To Pull Permits or Not, That Is the Temptation in California

March 6, 2006
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Adhering to California Title 24 has been a challenge for Geno Gruber, general manager of Gallagher’s Heating and Air Conditioning, Los Molinos, Calif. (Photo by Glenn Fuentes.)
If what has transpired over the first three months since Title 24 went into effect is the norm, business may remain as usual for contractors in California this year. And, that's what scares Kevin Comerford, Bryan Lee, Geno Gruber, and other law-abiding HVAC contractors in California.

If California contractors are following the new law of their land, they should be pulling a building permit every time they come to install or replace a central air conditioner or furnace in a household. However, in an informal survey of cities across the great state of California, not one city official noted a spike in the issuance of building permits since Title 24 went into effect Oct. 1, 2005.

Granted, there could be an outside chance that not many air conditioners or furnaces were installed or repaired in California during the months of October, November, or December last year, but what is the likelihood?

Zero, responded Comerford.

"No one is doing this," said the president of Service Champions of Northern California, referring to getting permits.

You see, with a permit in hand, a paper trail can be followed. And, that could hurt the pocketbook of both homeowner and contractor.

As stated in a California Energy Commission (CEC) memo mailed in August last year to all California homeowners, Californians must have their home's ducts tested for leaks when the homeowner has a central air conditioner or furnace installed or replaced. Ducts that leak 15 percent or more must be repaired to reduce the leaks. Of course, if repairs are needed, the homeowner has more costs.

After the contractor tests and fixes the ducts, a homeowner is then required to choose whether he/she prefers to have an approved third-party field verifier check to make sure the duct testing and sealing was done properly, or have the home included in a random sample where one in seven duct systems are checked. Again, another cost.

Therefore, if a building permit is not pulled at the start of the process, a contractor and home-owner could go about installing a new air conditioning or heating system undetected. No need to pay for the permit. No need to check the ducts. No need to repair the leakage. No need to have a third-party verification. Money, in the end, is saved.

And, again, Comerford, Lee, Gruber, and other law-abiding contractors are fearful this may be the norm rather than the exception in their state.

"For years, quality-driven California HVAC contractors have been practicing differentiation by pulling permits, which has been a successful tactic when competing against ‘lowball' competitors," wrote Lee in a letter addressed to The NEWS. "California duct test and seal laws are changing the effectiveness of pulling permits as a differentiating tactic.

"Assuming there are no other differences between competing proposals, the difference between a permitted and nonpermitted job used to be only a few hundred dollars, which the homeowner or business owner would find reasonable. Now, the difference starts at $700 and easily exceeds thousands, as many duct systems are difficult to access or are not worthy of repair."

As Lee stated in his letter, retail establishments such as Wal-Mart and Costco have proven that consumers are driven by price, "and when comparing the permitted proposal against the nonpermitted proposal, the price difference is too tempting, even if they know a permit is required."

In the end, Lee, Comerford, and others will continue to pull permits, but is it all to their disadvantage? "For the first time, California contractors are finding that permits can negatively drive sales," wrote Lee. "Until the industry is near 100 percent compliant, the contractor that pulls permits faces a perilous period."

General manager Ray Dias (left) and Service Champions of Northern California owner Kevin Comerford (right) have been pushing for installing new 92 percent or higher rated furnaces.

GETTING AROUND THE ORDER

Duct sealing is not required in the following situations: 1) when homes are in specific coastal climates; 2) when systems have less than 40 feet of ductwork in unconditioned spaces like attics, garages, crawlspaces, basements, or outside the building; or 3) when ducts are constructed, insulated, or sealed with asbestos. There are specific alternatives that allow high-efficiency equipment and added duct insulation to be installed instead of fixing duct leaks.

For instance, if a new 92 percent or higher rated furnace is installed in a home, a homeowner is not required to get his ducts rated. As a result, Comerford has decided to make this his selling strategy.

"We are pushing [homeowners] for 92 and above," he said.

"In the end, it might just be less costly to go to 92 or higher efficiency," added Ray Dias, general manager at Service Champions of Northern California. "If your ductwork is in need of repair, this is going to cost the homeowner."

Some permit services organizations are coming to the forefront, looking to pick up business as well as help contractors get through the Title 24 process unscathed.

"I am very concerned about the new Title 24 laws and regulations regarding duct leakage rating," said Matthew Blake, owner of MDB Enterprises, a permits services company located in Orange County, Calif. "Too many contractors do not know what is in store for them."

As he put it, third-party certified leakage rate testing will be required in almost every situation mechanical contractors see.

"Almost every project mechanical contractors will pull permits for in 2006 must adhere to these standards," he said. "Six percent leakage of the fan flow rate on newer systems may not be as large a concern as 15 percent leakage of the fan flow rate for replacement of existing systems and additions to existing systems. This will require every project qualifying to possess certification by a qualified third-party duct leakage rating company or person."

