CSHB 357(L&C): "An Act requiring errors and omissions insurance for real estate licensees; renaming the real estate surety fund as the real estate recovery fund and relating to that fund, and redefining the procedures and criteria used by the Real Estate Commission to make an award from the fund to a person suffering a loss caused by certain misconduct of real estate licensees; requiring a real estate licensee to maintain an office in the state; and providing for an effective date."
00 CS FOR HOUSE BILL NO. 357(L&C) 01 "An Act requiring errors and omissions insurance for real estate licensees; renaming the 02 real estate surety fund as the real estate recovery fund and relating to that fund, and 03 redefining the procedures and criteria used by the Real Estate Commission to make an 04 award from the fund to a person suffering a loss caused by certain misconduct of real 05 estate licensees; requiring a real estate licensee to maintain an office in the state; and 06 providing for an effective date." 07 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 08 * Section 1. AS 08.88.071(a) is amended to read: 09 (a) The commission shall 10 (1) determine whether applicants meet requirements for licenses under 11 this chapter and issue licenses to those who qualify; 12 (2) prepare and grade examinations; 13 (3) after hearing, have the authority to suspend or revoke the license of
01 a licensee or impose other disciplinary sanctions authorized under AS 08.01.075 on a 02 licensee who 03 (A) with respect to a real estate transaction 04 (i) made a substantial misrepresentation; 05 (ii) made a false promise likely to influence, persuade, 06 or induce; 07 (iii) in the case of a real estate broker, pursued a 08 flagrant course of misrepresentation or made a false promise through 09 another real estate licensee; 10 (iv) has engaged in conduct that is fraudulent or 11 dishonest; 12 (v) violates AS 08.88.391; 13 (vi) violates AS 08.88.396; 14 (B) procures a license by deceiving the commission, or aids 15 another to do so; 16 (C) has engaged in conduct of which the commission did not 17 have knowledge at the time the licensee was licensed demonstrating the 18 licensee's unfitness to engage in the business for which the licensee is licensed; 19 (D) knowingly authorizes, directs, connives at or aids in 20 publishing, distributing, or circulating a material false statement or 21 misrepresentation concerning the licensee's business or concerning real estate 22 offered for sale, rent, or lease, or managed in the course of the licensee's 23 business in this or any other state or concerning the management of an 24 association in the course of a licensee's business in this or another state; 25 (E) if a real estate broker, wilfully violates AS 08.88.171(d) or 26 08.88.291; 27 (F) if an associate real estate broker, claims to be a real estate 28 broker, or, if a real estate salesperson, claims to be a real estate broker or 29 associate real estate broker; 30 (G) if a real estate broker, employs an unlicensed person to 31 perform activities for which a real estate license is required;
01 (H) if an employed real estate licensee of a real estate broker, 02 fails immediately to turn money or other property collected in a real estate 03 transaction over to the employing real estate broker; or 04 (I) fails to carry and maintain errors and omissions 05 insurance with terms and conditions established by the commission under 06 AS 08.88.172; 07 (4) prosecute, through the Department of Law, violations of the 08 provisions of this chapter or lawful regulations adopted under this chapter; 09 (5) release for publication in a newspaper of general circulation in the 10 locale of the offending person's principal office registered with the commission notice 11 of disciplinary action taken by the commission against a person licensed under this 12 chapter; 13 (6) issue a temporary permit to the personal representative of the estate 14 of a deceased real estate broker or to another person designated by the commission 15 with the approval of the personal representative of the estate in order to secure proper 16 administration in concluding the affairs of the decedent broker's real estate business; 17 (7) issue a temporary permit to the personal representative of a legally 18 incompetent real estate broker or to another person designated by the commission with 19 the approval of the personal representative of the broker in order to secure proper 20 administration in temporarily managing the real estate business of the broker; 21 (8) establish and periodically revise the form of the seller's property 22 disclosure statement required by AS 34.70.010; 23 (9) have the authority to levy civil fines as established in this chapter; 24 (10) revoke the license of a broker or associate broker who is 25 convicted of a felony or other crime committed while licensed under this chapter that, 26 in the judgment of the commission, affects the ability of that person to practice as a 27 broker or associate broker competently and safely or who is convicted of forgery, 28 theft, extortion, conspiracy to defraud creditors, or fraud; notwithstanding 29 AS 08.88.171, a person whose license is revoked under this paragraph is not qualified 30 for a license under AS 08.88.171(a) or (b) until seven years have elapsed since the 31 person completed the sentence imposed for the conviction.
