Legislature(1997 - 1998)

03/19/1998 01:42 PM Senate L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                  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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