Proposed Rule(s) Filing Form

Transcription

1 Department of State Division of Publications 312 Rosa L. Parks Avenue, 8th Floor Snodgrass/TN Tower Nashville, TN Phone: For Department of State Use Only Sequence Number: 03.. ~~-l8 Rule ID(s): /.,73/,.~732 File Date:?j2t;/Js Effective Date:.u,,/... ~~() f~f6~_ Proposed Rule(s) Filing Form Proposed rules are submitted pursuant to Tenn. Code Ann , and in lieu of a rulemaking hearing It is the intent of the Agency to promulgate these rules without a rulemaking hearing unless a petition requesting such hearing is filed within ninety (90) days of the filing of the proposed rule with the Secretary of State. To be effective, the petition must be filed with the Agency ancl be signed by ten (10) persons who will be affected by the amendments. or submitted by a municipality which will be affected by the amendments. or an association of ten (10) or more members. or any standing committee of the General Assembly. The agency shall forward such petition to t11e Secreta1y of State. Pursuant to Tenn Code Ann , any new fee or fee increase promulgated by state agency rule shall take effect on July 1. following the expiration of the ninety (90) day period as provided in This section shall not apply to rules that implement new fees or fee increases that are promulgated as emergency rules pursuant to (a) and to subsequent rules that make permanent such emergency rules, as amended during the rulemaking process, In addition, this section shall not apply to state agencies that did not, during the preceding two (2) fiscal years. collect fees in an amount sufficient to pay the cost of operating the board, commission or entity in accordance with (b} Agency/Board/Commission: Division: Contact Person: Address: Zip: Phone: Tennessee Board for Licensing Contractors Regulatory Boards Ashley N. Thomas 500 James Robertson Parkway, Nashville, TN ashley. thomas@tn.gov Revision Type (check all that apply): x Amendment x New Repeal Rule(s) (ALL chapters and rules contained in filing must be listed here. If needed, copy and paste additional tables to accommodate multiple chapters. Please make sure that ALL new rule and repealed rule numbers are listed in the chart below. Please enter only ONE Rule Number/Rule Title per row) Chapter. Number Rule Number Chapter Title Licensing Rule Title Monetary Limitations Incompetency and Gross Negligence Chapter Number I Ch_ap!e~ Title General Regulations for Home Improvement Contractors Rule Number Rule Title Bonds

2 Chapter Licensing Amendments The Table of Contents is amended by adding Rule Incompetency and Gross Negligence, so that as amended, it shall read as follows : Table of Contents Application for License Consideration of Applications Special Meetings Repealed Repealed Reinstatement of Invalid License Repealed Change of Address or Officers Change in Mode of Operation Renewal of Licenses Joint Ventures General and Specialty Classifications Monetary Limitations Request for Change of Classifications or Limitation Review and Adjustment of Classifications and Monetary Limitation Appendix A of Rule (Classification System) Repealed Unlawful Bidding Civil Penalties Fees Citation Penalties Exemption Requalification of Agent Bidding Procedures Contracting in Correct Name; Change of Name License Required for Property Owners Misconduct Emergency Actions Limited Residential License Expedited Procedure for Military Personnel and Spouses Incompetency and Gross Negligence Monetary Limitations shall be amended by adding paragraph (9), so that the whole rule, as amended, reads as follows: Monetary Limitations. (1) Generally, the monetary limitation placed on a classification of a license may be determined as follows: (a) For applicants having no apparent deficiency with respect to plant or equipment, the lesser of: 1. Ten (10) times the applicant's net worth; or 2. Ten (10) times the applicant's working capital. Accounts receivable that are more than three (3) months overdue may not be included within the calculation of working capital. (b) At the Board's discretion, renewal applicants having no apparent deficiency with respect to plant or equipment, but with limited working capital, the greater of: 1. Ten (10) times the applicant's working capital; or 2. Fifty percent (50%) of the applicant's net worth. (c) For other applicants, a lesser amount reflecting the degree of lack of plant or equipment. (2) Lines of credit and indemnities (on forms furnished by the Board) may be considered to raise a SS-7038 (June 2016) 2 RDA 1693

