Legislature(1997 - 1998)
03/24/1997 03:23 PM House L&C
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 24, 1997
3:23 p.m.
MEMBERS PRESENT
Representative Norman Rokeberg, Chairman
Representative John Cowdery, Vice Chairman
Representative Bill Hudson
Representative Jerry Sanders
Representative Joe Ryan
Representative Tom Brice
Representative Gene Kubina
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 33
"An Act relating to real estate licensing and the real estate
surety fund; and providing for an effective date."
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 33
SHORT TITLE: REAL ESTATE LICENSING
SPONSOR(S): REPRESENTATIVE(S) ROKEBERG BY REQUEST
JRN-DATE JRN-PG ACTION
01/13/97 36 (H) PREFILE RELEASED 1/3/97
01/13/97 36 (H) READ THE FIRST TIME - REFERRAL(S)
01/13/97 36 (H) LABOR & COMMERCE, FINANCE
03/14/97 (H) L&C AT 3:15 PM CAPITOL 17
03/14/97 (H) MINUTE(L&C)
03/17/97 (H) L&C AT 3:15 PM CAPITOL 17
03/17/97 (H) MINUTE(L&C)
03/24/97 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
JANET SEITZ, Legislative Assistant
to Representative Norman Rokeberg
Alaska State Legislature
Capitol Building, Room 24
Juneau, Alaska 99801
Telephone: (907) 465-6547
POSITION STATEMENT: Presented amendments to HB 33.
GRAYCE OAKLEY, Executive Administrator
Real Estate Commission
Division of Occupational Licensing
Department of Commerce and Economic Development
3601 C Street, Suite 722
Anchorage, Alaska 99503-5966
Telephone: (907) 269-8197
POSITION STATEMENT: Testified regarding HB 33.
SCOTT CONNELLY, President
Kachemak Board of Realtors
331 East Pioneer Avenue
Homer, Alaska 99603
Telephone: (907) 235-6183
POSITION STATEMENT: Testified regarding HB 33.
ERIC DYRUD
Associated Brokers Incorporated
2509 Eide Street, Number 4
Anchorage, Alaska 99503
Telephone: (907) 258-8888
POSITION STATEMENT: Testified regarding HB 33.
RON JOHNSON, Broker and President
Kenai Board of Realtors
610 Attla Way, Number 6
Kenai, Alaska 99611
Telephone: (907) 283-4372
POSITION STATEMENT: Testified regarding HB 33.
DWIGHT BOWDEN, Broker
ERA Professional Real Estate
2331 Sues Way
Anchorage, Alaska 99516
Telephone: (907) 562-3300
POSITION STATEMENT: Testified regarding HB 33.
PAT STEPHEN, Broker
Polar Realty, Incorporated
1101 East 76th Avenue
Anchorage, Alaska 99508
Telephone: (907) 349-7681
POSITION STATEMENT: Testified regarding HB 33.
CAROL MEYER, State President
Alaska Association of Realtors
951 Hermon Road
Wasilla, Alaska 99654
Telephone: (907) 376-2448
POSITION STATEMENT: Testified regarding HB 33.
KRISTAN TANNER, Broker Associate
RE/MAX of Wasilla
1590 East Financial Drive, Suite 200
Wasilla, Alaska 99654-8237
Telephone: (907) 376-4515
POSITION STATEMENT: Answered question related to HB 33.
DAVID GARRISON, Associate Broker
AAR Investments
P.O. Box 190727
Anchorage, Alaska 99519
Telephone: (907) 277-3446
POSITION STATEMENT: Testified regarding HB 33.
WILEY BROOKS, CPM and Broker
Wiley Brooks Company, Incorporated
2525 Blueberry Road, Suite 204
Anchorage, Alaska 99503
Telephone: (907) 277-2484
POSITION STATEMENT: Testified regarding HB 33.
ACTION NARRATIVE
TAPE 97-28, SIDE A
Number 0001
CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce
Standing Committee meeting to order at 3:23 p.m. All members were
present at the call to order: Representatives Rokeberg, Cowdery,
Hudson, Sanders, Ryan, Brice and Kubina.
HB 33 - REAL ESTATE LICENSING
Number 0024
CHAIRMAN ROKEBERG announced the committee would continue the public
hearing on House Bill No. 33, "An Act relating to real estate
licensing and the real estate surety fund; and providing for an
effective date."
Number 0085
REPRESENTATIVE JOHN COWDERY informed members that amendments B.2
and B.3, presented the previous week by his staff, had been
intended for discussion, not introduction.
CHAIRMAN ROKEBERG acknowledged receipt of those and said the
Anchorage Legislative Information Office (LIO) had copies.
Although the committee would respect Representative Cowdery's
wishes and not introduce them, they would address those issues.
CHAIRMAN ROKEBERG advised members that Janet Seitz would explain
changes in the latest bill version, 0-LS0197\F, Lauterbach,
3/18/97. It wasn't his intention to move the bill that day. In
addition to public testimony, there was correspondence from real
estate groups and individuals to consider.
Number 0279
CHAIRMAN ROKEBERG said the bill is broader and bigger than perhaps
originally intended. This "F" version is not the final working
draft of the committee; his intention following that day's hearing
was to put it into a "de facto subcommittee," which he would work
on, then hold another public hearing before coming up with a final
version. He wanted to provide everyone in the real estate
community an opportunity to make suggestions about the bill.
Number 0388
REPRESENTATIVE BILL HUDSON made a motion to adopt 0-LS0197\F,
Lauterbach, 3/18/97, as a work draft. There being no objection, it
was so ordered.
