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1997-02-10 Work Session NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 25 WORK SESSION, FEBRUARY 10, 1997PAGE 824 ASSEMBLY The New Hanover County Board of Commissioners held a Work Session on Monday, February 10, 1997, at 7:00 P.M. in the Assembly Room of the New Hanover County Courthouse, 24 North Third Street, Wilmington, North Carolina. Members present were: Commissioners Buzz Birzenieks; Ted Davis, Jr.; Charles R. Howell; Vice-Chairman William A. Caster; County Manager, Allen O'Neal; County Attorney, Wanda M. Copley; and Clerk to the Board, Lucie F. Harrell. Chairman Greer was absent because of a planned trip out of town. Vice-Chairman Caster called the meeting to order and welcomed everyone present. He reported the purpose of the Work Session was to hear an overview of the duties and responsibilities of the Inspections Department and allow persons from the N. C. Homeowners Association to present remarks as well as state officials from the N. C. Licensing Board for General Contractors and N. C. Department of Insurance. Vice-Chairman Caster expressed appreciation to State officials for attending the meeting and introduced the Inspections Director, Jay Graham, Allen Golden, Assistant Director of Inspections, and Tony Roberts, Code Administration Chief. N. C. Licensing Board of General Contractors Mr. Joel Macon, Field Investigator N. C. Department of Insurance Mr. Lee Hauser, P.E., Senior Deputy Commissioner of Insurance Mr. Grover Sawyer, P.E., Deputy Commissioner of Insurance, Engineering Division Mr. Bill Stevens, Deputy Commissioner of Insurance, Consumer Division Mr. Peter Kolbe, General Counsel for the N. C. Department of Insurance N. C. Homeowners Association Ms. Linda Harrill, Secretary/Treasurer of N. C. Homeowners Association Home Builders Association Mr. Terry Bache, President PRESENTATION BY THE N. C. HOMEOWNERS ASSOCIATION Ms. Linda Harrill spoke regarding problems experienced in the building of her home that was completed in May, 1994. In March 1995, severe defects were found in the construction of the home due to building code violations that were undetected by improper inspections or detected and never cleared although a certificate of occupancy was issued. Problems with the foundation, bricking, and roofing were estimated at $125,000 in repairs. Ms. Harrill complained that the Inspections process failed beginning with the fact that the builder should not have been issued a permit because he had a limited license. Contacts were made with the Inspections Department, N. C. Commissioner of Insurance, Licensing Board for General Contractors, Attorney Generals Office, and the Governors office. On November 9, 1995, she met with County officials, Allen O’Neal, Jay Graham, and Wanda Copley. A list was presented on the problems that occurred and recommendations were given to correct the problems. Nothing resulted from that meeting. After calling Commissioner Mathews, this item was placed on the agenda. Ms. Harrill advised that her intentions were to insure that employees perform the jobs they are paid to do. In paying for a NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 25 WORK SESSION, FEBRUARY 10, 1997PAGE 825 building permit, certain services should be received. The following issues were presented: (1)The permit application form did not conform with the contents required by the Building Code Counsel since 1991. The form should require the building contractor to state the limitation of his or her license. The Inspections Department has issued permits to contractors that are not duly licensed or to builders with expired licenses. Although a 60-day grace period exists to renew a license, many builders allow their licenses to expire. Contractors receive permits for constructing homes that are more than the dollar limit of their license, and the Inspections Department is unaware of the license information. (2)The permit application did not have the signature of the owner or the owner’s agent as required. She had not been asked to sign the permit application and was told the builder was the agent. If Inspections had used the contract as proof of agency, they would have noted that the contract amount was more than the builder’s $250,000 limit. The permit should not have been issued. (3)The permit application did not have the correct square footage of the house. Sets of plans showing the square footage of a house should be submitted before permits are issued. The permit fee is based on the square footage, and frequently, the square footage is not the same as the amount of the permit, which results in revenue loss to the County. (4)Permits are not revoked after substantial changes are made to approved plans. The law does not allow a builder to deviate from approved plans. Permits are not revoked when code violations occur. In responding to her question of why work was not stopped when code violations occur with multiple reinspections, the Inspections Department answered they did not want to put people out of jobs. Ms. Harrill replied that the building code was written for the protection and safety of the homeowners and the public, not to save jobs. (5)Building plans are not maintained as public records in the Inspections Department as stipulated in the Building Code, Section R-110. The Inspections Department gives the plans back to the builder once the plans are approved. Ms. Harrill felt that a homeowner should be able to copy plans from the Inspections Department, if unable to get a copy from the builder. (6)Construction of houses started before building