03/12/2010 01:00 PM House JUDICIARY

              HB 253 - MECHANIC/MATERIALMEN LIENS                                                                           
                                                                                                                                
1:14:39 PM                                                                                                                    
                                                                                                                                
CHAIR RAMRAS announced that the  first order of business would be                                                               
HOUSE  BILL  NO.  253,  "An  Act relating  to  the  time  periods                                                               
affecting  certain liens  related to  providing labor,  material,                                                               
service, or  equipment to real property,  including buildings and                                                               
other improvements."                                                                                                            
                                                                                                                                
1:15:16 PM                                                                                                                    
                                                                                                                                
DON  HEBIGER,  Staff,  Representative Jay  Ramras,  Alaska  State                                                               
Legislature,  explained  that  HB  253 came  at  the  request  of                                                               
constituents.  This legislation extends  by 30 days the period of                                                               
time  in  which a  mechanic  or  material  man  may work  with  a                                                               
customer  for payment  or  settlement  of a  bill  or an  invoice                                                               
before being  able to file  a lien.   Therefore, the  time period                                                               
would be changed from 90 days to 120 days.                                                                                      
                                                                                                                                
CHAIR  RAMRAS,  speaking as  the  sponsor,  relayed that  HB  253                                                               
addresses those  who live  in a  diesel-dependant community.   He                                                               
explained that the harder a boiler  works the more inclined it is                                                               
to  go out  and  rarely  does the  boiler  go  out during  normal                                                               
business hours.   Therefore,  bills for  such services  are often                                                               
high and in  cases in which there is other  damage, such as water                                                               
damage, the insurance claims can  take time.  Moreover, the check                                                               
for insurance claims can be made  to the occupant rather than the                                                               
individual who actually performed  the work/repair.  Chair Ramras                                                               
mentioned that  the Home Builder's  Association is opposed  to HB
 and  believes that [the mechanic/material  man] should secure                                                               
a promise of payment for the work.                                                                                              
                                                                                                                                
1:21:14 PM                                                                                                                    
                                                                                                                                
ROCKY  PAVEY, President,  Rocky's  Heating  Service, opined  that                                                               
small business is  the economic backbone of any  community.  This                                                               
legislation will help small businesses  across the state in terms                                                               
of securing payment  for their hard work.  The  intent of HB 253,                                                               
he offered,  is to extend  the amount of  time allowed to  file a                                                               
mechanic's lien  by another 30  days.   He characterized it  as a                                                               
timing  issue,  and  explained  that  when he  does  work  for  a                                                               
customer at the beginning of  the month, the bill isn't generated                                                               
until the  end of the  month.   Once customers receive  the bill,                                                               
they often  feel they have 30  days to pay the  bill.  Therefore,                                                               
companies  face  60  days  before  payment  is  received  from  a                                                               
multitude of  customers.  He noted  that if a customer  calls and                                                               
requests an  extension, it's  often given.   However, he  said it                                                               
shouldn't be at  the company's own peril.  In  such a case, after                                                               
75-85  days of  nonpayment the  company faces  making a  judgment                                                               
call  around  regarding  whether  to  file  a  lien  against  the                                                               
individual.                                                                                                                     
                                                                                                                                
[Chair Ramras passed the gavel to Vice Chair Dahlstrom.]                                                                        
                                                                                                                                
MR. PAVEY  characterized HB 253,  which adds  30 more days,  as a                                                               
"win-win situation" for the contractor  as well as the homeowner.                                                               
After  the 90  day period  has  expired, the  company would  know                                                               
within 10-15  days whether the customer  is going to pay  or not.                                                               
This  legislation  allows  small  businesses  to  provide  better                                                               
payment terms  to customers  without filing  a lien,  creating an                                                               
adversarial relationship, and damaging  the credit history of the                                                               
customers.                                                                                                                      
                                                                                                                                
[Vice Chair Dahlstrom returned the gavel to Chair Ramras.]                                                                      
                                                                                                                                
