01/28/1998 03:22 PM House L&C

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

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HOUSE LABOR AND COMMERCE STANDING COMMITTEE January 28, 1998 3:22 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 MEMBERS ABSENT Representative Gene Kubina 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." - MOVED CSHB 33(L&C) OUT OF COMMITTEE (* First public hearing) PREVIOUS ACTION BILL: HB 33 SHORT TITLE: REAL ESTATE LICENSING SPONSOR(S): REPRESENTATIVES(S) ROKEBERG BY REQUEST Jrn-Date Jrn-Page 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 03/24/97 (H) MINUTE(L&C) 10/13/97 (H) L&C AT 1:00 PM ANCHORAGE LIO 10/13/97 (H) MINUTE(L&C) 10/23/97 (H) L&C AT 2:00 PM ANCHORAGE LIO 10/23/97 (H) MINUTE(L&C)

01/23/98 (H) L&C AT 3:15 PM CAPITOL 17

01/23/98 (H) MINUTE(L&C)

01/26/98 (H) L&C AT 3:15 PM CAPITOL 17

01/26/98 (H) MINUTE(L&C)

01/28/98 (H) L&C AT 3:15 PM CAPITOL 17 WITNESS REGISTER SHIRLEY ARMSTRONG, Legislative Assistant to Chairman Rokeberg Alaska State Legislature Capitol Building, Room 24 Juneau, Alaska 99801 Telephone: (907) 465-4954 POSITION STATEMENT: Provided information on HB 33. CATHERINE REARDON, Director Division of Occupational Licensing Department of Commerce and Economic Development P.O. Box 110806 Juneau, Alaska 99811-0860 Telephone: (907) 465-2534 POSITION STATEMENT: Presented Amendment 12 to HB 33, answered questions on HB 33. REPRESENTATIVE BILL WILLIAMS Alaska State Legislature Capitol Building, Room 424 Juneau, Alaska 99801 Telephone: (907) 465-3424 POSITION STATEMENT: Presented Amendment 13 to HB 33. PETER ECKLUND, Legislative Assistant to Representative Bill Williams Alaska State Legislature Capitol Building, Room 424 Juneau, Alaska 99801 Telephone: (907) 465-3424 POSITION STATEMENT: Presented Amendment 13 to HB 33. LEIF STENFJORD, Broker Tongass Realty, Incorporated 431 Dock Street Ketchikan, Alaska 99901 Telephone: (907) 225-4108 POSITION STATEMENT: Testified in favor of Amendment 13 to HB 33. ART CLARK Real Estate Unlimited, LLC Board of Directors, Anchorage Board of REALTORS ; Board of Directors, Community Association Institute 7740 McHenry Circle Anchorage, Alaska 99502 Telephone: (907) 345-4110 POSITION STATEMENT: Testified on HB 33. BETTY COX, Vice President Brady and Company, Incorporated 1031 West 4th Street, Suite 400 Anchorage, Alaska 99501 Telephone: (907) 276-5617 POSITION STATEMENT: Testified on HB 33. RON JOHNSON, Broker ERA Real Estate Specialists; Representative, Kenai Peninsula Board of REALTORS 610 Attla Way, Suite 6 Kenai, Alaska 99611 Telephone: (907) 283-4372 POSITION STATEMENT: Testified on HB 33. ERIC DYRUD, Broker Associated Brokers, Incorporated; Legislative Committee, Anchorage Board of REALTORS 2509 Eide Street, Number 4 Anchorage, Alaska 99503 Telephone: (907) 258-8888 POSITION STATEMENT: Testified on HB 33. ACTION NARRATIVE TAPE 98-7, SIDE A Number 0001 CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce Standing Committee meeting to order at 3:22 p.m. Members present at the call to order were Representatives Rokeberg, Cowdery, Ryan and Brice. Representative Sanders and Hudson arrived at 3:26 p.m and 3:27 p.m. respectively. HB 33 - REAL ESTATE LICENSING Number 0053 CHAIRMAN ROKEBERG announced the committee would take up HB 33, "An Act relating to real estate licensing and the real estate surety fund; and providing for an effective date." The meeting's purpose would be to review amendments before the committee and take public testimony with possible public amendments. Number 0147 CHAIRMAN ROKEBERG offered Amendment 8, 0-LS0197\P.7, Lauterbach, 1/28/98, to the committee. Amendment 8 read: Page 11, line 19: Delete "a new section" Insert "new sections" Page 11, following line 31: Insert a new section to read: "Sec. 08.88.175. Limitations on community association managers. A licensee may not, within the practice of community association management, exercise control over the (1) reserves or investment accounts of a community association; (2) operating account of a community association unless (A) allowed under a contract that has been approved by the association's board of directors; and (B) duplicate financial statements concerning the account are sent by the institution holding the account to the licensee and the associations' board of directors at separate addresses." Number 0188 REPRESENTATIVE JOHN COWDERY made a motion to adopt Amendment 8 for discussion. Number 0198 CHAIRMAN ROKEBERG stated Amendment 8 is language relating to community associations clarifying the responsibilities for reserve accounts by community association managers in Version P. This language restricts a community association manager from being a signatory on the reserve or investment accounts of an association, but allows, by agreement, a community association manager to be a signatory on the operating accounts of an association. Amendment 8 also requires that duplicate statements be sent to both the manager and the association at separate addresses. Number 0287 CHAIRMAN ROKEBERG asked if there were any objections to Amendment 8. Hearing none, he stated Amendment 8 had been adopted. Number 0297 REPRESENTATIVE COWDERY made a motion to adopt Amendment 9 for discussion. Amendment 9 read: Page 6, line 16 After "Unless licensed" insert "in the State of Alaska" Page 6, line 27 After "assist in" insert "or communicate with" After "prospective buyers" insert "sellers," Number 0312 CHAIRMAN ROKEBERG stated it had been brought to the committee's attention by the Real Estate Commission that the insertion of the wording "in the State of Alaska" on page 6, line 16, might compromise some abilities spoken to later in the bill regarding outside co-brokerage. Number 0336 CHAIRMAN ROKEBERG made a motion to amend Amendment 9 by the deletion of the page 6, line 16 change. Number 0348 REPRESENTATIVE TOM BRICE asked Chairman Rokeberg to explain the reason for this change again. Number 0353 CHAIRMAN ROKEBERG repeated his explanation that the proposed change would make another portion of the bill inconsistent regarding outside cooperation with brokers. He noted that an outside broker could work in conjunction with a broker within the state. Number 0400 CHAIRMAN ROKEBERG stated the remaining portion of Amendment 9 clarified language to reflect that real estate personnel and licensees work with both buyers and sellers. He asked if there were any objections to Amendment 9. Hearing none, he stated Amendment 9 had been adopted as amended. Number 0465 REPRESENTATIVE COWDERY made a motion to adopt Amendment 10 for discussion. Amendment 10 read: Page 18, line 12 Page 18, line 14 Delete "real estate employment" Insert: "listings and management" NOTE: This is to conform with Amendment 2 adopted by the House Labor & Commerce Committee on January 26, 1998. Number 0474 CHAIRMAN ROKEBERG stated, "The section below this changed the title and the -- we had the discussion about changing that section about listings and management agreements; ... this is merely a clarification/technical amendment that adjusts the paragraph and