Number 0426
JANET SEITZ, Legislative Assistant to Representative Norman
Rokeberg, explained changes (references to amendments are from
those adopted at the previous hearing). On page 7, lines 9 and 10,
Amendment 1 had added new language regarding the Building Owners
and Managers Association. On page 8, lines 8 through 13, there is
new language, subsection (b), relating to commercial services
brokers, which the legislative drafter had suggested.
Number 0518
CHAIRMAN ROKEBERG said this is one of the more controversial areas.
He intends to add a conceptual amendment here to exclude anything
under a four-plex, so that a real estate sales practitioner without
a commercial endorsement could sell up to a four-plex,
notwithstanding its valuation. He indicated the desire for
additional testimony regarding this.
Number 0586
MS. SEITZ advised members the next change is on page 9, line 3.
Subsection (e) begins, "Unless licensed as a commercial real estate
broker"; that is new language. Section 13, which starts on page 9,
line 17, and continues through page 10, line 13, is also new
language, from Amendment 4. She explained, "The only difference is
it didn't get to the drafter that small subsection (b) should be
`Before issuing' instead of `After providing'. So, ... that would
be changed."
CHAIRMAN ROKEBERG said it is a civil penalty clause. There are a
number of different citations to penalties in this chapter. Once
the basic draft is done, he wants to review those and try to
minimize them.
Number 0669
REPRESENTATIVE HUDSON suggested perhaps using a graph to indicate
the complex changes, which had worked well elsewhere.
Number 0691
MS. SEITZ advised members that Section 16, beginning on page 14,
line 3, and continuing to page 15, is entirely new and contains
commercial broker language. On page 17, Amendment 1 had deleted a
section regarding the commission's adoption of a system for
reevaluation of examinations; it would have occurred after line 2.
In version B, it had been on page 14.
MS. SEITZ continued. On page 17, line 25 now reads, "60 days or
less"; line 29 now reads, "more than 60 days". Those were from
Amendment 1. On page 18, line 23 now reads, "may reactivate the
license"; it had been awkward language, cleaned up by Amendment 1.
One page 21, line 28, the word "exclusive" is dropped between "All"
and "real estate personal services contracts".
MS. SEITZ referred to page 22, lines 3 through 6, and said, "This
is where we had the duplicative `for at least three years'
language, and that's been cleaned up. So, we only have reference
one time to `for at least three years.' And on line 7, the
language, `upon request to any principal in a transaction,' was
added."
Number 0882
MS. SEITZ advised members that on page 24, after line 16, another
section, relating to disclosure of agency, had been dropped. In
version B, it had been Section 37, on page 22.
CHAIRMAN ROKEBERG specified that the agency disclosure section
would have been just before Section 38, page 24, of version F.
MS. SEITZ referred to page 35. On lines 2 and 3, the drafter had
added, "including a commercial real estate services broker". On
lines 9 and 10, the definition of "commercial real estate services
broker" is new language. And on lines 18 and 19, the definition,
"`employed' includes being an independent contractor" is also new
language.
Number 1062
GRAYCE OAKLEY, Executive Administrator, Real Estate Commission,
Division of Occupational Licensing, Department of Commerce and
Economic Development (DCED), testified via teleconference from
Anchorage, saying she was mainly available to answer questions.
She stated, "I do have a little bit of concern on the section of
the F draft on page 9, where the `commercial' is added in line 3,
because it seems like that section is the same ... section (b) on
the previous bill, that was referring back to all of the different
endorsements. And by putting it in this way, it would limit it to
just the commercial endorsement, and I'm not sure that's what you
want to do." She asked that the committee look carefully to ensure
that "commercial" is appropriate there.
MS. OAKLEY referred to page 15, line 11. She said testimony the
previous Monday indicated the language about insurance requirements
would be changed so that premium payments wouldn't come to the Real
Estate Commission; however that hadn't been incorporated. In
addition, she'd sent suggested language regarding the phrase, "the
commission or the designee," because of a concern raised within the
DCED about its possibly applying to people who aren't state
employees. That hadn't been incorporated, either, although she
acknowledged the committee may have reasons for that.
Number 1187
REPRESENTATIVE HUDSON asked where that is in the bill.
MS. OAKLEY said the designee language is located in a couple of
places: page 2, line 15, and page 15, line 30.
Number 1224
CHAIRMAN ROKEBERG stated, "We do have an opinion on that; so, we
will be looking at that." He said he'd asked the drafter to
totally redraft the section on errors and omissions (E&O)
insurance. He then asked how much activity the commission had
conducted to try to educate and inform members of the real estate
community that this would be happening.
Number 1278
MS. OAKLEY answered that at the time the task force made its
recommendations to the Real Estate Commission, one issue of the
real estate newsletter, which went through it section by section,
was mailed to every licensee, active or inactive. After the change
in commission membership, they wanted time to digest it; she
believed about a year had lapsed since it was published.
Number 1323
CHAIRMAN ROKEBERG asked when the task force report was prepared.
MS. OAKLEY said the summer of 1995. It was discussed at the
convention in Fairbanks last year, right after the commission
adopted it. She stated, "It was taken to the board of directors of
AAR, and then I reported on it at the general membership meeting."
She said there was a chance for people to contact her afterwards,
but it wasn't gone through section by section.
CHAIRMAN ROKEBERG requested that Ms. Oakley provide a memo setting
forth that time frame and efforts to disseminate information. He'd
received complaints about this catching people by surprise.
Although the committee had sent out more than 75 copies, to all
property management firms and to many major brokers in the state,
it didn't mean they had contacted everyone, which concerned him.