3 monetary limitation. Lines of credit may be added up to its full value to the working capital. Credit for indemnities will be limited to fifty percent (50%). However, if the applicant has a negative working capital, lines of credit will be recognized at fifty percent (50%) of value. (3) A Guaranty Agreement, line of credit, bond, or other indemnity may be required in addition to the financial statement in the following situations, (a) (b) Applicants that have a primarily cash financial statement without fixed assets and; If an applicant company is completely or partly owned by a parent company then the Board may require the parent company to provide a financial statement along with a "Guaranty Agreement" in which the parent company agrees to guarantee the debts and obligations of the subsidiary company for all debts and obligations arising out of the contracting activities of the applicant. If the parent company cannot provide a "Guaranty Agreement" they may request the board to consider a bond in the Board's format. This bond would not be accepted in lieu of providing a financial statement. (4) A Guaranty Agreement may be utilized when an applicant wishes to supplement the working capital and/or net worth portion of their financial statement. The guarantor must submit a personal financial statement with a personal guaranty agreement. (5) The Board reserves the right to accept or decline Guaranty Agreements as a supplement to applicant financial statements depending on the individual circumstances of each application. (6) If a guarantor's spouse is named on the financial statement submitted with the Guaranty Agreement then the named spouse must also sign the Guaranty Agreement. (7) All Guaranty Agreements shall expire on the same date as the license that the agreement was provided to support. (8) Subject to such tolerance, no contractor shall engage, or offer to engage, in any project of which the cost (including all material and labor furnished by or through another source other than the owner) would exceed the monetary limitation placed on his license. If a contractor holds a license with more than one classification with different monetary limits, the monetary limits shall not be combined to bid a project. (a) A tolerance of ten percent (10%) of the monetary limit is allowed, except for the BC-Air licensees. (9) Where an applicant can demonstrate having a minimum working capital and net worth of three hundred thousand dollars ($300,000) or more, the Board may, in its discretion, award the applicant an unlimited license, allowing the contractor to bid or offer to contract on any project within a classification the contractor is licensed of any size that the contractor can financially support. Authority: T.C.A , , and Chapter Licensing New Rules Incompetency and Gross Negligence shall be created as a new rule and shall read as follows: SS-7038 (June 2016) 3 RDA 1693

4 Chapter ; Incompetency and Gross Negligence. Incompetency and gross negligence as used in T.C.A (a) shall be defined by a standard of care determined by the Board, in its discretion. When defining this standard of care for residential builders the Board may use: ( 1) the Residential Construction Performance Guidelines, issued by the National Association of Home Builders, the most current edition, or (2) community and industry standards. Authority: T.C.A , Chapter General Regulations for Home Improvement Contractors Amendments Bonds, paragraph (2) shall be amended by deleting subparagraph (a) in its entirety, and renumbering the remaining subparagraphs so they follow alphabetically and numerically, and the rule, as amended, shall read as follows: (2) Description of Bonds. (a) Surety Bond. 1. A surety bond shall be in the amount of ten thousand dollars ($10,000.00), issued to a home improvement contractor by an approved insurance company authorized to do business in Tennessee, for the benefit of a claimant, who has been damaged by the contractor's breach of a home improvement contract. If the bond ceases to be in effect, the home improvement contractor's license shall become invalid. 2. The Board may refuse to accept a bond written for a home improvement contractor by a surety which has failed to meet its obligations under this subtitle. (b) Letter of Credit. 1. A bond in the form of an irrevocable letter of credit shall be an agreement, between a financial institution and a home improvement contractor on record at the Board wherein the FDIC insured financial institution agrees to extend an irrevocable line of credit amounting to ten thousand dollars ($10,000.00), for the purpose of honoring claims filed with the Board. 2. The irrevocable letter of credit shall show the name of the financial institution extending the credit and the name of the applicant or home improvement contractor to whom the letter of credit was issued as it appears on the applicant's or home improvement contractor's license application. Authority: T.C.A (h) and (3). SS-7038 (June 2016) 4 RDA 1693