section above it to be consistent with the section below it. And so it's merely a technical amendment to make - to conform to language." He asked if there was any further discussion of Amendment 10. Chairman Rokeberg then asked if there were any objections to Amendment 10. Hearing none, he stated Amendment 10 had been adopted. Number 0525 REPRESENTATIVE COWDERY made a motion to adopt Amendment 11 for discussion. Amendment 11 read: Page 11, line 29: Delete "(b)" Delete "section" Insert "subsection" Page 11, following line 31: Insert a new subsection to read: "(b) If a loss covered by the fidelity bond required under this section is also reimbursable from the real estate surety fund, the owners' association who suffered the loss may not recover under the bond until the person has filed a claim for reimbursement under AS 08.88.460 and proceedings relating to the claim are concluded." Page 23, line 21, following "funds": Insert "or community association accounts" Page 23, line 27, following "funds": Insert "or community association accounts" Page 25, line 11, following "funds": Insert "or community association accounts" Page 25, line 25, following "funds": Insert "or community association accounts" Page 26, line 3, following "funds": Insert "or community association accounts" Number 0530 CHAIRMAN ROKEBERG noted the first section of Amendment 11 was technical; it revised the fidelity bond section of the bill, adding new language as a new subsection (b). He stated the language in (b) meant that the surety fund was in first position in relation to the fidelity bond, so that there would be no dispute if there was a claim under the surety fund, or a claim under the bond; the surety fund would come first. He stated, "That's limited to $10,000, then the bond which ... ostensibly would have a higher - higher value, and so forth." Number 0605 CHAIRMAN ROKEBERG noted, "The funds under the existing surety fund statute -- under the article within the chapter on surety funds, it says that the conversion of trust funds is the term of (indisc.) for one offense under the (indisc.) of the surety fund. This adds the words 'or community association accounts' underneath the - the surety fund." Number 0648 CHAIRMAN ROKEBERG called an at-ease at 3:29 p.m. The meeting resumed at 3:30 p.m. Number 0667 CHAIRMAN ROKEBERG stated, "I believe I'd like to offer an amendment here. The intention here was to make sure -- we just adopted an amendment that said we had the reserve and investment accounts as one account. The community manager can't sign on that account. He can sign on an operating account, therefore, he has control over that operating account. But he doesn't have it over the reserve account. ... On these - these amendments down below, 'or community association accounts', it should be 'under the control of the manager'." Number 0686 CHAIRMAN ROKEBERG stated, "Each line would be amended to say 'under the control of the manager'. So that means that the surety fund could not be liable for - for any conversion out of the investment accounts because the financial institution holding those funds would be responsible for the disposition if a 'nonsignatory' was [to] access those funds. ... In other words, you can't sign on the reserve accounts and the investment accounts. So, therefore, the surety fund or the bond would have -- would cover those - those funds because he has no control over those funds." Number 0733 SHIRLEY ARMSTRONG, Legislative Assistant to Chairman Rokeberg, asked if the wording should be "community association manager" for clarity. CHAIRMAN ROKEBERG agreed, noting the complete wording should be "controlled by community association manager". Number 0753 REPRESENTATIVE BRICE stated, "The page 23 changes -- or starting on the page 23, line 21, changes, should be, 'or community association accounts under the control of the community association manager'." CHAIRMAN ROKEBERG stated, "That's a controlled by community association -- by the - by a - by a community association manager. And that goes through to the second page ...." Number 0795 CHAIRMAN ROKEBERG asked if there were any questions, noting "We're trying to keep the cost down and the liability down, but also make sure the public's protected in that case." He asked if there was any further discussion on the amendment to Amendment 11 or any objections to the amendment to Amendment 11. Hearing none, he stated the amendment to Amendment 11 had been adopted. Number 0820 CHAIRMAN ROKEBERG asked if there was further discussion on Amendment 11 or any objections to Amendment 11. Hearing none, he stated Amendment 11 was adopted as amended. Number 0836 REPRESENTATIVE COWDERY made a motion to adopt Amendment 12 for discussion. Amendment 12 read: PAGE 3, lines 17 thru 18, after "(4)": Delete the proposed changes and insert current law. This section should now read: (4) prosecute, through the Department of Law, violations of the provisions of this chapter or lawful regulations adopted under this chapter; PAGE 13, line 11, after "license.": Delete: All material on lines 11 through 15. PAGE 13, line 16 after "lapsed": Delete: "more than 60 days and" Renumber bill sections accordingly. PAGE 27, lines 19 thru 20, after "Exceptions.": Delete the proposed changes and insert current law. This section should read: "This chapter does not apply to" PAGE 31, line 26, add a new bill section: "Sec. 56. Notwithstanding Section 54 the Real Estate Commission may begin the process to adopt regulations to implement 08.88.091 (f) and (g)." (Plus any additional language LAA Legal determines necessary to activate this section) Renumber bill sections accordingly. Number 0840 CHAIRMAN ROKEBERG stated Amendment 12 was offered by the Department of Commerce and Economic Development (DCED). He invited Catherine Reardon to testify. Number 0848 CATHERINE REARDON, Director, Division of Occupational Licensing, Department of Commerce and Economic Development (DCED), came forward to present Amendment 12. She stated Amendment 12 addressed a number of relatively small issues which came up partly in discussions with the Department of Law (DOL) earlier that day. Number 0875 MS. REARDON stated clearly that the changes offered in Amendment 12 were from the DCED and DOL, not the Real Estate Commission. She noted the first change, to page 3, lines 17 and 18, is a return to present law which was brought up this morning by the DOL. They said AS 44.23.020(b)(3) states that the DOL prosecutes all cases involving violations of the law, and this change in the bill implying that the DCED would be undertaking the prosecution of violations would not be consistent with that other section of law. The DOL's understanding of this subsection is that it refers only to criminal prosecutions and unlicensed activity, not civil enforcement of violations of the statute, therefore the DOL is still the appropriate prosecutor. Number 0957 REPRESENTATIVE JOE RYAN asked if it wasn't appropriate for the DCED to retain the regulations, noting the DCED's operation on administrative procedures, stating, "If there