In the end, Blake said contractors would suffer through additional costs of materials and labor, management time involved, and new applicable permit fees. Consumers, on the other side of the coin, will have to pay for ducting repairs they previously did not have to attend to, increasing their costs.

"It is anticipated the energy cost savings of these new requirements will, over time, outweigh the initial costs to consumers," said Blake, believing that permit service companies will see an influx of contractors seeking advice and permit services, as well as inspectors issuing "stop work" notices due to duct leakage noncompliance.

PENALTIES IN THE AIR?

To prepare for the new standard, Comerford sent a few employees to a teaching session put on by the CEC in Fresno in July of last year. When he heard the instructor point out that less than 10 percent of contractors are pulling permits, he just could not believe it.

"I am not sure how they think this will change," he said.

If the fining process is enforced, contractors may begin to take notice and follow the law, said Lee. If a contractor fails to obtain a required building permit and fails to test and repair a homeowner's ducts, the home-owner will also be susceptible to additional costs and liability.

"Real estate law requires you to disclose to potential buyers and appraisers whether or not you obtained required permits for work done on your house," the CEC warned homeowners in its August letter.

"If you do not obtain a permit, you may be required to bring your home into compliance with code requirements for that work, and you may have to pay penalty permit fees and fines prior to selling your home."

Of course, the new law was not established to cause chaos. According to the CEC, the greatest energy use in California homes is for central air conditioning and heating. Most homes with central air conditioning and heating systems have ducts "that were never properly sealed. The average home's ducts leak around 30 percent of the conditioned air outside the home."

Therefore, insists the CEC, properly sealed ducts will lower energy bills, reduce pollution inside homes, and, as the CEC put it, "help to avoid a repeat of the inconvenience and health and safety risks that we suffered during the power blackouts of 2000."

While adjusting to the new 13 SEER standard may be the challenge for most contractors in the United States, adhering to the California Title 24 has been a much bigger challenge for Gruber and most California contractors.

"We have had to prove duct system leakage to no more than 15 percent on retrofit work. This has forced us to train our salespeople to be better at data collection about the customer's home," he said.

In Lee's estimation, California contractors have to decide if they want to be law-abiding or not.

"The duct test standard in California will not change," he said. "In fact, it will become more stringent in 2008 as part of the next revision. Regulators are just warming us up."

As he put it, the time of reckoning is here.

"There are people in charge who are certain we are in an industry in need of radical change," said Lee.

"They are smart, can demonstrate the increasing need for change as energy costs escalate - and their train has left the station. Our opportunity to change the political climate is gone because politics is an art of endurance, not the quick fix. They have been working on their plan since 2001. We just got started."

Sidebar: Title 24 Answers

Here are some answers to some common questions, provided by the California Energy Commission:

Do these requirements apply throughout the state?
No, they only apply in specific climate zones defined by the California Energy Commission (CEC) (climate zones 2, 9, 10, 11, 12, 13, 14, 15, and 16). These are inland climate zones where there is substantial air conditioning or heating. The requirements don't apply to mild climate regions near the coast.

Are there other situations where these requirements do not apply?
Yes. Duct sealing is not required when systems have less than 40 feet of ductwork in unconditioned spaces like attics, garages, crawlspaces, basements or outside the building or when ducts are constructed, insulated or sealed with asbestos. There also are specific alternatives that allow high-efficiency equipment and added duct insulation to be installed instead of fixing duct leaks.

How is duct leakage measured to determine if the ducts are sealed?
The installing contractor pressure tests every system to meet one of the four criteria established in the standards. The measurement must be completed using special pressurization equipment (commonly called a "duct blaster") following procedures established by the CEC.

Who does the third-party verification?
A homeowner can choose to either have an approved third-party field verifier check to make sure the duct testing and sealing was done properly or have their house included in a random sample where one in seven duct systems are checked. The third-party verification must be done by a certified Home Energy Rating System (HERS) rater. The installing contractor needs to contact the HERS rater to arrange for the verification. The HERS rater is required by law to be independent from the installing contractor to avoid having a conflict of interest.

Is duct sealing required when space conditioning equipment is replaced in commercial buildings also?
Yes, in some cases. When single zone space conditioning equipment is replaced and when at least 25 percent of the ducts are installed outside of the building or in unconditioned space (above an insulated drop or sheetrock ceiling), duct sealing requirements must be met.

How can I get more information on the requirements?
Contact the CEC hotline at 800-772-3300. Training will be offered by utilities and other organizations around the state. The CEC will provide information about training in its quarterly newsletter, the "Blueprint." A contractor can call the hotline and ask to be added to the "Blueprint" e-mail list. The CEC has also prepared a letter for contractors to give to homeowners explaining the new law. The letter is available at www.energy.ca.gov/title24/changeout.

What contractors state license law requirements apply to compliance with the energy code?
A contractor must be licensed to do installation work valued at $500 or more. All contractors are required to follow all California building code requirements, including the California Energy Code. Contractors are required to get building permits for replacement of space conditioning equipment valued at $500 or more.

Publication date: 03/06/2006

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