permits were issued. Ms. Harrill reported finding the date of the first footing inspection before the building permit was issued. The Building Code does not allow construction to start before the permit is issued. (7)Inspectors were not performing all inspections as required by the Building Code. She found that inspection logs were missing footing and insulation inspections, or a re-inspection was not performed on a code violation. The Code specifies certain inspections, such as under-slab inspection, foundation, framing, insulation, and final inspections. According to Section R-108 of the Building Code, alternative materials are to be evaluated to insure the material is comparable to other materials. The Inspections Department should have performed an inspection to insure the exterior covering was installed according to the manufacturer’s instruction. The failure to do so resulted in 32,000 damaged homes in New Hanover County. NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 25 WORK SESSION, FEBRUARY 10, 1997PAGE 826 (8)Inspectors do not follow up on reinspections unless requested. A mechanism should be in place to insure that all necessary inspections are approved as required by law. (9)Certificates of occupancy are issued with uncleared code violations. Ms. Harrill reported people are living in houses without a certificate of occupancy. Service utilities should not be connected without a certificate of occupancy. (10)Penalties of $50 per code violation were not assessed every 30 days. After reviewing the records of the Inspections Department, Ms. Harrill reported out of 30 homes on one street in Porters Neck, 12 homes were not issued a certificate of occupancy; 9 homes were issued certificates of occupancy despite uncleared building code discrepancies. Certificates of occupancy were issued to 5 homes although no inspections were performed. Exterior inspections were not performed on the 9 homes requiring exterior inspections. Records of 2 homes did not show a footing inspection while another record indicated a footing discrepancy due to soil conditions, which required the footing to be checked by a soil engineer. The discrepancy was never cleared and the house is still under construction. The same home had uncleared discrepancies for framing and lentils. Record of a home showed 3 sheathing inspections over a 3-day period with no approval. Another house had 6 inspections with no approval and 5 framing inspections over one week with no re-inspection fees charged. Record of a home did not show an insulation inspection. Records showed 18 inspections at one home with another home having 19 inspections. A normal home should have six inspections. The person who had 6 inspections with approvals pays the same fee as someone who has 18 inspections, because re-inspection fees are not charged. As Mr. Greer has said “people who use the service, should pay for the service.” According to information received from the General Contractors Board, permit applications of 4 homes did not have the correct contractor’s name and license number. Work began on two homes before the building permits were issued. Out of the 28 homes, only one home had all the required inspections with no uncleared items when the certificate of occupancy was issued. In reviewing 9 more homes, Ms. Harrill advised she found a permit had been issued to an unlicensed contractor. Records of 3 homes showed no certificates of occupancy had been issued, while 4 homes showed certificates of occupancy had been issued with uncleared building code violations. On a builder’s home, the footing inspection was made the day before the permit was issued. One home had no record of a footing inspection, 3 homes had 3 footing inspections each with no re-inspection fees charged, and 4 homes had EIFS with no EIFS inspections. In looking at records of 10 more homes in Porters Neck, Ms. Harrill reported a home did not have a certificate of occupancy, while 5 homes had certificates of occupancy with uncleared code discrepancies. Three homes did not have all the inspections, 2 homes did not have footings inspections, 1 home had 4 framing inspections over 11 days with uncleared discrepancies and 4 homes had no EIFS inspections. In checking the records of Preston Woods, 19 homes have been permitted since December 1991. Twelve homes have no certificates of occupancy, 2 homes had certificates of occupancy with building code violations. Ten of the homes without certificates of occupancy had uncleared discrepancies. Ms. Harrill reported on 10 homes permitted for stucco removal and replacement that had exterior covering inspections. Records indicate that 5 homes had no inspection exceptions other than the EIFS. However, in her neighborhood, 6 out of 19 homes had footing inspections on the same day that the building permits were issued. NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 25 WORK SESSION, FEBRUARY 10, 1997PAGE 827 Four homes had footing inspections the day after the permits were issued. One home had 6 final inspections over a 2-month period with no indication of reinspection fees. In reviewing the inspection records of homes shown in the “Parade of Homes”, 3 homes had improper issuance of permits relative to the name on the permits, and the license numbers did not match the records of the Contractors Licensing Board in Raleigh. Two contractors were not duly licensed because the project value exceeded the license limit of $250,000; one contractor’s license expired. Construction of one home began before the permit was issued; 4 homes did not have all the necessary inspections required