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Termite Inspection Control Goes Full Bore

A state board follows up on legal complaints from homeowners who suspect pest damage even after getting a company's favorable report.


Dennis Patzer thought he had seen it all.

As chief legal enforcement officer for the state's Structural Pest Control Board, he had reviewed thousands of legal complaints by irate homeowners challenging the findings in a termite inspection report.

But Patzer still chuckles when he recalls a 1997 case in which the owner of a San Diego-area pest control company was found to have missed 17 individual problems that were in immediate need of repair.

"I've never seen anything like it," Patzer says of the complaint against the company. "It went all the way to the state attorney general for licensing action."

Termite reports are nearly always required by lenders in residential real estate sales, and with the market sizzling statewide, the Sacramento-based pest control board is busier than ever.

Kelli Okuma, the board's registrar, says her agency normally gets about 1,200 complaints a year. "But historically, as the market increases--or when [interest] rates drop and a lot of people refinance--we get more," she says.

More than 80% of the complaints the board receives are driven by escrow transactions, Okuma said. Complaints generally involve a new owner's allegation that a pest control firm failed to detect visible conditions that require repair, such as a wood-destroying fungus on a deck, front steps weakened by termite infestation or window frames damaged by moisture.

In regulating the pest control industry, the state board is legally responsible for disciplining errant companies and individuals. It has eight investigators, five of whom are based in Southern California.

Patzer said that there are 2,153 registered termite inspection companies in the state and that they performed about 1.3 million inspections last year.

In the same period, the board reviewed 1,340 complaints, 38 of which resulted in license suspension or revocation by the state attorney general's office and 50 more in citations or fines. An additional 320 cases were referred to county agencies for disciplinary action.

Most complaints arise shortly after escrow closes and the new owner sees the house for the first time without the furniture, carpets and crammed closets. Although sellers are required by law to disclose everything they know about a property's condition, it's what they don't know that the buyer expects the inspection company to find for them.

Although inspections are not required by the state, a prospective buyer "should always have one," says Gary Effron, a Los Angeles attorney specializing in real estate cases. "You have to know what you're buying. It's a practical matter."

The state regulates the industry by statute through the Business and Professions Code. Lenders require immediate correction for most major problems, known as Section 1 findings, before a property sale can be concluded. Unless the arrangement has been otherwise negotiated, the seller is usually financially responsible. Potential problems that warrant continued watching, but do not necessitate immediate repair, fall into a second category known as Section 2 problems.

Harvey Logan, executive vice president of the Pest Control Operators of California, the largest industry trade group in the state, says it was the pest control companies that lobbied the Legislature in 1935 to form a regulatory board.

"We've always been very proactive," he says.

His group is particularly busy these days. "Termites swarm in spring and summer. So, whether people are selling their homes or not, this is our time of year."

Many termite companies do the repairs themselves, but others subcontract, particularly for tenting, the most common method of residential fumigation. Although it is not uncommon for a seller to choose a different repair company to undertake the work, the company that made the initial report must provide the certification that the job has been completed.

If a seller has a second inspection, disclosure laws require that the information from both reports be made available to the buyer. And there must be a clearance for all Section 1 items in both reports.

When buyers discover problems they believe should have been uncovered on the termite inspection report, they can file written complaints with the control board. But the state won't act unless a second inspection is undertaken.

Okuma says the board first tries to mediate disputes between homeowners and inspectors. "Only if a violation was committed, and is serious enough, will we send in an investigator," she says. "If it is determined that the company should have found the problem, we issue a report of findings and give them 30 days to correct the problem, at no charge to the homeowner."

She noted that buyers who are aware that a problem existed before the close of escrow but do not act cannot later demand that it be fixed at no cost, even if the company was found in violation and was subjected to licensing action and civil penalties.

Nearly all complaints against pest control companies, Okuma says, are resolved through mediation. The process usually takes two to three months.

"Depending on the time frame, we really like to get the companies to work with the consumer," she says. "It's better when they can work it out."

That is not what happened with the case cited by Patzer, the board's chief enforcement officer. He said the inspector who missed 17 problem conditions was forced to make restitution of $15,000, in addition to repayment for all costs related to pursuing the case.

The inspector had his license suspended as well, and was ordered to pay a civil penalty of $1,000 and take continuing education classes.

"Guess what?" said Patzer. "He's back up before us again--for the exact same thing."

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