Number 1407
MS. OAKLEY said she'd misspoken; it was the summer of 1996 that it
was published in the newsletter. She would provide that newsletter
article to the committee, along with the requested memo. In
September 1996, the new commission had indicated they needed more
time to digest this.
CHAIRMAN ROKEBERG asked whether the commission took action on it
before that.
MS. OAKLEY replied, "Yes, they did take action."
CHAIRMAN ROKEBERG requested a copy of that or related minutes.
MS. OAKLEY agreed to provide that.
Number 1509
SCOTT CONNELLY, President, Kachemak Board of Realtors, testified
via teleconference from Homer.
CHAIRMAN ROKEBERG asked whether Mr. Connelly had received his
letter.
MR. CONNELLY said yes. He stated, "I'm really, really pleased with
the reaction that I'm getting from everybody. And the answers that
I got at the last teleconference went a long, long way to assuaging
a lot of people's fears down here."
MR. CONNELLY discussed three points from comments he'd heard.
First, people don't like the concept of mandatory E&O insurance.
Although he believes there would be excellent participation if
there was a reasonable price, people seem to have a problem with
the word "mandatory." Second, he has the feeling that people don't
want criteria for certifying the commercial endorsement tied into
National Association of Realtors (NAR) classes.
MR. CONNELLY referred to page 8, lines 8 through 13, and indicated
the final point relates to real estate with an anticipated market
value over $500,000 unless there is a residential dwelling. He
acknowledged Chairman Rokeberg's discussion of adding terminology
about four-plexes, then stated, "The way that I read that is that
without the commercial endorsement, I couldn't sell a piece of raw
land with a value of over $500,000. And I guess that just confuses
me. It strikes me that that could be, most definitely, a
noncommercial sale, even in that price range."
Number 1599
CHAIRMAN ROKEBERG said that is a good point. The $500,000 is not
entirely arbitrary but started as a base line for discussion, with
the thinking that a dollar amount makes it easier to determine
whether a transaction is commercial or noncommercial, rather than
having a whole litany of different classifications. He expressed
interest in hearing opinions on that. He stated, "And as we get
into this whole discussion further, I think the importance of
having that endorsement will become more evident to everybody."
CHAIRMAN ROKEBERG pointed out that E&O insurance would only be
mandatory if it were obtainable for a premium of $200 or less a
year. He stated, "And I will not myself support any kind of
mandatory E&O insurance unless it's a universally-available policy
at a very low rate. And that particular portion of the bill CS has
not been updated. I've asked the drafter to try to reduce it, even
down to about a paragraph or so, and allow the commission to try to
find that insurance, and if they do find it, to make sure that it
is available." He emphasized that it would be mandatory in order
to obtain lower premiums, which is the reason for considering a
premium cap.
MR. CONNELLY replied that he appreciated the fact that with better
participation, there would be better rates. He said he'd love to
be able to get E&O insurance for $200 a year.
CHAIRMAN ROKEBERG stated, "I thought everybody would. That's why
we even raised it from $100 to $200."
MR. CONNELLY said he'd noticed that; even $200 is very reasonable.
He commented that everyone there is comfortable that they'll have
an opportunity to address any future bill versions. "And, again,
thank you for that, for making us feel at ease," he concluded.
Number 1764
CHAIRMAN ROKEBERG noted that Eric Dyrud had sent a letter dated
March 23. He inquired about the rationale behind his suggestions.
ERIC DYRUD, Associated Brokers Incorporated, testified via
teleconference from Anchorage. He explained his first
recommendation, regarding composition of the Real Estate
Commission. As he read the current language, the commission could
have contained no associate brokers or brokers. However, he
believes it is important that at least two members be either
associate brokers or brokers, because oftentimes brokers look at
things differently than sales people do, as far as responsibility.
Number 1820
CHAIRMAN ROKEBERG commented that he'd asked the drafter to put the
brokers back in. He'd like to hear from commission members later
about why they removed that. He agreed with Mr. Dyrud 100 percent
on that point, because they need experienced people in those slots.
He noted that it only takes two years to get a broker's license.
Number 1835
MR. DYRUD said next was a suggestion on the language under duties
of the commission. He believes the current statute calls for just
a summary of the disciplinary action. However, he believes it is
important to the industry, and would be educational, to have a
little more information in there on exactly what the problem was.
CHAIRMAN ROKEBERG said that's a good idea and they'd look at it.
MR. DYRUD referred to page 5, Section 5, relating to AS 08.88.081,
commission regulations, and said he had some real concerns. He
recommended deleting (1), which calls for setting ethical standards
and minimum standards of professional conduct. He believes if
those exist, they should be spelled out ahead of time and subject
to review, rather than empowering the Administration or the board
to do that.
MR. DYRUD also expressed concern that if the commission developed
its own code of ethics, different from the NAR's code, an agent or
licensee might be in the situation of having to violate one code or
another. Having two separate codes could create confusion and
problems in the industry and with the public.
Number 1924
CHAIRMAN ROKEBERG agreed and said he'd asked several questions
about that; he believes it needs further debate.
MR. DYRUD referred to page 6, Section 6, and recommended
substituting "identify" for "provide". He explained, "I'm not sure
that it's proper for the Real Estate Commission or the
administrative staff to get into training of instructors. I think
that adds a whole new dimension. It would be my recommendation
that it would be proper for the commission or the executive
secretary to identify those courses that are required, but that we
should not have to pay those out of license fees. And if they felt
there was no other way to do it, other than to put on a course,
that the instructor should fully pay for that course, because they,
in turn, turn around and charge all the people that go to the
courses, to pay for it."