by code; 3 homes had uncleared discrepancies with no reinspection fees assessed; 2 homes had more heated square footage than shown on the permit applications; and 6 homes had no certificates of occupancy. In checking the records, it was also found that a builder was over the dollar amount limit, the name did not match the license number, and the license had expired. The builder had 78 permits issued with his name as contractor and project owner on spec houses. Permits were improperly issued for 20% of the houses where the name and number did not match. Eight building inspectors over a 5-year period allowed this to happen. Records of 7 homes did not indicate certificates of occupancy, while 7 other homes indicated uncleared items when the certificates of occupancy were issued. Records of four homes showed no inspection exceptions; two homes showed no exceptions or unresolved issues. Two of 16 homes were well inspected. One home had the footing inspection on the same day the permit was issued. The records did not indicate the contractor was charged for reinspections. Ms. Harrill explained the framing inspections appeared to be the most difficult to approve, since there are numerous items that can be wrong. This seems to be the most problematic area in the new construction inspections process. Regarding the stucco problems in the County, 515 permits have been issued to remove and replace stucco at a cost of $10.5 million. The number may be understated because the full amount of the contract may not be on the permit. The work may not include the cost of repairing rotting or structural damages behind the wall. The average cost has been $20,000 a home, but that amount is understated. In looking at permits issued through November 4, 1996, 24% have been for stucco removal and replacements. None of the homes had the necessary inspections. The homes should have been inspected when the stucco was removed to point out rotting or damaged areas, then reinspected to insure repairs were made properly. A final inspection of the houses should have checked for proper wrapping, flashing of windows, and installation of exterior coverings, along with a certificate of compliance to verify that the work was done. Out of 107 homes, 25 homes had no inspections. These people paid for a service, but did not receive it. Ninety- four homes did not have flashing inspections, which was the major problem found with synthetic stucco installation. Flashing, according to Section 503.8 of the Building Code, is a part of the framing inspection. Exterior covering inspections were not performed on 102 homes. After the removal of synthetic stucco, cedar-shakes shingles were improperly installed. The Building Code specifically refers to the CSSB manual for proper installation. The owner is required to have all the shingles removed and the work re-done. In conclusion, Ms. Harrill felt building code enforcement in the County did not comply to the responsibility outlined in the Building Code. General Statutes 153A-365 states the homeowner is responsible for repairing a problem with a home. The contractor, who allowed improper installation, is not responsible. Another part of the section requires the local building inspector, who finds a defect in a home, to notify the owner or occupant. When an NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 25 WORK SESSION, FEBRUARY 10, 1997PAGE 828 inspector finds a problem in a home, a sticker is placed on the home and the contractor is notified. The inspectors have not fulfilled their duty under the General Statutes, which states they shall notify the owner. NCGS 360 states an inspector shall make all the necessary inspections. Section 363 states that after a final inspection and the work meets the requirements, a certificate of compliance “shall be issued.” When the public pays for a building permit, they think they are being protected by an inspection function. If the home has a problem, the owner finds out that he or she is required to make the repair. An attorney is unable to do anything because inspectors hide behind the public duty doctrine. They are not accountable for their work and not financially responsible for mistakes. The owner is financially responsible for the mistakes made in the inspections process. Ms. Harrill stated that for two years she tried to work with the Inspections Department to point out problems with no success. The Inspections Department continues to issue permits to builders (like the builder of her home) who are not properly licensed. Required inspections are not performed and building code discrepancies remain uncleared. She promised to continue exposing the problems until the Inspections Department performs the job as required by the law. Mr. Dan Beck, a member of the Homeowners Association, stated when building permits are issued the public should be protected by the inspectors who are inspecting the houses. When removing stucco from his home, an inspector stated the footing was not in code and informed him that he needed to hire a certified engineer to make an inspection. To hire an engineer to inspect his home cost $250. With the cost of a building permit in New Hanover County, a county inspector should be qualified to inspect the footing. Because the public duty law protects inspectors from being fired, they have no responsibility for their actions. He asked that the Building Code be enforced, and stated he felt the Inspections Department should keep blueprints of houses on record. Mr. Brian Coughlan, a stucco homeowner, expressed concern for the Inspections Department allowing homes to be