One Small Step For Man

On July 28, the National Pest Control Association received federal approval for its "Wood Destroying Insect Infestation Inspection Report Form NPCA-1." The new form replaces the combined U.S. Department of Housing and Urban Development (HUD) Form 92053 and Veterans Administration (VA) Form 26-8850 for government-guaranteed loans on property transactions.

Pest control operators doing wood destroying insect (WDI) inspections for real estate transactions can call 800/678-6722 or 703/573-8330 for more information or to order copies of the form. Copies will be distributed by sources nationwide, according to NPCA technical manager Greg Baumann.

"Form NPCA-1 can be used immediately and becomes mandatory for all FHA-guaranteed loans signed on or after October 1, 1995, and all VA loams signed on or after January 1, 1996," Baumann said. "The only exception would be in states mandating their own form to the exclusion of all others. But even if that's the case, it's a good idea to get a copy."

Form NPCA-1 is a big improvement over the old HUD and VA forms which it is replacing, Baumann said. "All pest control operators doing WDI inspections for realty transactions should read and consider the improvements it includes," he suggested.

A LEGAL MINEFIELD. An estimated 60% of all liability claims against pest control operators relate directly to wood destroying insect reports, Baumann said. The previous HUD and VA inspection report forms invited lawsuits because they were difficult to use and understand.

"Our industry has lost millions of dollars because of ambiguous language on the HUD and VA inspection forms," Baumann said. "For example, those forms required the reporting of `conditions conducive' to wood destroying insects. Unfortunately, the list of conducive conditions ended with et cetera. That one little word has exposed PCOs to lawsuits. As one industry consultant commented somewhat sarcastically, houses are made of wood, and that's a condition conducive to a WDI infestation."

The NPCA has been requesting improvements to the HUD and VA forms for more than a decade, and in 1993 came close to having some enhancements adopted. The association's efforts paid off in September 1994 when HUD officials agreed to permit the NPCA to draft an industry version of the WDI inspection form. If the NPCA form was deemed acceptable by HUD and VA, agency officials said, they would approve it to replace their WDI inspection forms.

The NPCA's Project Development Council assigned the task to its Wood Destroying Organism (WDO) Committee and Working Group, headed by Tim Leatherman of Dawn Exterminating, Edgewood, Ky. The WDO committee immediately "threw the door open" and invited industry participation. The committee also invited pest control industry consultants and the Association of Structural Pest Control Regulatory Officials (ASPCRO) to offer their recommendations.

A first draft of the form was ready by February 1995. Suggestions from hundreds of PCOs, as well as state pest control associations, industry consultants and state regulatory officials, were included in subsequent drafts. One challenge, Baumann said, was producing a form that is able to take important regional differences into account.

In June 1995, HUD officials took Form NPCA-1 to their assistant secretary (the No. 2 person at HUD) for approval. It was approved in July with additional minor revisions, less than one year after the effort began.

"This is a big first step for the pest control industry," Baumann said. "It shows how far our industry and the NPCA have come in terms of earning credibility and trust with the federal government. The final result is a negotiated WDI form that is much better for PCOs, the government, realtors, lenders, and most importantly, home buyers."

Baumann emphasized that Form NPCA-1 is not a HUD or VA form, and is not available through either agency. Rather, it is an NPCA form which has been accepted and approved to replace HUD Form 92053 and VA Form 26-8850. In their official mortgagee letter, HUD officials said Form NPCA-1 "would better help prospective borrowers to be properly notified about the condition of the property as related to termites and other wood destroying insects."

CONSUMER FRIENDLY. Improving consumer information was a key consideration in developing a better WDI inspection form. For example, Baumann said, Form NPCA-1 lists specifically which structures were inspected on the property.

Another entire section "Important Consumer Information Regarding the Scope and Limitations of the Inspection" explains terms used on the inspection report and defines what the inspection report itself means.

"The entire NPCA WDO committee worked very hard to produce an inspection form that is consumer-friendly," Baumann said. "We've taken out unnecessary disclaimers, tried to use plain English, and most importantly, more clearly defined the responsibilities of the inspector, the buyer, and the seller and his or her agent.