MR. DYRUD emphasized that his two concerns here were that they were
getting into the educational business with the commission, as far
as instructors, and that they were inadvertently creating a
situation where the surety fund or a portion of the fees are used
to train instructors, who would then turn around and bill students.
Number 1995
REPRESENTATIVE JOE RYAN agreed. He stated, "We're asking the
brokers and the sales persons to upgrade their skills by getting
these endorsements. It would seem only reasonable that a person
who's teaching the course, if they wanted to expand their ability
to make a living, that they should bear the cost of that
themselves."
CHAIRMAN ROKEBERG said they'd take that and all of these under
consideration.
Number 2016
MR. DYRUD referred to page 8, Section 12, under "license required";
page 10, Section 14; and page 14, Section 16 "and other." These
refer to the requirement for an endorsement and for the limitations
that would be established on dollar amounts or types of properties.
He suggested that Ron Johnson could comment if he was on
teleconference.
MR. DYRUD stated, "It was my understanding, and his comments to the
Alaska Association legislative committee, that the primary thrust
of this change was to ensure we had appropriate education for those
people who might, the commercial sales, who might do leasing and
might do property management. But I think the intent of it is,
it's to create a class of licensees and a class of brokers. And I
think there's some real problems with that, and I don't believe
that that's beneficial to the public or to the industry."
MR. DYRUD continued, "I had a couple of sub-items on that, and I
think it's particularly crucial in small towns and communities,
that it would be very difficult for them to maintain these various
endorsements, and that we might inadvertently push buyers and
sellers to do their own transactions because an individual would
not have that kind of endorsement. So, if they didn't, they would
either have to bring a real estate licensee in, turn to an
attorney, or do without a licensee to complete the transaction."
CHAIRMAN ROKEBERG said those are philosophical issues that the
committee needs to discuss.
Number 2110
MR. DYRUD suggested they pull that whole issue out of this bill.
Although there might be a philosophical disagreement and he might
be in the minority on that, he believes it is important that the
industry understands what is intended and what will be done under
that. He also believes it could be added later. "I think at this
point, there are not enough people at the grass roots level, if you
will, that understand what's coming down," he concluded.
CHAIRMAN ROKEBERG responded that the major thrust of the bill was
originally to incorporate community associations. It added the
endorsements as a method of reaching that point, and then
differentiating in the education. He stated his understanding that
Mr. Dyrud believes the educational considerations could be done by
the commission, providing regulations for that.
Number 2154
MR. DYRUD mentioned mandatory training, suggesting someone selling
houses would want to take a residential course, not a commercial
one.
CHAIRMAN ROKEBERG said if it is mandatory, everybody must take it,
if there isn't a different endorsement or a differentiation in the
types of licenses.
MR. DYRUD suggested, "Well, if you had 10 or 12 hours of mandatory
courses, and an individual could collect, maybe, one of three of
those mandatory courses, maybe one's geared to commercial, one's
residential and one's property management, you've still taken your
... mandatory education, and the licensee has had the opportunity
to select which one of those mandatory courses, out of maybe three
choices, that would foot the bill."
Number 2190
CHAIRMAN ROKEBERG submitted they may not be mandatory if a person
selects which ones to take.
MR. DYRUD pointed out that a commercial broker might deal with a
trust account differently than a property manager would.
Therefore, there might be two trust account courses, for example,
one geared towards residential and one towards commercial or
property management. A person could take either to fulfill the
mandatory requirement for that course block.
MR. DYRUD next referred to page 15, Section 08.88.173.
CHAIRMAN ROKEBERG noted that it is discussed on page 4 of Mr.
Dyrud's letter.
MR. DYRUD explained the suggestion: If the commission offers
mandatory E&O insurance to licensees, the $125 currently charged
for licensing and designated for the surety fund should be
eliminated. Because the E&O insurance would protect the public for
any wrongs that may have occurred, the surety fund would be a
duplication.
CHAIRMAN ROKEBERG said the committee would take that up. However,
there is a distinction between limitations under the surety fund
and deductibles and limitations on E&O insurance. They don't want
to be party to anything that would inhibit commerce in the state by
putting undue burdens on individual licensees.
Number 2280
MR. DYRUD referred to "I." on page 4 of his letter, a conceptual
amendment which read: "The real estate surety fund shall be
removed from the general fund and placed in an interest bearing
account." He suggested that would be beneficial to potential
claimants and licensees, as it would increase the size of the
surety fund.
CHAIRMAN ROKEBERG advised Mr. Dyrud that there is a constitutional
prohibition against dedicated funds. He noted that there is "cash
management" in the general fund.
MR. DYRUD asked whether "cash management" means it earns interest.
Number 2309
REPRESENTATIVE HUDSON explained that most of the funds deposited to
the general fund accrue interest, but it accrues to the state.
MR. DYRUD agreed. To him, this is a special fund, paid for by the
industry to protect the public. He believes there should be a way
to put it in an interest-bearing fund to increase it.
Number 2329
REPRESENTATIVE HUDSON stated, "I think we can write language
calling for interest to accrue to the account and separate
accounting."
CHAIRMAN ROKEBERG suggested in that case, they may have to rewrite
"the whole surety fund area." He mentioned concerns of
Representative Ryan about that, as well as the current cap where
"everything lapses to the general fund over $500,000." He
expressed appreciation for the comments about E&O insurance in
particular, mentioning possibly having the surety fund provide the
deductible of a lower-premium E&O insurance, for example.