01 * Sec. 2. AS 08.88.071(b) is amended to read: 02 (b) When an award is made from the real estate recovery [SURETY] fund 03 under this chapter, the commission may suspend the license of the real estate licensee 04 whose actions formed the basis of the award. A suspension ordered under this 05 subsection shall be lifted if the licensee reaches an agreement with the commission on 06 terms and conditions for the repayment to the real estate recovery [SURETY] fund of 07 the money awarded to the claimant [AND THE COSTS OF HEARING THE CLAIM 08 UNDER AS 08.88.465] and if the licensee satisfies the requirements of AS 08.88.095. 09 The suspension shall be reimposed if the licensee violates the terms of a repayment 10 agreement entered into under this subsection. 11 * Sec. 3. AS 08.88.171(b) is amended to read: 12 (b) A natural person qualifies for an associate real estate broker license if the 13 person passes the brokers examination, applies for the license within six months after 14 passing the examination, submits satisfactory proof of successful completion of the 15 education requirements of AS 08.88.091, has had at least 24 months of active and 16 continuous experience as a real estate licensee within the 36 months immediately 17 preceding application for the license, furnishes satisfactory proof that errors and 18 omissions insurance required under AS 08.88.172 has been obtained, is not under 19 indictment for or seven years have elapsed since the person has completed a sentence 20 imposed upon conviction of a felony or other crime that, in the judgment of the 21 commission, affects the person's ability to practice as an associate real estate broker 22 competently and safely or upon conviction of forgery, theft, extortion, conspiracy to 23 defraud creditors, or fraud, and is employed by a licensed real estate broker as an 24 associate real estate broker. Unless the associate broker fails to satisfy the educational 25 requirements of AS 08.88.095 or renew the license, or the associate broker's license is 26 suspended or revoked, the associate broker's license continues in effect as long as the 27 associate broker is employed by a licensed real estate broker as an associate broker. If 28 the associate broker stops being employed by a licensed real estate broker, the 29 associate broker's license is suspended from the time the associate broker stops until 30 the associate broker satisfies the educational requirements of AS 08.88.098 and 31 (1) again is employed by a real estate broker as an associate broker; or
01 (2) becomes an owner of a real estate business or is employed as a real 02 estate broker by a foreign or domestic corporation, partnership, limited partnership, or 03 limited liability company, in which case the associate broker's license shall be returned 04 to the commission by the associate broker, and the commission shall issue the licensee 05 a broker's license. 06 * Sec. 4. AS 08.88.171(c) is amended to read: 07 (c) A natural person qualifies for a real estate salesperson license if the person 08 passes the real estate salesperson examination, applies for the license within six 09 months after passing the examination, submits satisfactory proof of successful 10 completion of the education requirements of AS 08.88.091, is at least 19 years of age, 11 furnishes satisfactory proof that errors and omissions insurance required under 12 AS 08.88.172 has been obtained, is not under indictment for a felony or other crime 13 that, in the judgment of the commission, affects the individual's ability to practice as a 14 real estate salesperson competently and safely or under indictment for forgery, theft, 15 extortion, conspiracy to defraud creditors, or fraud, or, if convicted of such an offense, 16 seven years have elapsed since the person completed the sentence imposed upon 17 conviction. Unless the salesperson fails to satisfy the educational requirements of 18 AS 08.88.095 or renew the license, or the real estate salesperson's license is suspended 19 or revoked, a real estate salesperson's license continues in effect. 20 * Sec. 5. AS 08.88 is amended by adding a new section to read: 21 Sec. 08.88.172. Errors and omissions insurance. (a) A person licensed as a 22 real estate broker, associate real estate broker, or real estate salesperson shall, as a 23 condition of licensing, carry and maintain errors and omissions insurance to cover 24 activities for which licensing is required under AS 08.88.161. 25 (b) The department shall establish by regulation the terms and conditions of 26 the errors and omissions insurance required by this section, including 27 (1) coverage requirements; 28 (2) limits of coverage; 29 (3) the maximum amount of premium to be charged licensees under a 30 master errors and omissions policy under (d) of this section; and 31 (4) the method for adjusting these amounts based on the Consumer