was somebody broke the regulation, Law goes after criminal; the department still goes through on the administrative procedures ...." Number 0971 MS. REARDON stated that was correct. The DOL's perspective, as she understood it, was that page 2, line 11, paragraph 3, where it says, "The commission shall, after a hearing, have the authority [to] suspend or revoke or impose disciplinary sanctions" was where the administrative procedures go on through the Real Estate Commission and the DCED. She said, "This page 3 reference to prosecutions is the criminal, and that's why they prefer to have Department of Law stay in that section." Ms. Reardon stated she was, in effect, relaying her conversation with DOL that morning. Number 1016 REPRESENTATIVE RYAN asked if there was a criminal sanction on a regulation violation. Number 1024 MS. REARDON answered she was unaware of any and stated that there was a criminal sanction on unlicensed activity which was referred to in this chapter. Number 1033 CHAIRMAN ROKEBERG added that there were both civil and criminal penalties but the criminal penalties (indisc.) misdemeanor relating to unlicensed activity. Number 1050 MS. REARDON cited the next change, page 13, line 11, noting it was a "clean-up" of an action she had made at the previous meeting. As a result of deleting the additional penalty on line 20 in an amendment adopted January 26, 1998, a superfluous paragraph (a) had been created, which this amendment deletes. She noted the next change, on page 13, line 16, corrected the same error. Number 1109 MS. REARDON continued, noting changes to page 27, lines 19 through 20 after "Exceptions". She noted it was the DOL's opinion that this section unchanged indicated non-licensure items would still apply to those who qualified for exception. The recommendation was to return to the language, "This chapter does not apply to" rather than saying, "The provisions of this chapter that require licensure do not apply to". However, she stated, in her conversation just concluded with the Real Estate Commission, who supported this change, the attorney further recommended it say "Except for AS 08.88.167, this chapter does not apply to". The reasoning for this is that AS 08.88.167 is the civil penalty section on page 7, line 11, which says that the commission may apply civil penalties through administrative hearings to those practicing without licenses. Ms. Reardon stated the desired change on page 27, lines 19 through 20, after "Exceptions", is to delete the proposed changes and insert current law. This section should now read, "Except for AS 08.88.167, this chapter does not apply to". Ms. Reardon stated she had just come out of a teleconference with Assistant Attorney General Gayle Horetski regarding this. Number 1233 CHAIRMAN ROKEBERG commented he was unhappy with this recommended change to a very important element of HB 33. Number 1255 REPRESENTATIVE BILL HUDSON asked Chairman Rokeberg to again explain the justification for exemption to that provision of the law. Number 1265 CHAIRMAN ROKEBERG acknowledged Representative Hudson's question and stated he would like to first address Ms. Reardon's last statements. He asked, "Why is it that the Attorney General's advising us now when this has been in the statute for a number of years? Is it because we're going into the penalty provisions?" Number 1279 MS. REARDON answered in the affirmative. Number 1283 CHAIRMAN ROKEBERG replied that the penalty provisions had been in the general section of boards and licensing for years anyway, only not under the real estate chapter. He said, "They could have been accessed, could they not have, under the APA?" Number 1294 MS. REARDON stated that she was somewhat uncomfortable because the legal advice had come with such rapidity a few minutes ago. She felt that she was not able to clearly explain the wording (indisc.- -talked over) exceptions. Number 1313 CHAIRMAN ROKEBERG stated that he would note Ms. Reardon's and the Attorney General's concern about this issue and take it under advisement as the bill progressed. He said he preferred not to "cloud the issue" at this juncture, but it would be taken up later. Chairman Rokeberg asked Representative Hudson if he wanted to follow anything up. Number 1332 REPRESENTATIVE HUDSON replied in the negative. He said he understood the committee was keeping the language in the proposed amendment. Number 1347 MS. REARDON addressed the final item in Amendment 12. She noted it was a conceptual amendment because of the language,"(Plus any additional language LAA Legal determines necessary to activate this section)" She stated, "What this is doing is allowing the Real Estate Commission to begin adopting the regulations right away. There is a delayed effective date at the end of the bill for two sections of the law. ... So those sections don't actually go into effect until the 31st of January 1999, but we want to be able to start adopting the regulations so that we don't have six months following that working on regulations. This would allow the commission to get going on those 'regs' so that when the bill - that section of law does take effect, ... the regulations will be ready to go into effect." Number 1381 CHAIRMAN ROKEBERG commented the anomaly is that, apparently, if a piece of legislation has a delayed effective date, the regulations cannot be drawn up, noting the intention of the delayed effective date on those two sections had been to allow time for the DOL to draw up the regulations. Number 1408 CHAIRMAN ROKEBERG asked if there were any objections to Amendment 12 unamended. Number 1411 REPRESENTATIVE BRICE asked if the page 27 section was to be withdrawn. Number 1420 CHAIRMAN ROKEBERG answered in the negative. He stated the committee would be going forward with the amendment without Ms. Reardon's suggested verbal amendment to the amendment. Chairman Rokeberg asked the committee if there was any further discussion of Amendment 12. Hearing none, he asked if there were any objections to Amendment 12. Hearing none, he stated Amendment 12 had been adopted. Number 1450 REPRESENTATIVE COWDERY made a motion to adopt Amendment 13, marked 0-LS0197\P.11, Lauterbach, 1/28/98, for discussion. Amendment 13 read: Page 1, line 1: Delete "licensing" Insert "licensees" Page 1, line 4, following "Section 1.": Insert "AS 08.67.010 is amended to read: Sec. 08.67.010. Registration of mobile home dealers. A mobile home dealer may not do business in the state unless the dealer is registered with the department. However, a person licensed under AS 08.88 may, without registering under this chapter, perform the same activities with respect to mobile homes as are authorized for that person to perform under AS 08.88 with respect to real estate. * Sec. 2." Renumber the following bill sections accordingly. Page 22, following line 28: Insert a new bill section to read: "* Sec. 35. AS 08.88.405 is amended to read: Sec. 08.88.405. Preparation of documents. Notwithstanding AS 08.08, a person licensed as a real estate broker, associate real estate broker, or real estate