Number 2360
MR. DYRUD suggested if the $500,000 sitting around could be put in
a bank at 4 or 5 percent, even, that would result in a tidy sum to
add to the surety fund.
CHAIRMAN ROKEBERG indicated that about $200,000 per year is
expended for educational functions of the commission, which Mr.
Dyrud could ask Ms. Oakley about.
Number 2376
MR. DYRUD referred to page 17, Section 20. His suggestion, found
on page 4, item "J." of his letter, is that for subsequent exams,
individuals only are required to retake and pass the portion they'd
failed, whether it was the "general" or the "law" portion.
MR. DYRUD referred to item "K." of his letter, relating to page 22,
Sections 33 and 34. He recommends changing the phrase "complete
record" to read "all records". He believes the intent is that the
broker provide all records, and he would hate to get into an
argument after the fact of what a complete record should have been.
CHAIRMAN ROKEBERG said they'd have the drafter look at that.
Number 2429
MR. DYRUD referred to page 29, Section 43. Item "L." in his letter
suggests adding a new subsection (e) to read: "In the event of a
claim from association against a licensee, said association shall
be required to show that its board of directors employed reasonable
fiduciary responsibility on the part of the association to protect
its interests and moneys. In cases where the association failed to
exercise reasonable care, the amount due claimant shall be reduced
by one-half of the normal amount."
MR. DYRUD explained that all of these associations have boards of
directors which have responsibilities. "And I'm not sure it's fair
if they don't exercise that right that they look to the surety fund
for being made whole," he said, suggesting if an association's
board didn't exercise proper fiduciary responsibility, it may
enhance a problem.
REPRESENTATIVE RYAN replied, "We are constantly talking about
personal responsibility and how the state shouldn't pick it up if
somebody else would pick it up. I think it's a very good point,
putting responsibility where it lies." He noted that the board
sets membership requirements for an association.
TAPE 97-28, SIDE B
Number 0006
CHAIRMAN ROKEBERG said when trying to determine whether the board
had exercised reasonable fiduciary responsibility, there is a
question of law that is a matter of interpretation. He stated,
"You could spend more money on litigating the interpretation of
that law than you would be paying the claims. So, I would ask if
we could have the commission look at that and see if they can make
some recommendations along those lines, because I think it's an
excellent comment."
REPRESENTATIVE RYAN indicated perhaps a good definition was needed.
CHAIRMAN ROKEBERG replied, "But it still is a matter of evidentiary
proof, if there's a breach of fiduciary responsibility on the part
of the board. And ... should they or shouldn't they have been
looking over this guy's shoulder more? And ... that is a matter of
evidence, I think."
MR. DYRUD commented, "I think some of us out in the profession get
the feeling that we have this pot of money and everybody is trying
to get a part of it. ... If somebody in the industry has wronged
somebody, I don't have a problem with that. But on the other hand,
I think they also have a responsibility ... to do normal business
practices to serve their interests."
CHAIRMAN ROKEBERG said he couldn't agree more.
Number 0057
MS. OAKLEY requested confirmation that on that last point, Mr.
Dyrud was speaking of community associations, not just any
association.
MR. DYRUD affirmed that.
CHAIRMAN ROKEBERG turned the gavel over to Vice Chairman Cowdery.
Number 0077
RON JOHNSON, Broker and President, Kenai Board of Realtors,
testified via teleconference from Kenai. He had sent a letter
addressing the possibility of protecting the commission appointee's
position so that the commission could not as readily be changed.
Under the current governor, five members were replaced all at once,
leaving the commission with members who didn't know a lot about
what had happened in the past. He likened that to this bill; many
people don't know what the bill said, or what the intent of the
original task force was, because they weren't there.
MR. JOHNSON suggested changing "employed" and "employee" to
"associated" and "associate" throughout the bill.
MR. JOHNSON advised members he has a copy of the state of
Washington's recently-rewritten license law, which has specific
definitions relating to the concept of agency. He said, "And I
think that while the state requires that we disclose our agency
position, the law doesn't address ... the limitations of agency
under common law, as it were, or the definitions under common law;
and perhaps that might be beneficial to someplace put that in
there." He suggested they look at defining agency, perhaps using
the Washington license law as an example.
Number 0175
VICE CHAIRMAN COWDERY asked Mr. Johnson to fax a copy of that to
the committee at 465-2040.
MR. JOHNSON suggested passing the request on to Ms. Oakley, from
whom he'd obtained his copy.
Number 0185
REPRESENTATIVE RYAN said he'd found that people in real estate are
skeptical of dual agency, even though the option is there. He'd
worked in brokering commodities internationally, where it is a
common practice. He explained, "You have something to sell at a
price, and then you find a buyer who is willing to pay that price,
and you get paid at both ends. And I don't really understand in
real estate why people have this much of a problem with this." He
asked Mr. Johnson's opinion on why there is a problem.
Number 0225
MR. JOHNSON replied that he is certified by the commission to teach
agency courses and had taught 60 to 80 hours of agency using
various course outlines. It still amazes him how the concept of
agency is misunderstood, which he suggested is partly due to there
being so many concepts of agency. For example, there are agents
for football players, insurance agents, brokerage agents and real
estate agents. He suggested defining specific agency relationships
relative to the real estate business and common law.
MR. JOHNSON believes the courts like to put real estate people into
an agency position through making determinations based on their
actions. He stated, "If it walks like an agent, talks like an
agent and acts like an agent, it's an agent." Unfortunately, some
actions "under the fair-dealing-and-honest-practices-type-of-a-
thing" make buyers and sellers believe that real estate people are
their agents. Mr. Johnson believes that has created a problem,
multiplied by the fact that the agency concept in real estate is
unique to real estate.