5 Chapter ; " If a roll-call vote was necessary, the vote by the Agency on these rules was as follows: Board Member Aye No Abstain Absent Jack Ronnie Tickle Keith Whittington William Mason Reese Smith Jerry Hayes Cindi Debusk Mark Bradd Ernest Owens Randy Chase Signature (if required) I certify that this is an accurate and complete copy of proposed rules, lawfully promulgated and adopted by the Board on May 23, 2017, and is in compliance with the provisions of T.C.A The Secretary of State is hereby instructed that, in the absence of a petition for proposed rules being filed under the conditions set out herein and in the locations described, he is to treat the proposed rules as being placed on file in his office as rules at the expiration of ninety (90) days of the filing of the proposed rule with the Secretary of State. Date: 1\ It I r, r, 1,,,,,, M,,, \,, CGt..,,,, 'a:\t r,a_,,, "' II ~v_,,,.. ;: $ STATE ;i, ~ : O Or. :.. '. - = : TENN ssee : E \. '._ NOTAf\'< : : pusuc.).,. i - -~,,... --~ ~ ~,..,v..., ~""'ii;".,...,,,,v,.. t;;1,, ">. "o ',, DSQN v,,, ',\ - "'-?'/,,,,.,...,,, C) 'S$1on Ex911., Signature: Name of Officer: Title of Officer: Assistant General Counsel Subscribed and sworn to before me on: ~~-~-""~l,(_tt~n...,~,_'d Notary Public Signature: Ll{\ftv{_ ty1t fm. ~~ --,.}_'2.-0 ( _S My commission expires on : - ~N~o~"~ -5" ----1j-U) ~... (_ J SS-7038 (June 2016) 5 RDA 1693

6 Agency/Board/Commission: Board for Licensing Contractors Rule Chapter Number(s): : All proposed rules provided for herein have been examined by the Attorney General and Reporter of the State of Tennessee and are approved as to legality pursuant to the provisions of the Administrative Procedures Act, Tennessee Code Annotated, Title 4, Chapter 5. Herbert H Slatery Ill Attorney General and Reporter ~/22..J-µ,1t I T Date Department of State Use Only Filed with the Department of State on : ----~3~/_:;a Effective on : ~/_!~8 t,""'-+-/~~=o-+/~f~s ~ct I Tre Hargett Secretary of State C.l? rn -~~ (J _,; ::::-0 -= :~: rri.' J----! en ', 0 w SS-7038 (June 2016) 6 RDA 1693

7 Regulatory Flexibility Addendum Pursuant to TC.A through , prior to initiating the rule making process, all agencies shall conduct a review of whether a proposed rule or rule affects small business. 1. The type or types of small business and an identification and estimate of the number of small businesses subject to the proposed rule that would bear the cost of, or directly benefit from the proposed rule; The proposed rules will affect more than 40 trades and professions across all facets of the construction industry in Tennessee. In total the Board licenses approximately 16,600 general contractors and 1,370 home improvement contractors. The vast majority of these licensees are considered small businesses. 2. The projected reporting, recordkeeping and other administrative costs required for compliance with the proposed rule, including the type of professional skills necessary for preparation of the report or record; There is no additional expected record keeping or additional reporting necessary. 3. A statement of the probable effect on impacted small businesses and consumers; The effect on small businesses will be positive. These rules allow for contractors to be on notice of what guidelines inspectors use in inspecting their work in the event of a complaint. The other changes are expected to have low impact on small businesses other than making clear the rules and regulations of the Board in response to legislative alterations and in their effort put consumer protection first. 4. A description of any less burdensome, less intrusive or less costly alternative methods of achieving the purpose and objectives of the proposed rule that may exist, and to what extent the alternative means might be less burdensome to small business; There are no less burdensome, less intrusive or less costly methods of achieving the purpose of these proposed rules. These rules were developed specifically for small businesses since the majority of licensed contractors in Tennessee are small businesses. 5. A comparison of the proposed rule with any federal or state counterparts; and There are no federal counterparts to the proposed rules. The proposed rules are in response to the recent legislative session. Bordering states have differing schemes for how they regulate contractors: Kentucky has no state regulation on general contractors. In Georgia, home improvement contractors are not separately licensed from general contractors. It does not appear that filing a bond is required to obtain licensure. In Texas, home builders are not required to be licensed through the state; however, most municipalities require licensure and these municipal requirements often include proof of liability insurance. Ohio does not separate home improvement contractors from general contractors. However, it does not appear that any contractors are required to file a bond to obtain licensure. Georgia contractors' standard of care is defined as "an inability to practice a business or profession with reasonable skill and safety to the public or has become unable to practice the profession with reasonable skill and safety to the public by reason of illness, use of alcohol, drugs, narcotics, chemicals, or any other type of material," and, "gross negligence, repeated or persistent negligence or negligence resulting in a significant danger to life or property." The Georgia consumer protection website puts consumers on notice that builders can be sued using the Georgia Rights to Repair Act, which is officially codified (O.C.G.A. Sections through ). Georgia does require that an applicant provide satisfactory proof that they possess financial responsibility and obtain $500,000 in general liability insurance. SS-7038 (June 2016) 7 RDA 1693