01 Price Index. 02 (c) A licensee may obtain the errors and omissions insurance required by (a) 03 of this section by 04 (1) obtaining a master insurance policy that may be made available to 05 licensees by the commission; or 06 (2) independently obtaining errors and omissions insurance that 07 complies with the requirements established under (b) of this section. 08 (d) The commission may 09 (1) solicit bids for a master errors and omissions insurance policy for 10 licensees that meets the minimum terms and conditions established under (b) of this 11 section using a competitive sealed bid process under AS 36.30 (State Procurement 12 Code); and 13 (2) charge a licensee a reasonable administration fee to recover costs 14 incurred in connection with the solicitation made under (1) of this subsection. 15 (e) If the commission is unable to obtain a master errors and omissions 16 insurance policy to insure licensees that meets the terms and conditions established 17 under (b) of this section, the requirement that a real estate licensee carry and maintain 18 errors and omissions insurance under AS 08.88.172 is void during the period that the 19 commission is unable to obtain the insurance. 20 (f) A licensee seeking to obtain or renew a license shall certify to the 21 commission that errors and omissions insurance has been obtained. A licensee who 22 elects to independently obtain errors and omissions insurance shall provide a 23 certificate of coverage with the application to obtain or renew a license. 24 * Sec. 6. AS 08.88.173(b) is amended to read: 25 (b) If a loss covered by the fidelity bond required under this section is also 26 reimbursable from the real estate recovery [SURETY] fund, the owners' association 27 that suffered the loss may not recover under the bond until the association has 28 obtained a final judgment, final arbitration award, or a settlement agreement 29 and filed a claim for an award [REIMBURSEMENT] under AS 08.88.460 [AND 30 PROCEEDINGS RELATING TO THE CLAIM ARE CONCLUDED]. 31 * Sec. 7. AS 08.88.281 is amended to read:
01 Sec. 08.88.281. Real estate recovery [SURETY] fund. Before issuing a 02 license to an applicant under this chapter, the commission shall ensure that the 03 applicant has complied with the provisions of AS 08.88.455 and is covered by the real 04 estate recovery [SURETY] fund established in AS 08.88.450. 05 * Sec. 8. AS 08.88.291(a) is amended to read: 06 (a) A person licensed as a real estate broker shall, by registering with the 07 commission, inform the commission of the person's principal office and of any branch 08 offices of the person's real estate business and include in the information the names of 09 the real estate licensees who are employed at each office. A real estate licensee may 10 do real estate business only through a principal office or from a branch office 11 registered by the broker by whom the licensee is employed. Failure of a real estate 12 broker to maintain a place of business in the state or to inform the commission of its 13 location and the names and addresses of all real estate licensees employed at each 14 location by the broker is grounds for the suspension or revocation of the broker's 15 license. 16 * Sec. 9. AS 08.88.291(d) is amended to read: 17 (d) The commission shall mail all notices pertaining to a license or recovery 18 [SURETY] fund action taken under this chapter or a regulation adopted under this 19 chapter to the current address or addresses of a licensee obtained under this section. 20 Proof of notice provided under this subsection satisfies due process notice 21 requirements. 22 * Sec. 10. AS 08.88.391(b) is amended to read: 23 (b) The failure of a licensee to disclose a conflict of interest as required under 24 this section does not give rise to a cause of action by a private person. However, the 25 commission may, under AS 08.88.071, impose a disciplinary sanction for violation of 26 this section [, AND A CLAIM MAY BE FILED BY A PRIVATE PERSON UNDER 27 AS 08.88.460 IF THE VIOLATION CONSTITUTED FRAUD, 28 MISREPRESENTATION, OR DECEIT AND THE PERSON SUFFERED A LOSS 29 AS A RESULT OF THE VIOLATION]. 30 * Sec. 11. AS 08.88.450 is amended to read: 31 Sec. 08.88.450. Real estate recovery [SURETY] fund. (a) The real estate