CHAIRMAN ROKEBERG, who had resumed chairing the meeting, called on
Jerry Adams in Fairbanks; however, Mr. Adams had had to leave.
Chairman Rokeberg asked whether anyone else had time constraints.
He then called on Dwight Bowden.
Number 0326
DWIGHT BOWDEN, Broker, ERA Professional Real Estate, testified via
teleconference from Anchorage. Licensed for real estate in Alaska
since 1968, he'd been a broker since 1970. He endorsed most of
Eric Dyrud's comments and recommendations, but he took exception to
the suggestion that there be at least two brokers or broker
associates on the Real Estate Commission. However, he sees no
reason why the real estate representatives shouldn't be either
brokers or associate brokers, because it only takes two years to
get a broker's license; if someone isn't experienced enough to do
that, he believes they probably shouldn't be on the commission.
MR. BOWDEN said the commercial real estate endorsement will require
much more work; he tends to doubt that such an endorsement is
necessary. The original intent of the bill was to cover some
problems they'd had with property management and association
management. Mr. Bowden suggested if they gave all of their
attention to that particular portion of it, that would be most
helpful and difficult enough to accomplish.
MR. BOWDEN indicated Mr. Dyrud's comments on the E&O insurance and
the surety fund were excellent. They wouldn't need the surety fund
except for the deductible if everyone in the business had E&O
insurance, which he believes should be the case.
MR. BOWDEN endorsed the civil penalties for unlicensed persons
doing business where a license is required; that has been missing
for a long time. However, he believes this bill will add layers to
the bureaucracy for licensing. The commission doesn't have the
ability to investigate current complaints. He asked how they can
investigate even more complaints resulting from this bill.
Number 0470
MR. BOWDEN mentioned Ron Johnson's comments regarding agency. Mr.
Bowden believes that if licensees understand consensual dual
agency, the situation is certainly workable. He has a small
office, and at last count, they are selling 40 percent of their own
listings. They explain the consensual dual agency to the seller at
the time they list a property, and they explain it to the buyer the
first time they meet. They've had no problems to date. He
believes it will work provided that people know how to explain it.
Number 0514
REPRESENTATIVE RYAN asked whether Mr. Bowden believes the civil
penalties associated with operating without a license should
reflect the cost of becoming a licensed broker or sales person.
MR. BOWDEN replied that he'd endorse that and it is probably
appropriate. The only problem is with people who manage their own
property. This bill specifies no more than four units to manage
oneself or for another; Mr. Bowden believes that is probably too
low. They need to really go after the people with whom they've had
the most property management problems, involving embezzlement by
both licensed and unlicensed people. Being too strict gets people
who manage a few units. Although he's unsure what "a few units"
is, he believes four is too few for this bill.
Number 0602
CHAIRMAN ROKEBERG noted Mr. Bowden's indication that he is in favor
of most of Mr. Dyrud's recommendations. He asked whether Mr.
Bowden is skeptical of the need for a commercial endorsement.
MR. BOWDEN said yes.
CHAIRMAN ROKEBERG asked whether he'd change his mind on that if he
felt there was going to be "a different provision for agency laws
relating to the commercial agents, versus residential agents."
MR. BOWDEN said he'd keep an open mind.
Number 0637
PAT STEPHEN, Broker, Polar Realty, Incorporated, testified via
teleconference from Anchorage. Like Mr. Bowden, he believes what
Eric Dyrud has done and the study he's put into it have been pretty
good. He believes the commercial endorsement is more for the
protection of commercial agents than for the public. In commercial
deals, the higher the dollar value gets, the more the client, not
the agent, has control of that deal. Such clients have their own
lawyers standing by, and they are much more knowledgeable than many
agents who call themselves commercial brokers.
MR. STEPHEN, who is in the commercial business, said he has no
desire to limit who can sell commercial property. He worries more
about commercial brokers selling a home. He asked, "Ever see a
commercial broker try to write a home deal? And I see no
restriction in here about that."
CHAIRMAN ROKEBERG pointed out that there had been testimony from
more than one source about the incompetency of commercial brokers
relative to house sales. He asked that Mr. Stephen mull over "the
commercial endorsement in the realm of agency."
Number 0769
CAROL MEYER, State President, Alaska Association of Realtors (AAR),
testified via teleconference from the Mat-Su LIO, saying she'd been
fielding numerous phone calls on this. Indications are that those
people fairly much agree with other testifiers that day. Mandatory
E&O insurance would be a big problem; her guess is if it remains,
the bill may go nowhere unless some things are changed regarding
that. She indicated she and Ron Johnson had talked about whether
they want agency in there, as there is a question as to whether
including it would help or not. Even after all the education,
there is still much discussion about what agency is. "And many of
us still can't understand why there's such a misunderstanding of
agency," she added.
MS. MEYER continued: "The commercial, yeah, pretty much they're
all saying they would prefer to see, at this point, at least, the
commercial left out of it, at least until further examination, and
probably going over maybe some education and what continued
education is going to be on some of these things."
Number 0854
MS. MEYER said as state president, she is trying to find a way to
communicate what is going on. In January 1997, this bill was
brought in front of the state board; each of the local board's
presidents sits on that board. They'd "fairly supported" the bill
as it was then, with reservations on a couple of items. She'd
assumed those local presidents would inform their boards and
legislative chairs about what was happening. "And I think part of
this was already out there; so, they could have gotten their hands
on at least ... what was being presented to you, Representative
Rokeberg," she stated.