8 6. Analysis of the effect of the possible exemption of small businesses from all or any part of the requirements contained in the proposed rule. The overwhelming majority of businesses that are affected by these rules are small businesses. These rules do not create any additional requirements for small businesses. SS-7038 (June 2016) 8 RDA 1693

9 Impact on Local Governments Pursuant to T.C.A and "any rule proposed to be promulgated shall state in a simple declarative sentence, without additional comments on the merits of the policy of the rules or regulation, whether the rule or regulation may have a projected impact on local governments." (See Public Chapter Number 1070 (http;//state.tn.us/sos/acts/106/pub/pc1070. pdf) of the 2010 Session of the General Assembly) The proposed rules are not expected to have an impact on local governments. SS-7038 (June 2016) 9 RDA 1693

10 Additional Information Required by Joint Government Operations Committee All agencies, upon filing a rule, must also submit the following pursuant to TC.A (i)( 1 ). (A) A brief summary of the rule and a description of all relevant changes in previous regulations effectuated by such rule; The Board has stated in rule the unlimited monetary classification threshold on licensure. The new rule adopting Residential Construction Performance Guidelines formally adopts a guideline that has an effect on licensure. The deletion of subparagraph (a) deletes all information regarding cash bonds for home improvement contractors since those are no longer accepted. (B) A citation to and brief description of any federal law or regulation or any state law or regulation mandating promulgation of such rule or establishing guidelines relevant thereto; The two amendments and the new rule are all in response to recent legislation passed by the 2017 Tennessee General Assembly. The amendment to state the unlimited license status is in response to Public Chapter 237 which raised the threshold on general contractor's license limitations requiring CPA audits. The Board wanted their unlimited license status to remain the same but to put this in the rules for clarification. The new rule adopting Residential Construction Performance Guidelines is in response to Public Chapter 215 which requires certain administrative entities to formally adopt outside codes or guidelines that have an effect on licensure. The deletion of subparagraph (a) is in response to Public Chapter 226 section 5 which no longer allows home improvement contractors to apply for licensure using cash bonds. (C) Identification of persons, organizations, corporations or governmental entities most directly affected by this rule, and whether those persons, organizations, corporations or governmental entities urge adoption or rejection of this rule; These rules are produced to comply with the Tennessee General Assembly's legislation. We are unaware of groups outside of the legislature or the Board that have either urged or opposed these rules. The Board urges the adoption of these rules to comply with the legislature. (D) Identification of any opinions of the attorney general and reporter or any judicial ruling that directly relates to the rule or the necessity to promulgate the rule; I None known. (E) An estimate of the probable increase or decrease in state and local government revenues and expenditures, if any, resulting from the promulgation of this rule, and assumptions and reasoning upon which the estimate is based. An agency shall not state that the fiscal impact is minimal if the fiscal impact is more than two percent (2%) of the agency's annual budget or five hundred thousand dollars ($500,000), whichever is less; I None known. (F) Identification of the appropriate agency representative or representatives, possessing substantial knowledge and understanding of the rule; Ashley N. Thomas Assistant General Counsel Division of Regulatory Boards Department of Commerce and Insurance SS-7038 (June 2016) 10 RDA 1693

11 Chapter ; Rule ; ; (G) Identification of the appropriate agency representative or representatives who will explain the rule at a scheduled meeting of the committees; Ashley N. Thomas Assistant General Counsel Division of Regulatory Boards Department of Commerce and Insurance (H) Office address, telephone number, and address of the agency representative or representatives who will explain the rule at a scheduled meeting of the committees; and Ashley N. Thomas, Assistant General Counsel 500 James Robertson Parkway Nashville, Tennessee (615) ashlev. thomas@tn. Qov (I) Any additional information relevant to the rule proposed for continuation that the committee requests. I None known. SS-7038 (June 2016) 11 RDA 1693