built in violation of codes and specifications. In most cases, construction problems are not identified during the inspections process. Considering the tremendous growth in the County, he was aware that the Inspections Department could not fully inspect all new homes. He advised this problem would continue until additional resources and staffing were obtained for the Inspections Department. Although the stucco problem exists throughout the State and the Southeast, New Hanover County and the Inspections Department should be commended for finding the problem and bringing it to the attention of people throughout the country. Mr. Coughlan advised that providing additional staffing to the Inspections Department would help in the future, but stated the stucco problems being experienced by homeowners now should be addressed immediately. The majority of the home builders have builder’s liability insurance in case of negligence, and the stucco problems evolved because the homes were not built according to specifications and the Building Code, which created negligence in construction. In almost all cases, the insurance companies have refused to honor the insurance policies. The N. C. Department of Insurance and the Insurance Commissioners, who are elected and paid by the public, regulate the insurance industry within our state. Although the N. C. Department of Insurance is well represented at this meeting, they have refused to take any significant, decisive, or aggressive action in resolving this issue. After trying several times to contact Insurance Commissioner Long to discuss this problem, no calls were returned. In talking with Mr. Kolbe, the Attorney for the Department of Insurance, he was informed that the department cannot make an insurance company provide coverage or pay on a policy; however, the N. C. Department of Insurance does have authority to license or refuse to license an insurance company NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 25 WORK SESSION, FEBRUARY 10, 1997PAGE 829 within the State of North Carolina. Mr. Kolbe stated that the only recourse was to sue the insurance company with the hope that enough cases would be won in court to provide evidence to the Department of Insurance that these insurance companies were not honoring their policies. Then, the Department of Insurance could work with the homeowners to correct their problems. Mr. Coughlan questioned whether an individual would be successful in filing a suit against a multi-billion dollar corporation with unlimited resources. He requested the Board of County Commissioners to urge the Insurance Department to assist the homeowners with insurance claims on stucco problems. BREAK Vice-Chairman Caster called a break from 7:40 P.M. until 7:48 P.M. DISCUSSION OF STUCCO ISSUE Mr. Jay Graham, Director of the New Hanover County Inspections Department, explained the problems experienced with stucco installations in New Hanover County had been experienced nationwide. He assured the homeowners in attendance that the synthetic stucco problem was not connected to code enforcement, as the Homeowners Association had reported. The stucco issue involves a material juxtaposition issue. The industry has a weather-proof product weakened with weather-resistant products, such as windows, doors, pipes, deck connections, flashings, etc. The Building Code in North Carolina requires a building to be clad in a weather- resistant fashion and not a weather-proof fashion. Other claddings, such as vinyl or brick material, were designed to deal with water infiltration by having a water barrier behind the material. To say the stucco problems happened because of bad code enforcement leads a homeowner to believe that the product would not be a problem in another area. Director Graham invited anyone having a synthetic stucco problem to attend a seminar offered by the Inspections Department. The multi-media seminar provides information on the history and the issues faced by stucco homeowners. Director Graham explained that synthetic stucco was not considered as an alternate material or method when used on structures in New Hanover County or throughout the State, because it has been in use since 1969. The material had reached a standard of common acceptance and was not included in the Building Code; however, it has been used in the building market for 30 years. In January 1996, the N. C. Department of Insurance sent out a notice to all Inspection Departments advising them that due to problems found in the use of synthetic stucco, inspectors should consider synthetic stucco as an alternate material and it must be approved by each independent jurisdiction, as stated in Section 108. Director Graham advised that he needed to respond to all allegations made by the Homeowners Association because he felt trust between the public and the Inspections Department had been harmed. He complimented the quality and capability of the inspectors in the Inspections Department and stated that North Carolina was one of only four states that require mandatory code enforcement. The ISO/CRS insurance service is a professional rating group that evaluates areas so insurance companies will know how to set rates. Since North Carolina is one of four states with mandatory code enforcement, the State has the best ISO/CRS rating. The public needs to know that the State has made strides to protect the public in consumer protection. By the year 2000, all Inspections Departments must be rated by the ISO/CRS. New Hanover County was one of the first departments to participate in the rating and is rated in the top 41% of the