01 recovery [SURETY] fund is established in the general fund to carry out the purposes 02 of AS 08.88.450 - 08.88.495. The fund is composed of payments made by real estate 03 licensees under AS 08.88.455, filing fees retained under AS 08.88.460, income earned 04 on investment of the money in the fund, and money deposited in the fund under (c) of 05 this section. Money in [APPROPRIATED TO] the fund does not lapse. The 06 commission may make payments from the fund for awards from the fund under 07 AS 08.88.450 - 08.88.495 [AMOUNTS IN THE FUND MAY BE APPROPRIATED 08 FOR CLAIMS AGAINST THE FUND], for hearing and legal expenses directly 09 related to fund operations and claims, and for real estate educational purposes. 10 (b) The Department of Commerce, Community, and Economic Development 11 shall provide the commission every three months with a statement of the activities of, 12 balances in, interest earned on, and interest returned to the real estate recovery 13 [SURETY] fund. 14 (c) If money from the real estate recovery [SURETY] fund is expended to 15 prepare, print, manufacture, sponsor, produce, or otherwise provide an item or a 16 service to a member of the public, to a real estate licensee, to a potential real estate 17 licensee, or to another person, any money paid by the person to the commission, either 18 directly or through an agent or contractor of the commission, to receive the item or 19 service shall be deposited in the fund. In this subsection, "an item or a service" 20 includes an information pamphlet, an examination preparation packet, an educational 21 course, the certification of a real estate education course, and the approval of a real 22 estate education instructor. 23 * Sec. 12. AS 08.88.455 is amended to read: 24 Sec. 08.88.455. Payments by real estate licensees. (a) A real estate licensee, 25 when applying for or renewing a real estate license, in lieu of obtaining a corporate 26 surety bond, shall pay to the commission, in addition to the license fee, a recovery 27 [SURETY] fund fee not to exceed $125. After each two-year licensing cycle, if the 28 commission finds that the average balance in the recovery [SURETY] fund during the 29 two-year licensing cycle was less than $250,000 or more than $500,000, the 30 commission shall by regulation adjust the recovery [SURETY] fund fees so that the 31 average balance of the recovery [SURETY] fund during the next two-year licensing
01 cycle is anticipated to be an amount that is not less than $250,000 or more than 02 $500,000. In this subsection, "average balance" means the average balance after taking 03 into account anticipated expenditures for awards from [CLAIMS AGAINST] the 04 fund [, FOR HEARING] and legal expenses directly related to fund operations [AND 05 CLAIMS], and for real estate educational purposes. 06 (b) All fees collected under this section shall be paid at least once a month by 07 the department into the general fund. These payments shall be credited to the real 08 estate recovery [SURETY] fund. 09 * Sec. 13. AS 08.88.460(a) is amended to read: 10 (a) Subject to (e) of this section, a person seeking an award from the 11 recovery fund [REIMBURSEMENT] for a loss suffered in a real estate transaction as 12 a result of fraud, an intentional tort [MISREPRESENTATION], deceit, or the 13 conversion of trust funds or the conversion of community association accounts under 14 the control of a community association manager on the part of a person [LICENSEE] 15 licensed under this chapter shall 16 (1) obtain a final judgment from a court of competent jurisdiction, 17 a final arbitration award, or a settlement agreement with a licensee that involves 18 a person committing fraud, an intentional tort, deceit, the conversion of trust 19 funds, or the conversion of community association accounts; 20 (2) submit an affidavit describing the efforts made to collect the 21 final judgment, final arbitration award, or settlement agreement stating that the 22 person has used due diligence to collect the amount due, stating that the 23 judgment, arbitration award, or settlement agreement is uncollectable using 24 reasonable efforts, and that the conduct that is the subject of the judgment, 25 arbitration award, or settlement agreement involved an activity for which a 26 person must obtain a license under AS 08.88.161; 27 (3) make a claim to the commission for an award from the recovery 28 fund [REIMBURSEMENT] on a form furnished by the commission; in [. IN] order to 29 be eligible for an award [REIMBURSEMENT] by the commission, the claim form 30 must be filed within two years after the date of a judgment, arbitration award, or 31 settlement agreement that is [THE OCCURRENCE OF THE FRAUD,