12 Department of State Division of Publications 312 Rosa L. Parks Avenue, 8th Floor Snodgrass/TN Tower Nashville, TN Phone: For Department of State Use Only Sequence Number: Rule ID(s): File Date: Effective Date: Proposed Rule(s) Filing Form - REDLINE Proposed rules are submitted pursuant to Tenn. Code Ann , , and in lieu of a rulemaking hearing. It is the intent of the Agency to promulgate these rules without a rulemaking hearing unless a petition requesting such hearing is filed within ninety (90) days of the filing of the proposed rule with the Secretary of State. To be effective, the petition must be filed with the Agency and be signed by ten (10) persons who will be affected by the amendments, or submitted by a municipality which will be affected by the amendments, or an association of ten (10) or more members, or any standing committee of the General Assembly. The agency shall forward such petition to the Secretary of State. Pursuant to Tenn. Code Ann , any new fee or fee increase promulgated by state agency rule shall take effect on July 1, following the expiration of the ninety (90) day period as provided in This section shall not apply to rules that implement new fees or fee increases that are promulgated as emergency rules pursuant to (a) and to subsequent rules that make permanent such emergency rules, as amended during the rulemaking process. In addition, this section shall not apply to state agencies that did not, during the preceding two (2) fiscal years, collect fees in an amount sufficient to pay the cost of operating the board, commission or entity in accordance with (b). Agency/Board/Commission: Division: Contact Person: Address: Zi~: Phone: Tennessee Board for Licensing Contractors Regulatory Boards Ashley N. Thomas 500 James Robertson Parkway, Nashville, TN ashley.thomas@tn.gov Revision Type (check all that apply): x Amendment x New Repeal Rule(s) (ALL chapters and rules contained in filing must be listed here. If needed, copy and paste additional tables to accommodate multiple chapters. Please make sure that ALL new rule and repealed rule numbers are listed in the chart below. Please enter only ONE Rule Number/Rule Title per row) C hapter Number Chapter Title Licensing Rule Number Rule Title Monetary Limitations lncom12etenc~ and Gross Negligence Chapter Number Chapter Title General Re ulations for Home lmi>rovement Contractors Rule Number Rule Title Bonds

13 Chapter Licensing Amendments The Table of Contents is amended by adding Rule Incompetency and Gross Negligence, so that as amended, it shall read as follows: Table of Contents Application for License Consideration of Applications Special Meetings Repealed Repealed Reinstatement of Invalid License Repealed Change of Address or Officers Change in Mode of Operation Renewal of Licenses Joint Ventures General and Specialty Classifications Monetary Limitations Request for Change of Classifications or Limitation Review and Adjustment of Classifications and Monetary Limitation Appendix A of Rule (Classification System) Repealed Unlawful Bidding Civil Penalties Fees Citation Penalties Exemption Requalification of Agent Bidding Procedures Contracting in Correct Name; Change of Name License Required for Property Owners Misconduct Emergency Actions Limited Residential License Expedited Procedure for Military Personnel and Spouses Incompetency and Gross Negligence Monetary Limitations shall be amended by adding paragraph (9), so that the whole rule, as amended, reads as follows: Monetary Limitations. (1) Generally, the monetary limitation placed on a classification of a license may be determined as follows: (a) For applicants having no apparent deficiency with respect to plant or equipment, the lesser of: 1. Ten (10) times the applicant's net worth; or 2. Ten (10) times the applicant's working capital. Accounts receivable that are more than three (3) months overdue may not be included within the calculation of working capital. (b) At the Board's discretion, renewal applicants having no apparent deficiency with respect to plant or equipment, but with limited working capital, the greater of: 1. Ten (10) times the applicant's working capital; or 2. Fifty percent (50%) of the applicant's net worth. (c) For other applicants, a lesser amount reflecting the degree of lack of plant or equipment. (2) Lines of credit and indemnities (on forms furnished by the Board) may be considered to raise a SS-7038 (June 2016) 2 RDA 1693

