Legislature(2015 - 2016)BARNES 124
02/11/2015 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB81 | |
| HB9 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 81 | TELECONFERENCED | |
| *+ | HB 9 | TELECONFERENCED | |
HB 81-EXEMPTION: LICENSING OF CONTRACTORS
3:16:55 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 81, "An Act relating to an exemption from the
regulation of construction contractors."
3:17:31 PM
REPRESENTATIVE TILTON, speaking as prime sponsor of HB 81,
stated that this bill relates to the licensing of residential
contractors. She said she introduced HB 81 after holding
discussions with members of the Mat-Su Home Builders, Inc.
Further, after speaking with contractors and realtors in other
areas of the state and some affected home buyers, it became
clear that some individuals are commonly exploiting an
unintended loophole in the existing statutory language, creating
an uneven playing field for licensed professionals who abide by
the law and potentially exposing unwitting homebuyers to
substandard construction. In short, HB 81 is really a consumer
protection bill and not a bill to restrict trade, she said. She
emphasized that HB 81 does not prevent Alaskans from building
their own homes, from selling homes they have built, or propose
any new licensure.
REPRESENTATIVE TILTON said that under current state law an
exemption for licensed contractors has allowed unlicensed
contractors to operate a substantial businesses avoiding
licensing, bonding, and insurance. By avoiding licensing,
bonding, and insurance requirements in the law, unlicensed
contractors are skirting the law and jeopardizing protections
for consumers.
REPRESENTATIVE TILTON surmised that most committee members
probably recall the first home they built and their sense of
taking financial risks in doing so. In fact, for most Alaskans,
purchasing their homes is the largest investment they will make.
This bill helps ensure that home buyers have expectations of a
uniform standard of professionalism and seek to reasonably
include all individuals engaged in home under the existing
residential contractor licensure.
3:19:50 PM
DAN BELLERIVE, Staff, Representative Cathy Tilton, Alaska State
Legislature, on behalf of the prime sponsor, stated that this
issue was initially raised by home builders in the Mat-Su
valley. A growing number of people are abusing exemptions in
state law that were intended to allow people to act as their own
general contractors; however, abuse of these exemptions have
allowed unlicensed contractors to operate substantial business
enterprises without obtaining any licensing, bonding, or
insurance, thereby creating an unfair playing field for
contractors who do follow the law. This bill, HB 81, will
address the issue by establishing a two-year timeframe in which
an owner-builder cannot sell a home after the completion of the
construction, but provides an opportunity for the owners to sell
their homes earlier if they notify the Department of Labor &
Workforce Development (DLWD).
3:20:53 PM
REPRESENTATIVE JOSEPHSON said he likes the bill; however, he
wondered whether any constitutional issues such as due process
will arise under the bill, with respect to disposition of
property, since home owners cannot sell their homes when they
want to do so.
REPRESENTATIVE TILTON answered that a few questions have been
raised, but she did not think there were any constitutional
challenges at this point.
REPRESENTATIVE LEDOUX related her understanding that contractors
can still sell homes, but they must have the appropriate
licensing to build homes.
3:22:36 PM
REPRESENTATIVE COLVER asked whether this bill was an effort to
obtain compliance from those parties building homes who have not
adhered to rules and regulations pertaining to their employees
or by obtaining contractor licenses that most contractors in the
home building industry acquire. He asked whether this is an
effort to "level the playing field" of those who have been
operating outside the regulatory environment.
REPRESENTATIVE TILTON replied the bill could be viewed in that
way; however, HB 81 does not prevent people from building or
selling their own homes, but it does allow regulators to look
for patterns of unlicensed home building, closes a loophole, and
creates an "even playing field."
3:23:58 PM
REPRESENTATIVE COLVER referred to page 2, paragraph 11, of HB 81
which read, " ... the exemption in this paragraph does not apply
if the structure under construction is advertised for sale or
sold during the period of construction or for two years after
the period of construction ends, unless the owner can
demonstrate to the department's satisfaction that the sale would
not result in circumvention of the requirements under this
chapter;". He expressed concern about what "the department's
satisfaction" might mean if owner-builders desire to sell their
homes. He wondered what hurdles the owner/builders would need
to jump over, and whether the owners will need to show cause
such as divorce or loss of job to do so. He further asked
whether owner-builders could add their spouses to the deeds.