"The end result is that we have successfully reduced liability to our industry and at the same time provided much better and clearer information to property buyers. We're responsible professionals and want the inspection report to reflect that."

Forcing the property seller and his or her agent to officially recognize their responsibility is a big change, Baumann pointed out. The previous inspection forms did not require this. So it was possible for a pest control operator to do an inspection, find evidence of WDI damage, and report it to the home seller on a HUD or VA inspection form. A dishonest seller or real estate agent could mask the damage, then get another pest control firm to do another inspection. If the second firm missed the damage, and signed an inspection report finding no signs of damage, the liability was with the second pest control firm.

Now, with Form NPCA-1, the seller and/or his agent must sign a statement attesting that "the seller hereto agrees that all known property history information regarding WDI infestation, damage from infestation, and treatment history has been disclosed to the buyer."

While this addition does not eliminate PCO liability, it rightfully puts liability for withholding information on the property seller or agent.

CLEARER SCOPE. Another important improvement with Form NPCA-1 is the clearer definition of the scope of the inspection. Form NPCA-1 does not state or imply a warranty. Pest control operators can provide a warranty or guarantee if they like, of course, but this must be done with an attachment. And Form NPCA-1 requires a complete listing of all such attachments.

Form NPCA-1 is effective for closing purposes only for 90 days from the date of the inspection. That time frame is not a guarantee or warranty, Baumann emphasized, but rather is an adequate time to use the report for a property closing. Nationwide, the average time needed to close on a property is 62 days.

"We wanted the form to represent exactly what the inspection is a reflection of the property at that moment in time," he said. "Pest control inspectors are not building inspectors. But the old forms forced us into that trap with their language. We were forced to report on the condition of the property including, to some extent, its past and future and on any signs of active infestation separately.

"Form NPCA-1 specifies that the visible property damage is only further evidence of wood destroying insects. The form clearly states that the inspection is a wood destroying insect infestation inspection, not a damage inspection. Identifying the presence of wood destroying insects is our area of expertise."

Form NPCA-1 provides some much-needed flexibility in inspection conclusions, Baumann pointed out. When signs of a possible active infestation were present, such as visible damage or carpenter ant frass, the old inspection forms forced inspectors to decide that there was either an active infestation or an inactive infestation. The new form gives inspectors a third choice: "Activity and need for treatment cannot be determined without further investigation." It then provides several blank lines so that the specific reason can be stated.

"This option addresses certain situations, such as powderpost beetle holes in wood or carpenter ant frass," Baumann said. "If it's the wrong time of year for active insects, the inspector can't determine whether there is an active infestation. Previously, he or she had to make a yes-or-no choice, with the resulting added liability."

Baumann said the new option has been in use in Pennsylvania for five years, where it has been extremely well received and is considered very useful. It's not meant to give inspectors an easy "out" on a tough inspection. Nor is the option meant to hold up a real estate transaction. The form advises that if a pest control warranty or service agreement is in effect on the property, that firm should be contacted. It further states that if no warranty or service agreement is in effect, "the inspecting company or another company can be contacted to provide treatment if requested and permitted by regulations for an additional fee." These options would allow the real estate transaction to proceed, even though a conclusive inspection cannot be completed at that point in time.

GUIDELINES & TRAINING. Because the new form is a significant departure from the forms it replaces, the National Pest Control Association is including special guidelines that explain to inspectors how to use the form section-by-section. One copy of the guidelines is packaged in each set of forms.

Baumann said the forms will be sold by the NPCA and others, and the cost will be on par with similar forms. The NPCA has copyrighted Form NPCA-1 to prevent illegal modifications or tampering.

"The NPCA Wood Destroying Organism Committee wants comments from the field," Baumann said. "There are some things we'd still like to get on the form, if possible, like an arbitration clause to head off lawsuits, and a clause declaring that the form is invalid if the pest control firm did not receive payment. We also want input from PCOs in the field on how Form NPCA-1 can be improved.

"We're now in a position to recommend improvements and to see whether HUD, VA and regulators agree with them," Baumann said. "The NPCA and our industry can be proud that we've finally earned that level of credibility with governmental entities."

PCT Magazine, October 1995