Legislature(1997 - 1998)
03/19/1998 01:42 PM Senate L&C
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 33 - REAL ESTATE LICENSING
CHAIRMAN LEMAN announced HB 33 to be up for consideration.
REPRESENTATIVE NORMAN ROKEBERG, sponsor, said HB 33 is the
culmination of over four years worth of work by a Task Force that
was appointed by the Alaska Real Estate Commission. He said the
primary objective of this bill is to bring professional community
association managers under the licensing law . This is the result
of a case where there was an embezzlement of $570,000 from 18
separate associations by one individual in the Anchorage area. The
individual was convicted of felonies for conversion of funds, but
it was obvious at that time there was no regulation or oversight of
any of the activities of association managers. The professional
managers approached him and he has letters of support from
individual members in the packet.
This is a consumer protection bill. It provides that there will be
oversight by the Real Estate Commission, there will be fidelity
bonds in place to look after the funds, it provides for handling of
operational and investment funds, and the ability to make a claim
against a surety fund which exists that as licensed Realtors they
will be a party thereto.
Additionally, the bill covers a number of areas that provide the
Commission with greater statutory authority, delegates staff
workload, grants the authority to the Commission to levy civil
fines, expands the disciplinary power of the Board, and increases
the authority to charge for licensees. It also covers and expands
the ability of licensees to get their continuing education hours at
other sources rather than just certified instructors in the State
of Alaska. It expands that to include courses which are nationally
designated, fully accredited courses for leading to designations
within the real estate industry. He said he had attended many of
these courses himself and many of them go as long as a week. They
are full eight-hour type classes with examinations, excellent
instructors, and with extremely high costs (including travel,
accommodation, and the tuition). Prior to this legislation, real
estate licensees were unable to get credit for these extremely
expensive courses. It also provides that college courses and other
technology courses in our changing environment will be accepted for
credit.
The key areas in this bill are expansion or clarification of what
constitutes prohibitive conduct under the existing statutory scheme
in the State of Alaska. REPRESENTATIVE ROKEBERG explained that it
was believed that anyone engaged in a real estate transaction, as
defined under law, had to be licensed under Alaskan law and there
are a number of exemptions which are in the back of the bill.
There are 10 exemptions from requirements of licensing in this
State. This particular bill adds an additional 11 exemptions to
that and expands them under the law. One of the areas of
discussion in the House was whether or not individuals who own
property could manage their own property. He thought that existing
statute prohibits that activity. This bill expands the exemptions
and exceptions to who may practice real estate in the State and
allows people to have their friends for no compensation, other than
expenses, manage their property. Additionally, it provides that
relatives can get a fee and that management of a four-plex or less
can be done.
Because of the number of exceptions in property management, they
looked at other prohibitive conduct and discovered recent activity
(marketing kick-back mechanisms) of two or three firms in Alaska,
specifically Amway Corporation, which he believes is illegal in the
State of Alaska. The real estate community testified at the Real
Estate Commission's meeting on December 4 and requested that they
issue directives enjoining conduct on the part of some of these
activities. They were advised by the State Attorney General's
office that existing statute did not prohibit this activity. This
bill has adopted language drafted by the Mississippi Real Estate
Commission tested in federal court in order to prohibit third-party
kick-backs to people who are not in the loop of the real estate
transaction.
The conflict-of-interest provisions of this bill are a major area
where they are putting in higher standards for real estate
practitioners which is the result of a legislative Budget and Audit
report a couple years ago. They have added numerous definitions,
allowed licensed assistants to be employed directly by the
associate brokers, and have an immediate effective date, except for
the regulations that will need six to nine months to promulgate.
REPRESENTATIVE ROKEBERG informed them that they are talking about
a company that has a market capital on Wall Street in excess of $35
billion and controls 25 percent of every home sale in the United
States, and is a monolith in terms of business in this country. He
also told them that there are 2,200 licensed practitioners of real
estate in the State of Alaska. The same as attorneys. In 1997
there was $1 billion worth of real estate activity in the
Municipality of Anchorage, alone; he thought there could be $5
billion worth of gross State product annually. This is a big part
of our economy.