MS. MEYER said at the state convention in September (1996), it was
explained to quite a few people. There were 80 or 90 members
present, and several committee chairs and their local presidents
were there. It bothers her a bit that all of a sudden they're
hearing that the larger brokers and some other members are not
hearing about this. She asked for suggestions from any of them on
better getting this information to them.
Number 0948
MS. MEYER referred to discussion of "education being paid for out
of the surety fund for instructors." She believes the commission
has mandated that instructors be re-educated every two years, even
though evaluations from those taking the exams show they are
pleased with the instructors. It costs at least $400 for that
instructors' class every two years; out-of-state classes would add
to that cost. What will happen if suddenly they're looking at only
instructors who can afford to teach continuing education and
mandatory education classes? There are fewer instructors; they are
already seeing the same instructors over and over again. Ms. Meyer
pointed out that just because people take classes every two years,
it doesn't mean they'll instruct well; she knows of a couple of
instructors who still instruct the same as always, regardless of
which classes they've taken.
MS. MEYER asked: Who are they trying to protect, the consumer or
the realtor or real estate agent? Referring to property management
and association management, she said one reason they were
supporting HB 33 was because of horror stories that the commission,
brokers and agents were hearing. She cited an occurrence involving
a renter who was given two-weeks' notice to move after a house was
sold, contrary to the landlord-tenant act that provides for 30
days' notice. She said the problem seems to come more from owner-
managers than realtors who manage property.
MS. MEYER acknowledged that if she owned property, she may not want
to need a license to manage it. However, renters, who are also the
public, are being harmed because owners don't take classes or read
the landlord-tenant act, resulting in problems with improper
withholding of security deposits or property and inadequate notice
about moving. She asked the committee to seriously look at what
they're doing with this bill. She emphasized that many renters
can't afford to hire attorneys to help with these problems. She
asked how they can protect the public.
Number 1165
CHAIRMAN ROKEBERG responded, "Well, there is an amendment before
the committee, and I'd like you to consider it in your legislative
committees, of expanding the ability of family members to manage
the properties of other family members, which would expand the
definition of the existing statute now. So, I'd like everybody
down-line to consider that in our further deliberations, because I
know there is an amendment before us. So, we've pulled back for
further review, but we are going to be taking that issue up."
MS. MEYER thanked Representative Rokeberg and indicated everyone
was asking that the process be lengthened a bit so that they'd have
a chance to read it more thoroughly.
Number 1200
CHAIRMAN ROKEBERG restated that version F is not even the final
version for mark-up. They would work that week on further
amendments, considering testimony from that day; he hoped to come
up with the first really good draft within a week or ten days. He
would be in Anchorage the following Friday, March 28. He asked Ms.
Tanner about the meeting scheduled that day.
Number 1237
KRISTAN TANNER, Broker Associate, RE/MAX of Wasilla, responded via
teleconference from Anchorage. She said there was a teleconference
scheduled with all the legislative chairs. She invited Chairman
Rokeberg to join them.
CHAIRMAN ROKEBERG asked where that would be held.
MS. MEYER joined in, saying she'd let him know.
Number 1264
DAVID GARRISON, Associate Broker, AAR Investments, testified via
teleconference from Anchorage, saying he has no problems with
agency; he is a single-agency company, the number one buyers'
agency. He believes the bill is trying to do too much. He
suggested starting on page 1, line 1, and "eliminate it to just
trying to handle the licensing of property management and community
association management, instead of leaving this out as a blank
check, for everybody to make all the changes to every part of the
law that they can think of."
Number 1336
MR. GARRISON agreed with Eric Dyrud's synopsis of the bill.
However, the Anchorage Association of Realtors legislative
committee was "kind of caught in between meetings here, ... on
being able to get together and work on this piece of legislation,"
and he was glad to hear there would be opportunity for input later.
Number 1373
CHAIRMAN ROKEBERG responded to the suggestion that they focus on
just property management and community association management. He
said the methodology selected by the task force and the commission
at the time was to go the endorsement route for the
differentiation. He is prepared to press forward to recognize the
differentials in those various specialties, particularly as they
relate to education, both for entry and continuing education.
However, if anybody has a better suggestion, he is willing to take
that up, and he believes the committee is also willing.
Number 1442
MR. GARRISON continued. He doesn't want to see limitations on
four-plexes. In the past five years, those have been from 5 to 10
percent of their income properties, which are multi-family
properties. He doesn't get into what he calls "commercial," which
includes lease spaces, commercial buildings, and things of that
nature, as that isn't what he does best. He cited as an analogy
the engineering profession, where civil engineers don't design
automobiles. Similarly, he doesn't try to do property management,
except for his own property, nor association management. He
believes people can limiting themselves to real estate licenses for
what they know best and are able to handle.
CHAIRMAN ROKEBERG asked Mr. Garrison how many properties larger
than a four-plex he handles.
MR. GARRISON said four or five a year.
Number 1506
CHAIRMAN ROKEBERG specified he was talking about five-plexes up to
hundreds of units. He asked whether that wasn't commercial real
estate.
MR. GARRISON explained that he doesn't call that commercial real
estate as long as it is residential rentals. He commented that 800
units may be 200 four-plexes. The only difference above a four-
plex is the type of financing available.
CHAIRMAN ROKEBERG stated his understanding that it is different
from residential financing.
MR. GARRISON replied, "Up to four-plexes, yes, because of -- FHA
cuts off there. But Alaska Housing's ... talks about going to a
little bit higher units, too."