sales person under this chapter may prepare real property contracts, mobile home contracts, earnest money agreements, leases, and other documents related to real property or mobile homes if the documents are prepared by the person in the course of the person's work as a licensed real estate broker, associate real estate broker, or real estate salesperson under this chapter." Renumber the following bill sections accordingly. Page 29, line 9: Delete "or" Page 29, line 16, following "stepchild": Insert "; or (20) a mobile home dealer licensed under AS 08.67 performing within the scope of the dealer's license" Page 29, line 29, following "means": Insert "an interest in a mobile home or" Page 30, following line 20: Insert a new paragraph to read: "(8) "mobile home" has the meaning given in AS 08.67.080;" Renumber the following paragraphs accordingly. Page 30, line 22, following "to": Insert "a mobile home or" Page 30, line 25, following the first "of": Insert "mobile homes or" Page 30, line 30, following the first "in": Insert "a mobile home or" Page 30, line 31, following "in": Insert "a mobile home or" Page 31, line 1, following "market": Insert "a mobile home or" Page 31, line 3, following "property"" Insert "or a mobile home," Page 31, line 4, following each occurrence of "property": Insert "or a mobile home" Page 31, line 5, following "property": Insert "or a mobile home" Page 31, line 7, following "property": Insert "or a mobile home" Renumber internal references to bill sections in accordance with this amendment. Internal bill section references occur at the following places: Page 31, lines 22 and 24 Number 1453 CHAIRMAN ROKEBERG recognized Representative Williams. Number 1470 REPRESENTATIVE BILL WILLIAMS stated there had been problems with mobile home dealerships and it had been the intent to introduce a bill which would solve these problems He thanked Chairman Rokeberg for allowing this proposed amendment to HB 33 and asked permission to have a member of his staff present the amendment. Number 1509 PETER ECKLUND, Legislative Assistant to Representative Bill Williams, came forward to present Amendment 13 to the committee. He stated, "The amendment before you deals with a situation that was created a couple of years ago when the legislature passed a statute, a new law, creating a mobile home dealerships and bonding and fee licensing requirements to - to deal in mobile homes." This law's unintended result was that real estate agents, who already go through licensing with continuing education requirements and bond requirements through the surety fund, would have to become licensed out of the mobile home dealership statutes, paying fees and bonding at $50,000, in order to buy and sell mobile homes. Mr. Ecklund noted this has become cost prohibitive for many real estate agents because they do not deal in large numbers of mobile homes, and as a consequence, the marketplace may not be receiving the best service possible. Number 1567 MR. ECKLUND stated the purpose of Amendment 13 is to allow real estate agents, under their existing statute, license and fee structure, to market mobile homes as they would any other home. He noted it would exempt real estate agents from the further mobile home requirements above and beyond their current license requirements and fee structure. He noted a real estate agent from Ketchikan was standing by on teleconference to testify. Number 1612 LEIF STENFJORD, Broker; Tongass Realty, Incorporated, testified via teleconference in favor of Amendment 13 to HB 33. He stated this problem had come up about a year ago, noting Tongass Realty, Incorporated, currently handles mobile homes and has handled them in the past. Mr. Stenfjord stated they do not make a large profit on those sales and do not do many of them, but the service is needed because there is currently not a mobile home dealer in Ketchikan. He commented the situation is similar in quite a few communities throughout Southeast Alaska, and probably throughout the state. Number 1647 MR. STENFJORD stated Tongass Realty, Incorporated, has 4 offices and 15 agents or more. The amount of mobile home business they do does not cost effectively allow them to pay for the additional bonding requirement. Mr. Stenfjord noted he felt the surety fund and their own errors and omissions insurance, which he believed almost every office carried, already covered this additional bonding requirement. Number 1667 MR. STENFJORD stated he was in favor of Amendment 13 and commented he knew of at least three or four properties in Ketchikan currently on the market which the owners, already living elsewhere, were trying to sell. This was creating a hardship for these people, he said, and he stated he would not mind making "a few bucks off those and trying to pay for some of the existing funds and insurance and those kinds of things that we already have." Number 1686 MR. STENFJORD said the mobile home dealership statute is probably needed in some instances, but, in their case, it is somewhat redundant by requiring them to pay additional bonds, funds, insurance, et cetera. Number 1701 CHAIRMAN ROKEBERG asked what the cost of the required bond would be. Number 1710 MR. STENFJORD answered that, as he recalled from June or July, it was approximately $1,500. He stated, "And after a commission split, (indisc.) per year for the insurance, for the bonding, that doesn't include the mobile home dealer's license -- and after commission splits with - with agents, and that kind of thing, I don't know that we would even pay for the insurance bonding." Number 1732 CHAIRMAN ROKEBERG asked, with the $1,500, what the coverage ceiling was. Number 1739 MR. STENFJORD stated he had received a quote from their insurance carrier over the phone and did not have anything in writing. Number 1749 CHAIRMAN ROKEBERG asked what the max allowed was. Number 1755 MR. ECKLUND answered there is a $50,000 minimum. MR. STENFJORD added he believed the quote he received met at least the minimum requirements. Number 1760 CHAIRMAN ROKEBERG asked if most of the mobile homes Mr. Stenfjord was selling were on fee simple property or attached to some real estate. Number 1769 MR. STENFJORD stated the mobile home dealership Act does allow them, in their course of business, to sell mobile homes that are on their own fee simple property, but it does not allow the real estate agents to sell mobile homes in a park. Number 1782 CHAIRMAN ROKEBERG clarified, "This would allow you to sell mobile homes in a park off a rental lot, is that correct? Which you were prohibited by these other requirements the legislature put on you." Number 1798 CHAIRMAN ROKEBERG asked if there was any further discussion of Amendment 13. He noted to Mr. Ecklund that the committee was subject to "the vagaries of the drafter's ability." He stated he had expected Amendment 13 to be about two sentences long and commented that, perhaps, it would be possible to shorten the amendment "later on down the stream." Number 1816 REPRESENTATIVE WILLIAMS asked if Amendment 13 would slow the progress of HB 33, if it would