MR. PAVEY acknowledged that  the Alaska Homebuilder's Association                                                               
has pointed out that small businesses  have the ability to file a                                                               
notice  of  intent  to  lien.     However,  he  said  it  doesn't                                                               
necessarily work in  the service industry as it does  in new home                                                               
construction when only  one to two customers are  dealt with once                                                               
or  twice  a  month.    Mr. Pavey  pointed  out  that  it's  very                                                               
difficult  to get  a customer  to sign  something.   Furthermore,                                                               
there  are  often cases  in  which  the property  owner/landlord,                                                               
business  owner, or  homeowner  isn't present  when  the work  is                                                               
done.   "It really  is quite  impractical to  assume that  we can                                                               
file  one of  the notice  of right  to lien  papers every  single                                                               
service  call,"  he  emphasized.    Furthermore,  to  expect  his                                                               
technicians  to track  down owners  to  sign the  notice of  lien                                                               
would create a  massive amount of paperwork.   The aforementioned                                                               
would be  unnecessary if HB  253 is  passed.  Mr.  Pavey informed                                                               
the  committee that  his company  has lost  tens of  thousands of                                                               
dollars,  perhaps even  hundreds  of thousands  of dollars,  from                                                               
customers  who take  advantage of  the current  90-day timeframe.                                                               
Providing the additional  30 days would weed  out those customers                                                               
who are struggling but intend to  pay the bill from those who are                                                               
working the  system.  Unlike  an automobile repair shop  or other                                                               
shop  to which  equipment is  brought  to the  shop, the  heating                                                               
services  industry  can't hold  the  equipment  until payment  is                                                               
received.   Mr. Pavey  encouraged the  committee to  give careful                                                               
consideration to HB 253.                                                                                                        
                                                                                                                                
1:27:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GATTO asked  Mr. Pavey whether any  of his clients                                                               
are opposed to HB 253.                                                                                                          
                                                                                                                                
MR. PAVEY said  that he didn't know.  However,  he didn't believe                                                               
providing extra time to pay  the bill would negatively impact his                                                               
customers.   He reiterated his belief  that HB 253 is  a "win-win                                                               
situation."   In  further response  to Representative  Gatto, Mr.                                                               
Pavey  related   that  colleagues   who  perform   similar  work,                                                               
including plumbing,  mechanics, or  electrical, and with  whom he                                                               
has spoken  are in  support of  [HB 253].   Mr.  Pavey reiterated                                                               
that the 120  days provides the extra days necessary  to weed out                                                               
those who absolutely  aren't going to pay versus  those who will.                                                               
With regard  to the suggestion of  a time period of  180 days, he                                                               
said  that the  longer  he  has to  work  with  the customer  the                                                               
better.  Still, 120 days is sufficient.                                                                                         
                                                                                                                                
CHAIR  RAMRAS noted  that Lobbyist  Ashley Reed  and bankers  are                                                               
opposed to  HB 253.   He  further noted  that bankers  don't want                                                               
another entity before their lien.                                                                                               
                                                                                                                                
MR.  PAVEY,  in response  to  Chair  Ramras, shared  examples  of                                                               
services  his  company provides  and  the  price  of each.    For                                                               
example, the standard  rate for annual servicing  is $325; after-                                                               
hours calls incur an additional $50 fee.                                                                                        
                                                                                                                                
1:31:42 PM                                                                                                                    
                                                                                                                                
GRACE  RUDY, Overhead  Door Company,  concurred with  Mr. Pavey's                                                               
testimony.   In response  to questions,  Ms. Rudy  indicated that                                                               
her company also has after-hours  callouts for which the owner of                                                               
the building isn't really known.   In these cases, the company is                                                               
going on  a call in good  faith, trusting that the  customer will                                                               
pay the bill.  She informed  the committee that the Overhead Door                                                               
Company  charges $120  an hour  during normal  hours and  $180 an                                                               
hour for after-hour calls.   The company also charges for travel.                                                               
Therefore, a service call will be  a minimum of $120.  In further                                                               
response to  questions, Ms. Rudy  related that the  Overhead Door                                                               
Company employs  an average of  13 employees and  Rocky's Heating                                                               
Service employs 16 employees.                                                                                                   
                                                                                                                                
1:34:12 PM                                                                                                                    
                                                                                                                                
WAYNE LONG,  Wayne's Air Supply,  concurred with the  comments of                                                               
the  previous  two speakers.    He  related that  he's  currently                                                               
working  with an  insurance company  that  owes him  $5,000.   In                                                               
response to questions, he recounted  the specifics of the case in                                                               
which he performed  work for a customer who made  a claim with an                                                               
insurance  company that  says the  check  is the  mail while  the                                                               
homeowner has  a different story.   He noted that  companies want                                                               
to  be fair  and just  and  the extra  time would  be helpful  in                                                               
making the decision whether to file a lien.                                                                                     
                                                                                                                                
