04/09/2015 01:30 PM House FINANCE

HOUSE BILL NO. 81                                                                                                             
                                                                                                                                
     "An Act relating to an exemption from the regulation                                                                       
     of construction contractors."                                                                                              
                                                                                                                                
REPRESENTATIVE  CATHY  TILTON,  SPONSOR,  provided  a  brief                                                                    
summary of  the bill.  She explained that  HB 81  related to                                                                    
the licensing  of residential contractors. The  bill did not                                                                    
prevent owner-built Alaskan  housing, selling an owner-built                                                                    
home,  or propose  a new  licensure.  Due to  a loophole  in                                                                    
current  law,   the  "owner-builder  exemption"   created  a                                                                    
situation  where  unlicensed   contractors  had  engaged  in                                                                    
business   while   avoiding  requirements   for   licensing,                                                                    
bonding,  and  insurance.  She reported  that  the  language                                                                    
change  in  the  new   committee  substitute  was  developed                                                                    
through  discussions between  the Homebuilders  Association,                                                                    
individual  Alaskans,  and  the   Department  of  Labor  and                                                                    
Workforce  Development. The  bill "reasonably"  included all                                                                    
individuals  engaged  in  home  construction  as  a  regular                                                                    
course   of   business   under  the   existing   residential                                                                    
contracting  licensure. She  relayed personal  experience of                                                                    
building her  own home and  stated that its  common practice                                                                    
for  people living  in rural  areas to  construct their  own                                                                    
home.  She  noted  that according  to  existing  statute  an                                                                    
owner-builder was allowed to sell their home after two                                                                          
years.                                                                                                                          
                                                                                                                                
DANIEL  BELLERIVE,   STAFF,  REPRESENTATIVE   CATHY  TILTON,                                                                    
reviewed  the  sectional analysis  (copy  on  file) for  the                                                                    
committee  substitute  (CS). He  read  the  analysis from  a                                                                    
prepared document:                                                                                                              
                                                                                                                                
     Section  1(Page  1,lines 3-8)  -  Section  1adds a  new                                                                    
     section stating that the intent  of this bill is not to                                                                    
     limit the freedom and ability  of a person to construct                                                                    
     or sell their own home.                                                                                                    
                                                                                                                                
     Section 2  (Page 1,lines 9-15)  - Section 2 adds  a new                                                                    
     subsection   directing   that  the   department   shall                                                                    
     investigate  and   take  action   if  the   notice  and                                                                    
     circumstances  of  a  sale   under  AS    08.18.161(11)                                                                    
     indicate that  the owner is  operating a  business that                                                                    
     requires them  to register as  a contractor  under this                                                                    
     chapter.                                                                                                                   
                                                                                                                                
     Section 3 (Page     line 1through Page line     11)   -                                                                    
     Section 3 accomplishes three things.                                                                                       
                                                                                                                                
     1.   Page 2, lines 23-25  adds clarification explicitly                                                                    
     stating  that   AS  08.18.161(9)  refers   to  existing                                                                    
     structures.                                                                                                                
     2.   Page 2,  lines 30 and  31 expand the  exemption in                                                                    
     AS 08.18.161(11) to include owners  acting as their own                                                                    
     contractor,    as   well    as    hired   workers    or                                                                    
     subcontractors.  Previously   this  exemption  strictly                                                                    
     applied to workers hired on an hourly basis.                                                                               
                                                                                                                                
     3.   Page 3, lines 3-7 add  a requirement for an owner-                                                                    
     builder to  provide notification  if they  advertise or                                                                    
     sell  their home  build under  AS 08.18.161(11)  before                                                                    
     the two year period in statute.                                                                                            
                                                                                                                                
     Section  4  clarifies that  for  the  purposes of  this                                                                    
     section, construction begins when  the owner begins the                                                                    
     actual construction  work or  enters into  an agreement                                                                    
     labor,  act as  a subcontractor,  or provide  materials                                                                    
     for the construction.                                                                                                      
                                                                                                                                
3:18:02 PM                                                                                                                    
                                                                                                                                
Representative  Gattis   wanted  clarification   about  when                                                                    
construction  ended. She  wondered whether  an owner-builder                                                                    
could  sell their  house if  it  was not  completed and  the                                                                    
owner discontinued construction.  Mr. Bellerive replied that                                                                    
regardless of the level of  completeness if the construction                                                                    
was ceased then the period  of construction was over and the                                                                    
owner  could sell  the  house.  Representative Gattis  asked                                                                    
whether  the  owner  had  to  fill  out  a  form  or  notify                                                                    
government  in  order  to sell  the  unfinished  house.  Mr.                                                                    
Bellerive responded in the negative.                                                                                            
                                                                                                                                
