areas.

Since 2005, FHA has not required automatic SPC inspections, reports & clearances for every home sale involving an FHA-insured mortgage. In an effort to minimize the drop in U.S. homeownership, the requirements for obtaining maximum purchase-assist financing insured by the FHA now require an inspection only if (4):

1.) it is customary for home sales in the area 2.) active infestation is observed on the property 3.) it is mandated by state or local law; or 4.) it is called for by lender

After any SPC company completes treatment or repairs, a completion tag must be placed next to the inspection tag. The completion tag must display (3):

1.) name of the company; 2.) date of completion; and 3.) name of any chemicals used

The individual or company who does the inspection & issues the report holds a Branch 3 Wood-Destroying Pest & Organisms License/Registration. Those w/ a Branch 3 license may (4):

1.) perform inspections for wood-destroying pests & organisms 2.) issue inspection reports & completion notices; 3.) conduct treatments; & 4.) perform any repairs recommended on the inspection report.

** The general liability insurance covers financial loss due to (3):

1.) property damage 2.) public injury; and/or 3.) illness as a result of the company's actions

The reinspection is performed w/in _______ days of a requested inspection. A simple reinspection & certification will occur at that time. However, if more than ______ months have passed since the original inspection & report, a reinspection will not suffice. A full (original) inspection is then completed & new (original) inspection report is issued.

10 days 4 months

If property is fumigated, fumigation company (which needs to hold a Branch 1 license) will issue a certification of fumigation w/in ______ days.

5

What is a certificate of clearance?

A document certifying a property has been cleared of all infestations & all repairs necessary to prevent infestations have been completed.

** If SPC report is available, ASAP means SPC report is to be provided when?

AT TIME prospective buyer inquires further into property.

What are inaccessible areas?

Areas of a structure which cannot be inspected w/o opening structure or removing objects blocking the opening, such as attics or areas w/o adequate crawl space.

Is SPC report a manadated disclosure?

No

An SPC company is required to prepare a _________ for any work they undertake on a structure. The notice is given to the owner or the owner's agent w/in ________ working days after completing any work. The notice includes a statement of the cost of the completed work & estimated cost of any work not completed. A copy of the Notice of Work Completed and Not Completed is delivered by seller or seller's agent to buyer or buyer's agent as soon as possible.

Notice of Work Completed and Not Completed 10

A __________, a certificate of clearance by SPC company indicating the property is free of infestation or infection in the visible & accessible areas, will then be issued. This certification is commonly called a __________ However, if any signs of infestation or infection have not been corrected, it will be noted in certification.

Pest Control Certification termite clearance.

What is Structural Pest Control report (SPC)?

Report disclosing any: 1.) active infestations 2.) damage from infestations or 3.) conditions which may lead to infestations

When home w/ wood components goes on market, the war over Wood Destroying Pests and Organisms Inspection Report, aka ______________, begins.

Structural Pest Control (SPC) Report

** Continuing prior example, a buyer is located for property. Deciding to go w/ 1st SPC company's report, seller completes the repairs recommended by 1st company. Seller's agent delivers a copy of 1st company's inspection report to buyer (or buyer's agent), but does not inform buyer or buyer's agent of the 2nd inspection report. Escrow closes & buyer moves in. Buyer discovers termites & existence of 2nd inspection report. Buyer, after paying for extensive repairs & corrective measures, makes a demand on seller's agent for the costs to correct the damage, claiming seller's agent was liable since the agent knew about the 2nd report & termite infestation, a material fact the agent did not disclose. Is seller's agent liable for the costs buyer incurred to cure the termite damage since the agent knew about 2nd report & termite damage & failed to disclose the report or its contents?

Yes! The existence of 2nd report disclosing an active infestation is a material fact requiring its disclosure to buyer. Here, the condition adversely affected the value & desirability of the property. Seller's agent is responsible to ensure the delivery of all known inspection reports to buyer. Seller's agent cannot pick & choose which reports to deliver.

To best comply w/ pest control disclosure, a copy of SPC report is delivered to prospective buyer or buyer's agent by seller or their agent when?

as soon as practicable (ASAP).

Seller's agents acting in the best interest of their sellers will urge their sellers to authorize a prompt inspection & report upon taking the listing. The report, or better yet the clearance after all recommended repairs are completed, will be included in seller's agent's ___________

marketing package

If an estimate for corrective work is not given by SPC, the company is not required to perform a reinspection. A reinspection is mandated when a_________ is requested. The separation requires an estimate for repairs to allocate the costs to perform each & every recommendation for corrective measures for Section I and II items.

separated report

** Every company registered w/ SPC Board must maintain a $12,500 bond. The bonds are in favor of the State of CA for the benefit of any person who, after entering into a contract w/ a registered, licensed company, is damaged by (2):

• fraud; or • dishonesty