3:25:23 PM
MR. BELLERIVE deferred to the Division of Corporations, Business
& Professional Licensing, Department of Commerce, Community, and
Economic Development (DCCED).
3:25:40 PM
SARA CHAMBERS, Acting Director, Division of Corporations,
Business, and Professional Licensing, Department of Commerce,
Community, & Economic Development (DCCED), stated that the
language "to the department's satisfaction" would be developed
through the public comment process when the department develops
its regulations. She envisioned it would be an open and
transparent process for public scrutiny, but will be codified in
regulations to ensure the process is clear.
3:26:40 PM
REPRESENTATIVE LEDOUX asked whether the parameters will be put
in regulation and if the regulations will identify the types of
exemptions or reasons the department will accept to avoid
contractors circumventing the law.
MS. CHAMBERS answered that is correct.
3:27:02 PM
REPRESENTATIVE LEDOUX asked whether there would be a "catch all"
for other circumstances that the department deemed will not
circumvent the law.
MS. CHAMBERS responded that the department will work to create a
process that is transparent and educational to the public
without being so restrictive that some qualifying circumstances
wouldn't fit within the structure. She said setting a standard
for the public must be in regulation; however, the department
will want to ensure that the process meets the intent of the
bill by closing any loopholes, yet not be unduly restrictive.
3:27:54 PM
REPRESENTATIVE LEDOUX asked for further clarification on whether
the answer is yes.
MS. CHAMBERS answered yes.
3:28:01 PM
REPRESENTATIVE COLVER asked for a general framework of the
conditions the department envisions will be in the proposed
regulations. He further asked what the department has done to
enforce contracting regulations, in particular, the requirement
that general contractors hold a residential endorsement. He
recalled the residential endorsement requires contractors must
obtain training and undergo a certification process. He asked
whether the department has worked to assist the industry in the
Mat-Su Valley to achieve compliance, the types of enforcement
actions the department employs, and the reason this bill is
needed.
MS. CHAMBERS explained that the DCCED works with the Department
of Labor & Workforce Development (DLWD) to enforce contractor
licensing throughout the state. Although the enforcement
statutes are located within the DCCED's statutes, the DLWD's
Division of Labor Standards and Safety, Wage and Hour section
conducts wage and hour inspections statewide to ensure
compliance. As an efficiency measure, the departments decided
that the DLWD will also perform licensing compliance. Thus,
rather than having two departments with separate enforcement
staff located throughout the state, the DLWD provides licensure
compliance and ultimately issues fines, cease and desist
letters, and follow-up collection of fines. She emphasized that
the DCCED's goal was to ensure compliance and to work with the
public and first-time offenders to bring them into compliance;
however, the department does have the authority to take stronger
action with repeat offenders or those blatantly skirting the
law.
3:31:22 PM
REPRESENTATIVE COLVER asked whether the department could provide
data on complaints and subsequent investigations to support the
legislative intent of non-compliance. He related his
understanding that DCCED issues and administers licenses and the
DLWD conducts the wage and hour inspections to verify whether
contractors are properly licensed.
MS. CHAMBERS related that the division lists the contractor
enforcement activity and those out of compliance on the DCCED's
website. She offered to provide the information to the
committee.
3:32:45 PM
REPRESENTATIVE HUGHES related her understanding that this issue
was brought to the sponsor's attention in the Mat-Su area. She
asked whether this problem exists in other parts of the state.
REPRESENTATIVE TILTON answered yes; that unlicensed contractor
activity also occurs in other parts of the state. She reported
that this issue is the number one legislative priority of the
Alaska State Home Builders Association (ASHBA) and although the
Mat-Su Home Builders first approached her, the ASHBA has
subsequently highlighted the problems its members have
encountered.
CHAIR OLSON added that this issue is a priority for the home
builders [Kenai Peninsula Builders Association (KPBA)] in his
district, too. He suggested unlicensed contractors might not be
as prevalent in Anchorage due to the number of building
inspectors in that area, but it is an issue in the smaller
communities.
3:33:49 PM
REPRESENTATIVE LEDOUX asked for further clarification on the
fiscal note.
REPRESENTATIVE TILTON answered that the Division of
Corporations, Business and Professional Licensing identified
costs of $2,500 in its fiscal note, but she has been working
with the department to see if these costs can be zeroed out. In
response to a question, she agreed that a similar bill was
introduced last year without any fiscal impact so she thought
there might be some leeway.