be a better idea to make this amendment in the next committee of referral. Number 1823 CHAIRMAN ROKEBERG stated he would inform Representative Williams immediately if Amendment 13 had any effect on HB 33. Number 1828 REPRESENTATIVE WILLIAMS clarified he knew it was Chairman Rokeberg's wish to move HB 33 out of the committee today, and if the amendment needed to be redrafted, it could probably be done in the next committee. Number 1841 CHAIRMAN ROKEBERG noted it was probably that most of the amendment was an addition to the definitions of activities of licensees accepted under the statute and the amendment might have to stand as written. Number 1857 MR. ECKLUND stated his understanding was that, since mobile homes are personal property not real property, the definition of a real estate agent, or their allowed activities, had to be changed in multiple places. Number 1873 REPRESENTATIVE RYAN stated it was his understanding that when a mobile home is placed on a permanent foundation it becomes an improvement to the property, and is not considered mobile any longer. Number 1878 CHAIRMAN ROKEBERG stated he thought that was correct, but that there were situations where the home could still be moved and still be under the vehicle definition of the Department of Motor Vehicles (DMV) and various other taxing authorities. Chairman Rokeberg stated Amendment 13 recognized the practice of many rural areas, which was also a practice even in the Municipality of Anchorage. He noted, "It's something we were trying to do -- is legalize the - things that people have been doing for years that weren't in statute." 1907 CHAIRMAN ROKEBERG asked if there were any objections to Amendment 13. Hearing none, he stated Amendment 13 had been adopted. Number 1914 REPRESENTATIVE COWDERY made a motion to adopt Amendment 14, marked 0-LS0197\P.10, Lauterbach, 1/28/98, for discussion. Amendment 14 read: Page 22, line 15, following "prohibit": Insert "(1)" Page 22, line 18, following "chapter": Insert "; (2) negotiations between a licensee and a principal in a real estate transaction concerning the amount of a commission or other compensation; or (3) payments from a real estate licensee to a principal as part of the resolution of a dispute regarding the terms of a transaction or regarding the property transferred" Page 29, following line 24: Insert a new bill section to read: "* Sec. 47. AS 08.88.900 is amended by adding a new subsection to read: (b) Notwithstanding that a person is exempt from licensure under this section, the prohibition in AS 08.88.401(e)(1) is applicable to that person." Renumber the following bill sections accordingly. Renumber internal references to bill sections in accordance with this amendment. Internal bill section references occur in the following places: Page 31, line 24 Number 1936 CHAIRMAN ROKEBERG stated Art Clark, Eric Dyrud and Betty Cox in Anchorage were waiting to testify via teleconference, as was Ron Johnson in Kenai. He requested the committee discuss Amendment 14, asking those standing by for expert testimony if necessary. Number 1964 CHAIRMAN ROKEBERG noted Amendment 14 is fundamentally what he calls the "mitigation-litigation addition to the Mississippi language about the affinity group prohibition." He directed the committee's attention to subsection (2). He stated this is the "refrigerator clause," which allows direct negotiation between the licensee and the principal involved to make sure a sale goes through. He noted, as discussed previously, "The ability to set fees and commissions inside the real estate statute are certainly open to negotiation and bargaining ...." This really represents, he said, actual business practices that occur prior to closing without disclosure requirements. Number 2028 CHAIRMAN ROKEBERG continued, noting subsection (3). He commented that this subsection is what he calls "the post-closing litigation modifier -- 'You sold me a piece of junk and I'm gonna sue you.'" He said, "It's called self-help in law. If you go out and negotiate some terms that everybody can agree with and (indisc.) or mollify these folks, many times they'll be satisfied." It, in essence, grants them further compensation beyond the scope of the statute. Number 2062 CHAIRMAN ROKEBERG said, "What we're trying to do is prohibit rebates and the passing of monies from one to the other, unless it's strictly allowed under the statute. Therefore, we want to prohibit anything that - that shouldn't be in the form of any potential rebate, kick-back or so forth, but we also need to recognize that certain things occur in the business world where the transactions are undergoing and people need to be able to negotiate to resolve disputes when they occur and shouldn't have their hands tied by a bunch of legislators down in Juneau." He stated that the language for this subsection came from the Alaska Association of REALTORS , Incorporated, and the law offices of Stanley and Schadt. Reviews were undertaken by private counsel to ensure that the language being adopted was appropriate to the legislation's goals. Number 2102 CHAIRMAN ROKEBERG stated, however, the second section of Amendment 14 is different from the recommended language, but it accomplishes "much the same at this juncture." It adds a new subsection to Section 47, the "exceptions" area. Chairman Rokeberg explained that this subsection is a return to the state of Mississippi's language. He said, "It's saying that even though you're exempt, (indisc.) anybody that is looking at this can't do what's prohibited in that section." The purpose of this language is to further make it clear that rebates and kick-backs will not be allowed. He asked if there were any questions. Number 2183 REPRESENTATIVE RYAN asked, "(Indisc.) this language (indisc.) the stakes here are COSTCO [COSTCO Wholesale] and Amway [Amway Corporation], is that correct?" Number 2187 CHAIRMAN ROKEBERG said that was correct. He noted there was some concern from counsel about language in the "mitigation and litigation areas", but they would proceed accordingly. He asked if there was any further discussion of Amendment 14 or any objections to Amendment 14. Hearing none, Chairman Rokeberg stated Amendment 14 had been adopted. Number 2229 CHAIRMAN ROKEBERG called an at-ease at 3:59 p.m. The meeting resumed at 4:01 p.m. Number 2237 CHAIRMAN ROKEBERG asked if Art Clark in Anchorage wished to comment. Number 2240 ART CLARK; Real Estate Unlimited, LLC (Limited Liability Company); Board of Directors, Anchorage Board of REALTORS ; Board of Directors, Community Association Institute (CAI), testified via teleconference from Anchorage. He said he didn't understand what had just occurred and asked if this meant the language proposed for AS 08.88.900(1) was not going to be addressed. Number 2250 CHAIRMAN ROKEBERG stated that language would be in the next amendment, noting that was the reason for the at-ease. However, he said in clarification, "I think this actually goes beyond what that language does." He added that this addition was to make doubly sure the area was covered. Chairman