01 MISREPRESENTATION, DECEIT, OR CONVERSION OF TRUST FUNDS OR 02 THE CONVERSION OF COMMUNITY ASSOCIATION ACCOUNTS UNDER 03 THE CONTROL OF A COMMUNITY ASSOCIATION MANAGER CLAIMED 04 AS] the basis for the award from the recovery fund is no longer subject to appeal; 05 the [REIMBURSEMENT. THE] form must [SHALL] be executed under penalty of 06 unsworn falsification in the second degree and must include 07 (A) [THE FOLLOWING: (1)] the name and address of each 08 real estate licensee involved; 09 (B) a copy of the final judgment, final arbitration award, or 10 settlement agreement; 11 (C) a copy of the affidavit asserting due diligence but lack 12 of success in collecting the entire amount due; 13 (D) [(2)] the amount of the final judgment, final arbitration 14 award, or settlement agreement that remains unpaid [ALLEGED LOSS; 15 (3) THE DATE OR PERIOD OF TIME DURING WHICH THE 16 ALLEGED LOSS OCCURRED; 17 (4) THE DATE UPON WHICH THE ALLEGED LOSS WAS 18 DISCOVERED]; 19 (E) [(5)] the name and address of the claimant; and 20 (F) [(6)] a general statement of facts relative to the claim. 21 * Sec. 14. AS 08.88.460(b) is amended to read: 22 (b) The commission shall send a [A] copy of a claim filed [WITH THE 23 COMMISSION] under (a) of this section [SHALL BE SENT] to each real estate 24 licensee named in (a)(3) of this section [ALLEGED TO HAVE COMMITTED THE 25 MISCONDUCT RESULTING IN LOSSES, TO THE PRINCIPAL REAL ESTATE 26 BROKER EMPLOYING A LICENSEE ALLEGED TO HAVE COMMITTED THE 27 CONDUCT RESULTING IN LOSSES, AND TO ANY OTHER REAL ESTATE 28 LICENSEE INVOLVED IN THE TRANSACTION AT LEAST 20 DAYS BEFORE 29 ANY HEARING HELD ON THE CLAIM BY THE OFFICE OF 30 ADMINISTRATIVE HEARINGS (AS 44.64.010)]. 31 * Sec. 15. AS 08.88.460(d) is amended to read:
01 (d) A claimant under this section shall pay a filing fee of $250 to the 02 commission at the time the claim is filed. The filing fee shall be refunded if the 03 (1) commission makes an award to the claimant from the real estate 04 recovery [SURETY] fund; or 05 (2) claimant withdraws the claim [CLAIM IS DISMISSED UNDER 06 (c) OF THIS SECTION; OR 07 (3) CLAIM IS WITHDRAWN BY THE CLAIMANT BEFORE THE 08 OFFICE OF ADMINISTRATIVE HEARINGS (AS 44.64.010) HOLDS A 09 HEARING ON THE CLAIM]. 10 * Sec. 16. AS 08.88.465(a) is repealed and reenacted to read: 11 (a) If the commission receives a claim for an award from the recovery fund 12 that complies with the requirements of AS 08.88.450 - 08.88.495, the commission 13 shall make an award from the recovery fund in an amount not to exceed $15,000. Not 14 more than $15,000 may be paid for each transaction, regardless of the number of 15 persons injured or the number of parcels of real estate involved in the transaction. 16 * Sec. 17. AS 08.88.472(a) is amended to read: 17 (a) The commission may charge [TO] the real estate recovery [SURETY] 18 fund for [HEARING AND LEGAL] expenses related to fund operations [AND 19 CLAIMS]. The commission shall deposit into the real estate recovery [SURETY] 20 fund amounts recovered for these expenses from the licensee under AS 08.88.071(b) 21 or from other parties under AS 08.88.490. 22 * Sec. 18. AS 08.88.472(d) is amended to read: 23 (d) If the salary of an employee is entirely or partially paid for from money in 24 the real estate recovery [SURETY] fund, the employee may perform administrative 25 duties for the commission in addition to any duties the employee performs that are 26 related to the real estate recovery [SURETY] fund. AS 08.88.910 does not apply to 27 this subsection. 28 * Sec. 19. AS 08.88.475 is amended to read: 29 Sec. 08.88.475. Maximum liability. (a) The maximum liability of the real 30 estate recovery [SURETY] fund may not exceed $50,000 for any one real estate 31 licensee.