Inspections Departments throughout the state and nation. NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 25 WORK SESSION, FEBRUARY 10, 1997PAGE 830 With regard to the contractor licensing laws, 36 states require some type of license for contractors and 27 states require a license for residential work. Of these 36 states, some States require registration for the license, but do not require testing for the license. North Carolina requires passage of a test to obtain a license to construct a building. The Inspections Department is mandated by the State of North Carolina and authorized by the Board of County Commissioners, which sanctions the Inspections Department. The Department’s inspectors are sworn law enforcement officers, who enforce building code laws. Laws in the General Statutes govern the behavior of the building community. The Inspections Department operates under the public duty doctrine because when mistakes are made, the department serves the public as a whole, not as individuals. The Inspections Department provides a service to the public at-large and is only a part of the regulatory system. Every State agency as well as the local Inspections Department has a role and functions toward that duty. The Inspections Department does not provide insurance to homeowners, nor guarantee freedom from acts of crime. When a builder commits a code violation, that violation is considered a misdemeanor, which is on the same level as a parking ticket. When violations occur, the Inspections Department can play an effective role. The Inspections Department is not responsible for inspecting every aspect of the regulatory system and cannot serve as the project manager for home construction. The Inspections Department functions as the code enforcement official and provides a general overview service to the construction process. The builder is the project manager through the contract executed with the homeowner. The Inspections Department is not the sentencing arm of the judicial process. Fines and reinspection fees are issued to enforce the regulations; construction can be stopped and certificates of occupancy can be withheld when building is not performed in accordance with the law. Mr. Graham reported the Inspections Department has achieved an ISO/CRS rating of 5 out of a possible 10 point rating system. There are 228 inspection departments in the State with fifteen departments receiving a rating of 3, forty-one departments receiving a rating of 4, and five departments receiving a rating of 5, which includes New Hanover County. Thirty percent of the departments are rated with a 10. The ratings are from an independent rating agency that sets the insurance rates. The County has an award-winning comprehensive journeymen program, which trains plumbing, mechanical and electrical workers, before working in the County. Staff worked overnight to serve the citizens of New Hanover County after the hurricanes to assure that homes were ready for utilities as soon as possible. Although some inspectors’ homes were completely destroyed, they stayed in the office for days with no time off to take care of the citizens before handling their own personal losses. He complimented the high caliber of people working in the Inspections Department in comparison to the image portrayed by the N. C. Homeowners Association. Out of 55 inspectors and staff, 28 staff members are licensed mechanical, electrical or building contractors. Director Graham stated he was a current professionally licensed architect. Six staff members are qualified to teach inspectors or contractors to pass licensing tests. Eight inspectors are certified to teach journeyman courses. The County employees are involved, caring and professional workers who are knowledgeable of construction and care about doing a good job. Director Graham reported on the allegations made about plans not being kept according to law. Section R1-10 of the NC Building Code states that plans submitted shall be maintained as public records. Ms. Harrill's statement is complete and accurate, however it is not sufficient because the Records Retention and Disposition Schedule of the N. C. Department of Archives states Blueprints and drawings used in determining code compliance and enforcement of County building codes shall be destroyed in the office when the NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 25 WORK SESSION, FEBRUARY 10, 1997PAGE 831 administrative value ends. This Department’s administrative value of a plan ends at the issuance of the permit. The Building Code requires that a plan be kept on site for the building inspection process, so the plans are returned to the contractor or the permit holder to keep on site. Mr. Graham commented on the statements by Ms. Harrill in the newspaper alluding to the fact that the Inspections Department should not wait to receive calls for an inspection, but should call to ask if a site was ready for an inspection. In Section 5-28 of the local ordinance, it states that all holders of permits or their agents shall notify the Inspections Department and the appropriate inspector at specified stages of construction. Section 5-29 states that requests for inspections may be made to the Inspections Office or the appropriate inspector and failure to call for an inspection or preceding without an approval in each stage of the construction shall be deemed in violation of this chapter. This is the law and it is required of all persons involved in the construction industry across the State. In response to Ms. Harrill's report that persons should be notified in writing of