Rokeberg then briefly discussed the changes noted in Amendment 14 and commented the next amendment would take up the additional language regarding this area. Number 2277 MR. CLARK said he would like to address Amendment 13 briefly, noting many Anchorage mobile home dealers would probably be unfriendly to the amendment. Number 2309 CHAIRMAN ROKEBERG asked if it wasn't true that licensees often undertake the sales of "so-called mobile homes" on fee simple property. Number 2310 MR. CLARK answered in the affirmative, but noted that this amendment addresses mobile homes in mobile home parks; he mentioned it because this amendment might be a future source of concern. Number 2320 CHAIRMAN ROKEBERG commented that the amendment could be removed if it became a problem, as Representative Williams had mentioned, and the situation handled in a different way. MR. CLARK stated he was speaking on behalf of the Alaska Association of REALTORS , Incorporated, (indisc.) the ones that have been discussed to this point and the further amendments that would be addressed shortly. He mentioned amendments presented by Ron Johnson from the Kenai area, noting the Alaska Association of REALTORS , Incorporated, had discussed the next amendment in conjunction with Mr. Johnson's language. There is a section which says "portion of the commission or other compensation", he said, and a change to "portion of the fee or other compensation" might be desirable. Number 2348 CHAIRMAN ROKEBERG stated, "We'll be addressing that later. ... Before we go on to further testimony, I'd like to take up Amendment number 15 so we can get that clarified." Number 2355 REPRESENTATIVE COWDERY made a motion to adopt Amendment 15 for discussion. Amendment 15 read: Page 27, line 21 Delete "natural" Page 27, line 23 Delete: "the person's own behalf" Insert "is seeking to own so long as the compensation the person receives does not include any portion of the commission or other compensation paid to a real estate licensee in the transaction." Number 2360 CHAIRMAN ROKEBERG stated Amendment 15 referred to the "FISBO [For Sale By Owner] section." He asked if the committee was aware the language on lines 19 and 20 had been changed back by a prior amendment to the original statutory language, "This chapter does not apply to" ,and the other language had been deleted. Number 2386 CHAIRMAN ROKEBERG referred to Representative Ryan's comment in a previous meeting regarding the deletion of the word "natural" on page 27, line 21. Chairman Rokeberg stated the need for this deletion in the "exceptions" section was felt because the ability of a business to conduct the sale or acquisition of real estate for its own purposes was allowable, and therefore the distinction of a natural person was not appropriate. He noted the "natural person" provisions elsewhere in the bill accomplish their intended purpose. Number 2413 CHAIRMAN ROKEBERG pointed out, on page 27, line 23, the wording "on the person's own behalf." He said the interpretation of this phrase has caused some confusion within the legal community and he wished to delete that language. He noted a technical change to amendment 15, which omits the word "on" in the requested deletion. He referred to the phrase to be inserted, stating "seeking to own" was language he had supplied and the rest of the phrase came from Gordon Schadt, counsel for the Alaska Association of REALTORS , Incorporated. Chairman Rokeberg commented, "Our counsel said we didn't need this language in 15 if we adopted the bottom half of the prior amendment," noting he questioned that advice; he asked the committee to accept Amendment 15 as to make doubly certain. [NOTE: CHAIRMAN ROKEBERG'S QUESTION ASKING THE COMMITTEE IF THERE WERE ANY OBJECTIONS TO AMENDMENT 15 WAS NOT RECORDED BECAUSE IT FELL DURING THE TAPE LEADER AT THE BEGINNING OF SIDE B. NO OBJECTIONS WERE HEARD TO AMENDMENT 15.] TAPE 98-7, SIDE B Number 0002 CHAIRMAN ROKEBERG stated Amendment 15 had been adopted. He asked the committee members if they had any further amendments. Number 0038 REPRESENTATIVE RYAN stated he had a conceptual amendment. He referred to the addition of five items which could require fees charged by the DCED. He mentioned the current financial burden of schooling and licensure and these continually rising costs. He directed the committee's attention to page 13, line 5, (7) and stated his conceptual amendment concerned line 5 through line 9. Representative Ryan requested the deletion of items (7) through (11) which read, "(7) courses and seminars offered by the commission; (8) reinstatement of a lapsed license; (9) changes to registered office information; (10) course certification and recertification; and (11) instructor approval and renewal of approval". He commented, "Until we can find a way to set up an occupational licensing law that perhaps somehow has a cap on - on covering expenses ..." noting he had received numerous complaints from constituents regarding increasing license fees. Number 0140 CHAIRMAN ROKEBERG clarified that Representative Ryan was referring to all of the new language. He asked Ms. Reardon or Ms. Blackwell if they wished to comment. Number 0150 MS. REARDON stated she was pausing because she knew that the DCED already charged a fee for course certification and instructor approval but she could not cite the exact statute. However, since those fees are in regulation, there must be a statutory authority. She noted that DCED is already charging for course certification, changes to registered office information and instructor approval. She stated she thought the language in this section was an attempt to set it all out in one place in the statute, not an attempt to create brand-new fees. Ms. Reardon reiterated that these were not new fees, with the possible exception of the courses or seminars offered by the Real Estate Commission. Number 0209 REPRESENTATIVE RYAN stated, "When you charge a person a fee, you're performing some service to their benefit for which they're paying. That's the normal course of business; when you pay money you usually receive a good or a service that benefits you in some way for the money you pay. And what I see here, is we're not necessarily giving a benefit as much as we're collecting revenue." He noted the commission requires certain courses by regulation, and, in his view, the individual is forced to pay for and attend these courses. Representative Ryan commented on the presence of hidden fees, and increasing costs, asking where the benefit is to the individual for the money he or she is spending. He said the DCED is covering its costs, but what is the benefit to the licensee as consumer? Number 0262 MS. REARDON replied, for example, in the case of course certification and recertification, there are businesses who make a profit from offering real estate courses. The benefit these companies receive from certification by the Real Estate Commission is the right to teach and offer these courses, which allows them a type of monopoly. She said the commission reviews courses to ensure the courses are