3:34:45 PM
REPRESENTATIVE LEDOUX asked whether the fiscal note costs are
limited to $2,500.
REPRESENTATIVE TILTON answered yes. She stated that contractors
pay fees and their program pays for itself; however, there are
some additional items she has been working on with respect to
the fiscal note.
3:35:48 PM
CHAIR OLSON opened public testimony on HB 81.
3:35:57 PM
ALAN WILSON, Chair, Legislative Committee, Alaska State Home
Building Association (ASHBA), stated that HB 81 is the ASHBA's
number one priority. He stated that the problems are magnified
in the Mat-Su area, but as previously mentioned, the Kenai
Peninsula and rural areas have also experienced some problems.
Although ASHBA views this bill as a consumer protection bill, it
is also a means of closing a loophole since some homeowners have
complained to the ASHBA. He offered his belief that this bill
will "level the playing field" since some people have been
operating outside of the regulations that everyone else must
abide by; however, the bigger issue is consumer protection. He
said his organization has worked extensively with Grey Mitchell,
Director, of the Division of Labor Standards & Safety,
Department of Labor & Workforce Development (DLWD) on
enforcement issues. Although significant progress has been
made, the issue has become a priority for The ASHBA, he said.
He urged members to support HB 81.
MR. WILSON added that he was surprised by the fiscal note costs;
however, licensed contractors are willing to pay extra fees, if
necessary. In response to a question, he agreed that the
"valley" is the Mat-Su Valley and not the Mendenhall Valley.
3:39:24 PM
ANDRE SPINELLI, Design & Development Manager, Spinell Homes,
Inc., testified in support of HB 81. He offered his belief that
this issue is not limited to rural Alaska or the Mat-Su Valley,
and said that unlicensed contractor activity happens in
Anchorage, even though it's a heavily-regulated building
environment. For example, someone will build a house without a
contractor's license and immediately put up a "for sale" sign.
These unlicensed contractors don't pay fees for licensure or
other fees for their employees, he said. He related his
understanding that the need for this bill arose when the
attorney general's office advised the DLWD that the law was too
vague to enforce and he envisioned that HB 81 will tighten up
existing law. For example, when owner-builders build their
homes, they are allowed to perform their own plumbing and
electrical work. If these owner/builders are acting as
unlicensed contractors, it allows them to unfairly compete with
licensed contractors. It raises consumer protection issues
since licensed plumbers and electrical contractors are not being
used in homes that are built and subsequently marketed to the
public.
3:41:53 PM
ROBERT YUNDT, Vice President, Mat-Su Valley Home Builders
Association (MSVHBA), stated his family has lived in the Mat-Su
area since the 1940s. He graduated from Wasilla High School in
1998 and has also worked as an owner-builder. Although he now
does consulting work, he has family members [who build homes].
He offered his belief that this bill was not intended to harm
anyone who wants to put sweat equity into a project. Members of
his organization and the DLWD frequently have observed "owner-
builders" in the Mat-Su Valley who build multiple homes, often
in the same subdivision. These owner-builders post real estate
signs in their yards during construction and market their homes
on Craigslist. He related a situation in which an owner-builder
did work to a home and the family died from carbon monoxide
poisoning due to inadequate air exchange. The home with [faulty
ventilation] was the only home in the subdivision he had not
built. He offered his belief that these deaths could have been
avoided if the owner-builder had hired a contractor, noting
contractors are required to have continuing education on safe
practices.
MR. YUNDT acknowledged it was difficult for contractors who
abide by rules to compete with unlicensed contractors who do
not. He offered his support for HB 81 since it will help
provide consumer protection. Although he did not think the bill
would curb owner-builders from building homes, it will probably
result in more residential contractor licensing and continuing
education.
3:45:50 PM
REPRESENTATIVE LEDOUX asked how this bill will be enforced. She
asked whether the banks will require some type of certificate.
MR. YUNDT answered that the unlicensed builders don't use Alaska
Housing Finance Corporation (AHFC), but use larger nationwide
conventional mortgages, such as Fannie Mae or Freddie Mac.