Number 1588
REPRESENTATIVE RYAN mentioned demonstrating competency for people
engaged in various subdivisions of the profession. He said
numerous other professional associations demand that someone
successfully pass an original course of study, with continuing
education in a specialty to maintain currency. Those requirements
could be added here easily, without necessarily having the hurdles
of an endorsement, to obtain the same objective.
CHAIRMAN ROKEBERG suggested for an initial licensee, there would be
a different exam.
REPRESENTATIVE RYAN agreed there would need to be basic licensing
to establish a benchmark.
CHAIRMAN ROKEBERG submitted that it is what they do now. He asked
whether Mr. Brooks wished to comment.
Number
WILEY BROOKS, CPM and Broker, Wiley Brooks Company, Incorporated,
testified via teleconference from Anchorage. Head of his company,
he does a combination of all they'd been discussing, including
commercial real estate. He'd been part of the task force and
worked on this probably two years before; much effort and thought
was put into it. In the process of trying to differentiate between
areas of real estate, it had involved into the endorsement idea.
The original focus and concern was more professionalism and
protection relating to those who practice property management, to
bring them under the umbrella of the Real Estate Commission, "not
to break out a separate occupational licensing," and yet provide
the public protection. They hadn't wanted to create a new
bureaucracy. They'd found that most of the states where they
checked were bringing property management under the umbrella of the
real estate laws.
CHAIRMAN ROKEBERG asked, "And do you mean by that also community
associations?"
MR. BROOKS concurred, noting that over the years there had been
some embezzlement cases.
Number 1766
CHAIRMAN ROKEBERG asked whether the existing real estate statute
doesn't cover property management.
MR. BROOKS replied that it covers community association management
and it covers property management "if you're in the business of
collecting rents."
CHAIRMAN ROKEBERG said, "But not association management."
MR. BROOKS agreed. There is no statute governing association
management, and that is needed very much.
MR. BROOKS discussed the commercial requirement in the bill, saying
the task force had discussed "additional break-outs." There could
be no end to those specialties, which could include industrial,
development and office buildings, for example. The distinction
they'd wanted to make was that many community association people
have no intention or desire to sell. Their education requirements
are quite different from those of the rest of the industry, one
reason they'd wanted to break them out. At this point in time, Mr.
Brooks believes the committee would be well-advised "to take this
commercial thing out of there." He believes it is a bit divisive,
and the sales people will object to it.
MR. BROOKS had observed that it takes care of itself for the most
part. For example, in Anchorage only 10 or 12 people make much
money in office building sales; the public goes to them with
listings because people know it is their area of expertise. He
restated his suggestion to drop this, saying he doesn't want it to
hold up the legislation.
Number 1967
CHAIRMAN ROKEBERG asked, "Would you consider your comments on the
commercial endorsement in light of the change in the agency law?
Would that have any influence on your thinking there?"
MR. BROOKS replied, "No, I don't think so."
Number 2000
MR. JOHNSON again testified from Kenai. He stated, "When I first
got on the Real Estate Commission, a gentleman by the name of John
Benson (ph) was a champion of how to fix the unlicensed activity
problem. And at the time, my exposure to unlicensed activity was
knowing that a few people managed four-plexes for friends and that
sort of thing. His big charge was that there's a tremendous amount
of major commercial deals that are done in this state without
licensees participating in it."
MR. JOHNSON said he's not a commercial broker, although he does
some work in that area. He then stated, "But I think that maybe
the commercial brokers should band together, as it were, and
address it from that perspective, because I think that was the
original concept of this licensing and this license change, is to
deal with unlicensed activity. And because of ... Mr. Benson's
influence on me, I think that there may be reason to maintain this
commercial thing."
Number 2093
CHAIRMAN ROKEBERG provided a wrap-up. He would make himself
available Friday. He hoped to have made progress by then, taking
into consideration comments made that day and in letters received.
He'd already asked the legislative attorney who drafted the bill to
significantly reduce "the size and the intent of the E&O policy."
He believes testimony indicates almost universal consensus that all
they really want to do is authorize the commission to seek that E&O
insurance, making it mandatory only if they can obtain it, and
simplify it greatly.
CHAIRMAN ROKEBERG submitted that this statute is probably read more
than any other in Alaska; everyone taking the real estate
examination must learn it. Therefore, the language and intent of
the statute should be as clear and concise as possible.
CHAIRMAN ROKEBERG suggested there is a feeling among people in the
commercial area that they are the "step-children" of the business
and inadequately represented in the make-up of boards, commissions
and other governing bodies of the industry. He commented that it
is partly their own faults because they're too busy making money.
He said the "issue that revolves around the agency dispute and the
(indisc.) case," are very much on his mind when giving that further
consideration. He agreed with Mr. Johnson's comment about not
wanting to hurt the prospects of this bill.
Number 2354
MR. DYRUD asked whether Chairman Rokeberg had received the input
from the Anchorage legislative committee regarding brokers who
commit a felony.
An unidentified woman on teleconference said, "Monday."
CHAIRMAN ROKEBERG said they hadn't yet. He mentioned a
communication from Ms. Tanner and a number of other letters and
faxes relating the bill; all those issues would be considered.
He'd try to provide the next level of draft to Anchorage by Friday,
if possible, and it would probably be at least the middle of the
following week before they had a real working-draft model. Any
comments at the Friday meeting could also be added to that. (HB 33
was held over.)
ADJOURNMENT
TAPE 97-29, SIDE A
Number 0006
CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Standing
Committee meeting at 4:58 p.m.
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