mandatory inspections, the permit holder is given a form that identifies the stages of construction that must be called into the Department for an inspection. This policy has been in effect for at least eight years, when Mr. Sky Conklin, the former Inspections Director, signed the document. In closing, Director Graham stated in the last year and half many changes have occurred in the Inspections Department. A proactive review committee was created, which included all segments of the construction community, such as the Homebuilders Associations, Association of Architects, N. C. Engineering Association, plumbing, mechanical, and electrical contractors, designers, as well as the N. C. Homeowners Association represented by Ms. Harrill; however, she does not attend meetings. After Ms. Harrill was quoted in the Wall Street Journal, he requested a copy of her report in order to understand the charges being made against the Inspections Department. She wrote to the Assistant County Manager and stated the information could be found in the records of the Inspections Department. It was found that the information was obtained by the N. C. Homeowners Association from the public information network on the County’s computer system. Before a person is able to enter the system, they are told that the information is maintained for internal use by the County. The County makes no guarantee, expressed or implied, concerning the accuracy and completeness of the County data on the computer system. Yet, the N. C. Homeowners Association has accused the Inspections Department of having inaccurate and incomplete records. Mr. Lee Hauser, P.E. Senior Deputy Commissioner of Insurance, stated he had worked in the code enforcement area of the N. C. Department of Insurance since 1972. The staff includes 12 engineers, 2 architects, 4 electrical inspectors, and 3 educational specialists. He reported the Inspections Department was not under the authority of the N. C. Department of Insurance; however, many people feel the Department of Insurance should correct the problems in the Inspections Department, particularly regarding the stucco issue. In the late 1980's there was a similar problem in Wake County with a Legislative Study Commission appointed to recommend performance audits on the N. C. Department of Insurance, Building Code Council, Qualification Board, and Licensing Board. The report confirmed that the N. C. Department of Insurance was meeting the requirements of the General Statutes and did not have authority to review Inspection Departments. He emphasized the importance of understanding the levels of authority among the different local and state agencies, and he offered to assist the citizens of New Hanover County in any manner possible. Mr. Peter Kolbe, General Counsel of the N. C. Department of Insurance, reported the N. C. Department of Insurance was concerned about the stucco problems. He referenced Mr. Coughlan’s remarks about not receiving a response from Insurance Commissioner Long and NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 25 WORK SESSION, FEBRUARY 10, 1997PAGE 832 stated attorneys and experts in the stucco field had responded several times to Mr. Coughlan's questions. Mr. Kolbe explained that consumer affairs specialists receive complaint information and contact the insurance carrier involved to see if a problem can be resolved to the satisfaction of both parties. Unfortunately, the N. C. Department of Insurance does not have regulatory authority to make an insurance company pay a claim, and it is not possible to resolve every problem. Mr. Kolbe advised the stucco problem was complex with multiple alleged court cases. People, like Mr. Coughlan, are suing through class action suits and the EIFS manufacturers of the products claim there is a latent defect causing the problems. Some of the problems are the result of shoddy construction. It has been difficult to determine which party or parties were at fault for the negligence leading to the damages of these homes. The N. C. Department of Insurance does not have any statutory authority to ascertain the liability or the damages of a particular torque user. The N. C. Department of Insurance has gone beyond its statutory authority by contacting some insurance companies, such as Maryland Casualty, and asking the companies to pay 100% of the claim to the homeowners and subrogate against the manufacturers of the product. In response to Mr. Coughlan's accusation regarding the Department of Insurance not taking action against carriers for failing to pay claims, Mr. Kolbe stated the Department of Insurance had been aggressive in prosecuting violations when problems were identified. The authority of the Department of Insurance is governed by NCGS 58-63-15, which is the Unfair Claims Practices Act, that specifically outlines the level of fact, information, and evidence that has to be presented before moving forward with a violation. In closing Mr. Kolbe reported that only 57 stucco complaints had been received by the N. C. Department of Insurance. He advised the Department of Insurance would continue to work toward resolving the problems, and he urged persons with stucco problems to contact the Department of Insurance for assistance. Mr. Terry Bache, representing the Home Builders Association, reported the Association had not been previously involved with the debate; however, from the remarks presented, it appears the building industry is not doing a good job. He complimented Allen Golden, Assistant Director of Inspections, for not accepting allegations that stucco problems existed because builders