These conventional financing organizations do not require a full
set of inspections, but rely on a licensed safety inspection at
the end of construction; however, this bill will force the
unlicensed builders to get a residential endorsement, he said.
3:47:06 PM
REPRESENTATIVE LEDOUX asked for further clarification on the
provision related to owners selling a home within the two-year
period. She questioned how it would be known and whether the
purchaser could declare the home sale null and void if any
problems arose. She said she wants to put "teeth into this"
issue and not just add prohibitions. She then questioned how
this bill will stop the unlicensed builders.
MR. YUNDT related his understanding that owner-builders not
being able to openly market their homes will help curb
unlicensed activities. He suggested that from a business
standpoint, it typically takes about 4-6 months to build a house
and during this time other general contractors notice any
building activity and can monitor and report any suspected
unlicensed activity. Under the bill, anyone who has posted "for
sale" signs on their property will need to verify whether they
are licensed contractors or owner/builders. He offered that the
bill will likely force unlicensed contractors to get the
appropriate licenses so they can legitimately post their
properties, satisfy their lenders, and sell their homes.
REPRESENTATIVE LEDOUX commented that she was satisfied with his
answer.
3:50:26 PM
KIRK PERISICH, Member, Carpenters Local 1281, viewed regulation
of home builders as a good thing. He referred to paragraph 10,
of HB 81, which read, "an owner or tenant of commercial property
who uses the owner's or tenant's own employees to do
maintenance, repair, and alteration work on [UPON] that
property;" and asked whether this provision leaves a loophole
for commercial work to be done by owners and if the work will be
limited by a certain dollar threshold to alter or repair
commercial properties. He was curious why there would be a
loophole for commercial but not residential properties.
3:51:29 PM
CHAIR OLSON suggested he discuss this further with the bill
sponsor, but noted his point made sense.
MR. PERISICH remarked it might leave a loophole for the
commercial industry since some commercial owners have very large
properties so the amount of work they could do would be
substantial.
REPRESENTATIVE TILTON offered a willingness to discuss this
provision further after the hearing.
REPRESENTATIVE LEDOUX pointed out that paragraph (10) was
existing law and this bill makes a small editorial change.
3:52:51 PM
REPRESENTATIVE COLVER suggested that the intent of this
provision in existing law was to allow owners to perform
maintenance and minor alterations on their commercial property,
but it does not include major maintenance since that activity
would necessitate using a licensed contractor. He offered that
any commercial electrical work will require an electrical
administrator's approval since the standards are much higher for
commercial electrical and plumbing. He concluded that this
language refers to minimal minor maintenance rather than major
maintenance.
MR. PERISICH suggested imposing a dollar limit for minor
alterations on commercial property.
3:54:02 PM
GREY MITCHELL, Director, Central Office, Division of Labor
Standards & Safety, Department of Labor & Workforce Development
(DLWD), with respect to an earlier question on enforcement
activity, responded that investigator Al Nagel reported that
since fiscal year (FY) 2011 the department has issued 30
administrative fines for owner/builder violations and issued 16
fines in FY 11. These were violations associated with a person
building more than one structure within a two-year period, he
said, which is what the bill would address. This bill would
clarify that the department can investigate when it appears that
homes are being sold by unlicensed contractors and not by the
homeowners.
3:56:01 PM
MR. MITCHELL referred to page 2, line 10, to paragraph 10, of HB
81 which read, "(9) [(10)] a person working on that person's own
property, whether occupied by the person or not, and a person
working on that person's own residence, whether owned by the
person or not." Although this is existing law that provides an
exemption from contractor licensing, the division has had some
situations arise, he said. He stated that previous testifiers
identified instances when the attorney general reviewed
violations and found some vagueness to the law that precluded
enforcement. The department has interpreted this paragraph to
apply to people working on their own property on existing
structures, rather than "ground up" or brand new structures;
however, the language does not clearly provide the legislative
intent nor does a regulation further define it. He suggested
one remedy would be to add "existing structures" to avoid any
ongoing confusion about owner-builders building new houses
versus working on existing homes.
3:58:04 PM
REPRESENTATIVE COLVER asked for further clarification that the
aforementioned provision made the two-year restriction
unenforceable as interpreted by the attorney general's office.