14 monetary limitation. Lines of credit may be added up to its full value to the working capital. Credit for indemnities will be limited to fifty percent (50%). However, if the applicant has a negative working capital, lines of credit will be recognized at fifty percent (50%) of value. (3) A Guaranty Agreement, line of credit, bond, or other indemnity may be required in addition to the financial statement in the following situations, (a) (b) Applicants that have a primarily cash financial statement without fixed assets and; If an applicant company is completely or partly owned by a parent company then the Board may require the parent company to provide a financial statement along with a "Guaranty Agreement" in which the parent company agrees to guarantee the debts and obligations of the subsidiary company for all debts and obligations arising out of the contracting activities of the applicant. If the parent company cannot provide a "Guaranty Agreement" they may request the board to consider a bond in the Board's format. This bond would not be accepted in lieu of providing a financial statement. (4) A Guaranty Agreement may be utilized when an applicant wishes to supplement the working capital and/or net worth portion of their financial statement. The guarantor must submit a personal financial statement with a personal guaranty agreement. (5) The Board reserves the right to accept or decline Guaranty Agreements as a supplement to applicant financial statements depending on the individual circumstances of each application. (6) If a guarantor's spouse is named on the financial statement submitted with the Guaranty Agreement then the named spouse must also sign the Guaranty Agreement. (7) All Guaranty Agreements shall expire on the same date as the license that the agreement was provided to support. (8) Subject to such tolerance, no contractor shall engage, or offer to engage, in any project of which the cost (including all material and labor furnished by or through another source other than the owner) would exceed the monetary limitation placed on his license. If a contractor holds a license with more than one classification with different monetary limits, the monetary limits shall not be combined to bid a project. (a) A tolerance of ten percent (10%) of the monetary limit is allowed, except for the BC-Air licensees. (9) Where an applicant can demonstrate having a minimum working capital and net worth of three hundred thousand dollars ($300,000) or more, the Board may, in its discretion, award the applicant an unlimited license, allowing the contractor to bid or offer to contract on any project within a classification the contractor is licensed of any size that the contractor can financia lly support. Authority: T.C.A , , and Chapter Licensing New Rules Incompetency and Gross Negligence shall be created as a new rule and shall read as follows: Incompetency and Gross Negligence. SS-7038 (June 2016) 3 RDA 1693

15 Incompetency and gross negligence as used in T.C.A (a) shall be defined by a standard of care determined by the Board, in its discretion. When defi ning this standard of care for residential builders the Board may use: ill ill the Residential Construction Performance Guidelines, issued by the National Association of Home Builders, the most current edition, or community and industry standards. Authority: T.CA , Chapter General Regulations for Home Improvement Contractors Amendments Bonds, paragraph (2) shall be amended by deleting subparagraph (a) in its entirety, and renumbering the remaining subparagraphs so they follow alphabetically and numerically, and the rule, as amended, shall read as follows: (2) Description of Bonds. fa} Cash Bonds. Cash bonds may not include p8f6gnal chec;k&. Gasl=l-beAds may include; 4-:- Cl:Hf&Flcy, which shall ea deposited with the State Treasblrer, Sblbje~eorder of the Board, and '>\ hich may not earn interest; ~ Cashier's check, certificate of deposit for a term of at least two (2) yean; or certified chock: {ij W Issued ey a financial institl:kiea;- SRow!R -tho name of tho pllfct:laser; and ~ Assigned and payable to lhe Board; J:- Sa.cings and-loan-assasiation certificates, passeook or st:lare accounts, credit union or share accounts, passl:>ook sa ings or other similar accounts a&signed and payable to the Board, which shall be issued for periods of not less than one (1) year and accompanied by deli1jery of tho oertificate passbook, st:iare account, certificate, passeook or other similar acco1a1nt to the Board.,, Property Bond 4-:- A property bond shall be the assignment to tt:le Board by an owner applicant of an intefest of ten thousand dollars ($10,000.00) in real pfoperty located in Tennessee; and submission of-a-title search showing any eno1a1mbrances on the property. ~ The Board may require the applicant to submit an appraisal of the property to ascertain that the unenoumbefeg-vak:le-of tho pfoperty Is at least ten thousand dollars ($10,000.00)..(fil{G} Surety Bond. 1. A surety bond shall be in the amount of ten thousand dollars ($10,000.00), issued to a home improvement contractor by an approved insurance company authorized to do business in Tennessee, for the benefit of a claimant, who has been damaged by the contractor's breach of a home improvement contract. If the bond ceases to be in effect, the home improvement contractor's license shall become invalid. SS-7038 (June 2016) 4 RDA 1693

16 2. The Board may refuse to accept a bond written for a home improvement contractor by a surety which has failed to meet its obligations under this subtitle. fq}~ Letter of Credit. 1. A bond in the form of an irrevocable letter of credit shall be an agreement, between a financial institution and a home improvement contractor on record at the Board wherein the FDIC insured financial institution agrees to extend an irrevocable line of credit amounting to ten thousand dollars ($10,000.00), for the purpose of honoring claims filed with the Board. 2. The irrevocable letter of credit shall show the name of the financial institution extending the credit and the name of the applicant or home improvement contractor to whom the letter of credit was issued as it appears on the applicant's or home improvement contractor's license application. Authority: T.C.A (h) and (3). SS-7038 (June 2016) 5 RDA 1693