adequate and it reviews instructors to ensure they are competent to offer courses of value to licensees. If there is no course review there would be no fee, Ms. Reardon stated, but there might be courses that would be of minimal value to either the student or consumer of real estate services. Number 0310 REPRESENTATIVE RYAN questioned, "If the commission decided that these things were necessary for the people in [the] profession, I feel that the commission should be the one that sits down, reviews the course curriculum and says 'Yea' or 'Nay.' But no, the commission does not take their time to do this. They farm it out to the agency to do, and then we, in turn, have to pay the agency. And to me that's a remiss of duties. If you guys want to impose something on everybody in the profession, let them sit down, do the bloody work, and then perhaps they wouldn't be so interested in adding all this burdensome stuff to everybody if they had to do the work themselves. But it's real easy to (indisc.) with the staff. Got a hard job, 'Hey Staff, go do this.'" Number 0335 CHAIRMAN ROKEBERG commented that HB 33 allows the commission to designate the executive secretary and her employee to make those decisions rather than the board itself. He noted one of the biggest complaints in the real estate industry is that it would be impossible to accomplish anything if it was necessary to wait 90 days for the commission to review a course. Number 0362 CHAIRMAN ROKEBERG noted the reference to AS 08.01.065 on page 12 in the section under discussion is to the "entire fee-enabling statute of the Department of Commerce," not to the Real Estate Commission alone. He asked Ms. Reardon, because of the fee structure and the legislature's mandate that licensees support their own programs, if the Real Estate Commission could not charge the fees in question wouldn't the biennial licensing fees go up? He stated the fees generate revenue and offset an increase in licensing fees that might otherwise be necessary. Number 0414 MS. REARDON agreed. She stated that if state employees' course review time cannot be billed to the submitters of courses for review, then that time will be billed to real estate licensees as a whole. She noted, for the record, that real estate commissioners receive no compensation; she commented possibly the DCED can now allow them lunch. Number 0458 REPRESENTATIVE RYAN stated, "There's more than one way to skin a cat. And if this won't fly in this bill, I happen to be on the Department of Commerce's budget subcommittee and perhaps we can address that issue with the Real Estate Commission there. And if they don't have the money to hire the staff, they may have to take a few extra days off of their schedule and review the courses themselves like they make people come and take a weekend to take the courses ...." Number 0475 CHAIRMAN ROKEBERG noted he appreciated Representative Ryan's interest in this area, however he cautioned Representative Ryan not to "eviscerate the department's ability" to perform work the licensees wanted done in his budget subcommittee work. He proposed an amendment to Representative Ryan's amendment, "I would take your amendment and delete (8), (9), (10) and (11), leave them in, renumber, and take out 'courses' and the words 'seven courses (indisc.)' -- and I think you might be a lot happier, and I think a lot of realtors might even be happy, because the payment for the courses that are provided by the commission are paid out of the surety fund. Bingo, and therefore, I would agree if you'd accept the amendment to the amendment, I will - I'll support your amendment." Number 0517 REPRESENTATIVE RYAN agreed. Number 0526 CHAIRMAN ROKEBERG stated he would prefer it if Representative Ryan withdrew his amendment and offer a new amendment. REPRESENTATIVE RYAN withdrew his conceptual amendment and offered a new amendment. Number 0535 CHAIRMAN ROKEBERG stated Representative Ryan's new amendment, Amendment 16, was to delete subsection "(7) courses and" and renumber accordingly. Number 0549 CHAIRMAN ROKEBERG asked if there were any objections to Amendment 16. Hearing none, he stated Amendment 16 was so carried. Chairman Rokeberg asked if there were any further amendments from the committee. Number 0566 CHAIRMAN ROKEBERG referred to the time and his wish to move HB 33 out of committee mentioning the individuals on teleconference who wished to testify. He commented Betty Cox had submitted a letter to the committee. Number 0566 BETTY COX, Vice President in charge of the Surety Department, Brady and Company, Incorporated, testified via teleconference from Anchorage. She stated she was a licensed insurance broker and had contacted a bonding company at Chairman Rokeberg's request regarding the availability of fidelity coverage. She stated such coverage is available and would cover third-parties, it would also cover corporate officers and/or owners of property. She had contacted Reliance Surety Company, asking them to put some scenarios together for cost estimates, keeping in mind that property managers would have to institute strong internal control procedures. Their response was the letter she had submitted to the committee. She noted both Hartford Insurance Group and Fidelity and Deposit Company of Maryland indicated that they would participate in this coverage, she was still waiting to hear from Federal Insurance Company (ph), and she noted St. Paul Fire and Marine (ph) had said no because the account was not big enough. She stated that there were other markets available that she had not contacted. Number 0652 CHAIRMAN ROKEBERG referred to the letter from Reliance Surety Company which said "the employee dishonesty with third-party liability type of agreement." He asked if Ms. Cox could assure the committee that this would also be available for sole practitioners? Number 0660 MS. COX said she had asked Linda Beesley [Regional Fidelity Underwriter] at Reliance Surety Company to address that issue in a post script at the bottom of the letter. Number 0667 CHAIRMAN ROKEBERG stated the owners would not be excluded, which would include the principals of a firm or a sole proprietor. Number 0676 MS. COX agreed. Number 0679 CHAIRMAN ROKEBERG asked, "The property managers, the community association is interchangeable with that?" Number 0685 MS. COX answered in the affirmative. She stated it could be added by rider, if the carrier would do that, to a community association or homeowners' association policy. Or, she said, a property manager could add a third-party rider specifically naming "ABCD condo association or ... whatever homeowners' association." The third-party rider would be necessary because typically a property manager handles more than one association. Ms. Cox stated it should be relatively simple, and she noted one carrier that she spoke with suggested the formation of programs, which usually makes the process much easier and reduces costs. She noted there are many different ways the situation can be approached. Number 0723 CHAIRMAN ROKEBERG thanked Ms. Cox and noted she might