were not properly installing the covering. Mr. Golden thoroughly investigated the stucco problem to find out the cause. The National Home Builders Association Research Lab and others pointed fingers at the Wilmington builders. Recently in Atlanta, a three- part TV series presented stucco construction problems in the Atlanta area. Problems have been experienced across the country with synthetic stucco and the manufacturers are no longer blaming the builders for the problems experienced. The product appeared to be a material that builders could use for architectural designs without paying the cost for real stucco. Emphasis was placed on the fact that for every bad product, such as synthetic stucco, there are thousands of new products and items that have improved the quality of new homes. Mr. Bache reported the builders are aware that constructing or purchasing a new home is a lifetime investment for homeowners. This responsibility is taken seriously by the building industry. When homeowners consider purchasing new homes they have the following choices: (1) purchase an existing house constructed by a well-known builder; (2) contract with an experienced builder to construct a home; or (3) contract with an unexperienced builder to construct a home. These choices must be taken seriously and examined closely. The perspective homeowner must check out the contractor and decide which one can be trusted. A contractor at a lower price will not produce the same results as an established NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 25 WORK SESSION, FEBRUARY 10, 1997PAGE 833 builder with a higher price. The Inspections Department and home builders must meet standards of health, safety and structural integrity. The Inspections Department cannot take over the responsibility of the builders. The ultimate relationship is between the homeowner and the builder with the Inspections Department being sure that minimum levels of health, safety and structural items have been met as outlined in the Building Code. In closing, Mr. Bache expressed concern for discussion being held on holding building inspectors liable for their work. If a building inspector is paid $40,000 a year, and he has to assure that everything in a house meets specific code requirements, although there are many different ways within the code to perform a job, would the County have inspectors work under the threat of being fired and the possibility of losing their lifetime savings? The basic responsibility should be on adults to make informed decisions and to know the quality of the contractor hired. To attack the home building industry and stop the growth of a community is unrealistic. The theory that home builders create growth by building houses, which beckons people to move to our area, is untrue. Home builders build houses because people are moving into a community. People of New Hanover County are very fortunate to live in the best housed country in the world and in a desirable community where people want to live. The home building industry is working well for people in New Hanover County. Commissioner Birzenieks expressed concern for the homeowners who have stucco problems and the frustration experienced in dealing with insurance companies. He asked the County Attorney if there was anyway to assist these people? County Attorney Copley responded the County cannot become involved in a contract between the homeowner and the builder. If a homeowner experiences a problem with a builder, the builder and the insurance company are responsible; therefore, the County cannot become legally involved. Based on the Board's concern for the public, the County can encourage State agencies to assist in being more responsive to complaints. Vice-Chairman Caster asked if the County should write a letter to the N. C. Commissioner of Insurance to explain the problems? Mr. Hauser responded that Insurance Commissioner Long was aware of the stucco problems and has been involved in numerous meetings. He offered to listen to any comments or suggestions, but stated the N. C. Department of Insurance by State Statute must adhere to certain rules and regulations. Commissioner Davis expressed appreciation to the representatives of the N. C. Licensing Board of General Contractors, N. C. Department of Insurance, N. C. Homeowners Association, and the Home Builders Association for attending the Work Session and presenting remarks. He stressed the importance of resolving the problems with the N. C. Homeowners Association and the Inspections Department and stated the County should pursue this effort. Commissioner Howell expressed appreciation for those in attendance and for the comments received. Mr. Joel Rhine, an attorney representing persons with class- action lawsuits on stucco damage, expressed appreciation to the Commissioners for holding a public forum to hear the problems of the community. He advised that his law firm had over 30 cases in litigation representing over 100 homeowners with numerous types of construction deficiencies. The Inspections Director and Assistant Inspections Director were complimented for the effort given to make everyone aware of the synthetic stucco problems. NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 25 WORK SESSION, FEBRUARY 10, 1997PAGE 834 Attorney Rhine advised that New Hanover County had the second highest housing starts per capita in the country with only 38 qualified inspectors to oversee construction sites. In order to better manage inspections, the Board of County Commissioners should consider code violations as a crime and hire additional inspectors to