1:36:14 PM                                                                                                                    
                                                                                                                                
JIM  SLATER,   Slater  Construction,  offered  his   belief  that                                                               
extending the  time period beyond  120 days would  be beneficial.                                                               
He related  that he has been  in numerous situations in  which he                                                               
has had to  place a lien on a customer's  property.  He recounted                                                               
an example  wherein the  existing lien timeframe  of 90  days was                                                               
insufficient to  prevent court services and  paperwork, which are                                                               
expensive.   For  small repair  services the  120 days  should be                                                               
fine,  however, for  contractors a  longer time  period would  be                                                               
more appropriate  as it  would limit or  minimize issues  for the                                                               
homeowner, subcontractor,  and suppliers, all  of which are  at a                                                               
disadvantage  under the  90-day time  period.   He opined  that a                                                               
180-day time period would be  more advantageous for everyone.  If                                                               
a  lien needs  to  be  filed, there  are  other  issues, such  as                                                               
honesty  and credibility,  involved beyond  just the  funds owed.                                                               
In response to questions, Mr.  Slater informed the committee that                                                               
he  is a  general  contractor  who either  works  on  his own  or                                                               
subcontracts out his work with  bills that total $10,000 or more.                                                               
Although extending the timeframe  is desirable, he suggested that                                                               
the lien  issues should  be reviewed  as well.   He  informed the                                                               
committee  that when  claims are  filed, it  doesn't go  to small                                                               
claims court  because it  involves property  and deeds  of trust,                                                               
which are  Alaska Superior Court  issues.   Due to the  amount of                                                               
cases in  Fairbanks, it can take  a year to a  year-and-a-half to                                                               
merely obtain a court date at the Alaska Superior Court.                                                                        
                                                                                                                                
1:40:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG  offered his  understanding that  HB 253                                                               
will benefit homeowners  as well as companies since  it will help                                                               
avoid additional legal fees.                                                                                                    
                                                                                                                                
CHAIR RAMRAS highlighted the difficulty  some have when trying to                                                               
pay their [service/repair]  bills as well as  home heating bills.                                                               
He  reiterated  the  further costly  impact  of  diesel-dependent                                                               
communities.   He then  reviewed the  next committee  of referral                                                               
for HB 253, which is the House Rules Standing Committee.                                                                        
                                                                                                                                
MR. PAVEY, in  response to comments, reiterated that  HB 253 will                                                               
provide  one  more  tool  by  which  to  protect  his  business's                                                               
financial  well-being, and  in turn  that  of his  clients.   He,                                                               
again, characterized HB 253 as a "win-win situation."                                                                           
                                                                                                                                
1:47:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GATTO  asked whether the  goal of HB 253  could be                                                               
accomplished through a borough ordinance.                                                                                       
                                                                                                                                
CHAIR  RAMRAS answered  that he  didn't  believe so,  as it's  in                                                               
statute.   He opined that  it's likely  a similar issue  in other                                                               
communities and  thus would be  meaningful throughout  the state.                                                               
He noted that the smaller the  business the less access it has to                                                               
the legal  system due to  the cost and  the time involved.   This                                                               
legislation protects  small contractors and allows  for those who                                                               
are merely  slow to pay rather  than those who just  aren't going                                                               
to pay.                                                                                                                         
                                                                                                                                
MR. PAVEY concurred.                                                                                                            
                                                                                                                                
REPRESENTATIVE  GATTO noted,  however, that  ordinances can  make                                                               
statutes  more restrictive.    Therefore, he  asked  if the  time                                                               
period could be reduced by  an ordinance, even if the legislation                                                               
is passed.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  GRUENBERG replied  no, adding  that's because  of                                                               
the language of HB 253.                                                                                                         
                                                                                                                                
CHAIR  RAMRAS, after  ascertaining  that no  one  else wished  to                                                               
testify, closed public testimony on HB 253.                                                                                     
                                                                                                                                
REPRESENTATIVE  HERRON disclosed  that  passage of  HB 253  would                                                               
benefit the small businesses he owns in Bethel.                                                                                 
                                                                                                                                
REPRESENTATIVE GRUENBERG objected,  thus requiring Representative                                                               
Herron to vote.                                                                                                                 
                                                                                                                                
1:51:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DAHLSTROM moved to report  HB 253 out of committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
notes.   There being no objection,  HB 253 was reported  from the                                                               
House Judiciary Standing Committee.