wish to speak to Mr. Clark. Chairman Rokeberg mentioned Ron Johnson had submitted a letter with some proposed amendments to the committee. Number 0786 RON JOHNSON, Broker, ERA Real Estate Specialists; Representative, Kenai Peninsula Board of REALTORS testified via teleconference from Kenai. He stated, "Change from -- get the 'salesperson' language and the sales concept out of the bill and get 'licensee' towards a more professional aspect of it. Get the employees out and get (indisc.) toward contract labor and independent contractor. There is some argument from the various state agencies (indisc.) to keep us as employees, but I think that from a perspective that - tat most of the real estate industry is still in the independent contractor status, I think that language could help us in defending that position. I'd like to see the commission concept go away and become a fee and in all cases I've checked it ... it all makes sense ...." Number 0832 MR. JOHNSON continued, "The number one thing is get away from the 'listing agreement' and get into a 'personal services contract' which caused some heartburn, so I've offered an additional amendment which changes it to 'real services contract' and hopefully they can get along with that ...." In addition, Mr. Johnson referred to Amendment 10. He noted that 08.88.361 and 08.88.341 of HB 33 are now in conflict unless the committee adopts his proposed amendments. Number 0867 MR. JOHNSON referred to Amendment 13 commenting "While I sat on the Real Estate Commission there were several cases in which mobile homes transactions were brought in (indisc.) surety fund, they were (indisc.) thrown out. I want to say had real property involved because the definition as interpreted by the AG's [attorney general's] office in the real estate license law, is the transaction must be a real estate transaction to be covered by the surety fund." Mr. Johnson also said he would like to see the wording "commission" in Amendment 14 changed to "fee". Number 0895 CHAIRMAN ROKEBERG commented that Mr. Johnson's first suggestion regarding the conflict between 08.88.361 and 08.88.341 has been adopted. Chairman Rokeberg stated, from his perspective, Mr. Johnson was addressing three things: The first being the issue about the term "salesperson." He noted he tended to favor Mr. Johnson's view and referred to discussion on the National Association of REALTORS ' world wide web page. However, Chairman Rokeberg said, every state in the union, as far as he knows, uses "salesperson." He said, the problem with the term "licensee" has to do with the three classes of licensees: broker, associate broker, and, as it currently stands, salesperson. He asked for Mr. Johnson's assistance in finding a third term, reiterating that "licensee" would not work throughout the bill because it also referred to brokers and associate brokers. Number 0989 CHAIRMAN ROKEBERG stated, with regards to another of Mr. Johnson's concerns, the variations of the word "employment" added in the definition include, where appropriate, a contractor or under contract, throughout the entire bill. However, he said, Mr. Johnson's suggested language only uses "contracts" and deletes "employment" in its entirety. He stated, there are brokers in this state who employ licensees who are not under contract. Chairman Rokeberg commented that using "employed or contracted with" and variations in every instance could be considered but would add more words to the bill. Number 1046 CHAIRMAN ROKEBERG addressed Mr. Johnson's comments about the fees, stating he tended to agree. Chairman Rokeberg noted he would be happy to work with Mr. Johnson, taking that under advisement if the commission agreed. Chairman Rokeberg said, however, there is a clarifier in the "Definitions" section referring to the Real Estate Commission versus the compensation form of commission. Chairman Rokeberg stated he thought the fee situation was the most important issue Mr. Johnson had brought up. He noted he appreciated Mr. Johnson's comments and would take them under advisement, contacting Mr. Johnson personally. Number 1115 ERIC DYRUD, Broker, Associated Brokers, Incorporated; Legislative Committee, Anchorage Board of REALTORS , testified via teleconference from Anchorage. He stated the Anchorage Board of REALTORS generally agreed with the proceedings, but he noted the number of amendments made it somewhat confusing. He stated some concerns about Amendment 13, although he said he was not conceptually opposed to including mobile homes; however, there have been problems in the past. He commented that mobile homes not on real property are measured differently, his understanding is they are measured from the tongue, not the structure. MR. DYRUD stated, "I think Ron Johnson brought up the point that the surety fund doesn't necessarily cover that, and the testimony you received said that everybody had E and O [errors and omissions] insurance, and I think we're all aware of there're quite a few people out there that don't. I guess I've got some concerns about opening up mobile homes and mobile home parks to real estate agents, and that if we are going to do that, I think we need to make provisions in the licensing and the training to cover the differences when we get into mobile homes." Number 1193 CHAIRMAN ROKEBERG asked if it was true licensed realtors sold mobile homes attached to ground in the Anchorage area. MR. DYRUD stated that was correct. CHAIRMAN ROKEBERG asked, then, shouldn't licensed realtors be able to do that under the law. Number 1200 MR. DYRUD stated it had been prohibited because of the number of problems with the sale of mobile homes in trailer parks, which he noted "is a different creature." He said, "Conceptually, I don't have a problem with it but I think just to adopt that and go ahead the way that it is now, I think we're opening ourselves up to a lot of problems." Number 1228 CHAIRMAN ROKEBERG stated "band-aid" work would be done on HB 33 as it traveled. He said he would entertain a motion. Number 1246 REPRESENTATIVE COWDERY made a motion to pass HB 33 as amended, with individual recommendations, out of the House Labor and Commerce Standing Committee to the next committee of referral. CHAIRMAN ROKEBERG asked if there were any objections to moving HB out of committee. Number 1250 REPRESENTATIVE BRICE asked if there were any fiscal notes. Number 1260 SHIRLEY ARMSTRONG, Legislative Assistant to Chairman Rokeberg, stated HB 33 had an attached fiscal note from 1997 of $17,100. She noted Ms. Reardon, of the Division of Occupational Licensing, had said the note would be reduced to approximately $7,000 to $10,000 dollars. Number 1287 REPRESENTATIVE BRICE clarified the motion had been to move HB 33 with the appropriate fiscal note. Number 1292 CHAIRMAN ROKEBERG, hearing no objections, stated CSHB 33(L&C) had been moved out of the House Labor and Commerce Standing Committee. ADJOURNMENT Number 1306 CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Standing Committee meeting at 4:40 p.m.

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