Megan's law (sex offender) was argued in the House and whether
there is a duty to disclose psychologically impaired properties.
He said that at least 15 other states have laws on this issue. He
didn't think it was necessary, but would be willing to talk about
it.
SENATOR KELLY asked if the amendments had been talked about in the
House, but they chose not to adopt them.
REPRESENTATIVE ROKEBERG clarified that one amendment is very
technical. The amendments were not absolutely necessary.
CHAIRMAN LEMAN said that Section 34 causes him some concern,
especially when he looks at the Section 900 exemptions and 14 and
15, other areas where people involvement in a transaction is
incidental. He didn't know why their involvement in a real estate
transaction is no more significant than people whose activities are
currently exempted.
TAPE 98-15, SIDE B
Number 580
MR. RON POLLOCK, Broker, Jack White Co., said the bill is very
encompassing dealing with education and association management.
The topic of major concern to him is specifically strengthening the
language of prohibited unlicensed activity (kick-backs). The Real
Estate Commission has been very interested in this and has believed
that it requires a real estate license to receive a fee or a
portion of a fee. Any monies earned should come under the scrutiny
or regulatory powers of the Real Estate Commission. The affinity
language, from Mississippi, is a clarification of this. The
financial implications to the State, Alaska Housing Finance Co. ,
and the financial arena, etc. is very significant as most of the
money that goes to an affinity group leaves Alaska and there isn't
any added value that they bring to the transaction. The average
real estate person in Anchorage earns approximately $28,000 per
year. If any person is to receive a commission as a result of a
real estate transaction, that person should be licensed.
CHAIRMAN LEMAN noted that there are a number of exemptions
currently in the bill and wanted to know why certain transactions
should be exempt from the statement he just made and why other
transactions that appear to be as innocuous, in terms of the
transaction, should not be exempt.
MR. VLAHOVICH, Associate Broker, supported HB 33 as written.
MR. DAVID GARRISON, Associate Broker, NAR Investments, supported HB
33.
MR. CHARLES SANDBERG, Broker, NAR Real Estate, said he was also the
President-elect of the Alaska Association of Realtors. His
membership gave Representative Rokeberg a lot of help in putting
this comprehensive bill together. He urged the Committee to pass
the bill as written.
Number 523
MR. WILLIAM BRADY, Agent, ReMax Properties, said he is also
Chairman of the Industry Issues for the State Association of
Realtors, and the President-elect of the Anchorage Board of
Realtors. They agree with a lot of the comments already made today
and support HB 33 as written.
MR. BOB BAER, Associate Broker, Totem Realty, said he had been
involved in the banking and/or real estate industries for
approximately 33 years in Alaska. He represents Concerned
Advocates for Real Estate Services (CARE) with approximately 200
members. They endorse the passage of HB 33.
MR. JOHN CARMEN, Partner, Homestake Mortgage, said he is also a
member of Alaska Mortgage Bankers and its Legislative Committee.
He said the Alaska Mortgage Bankers passed a resolution in support
of HB 33. He feels this bill is very important for the continued
health of the real estate industry in Anchorage.
CHAIRMAN LEMAN said he wanted to make sure they didn't exclude
anyone who wanted to participate in the Alaskan economy,
incidentally, and yet protect real estate transactions.
MS. LISA HARRINGTON, Fortune Properties, supported HB 33 and said
it is very supportive of keeping jobs and money in Alaska.
MS. GRACE OAKLEY, Executive Administrator, Alaska Real Estate
Commission, supported HB 33.
MS. RUTH BLACKWELL, Chairperson, Alaska Real Estate Commission,
said they discussed HB 33 in their meeting this morning and
strongly support it as passed by the House without any changes.