Representative  Guttenberg referenced  the  two year  period                                                                    
provision and  wanted to  know the  legal definition  of the                                                                    
period of construction.                                                                                                         
                                                                                                                                
Mr.  Bellerive answered  that a  specific  definition for  a                                                                    
period  of  construction  did  not   exist  in  statute.  He                                                                    
indicated that the two year  period referred to the two year                                                                    
period  after   the  construction   ended.  He   added  that                                                                    
regardless of  the level  of completion  the house  could be                                                                    
sold two years after construction had ceased.                                                                                   
                                                                                                                                
Representative Guttenberg  referred to  page 3, line  5, the                                                                    
words, "…on  forms provided by the  department." He wondered                                                                    
how the home builder found out  that a form had to be filled                                                                    
out in order to sell the  house, especially if the owner was                                                                    
not using  a bank  or realtor.  He asked  how the  state was                                                                    
going to monitor owner-built house sales by owner.                                                                              
                                                                                                                                
Mr. Bellerive  replied that an  owner-builder living  in the                                                                    
house  would  qualify  for  exemption   9  and  was  further                                                                    
protected  from any  obligation to  submit notice.  He cited                                                                    
page 2, line 23 and read the following:                                                                                         
                                                                                                                                
     (9) [(10)]  a person working on  and existing structure                                                                    
     on that person's own property,  whether occupied by the                                                                    
     person or  not, and a  person working on  that person's                                                                    
     own existing residence, whether  owned by the person or                                                                    
     not…                                                                                                                       
                                                                                                                                
Mr. Bellerive  detailed that the  definition of  a residence                                                                    
was "an existing home being  a residence previously occupied                                                                    
as a residence."  Regardless of what the  subjective view of                                                                    
a completed home was, if  the owner-builder was claiming the                                                                    
house  as  a  residence   exemption  9  applied  instead  of                                                                    
exemption 11.                                                                                                                   
                                                                                                                                
Representative Guttenberg  was still unclear about  what the                                                                    
difference  was between  exemption  9 and  exemption 11.  He                                                                    
read page 3, lines 3 through 5:                                                                                                 
                                                                                                                                
     …an   owner   who   advertises  the   structure   under                                                                    
     construction  for sale  or sells  the structure  during                                                                    
     the period  of construction  or within two  years after                                                                    
     the period  of construction  ends shall file,  on forms                                                                    
     provided by the department…                                                                                                
                                                                                                                                
Co-Chair Thompson  voiced that the  bill was not  moving out                                                                    
of committee  today and he  would help provide clarity  at a                                                                    
later date.                                                                                                                     
                                                                                                                                
3:23:40 PM                                                                                                                    
                                                                                                                                
Representative Kawasaki  referred to the new  language under                                                                    
exemption 11. He  deduced that the language  seemed to place                                                                    
the obligation  on the  person selling  the house  to obtain                                                                    
the  forms.  He was  uncertain  about  "the effect"  of  the                                                                    
language. Mr. Bellerive deferred to the department.                                                                             
                                                                                                                                
Representative  Gara   surmised  that  the   provision  only                                                                    
applied to  an owner-builder and not  someone assisting with                                                                    
the construction. He  asked for confirmation. Representative                                                                    
Tilton confirmed the statement was correct.                                                                                     
                                                                                                                                
Representative Gara provided a  scenario where someone build                                                                    
a cabin and  occupied it unfinished for a period  of over 10                                                                    
years then finally completed construction  and sold it after                                                                    
two years. He wondered how that was allowed under the bill.                                                                     
                                                                                                                                
Mr. Bellerive commented that in  the particular scenario the                                                                    
only  requirement  for the  owner  would  be to  notify  the                                                                    
department.  He reported  that the  department did  not have                                                                    
the  authority to  prohibit someone  from selling  their own                                                                    
property and  emphasized the use  of the word  notify, since                                                                    
permission was  not required. The notification  ensured that                                                                    
the sale was not viewed as a business transaction.                                                                              
                                                                                                                                
HB  81  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
3:27:08 PM                                                                                                                    
                                                                                                                                
Co-Chair  Thompson reviewed  the  agenda  for the  following                                                                    
morning meeting.