If the language was tightened up by adding "existing
structures," he wondered whether it would be an enforceable
statute with the prohibition of a two-year waiting period for an
owner/builder - without adding the department's review and
consideration of the factors that led to the sale. He expressed
concern about involving more government and asked whether
compliance can be achieved by tightening up that clause in
existing statute.
MR. MITCHELL offered that clarifying the aforementioned
paragraph (9) would go a long way to resolve the loophole for
owner-builders; however, at the same time, testimony indicates
problems exist with owner-builders putting up "for sale" signs
during construction or immediately after finishing their homes.
Currently there isn't a clean way to say the owner-builders are
competing with licensed contractors. Thus he suggested the need
exists for both changes.
4:00:01 PM
REPRESENTATIVE COLVER recalled earlier testimony about carbon
monoxide in a Wasilla home that led to tragic deaths. He asked
if it would be possible to get the facts in this case. He
related his understanding that the homeowner changed something
such as the air intake in his home.
MR. MITCHELL replied that he was unsure because owner-builders
can make changes to their property, so that type of case would
not typically be something the department will investigate since
homeowners have an exemption from contractor licensing. He said
it was a tragedy when work is not performed correctly and the
department hopes that owner-builders do the work properly and
get the guidance to do so.
4:01:23 PM
REPRESENTATIVE COLVER asked whether he wrote the language with
respect to department waivers.
MR. MITCHELL answered no. He recalled his earlier question with
respect to how standards will be established and that the
Department of Commerce, Community & Economic Development (DCCED)
responded by suggesting regulations might be the way to address
the standards. A common sense approach might be to look at
whether there is any evidence to demonstrate that owner-builders
were acting as contractors, for example, a history of past
violations of contractor licensing requirements, or of acting as
owner-builders on multiple projects. Thus the department can
still conduct an investigation, but the owner-builders also have
an opportunity to provide legitimate reasons why they are
selling their homes. However, owner-builders would only need to
demonstrate proof if the department was pursuing an enforcement
action. These owner-builders could counter enforcement actions
by indicating they have reasons to sell their homes, such as
medical situations, family emergencies, divorces or lost jobs.
Certainly, if the reasons make sense, the department will accept
them. In addition, parties receiving administrative penalties
still have the ability to request hearings and supply the facts.
For example, if the home was the fourth house an owner-builder
built in the last three years, it will likely result in the type
of action to stop the owner-builder from using a homeowner
exemption and require the owner-builder to obtain the
appropriate contractor license.
4:04:17 PM
CHAIR OLSON, after first determining no one wished to testify,
closed public testimony on HB 81.
[HB 81 was held over.]
4:04:38 PM
The committee took an at-ease from 4:04 p.m. to 4:12 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB81 ver A.pdf |
HL&C 2/11/2015 3:15:00 PM |
HB 81 |
| HB81 Sponsor Statement.pdf |
HL&C 2/11/2015 3:15:00 PM |
HB 81 |
| HB81 Fiscal Note-DCCED-CBPL-02-06-15.pdf |
HL&C 2/11/2015 3:15:00 PM |
HB 81 |
| HB81 Fiscal Note-DOLWD-MI-02-06-15.pdf |
HL&C 2/11/2015 3:15:00 PM |
HB 81 |
| HB81 Supporting Documents-Letter Jess Hall 2-10-2015.pdf |
HL&C 2/11/2015 3:15:00 PM |
HB 81 |
| HB9 ver A.pdf |
HL&C 2/11/2015 3:15:00 PM |
HB 9 |
| HB9 Sponsor Statement.pdf |
HL&C 2/11/2015 3:15:00 PM |
HB 9 |
| HB9 Sectional Analysis.pdf |
HL&C 2/11/2015 3:15:00 PM |
HB 9 |
| HB9 Fiscal Note-DCCED-CBPL-02-06-15.pdf |
HL&C 2/11/2015 3:15:00 PM |
HB 9 |
| HB9 Supporting Document-Email Habeger 09-09-2013.pdf |
HL&C 2/11/2015 3:15:00 PM |
HB 9 |
| FOR REFERENCE ONLY-HB253 Fiscal Note-DCCED-CBPL-03-21-2014.pdf |
HL&C 2/11/2015 3:15:00 PM |
HB 9 |
| HB9 Opposing Documents-Letter Frank Wake 2-07-2015.pdf |
HL&C 2/11/2015 3:15:00 PM |
HB 9 |