enforce the Building Code. Also, existing laws should be strengthened and strictly enforced to protect the homeowner. Attorney Rhine recommended enforcement of licensing statutes by the District Attorney. It should be the responsibility of the courts to prevent unlicensed general contractors from building homes. The State licensing regulations need to be strengthened and the interpretation of financial responsibility laws must be maintained at the State level. Other States require insurance and bonds for general contractors, but North Carolina does not. This should be changed. In conclusion, Attorney Rhine recommended using civil and criminal processes to enforce the laws on unlicensed general contractors. If a general contractor builds without a license, he or she should be subject to trouble damages and attorney fees. Laws need to be strengthened against manufacturers. The Attorney General needs to lead the fight to stop unfair claim practices. The homeowners did not create the stucco problems and should not be held responsible. Discussion was held on the recommendations presented by Attorney Rhine. The County Attorney was requested to prepare the enabling legislation that would be required to change the State Statutes. Mr. Curtis Wright, President of Providence Homeowners Association, stated as a contractor in California, he was required to perform several tests on new products, and he recommended implementation of proactive training on new products. He expressed concern for the lack of knowledge and training by an inspector when inspecting a lift station at his home. The inspector did not know why the inspections were required or how the equipment functioned. He stressed the importance of inspectors being properly trained, particularly on a new product, such as stucco, which has created a problem for thousands of homeowners. Ms. Harrill presented rebuttal to the comments made by the Inspections Director regarding the County’s disclaimer and stated that her information on stucco removal inspections came from the original permit application that was faxed to her by the Inspections Department. Also, a copy of the information Ms. Harrill received when her house did not pass inspections matched the Inspection’s log; therefore, she did not find any discrepancies in the information on the computer system with actual documents on record in the Inspections Department. With reference to retaining plans in the Inspections Department, the law states that plans are to be kept for administrative value. The State retention schedule calls for the documents to be destroyed in the office, not given to the builder. Ms. Harrill advised that local ordinances address new construction, whether its a foundation inspection, framing inspection, or fire proofing, which are not the inspections required by the State Building Code. In suggesting that people should be called for inspections, Ms. Harrill was specifically addressing the issue of stucco removal and replacement. The ordinances address new construction, not extraordinary situations such as stucco replacement. In an unusual situation, the Inspections Department should not follow business as usual, but implement measures to address the situation. With regard to Ms. Harrill's permit, she was the permit holder and the owner, and she did not receive the document listing the required inspections. She alluded that the Inspections Department should educate the public so people will know what to expect. Last August she informed the NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 25 WORK SESSION, FEBRUARY 10, 1997PAGE 835 Inspections Department that her permit application did not comply with the building code. The permit application handed out by Mr. Graham does not require the owner’s signature, the builder’s license classification, nor the total cost of the project as specified in Appendix A, of Volume 1-A of the North Carolina Building Code adopted in 1991. It appears the permit application still does not require a signature. Mr. Joel Macon stated that Ms. Sherra Smith, Legal Counsel of the N. C. Licensing Board for General Contractors, had arrived late due to traffic problems and stated she would be glad to answer any questions. He also complimented Attorney Rhine for making excellent suggestions and requested the Board to consider changing the State Statutes. Ms. Smith spoke on the need to provide more education to potential home buyers. She advised that many problems could be avoided if the homeowners knew what was required at the beginning of construction and how to select a qualified builder. The homeowner should ask the Licensing Board about a builder to find out if any complaints have been filed. The records are public information; however, the test scores of contractors is confidential information. In closing, Ms. Smith reiterated the importance of providing education to potential home buyers. Vice-Chairman Caster advised that Ms. Harrill's comments should be taken as constructive criticism and stated proposed changes for strengthening the State legislation should be considered. He commented on the need for the Board to further discuss the issues presented and stated the County would move toward developing solutions to resolve the issues presented. ADJOURNMENT Vice-Chairman Caster expressed appreciation to those attending the meeting and stated the Inspections Director or any of the Commissioners would be glad to answer any questions or discuss concerns after the meeting. Vice-Chairman Caster adjourned the meeting at 9:05 P.M. Respectfully submitted, Lucie F. Harrell Clerk to the Board