She emphasized AS 08.88.161, licensing condominium managers, is a
public protection issue that is very necessary and AS 08.88.391,
the conflict of interest disclosure provision, is another public
protection issue where licensees would have to disclose to their
principals if they had a conflict and exactly what it was. The
fourth section is 08.88.401(e) prohibited conduct regarding payment
of fees for unlicensed activity.
MR. CLAIR RAMSEY, Real Estate Commission Member, said he had played
with numbers regarding the affinity groups and it's basically
structured to send a lot of dollars out of the State with no real
return. In fact, this would be quite detrimental to the State,
because we would see a direct impact on the financing programs,
like AHFC, and the appraisal and inspection industry within the
State. HB 33 is truly a consumer bill and it is very important
that it pass this session.
MR. SCOTT CONNELLY, Homer, said the membership of the Kachemack
Board of Realtors asked him to convey its unqualified support of HB
33 as written, in particular Section 34, regarding prohibited
conduct. He feels that allowing unlicensed entities to control and
direct a consumer in what should be a free market transaction
really opens the door for a multitude of abuses and potentially
shoddy representation for the consumer. Currently, the consumer is
free to interview and negotiate with real estate agents for
commissions or fees and they might lose that ability when they
start coming under a blanket organization. Allowing supermarket
employees to direct consumers in a real estate transaction only
lessens the odds that they will end up working with an agent that
best suits their needs.
MR. CONNELLY said he had personally been contacted by the Amway
Corporation and would elucidate on request.
CHAIRMAN LEMAN asked for his reaction to them.
MR. CONNELLY said he had been contacted regarding a referral for
listing a home in the Homer area that was owned by a woman with
whom he had previous contact. He had actually sent her a listing
agreement a year ago which she chose not to fill out and ended up
listing her house with another company in town. The listing has
since expired and out of the blue, he received a call from the
Amway Corporation asking if he wanted the referral and he replied
that he had a relationship with her already and wasn't interested
in the listing because of the previous relationship. He offered to
have another agent call them back which he did. Within a day the
Amway Corporation called again, totally by random, and talked to
another agent in his office and asked him if he wanted to take this
"referral." His impression is that they are basically a
telemarketing firm and don't care who they are calling. They are
not doing the consumer any favors in just totally randomly finding
someone who is willing to pay for a referral.
CHAIRMAN LEMAN asked who specifically called him and who they said
they represented.
MR. CONNELLY answered that they did not call themselves the Amway
Corporation, but the owner of the property contacted Amway
originally and this other person somehow got her name. He didn't
know if the company was related to Amway or not.
CHAIRMAN LEMAN asked him to fax his information to him.
Number 351
MR. RON JOHNSON, Kenai Realtor, asked for clarification on the
newest version on page 30, lines 19 and 20, under exceptions
saying, "management of a total of four or fewer residential units
by a natural person or other persons" means to him that everything
below a four-plex can be managed without the benefit of a real
estate license.
CHAIRMAN LEMAN said it would also include a four-plex.
MR. JOHNSON said a majority of property management complaints come
from four-plexes or tri-plexes rather than single family and he
asked them to consider language on page 31, lines 5 & 6 to be in
error. He thought it could open the door for any other unlicensed
activity and his understanding is that a majority of complaints are
tenants who were misled.
REPRESENTATIVE ROKEBERG said they included four-plexes, but not a
series of four-plexes. This is one of the key provisions the House
added to the bill to protect the every-day citizen of the State, so
their ability to manage their apartments is not inhibited by a
licensing law. He calls this the snowbird amendment, because it
allows people to have friends look after a property without making
a profit above expenses.
MR. BARB NORD, President, Kenai Board of Realtors, supported HB 33
as written.
Number 311
SENATOR KELLY asked if there was any opposition to this bill within
Alaska with the exception of the outside affinity groups.
REPRESENTATIVE ROKEBERG answered that there was none to his
knowledge.
MS. CATHERINE REARDON, Director, Division of Occupational
Licensing, said that the Department supports this bill as indicated
in a letter from Commissioner Sedwick. It will provide additional
consumer protection and additional attributes to the State of
Alaska.