17 Rule ; ; * If a roll-call vote was necessary, the vote by the Agency on these rules was as follows: Board Member Aye No Abstain Absent Jack Ronnie Tickle Keith Whittington William Mason Reese Smith Jerry Haves Cindi Debusk Mark Bradd Ernest Owens Randv Chase Signature (if required) I certify that this is an accurate and complete copy of proposed rules, lawfully promulgated and adopted by the Board on May 23, 2017, and is in compliance with the provisions of T.C.A The Secretary of State is hereby instructed that, in the absence of a petition for proposed rules being filed under the conditions set out herein and in the locations described, he is to treat the proposed rules as being placed on file in his office as rules at the expiration of ninety (90) days of the filing of the proposed rule with the Secretary of State. Date: Signature: Name of Officer: Title of Officer: Ashley N. Thomas Assistant General Counsel Subscribed and sworn to before me on: Notary Public Signature: My commission expires on: SS-7038 (June 2016) 6 RDA 1693

18 Agency/Board/Commission: Board for Licensing Contractors Rule Chapter Number(s): : All proposed rules provided for herein have been examined by the Attorney General and Reporter of the State of Tennessee and are approved as to legality pursuant to the provisions of the Administrative Procedures Act, Tennessee Code Annotated, Title 4, Chapter 5. Herbert H. Slatery Ill Attorney General and Reporter Date Department of State Use Only Filed with the Department of State on: Effective on: _ Tre Hargett Secretary of State SS-7038 (June 2016) 7 RDA 1693

19 Chapter ; Rule ; ; Regulatory Flexibility Addendum Pursuant to T.C.A through , prior to initiating the rule making process, all agencies shall conduct a review of whether a proposed rule or rule affects small business. 1. The type or types of small business and an identification and estimate of the number of small businesses subject to the proposed rule that would bear the cost of, or directly benefit from the proposed rule; The proposed rules will affect more than 40 trades and professions across all facets of the construction industry in Tennessee. In total the Board licenses approximately 16,600 general contractors and 1,370 home improvement contractors. The vast majority of these licensees are considered small businesses. 2. The projected reporting, recordkeeping and other administrative costs required for compliance with the proposed rule, including the type of professional skills necessary for preparation of the report or record; There is no additional expected record keeping or additional reporting necessary. 3. A statement of the probable effect on impacted small businesses and consumers; The effect on small businesses will be positive. These rules allow for contractors to be on notice of what guidelines inspectors use in inspecting their work in the event of a complaint. The other changes are expected to have low impact on small businesses other than making clear the rules and regulations of the Board in response to legislative alterations and in their effort put consumer protection first. 4. A description of any less burdensome, less intrusive or less costly alternative methods of achieving the purpose and objectives of the proposed rule that may exist, and to what extent the alternative means might be less burdensome to small business; There are no less burdensome, less intrusive or less costly methods of achieving the purpose of these proposed rules. These rules were developed specifically for small businesses since the majority of licensed contractors in Tennessee are small businesses. 5. A comparison of the proposed rule with any federal or state counterparts; and There are no federal counterparts to the proposed rules. The proposed rules are in response to the recent legislative session. Bordering states have differing schemes for how they regulate contractors: Kentucky has no state regulation on general contractors. In Georgia, home improvement contractors are not separately licensed from general contractors. It does not appear that filing a bond is required to obtain licensure. In Texas, home builders are not required to be licensed through the state; however, most municipalities require licensure and these municipal requirements often include proof of liability insurance. Ohio does not separate home improvement contractors from general contractors. However, it does not appear that any contractors are required to file a bond to obtain licensure. Georgia contractors' standard of care is defined as "an inability to practice a business or profession with reasonable skill and safety to the public or has become unable to practice the profession with reasonable skill and safety to the public by reason of illness, use of alcohol, drugs, narcotics, chemicals, or any other type of material," and, "gross negligence, repeated or persistent negligence or negligence resulting in a significant danger to life or property." The Georgia consumer protection website puts consumers on notice that builders can be sued using the Georgia Rights to Repair Act, which is officially codified (O.C.G.A. Sections through ). Georgia does require that an applicant provide satisfactory proof that they possess financial responsibility and obtain $500,000 in general liability insurance. SS-7038 (June 2016) 8 RDA 1693

20 6. Analysis of the effect of the possible exemption of small businesses from all or any part of the requirements contained in the proposed rule. The overwhelming majority of businesses that are affected by these rules are small businesses. These rules do not create any additional requirements for small businesses. SS-7038 (June 2016) 9 RDA 1693

