UNDERSTANDING SECTIONS I & II
For the past 40+ years, the vast majority of all California real estate purchase contracts contained terminology as to who was going to pay for "actual" damage or infestations reported in termite reports and who was going to pay for "conditions deemed likely to cause" damage or infestations. The problem with this phraseology was that no one was able to properly interpret termite reports to determine which findings were "actual" damage and which were "deemed likely."
In 1989, the California Association of Realtors spearheaded a new law that mandated termite inspection companies to separate their findings into categories called "Section I and Section II findings. The actual law says that "if requested by the consumer," the termite company must separate his findings. This labeling process is extremely important to home sellers and buyers because a property cannot be "certified" as being free and clear of wood destroying organisms and pests if it contains Section I items. No certification means no loan (in some cases). No loan means the home cannot be sold. To protect yourself in a real estate transaction, it is imperative that you review each finding to ensure it is properly classified.
SECTION I findings are classified as "Active damage and infestation to wood by wood destroying organisms and pests. The cause of the damage is also classified as a Section I item.
SECTION II findings are classified as "Conditions deemed likely to lead to damage or infestation to wood by wood destroying organisms and pests if the condition is not corrected".
Wood Destroying Pest: Includes subterranean termites, drywood termites, dampwood termites and wood destroying beetles.
Wood Destroying Organisms: Include brown fungus (commonly called dryrot) and white fungus. Remember, the damage or infestation has to be to wood, not sheetrock, not plaster, not tile--just wood.
The absolute best way to properly interpret your termite inspection report is to (1) read the finding and (2) ask yourself two questions:
First - "Is this a description of active damage and/or infestation to wood by a wood destroying pests or organism?" In other words, did the inspector say the wood is infested with termites, beetles or infected or damaged with fungus or dryrot? If the answer is no, this is not a Section I item.
Second - "Is this a description of conditions deemed likely to cause an infestation by wood destroying pests or organisms?" If the answer to this question is "yes", you have a Section II item. If your answer is "no", you simply have an informational note telling you of a condition within your house.