CHAIRMAN LEMAN asked if the Administration supported Section 34 as
written.
MS. REARDON answered, "Yes."
MR. JIM WAKEFIELD, Realtor, Powell Realty, Vice President, Alaska
Association of Realtors, supported HB 33. It has been worked over
by many divergent interests and they had come together and agreed
on it.
MR. ERIC DYRUD, Chairman, Legislative Committee, Anchorage Board of
Realtors, said this bill is the first time that 21 members agreed
on something. They are very supportive of HB 33.
REPRESENTATIVE ROKEBERG wanted CHAIRMAN LEMAN to ask Mr. Wakefield
and Ms. Blackwell if they have an agreement with Amway Corporation
or U.S. A. A. Insurance Corporation to represent them as a referral
broker under the situation outlawed under Section 34. He thought
they would find the Cendant Mobility Corporation is the actual
moving party here. He also wanted Mr. Ron Pollock, Jack White Co.,
to be asked the same question. A conversation he had with Mr. Jim
Jenks, U.S.A.A. San Antonio, Texas, indicates that Powell Real
Estate in Juneau and Jack White Co. in Anchorage are their
referring brokers for this type of activity.
CHAIRMAN LEMAN asked how important it was to him that Section 34 be
a part of this bill and not a piece of stand-alone legislation.
REPRESENTATIVE ROKEBERG answered if Section 34 does not stay in the
bill, he will not be returning to his home.
SENATOR KELLY asked for someone to explain the significance of
Section 34 to him.
REPRESENTATIVE ROKEBERG explained that it is language adopted by
the House Labor and Commerce Committee that is consistent with the
language that was promulgated by the Mississippi Real Estate
Commission which was tested in federal court to prohibit precisely
this type of activity. This type of activity is a marketing
company, such as Cendant Mobility. This company within the last 24
months was known as Home Equity. It was purchased in a corporate
take-over by H.S.F., Inc., a New York Stock Exchange company with
a C.E.O. and Chief Operating Officer named Mr. Harry Silverman.
SENATOR KELLY asked if Section 34 was the outside affinity
language.
REPRESENTATIVE ROKEBERG answered, "Yes."
Number 193
CHAIRMAN LEMAN said he received a letter from Amway Corporation
today which had information different than submit by the testifier
in Homer, but is more consistent with what Representative Rokeberg
talked about. It said that Amway distributors participate in a
program called the Amway Real Estate Network, administered by
Cendant Mobility. Their program is available to their own
distributors, not to others, and is available in 44 states. It's
more common that other states have the ability for that type of
participation and the number of states restricting it is six.
REPRESENTATIVE ROKEBERG responded that one of the 44 states is
Alaska which is typical of what that representation would mean.
This is a very new program and this is why he suggested that the
Chairman request this information specifically from Amway Corp.,
Powell Real Estate, and Jack White, Co. He has other names, also.
He has second-hand knowledge that Amway Corp. has been running a
telemarketing type of situation where they are making referrals to
Alaskan real estate brokers who don't even know they have an
alleged agreement with these people. This is why he asked the
Chairman to verify the circumstance. He said they are, in effect,
extorting, up to 34 percent of a real estate commission. They
share that with the consumer which is not good in the long run,
because it deals dollars out of the State and will have an impact
on Alaskan housing. There is also a loss of the ability to bargain
with the referral fee. He thought there was also a lack of choice
on the part of the consumer. He said that Cendant Corp. has a $35
billion market cap on Wall Street, a $14 billion balance sheet.
They own Avis Rental Cars, Howard Johnsons, Days Inn, Century 21
Real Estate, Caldwell-Banker, and ERA. They are a huge major
marketing conglomerate. They are putting themselves in the
position to control a substantial portion of our country's real
estate markets. He said this is a consumer protection bill, a very
important piece of legislation. This is not like corporate
welfare; they can conduct business here. All they have to do is
get a license.
CHAIRMAN LEMAN said the Committee would work with him on this and
adjourned the meeting at 3:20 p.m.
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