21 Chapter ; Rule ; ; Impact on Local Governments Pursuant to T.C.A and "any rule proposed to be promulgated shall state in a simple declarative sentence, without additional comments on the merits of the policy of the rules or regulation, whether the rule or regulation may have a projected impact on local governments." {See Public Chapter Number 1070 { of the 2010 Session of the General Assembly) The proposed rules are not expected to have an impact on local governments. SS-7038 {June 2016) 10 RDA 1693

22 Additional Information Required by Joint Government Operations Committee All agencies, upon filing a rule, must also submit the following pursuant to T.C.A (i)(1 ). (A) A brief summary of the rule and a description of all relevant changes in previous regulations effectuated by such rule; The Board has stated in rule the unlimited monetary classification threshold on licensure. The new rule adopting Residential Construction Performance Guidelines formally adopts a guideline that has an effect on licensure. The deletion of subparagraph (a) deletes all information regarding cash bonds for home improvement contractors since those are no longer accepted. (B) A citation to and brief description of any federal law or regulation or any state law or regulation mandating promulgation of such rule or establishing guidelines relevant thereto; The two amendments and the new rule are all in response to recent legislation passed by the 2017 Tennessee General Assembly. The amendment to state the unlimited license status is in response to Public Chapter 237 which raised the threshold on general contractor's license limitations requiring CPA audits. The Board wanted their unlimited license status to remain the same but to put this in the rules for clarification. The new rule adopting Residential Construction Performance Guidelines is in response to Public Chapter 215 which requires certain administrative entities to formally adopt outside codes or guidelines that have an effect on licensure. The deletion of subparagraph (a) is in response to Public Chapter 226 section 5 which no longer allows home improvement contractors to aoolv for licensure usinq cash bonds. (C) Identification of persons, organizations, corporations or governmental entities most directly affected by this rule, and whether those persons, organizations, corporations or governmental entities urge adoption or rejection of this rule; These rules are produced to comply with the Tennessee General Assembly's legislation. We are unaware of groups outside of the legislature or the Board that have either urged or opposed these rules. The Board urges the adoption of these rules to comply with the leqislature. (D) Identification of any opinions of the attorney general and reporter or any judicial ruling that directly relates to the rule or the necessity to promulgate the rule; I None known. (E) An estimate of the probable increase or decrease in state and local government revenues and expenditures, if any, resulting from the promulgation of this rule, and assumptions and reasoning upon which the estimate is based. An agency shall not state that the fiscal impact is minimal if the fiscal impact is more than two percent (2%) of the agency's annual budget or five hundred thousand dollars ($500,000), whichever is less; I None known. (F) Identification of the appropriate agency representative or representatives, possessing substantial knowledge and understanding of the rule; Ashley N. Thomas Assistant General Counsel Division of Regulatory Boards Department of Commerce and Insurance SS-7038 (June 2016) 11 RDA 1693

23 (G) Identification of the appropriate agency representative or representatives who will explain the rule at a scheduled meeting of the committees; Ashley N. Thomas Assistant General Counsel Division of Regulatory Boards Department of Commerce and Insurance (H) Office address, telephone number, and address of the agency representative or representatives who will explain the rule at a scheduled meeting of the committees; and Ashley N. Thomas, Assistant General Counsel 500 James Robertson Parkway Nashville, Tennessee (615) ashlev.thomas(a}tn.qov (I) Any additional information relevant to the rule proposed for continuation that the committee requests. I None known. SS-7038 (June 2016) 12 RDA 1693

24 Tennessee Secretary of State Tre Hargett Publications Division 312 Rosa L. Parks Avenue, 8 th Floor Nashville, Tennessee Robert A. Greene Assistant Director of Publications Robert.A.Greene@tn.gov May 18, 2018 Ms. Ashley N. Thomas Tennessee Board for Licensing Contractors Regulatory Boards 500 James Robertson Parkway Nashville, TN Dear Ms. Thomas, Per your instruction, we are amending rule as shown in the rule filing with the sequence number (effective June 20, 2018). We have deleted subparagraphs (2)(a) and (2)(b) as shown in the amendment, instead of just subparagraph (2)(a) as stated in the instructions. If you have any questions, please feel free to contact my office at Sincerely, Robert A. Greene Assistant Director of Publications sos.tn.gov