01 (b) If the $50,000 liability of the fund as provided in (a) of this section is 02 insufficient to pay in full the valid claims of all persons who have obtained a final 03 judgment, final arbitration award, or settlement agreement involving [FILED 04 CLAIMS AGAINST] an individual licensee and have filed claims for an award 05 from the recovery fund, the $50,000 shall be distributed among the claimants in the 06 ratio that their individual claims bear to the aggregate of valid claims, or in another 07 manner that the commission considers equitable. Distribution shall be among the 08 persons entitled to share in the recovery without regard to the order in which their 09 claims were filed. 10 * Sec. 20. AS 08.88.480 is amended to read: 11 Sec. 08.88.480. Order of claim payment. If the money deposited in the real 12 estate recovery [SURETY] fund is insufficient at a given time to satisfy a legally 13 [DULY] authorized claim against the fund, the commission shall, when sufficient 14 money has been deposited in the fund and appropriated, satisfy unpaid claims in the 15 order that the claims were originally filed, plus accumulated interest at the rate of eight 16 percent a year. 17 * Sec. 21. AS 08.88.490 is amended to read: 18 Sec. 08.88.490. Right to subrogation. When the commission has paid to a 19 claimant from the real estate recovery [SURETY] fund the sum awarded by the 20 commission, the commission shall be subrogated to all of the rights of the claimant to 21 the amount paid, and the claimant shall assign all right, title, and interest in that 22 portion of the claim to the commission. Money collected by the commission on the 23 claim shall be deposited to the real estate recovery [SURETY] fund. 24 * Sec. 22. AS 08.88.495 is amended to read: 25 Sec. 08.88.495. Disciplinary action [AGAINST BROKERS AND 26 SALESMEN]. Repayment in full of all obligations to the real estate recovery 27 [SURETY] fund does not nullify or modify the effect of disciplinary proceedings 28 brought under the provisions of this chapter. 29 * Sec. 23. AS 08.88.990 is amended by adding new paragraphs to read: 30 (13) "final arbitration award" means an arbitration award for which 31 there is no further right to appeal;
01 (14) "final judgment" means a judgment for which there is no further 02 right to appeal. 03 * Sec. 24. AS 08.88.460(c), 08.88.465(b), 08.88.465(c), 08.88.465(d), 08.88.465(e), 04 08.88.465(f), 08.88.470, 08.88.472(b), 08.88.472(c), and 08.88.474 are repealed. 05 * Sec. 25. The uncodified law of the State of Alaska is amended by adding a new section to 06 read: 07 TRANSITIONAL PROVISIONS: REGULATIONS. The commission may proceed to 08 adopt regulations necessary to implement this Act. The regulations take effect under AS 44.62 09 (Administrative Procedure Act), but not before the effective date of the amendments made by 10 secs. 1 - 24 of this Act. 11 * Sec. 26. Section 25 of this Act takes effect immediately under AS 01.10.070(c). 12 * Sec. 27. Except as provided in sec. 26 of this Act, this Act takes effect March 1, 2010.