Legislature(2015 - 2016)BELTZ 105 (TSBldg)
04/14/2016 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB290 | |
| HB234 | |
| HB372 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 125 | TELECONFERENCED | |
| += | HB 305 | TELECONFERENCED | |
| + | HB 290 | TELECONFERENCED | |
| + | HB 372 | TELECONFERENCED | |
| + | HB 234 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HB 290-EXTENDING THE REAL ESTATE COMMISSION
1:35:49 PM
CHAIR COSTELLO announced the consideration of HB 290.
1:36:42 PM
LAURA STIDOLPH, Staff, Representative Kurt Olson, House Labor
and Commerce Committee, sponsor of HB 290, introduced the
legislation on behalf of the sponsor speaking to the following
sponsor statement:
HB 290 extends the sunset date for the Real Estate
Commission to June 30, 2018.
I encourage all the members to review the Legislative
Audit summary and the full audit report. You will see
that in the opinion of our auditors, the Real Estate
Commission is serving the public's interest by
effectively licensing real estate brokers, associate
brokers, and salespersons. Additionally, it was found
that the board worked to improve operations and
industry practices by modifying and adopting
regulations.
MS. STIDOLPH said the audit made two recommendations: 1) the
chair of the Real Estate Commission and the director of
Administrative Services for the Department of Commerce,
Community and Economic Development (DCCED) should work together
to procure a master errors and omissions insurance policy and 2)
the Division of Corporations, Business and Professional
Licensing should take action to ensure that cases are actively
investigated. She concluded that the Real Estate Commission
serves an important role by improving operations and industry
practices by modifying and adopting regulations.
1:38:25 PM
CHAIR COSTELLO asked how many members serve on the commission.
MS. STIDOLPH replied there are five members: two sales persons,
two brokers and one public member.
1:39:12 PM
KRIS CURTIS, Legislative Auditor, Division of Legislative Audit,
reviewed the audit findings for the Real Estate Commission. She
emphasized that the audit recommended a six-year extension on
the condition that the board demonstrate by January 2016 that it
was able to secure a master errors and omissions insurance
policy. Otherwise, the recommendation was for a four-year
extension. She noted the bill calls for a two-year extension.
The audit made two recommendations. First was that the
commission work with DCCED to secure a master errors and
omissions policy for real estate licensees. The law requiring
this insurance became effective in 2010. The department
established the terms and conditions of the insurance in
December 2011 but the board delayed establishing regulations for
the insurance until October 2014. The Division of Corporations,
Business and Professional Licensing and the Division of
Administrative Services cited the reason for the delay was the
overall complexity of the project, the lack of insurance
expertise, and the length of time the commission involved the
Department of Law in drafting the regulations. She advised that
not securing the policy essentially removes the requirement from
all licensees thereby exposing the public to error and omission
risks in real estate transactions.
The second recommendation was for the chief investigator to take
action to ensure that all cases are actively investigated and
completed timely. Of the 235 investigations that were open
during the time period that was audited, significant inactivity
was found in 29 of the 36 cases that were tested. During the
audit, 11 of those inactive cases were closed because of the age
of the matter. The reasons for the excessive time lags were
inadequate monitoring and insufficient oversight to ensure that
investigations were completed timely. The consequence is that
consumers may not have been adequately protected from
incompetent or unlawful licensees.
MS. CURTIS said the department and the commission generally
concurred with the audit recommendations.
1:42:21 PM
CHAIR COSTELLO asked how the audit findings were communicated to
the commission, and the commission's response.
MS. CURTIS explained that there is communication with management
and the board chair during the audit and a formal exit meeting
that describes the findings. A draft of the report is
subsequently sent to both the board chair and the department,
which provides an opportunity for each to provide additional
information. The preliminary report then is provided to the
Legislative Budget and Audit (LB&A) Committee and the board and
department are allowed to formally comment on the report. Those
comments are found at the back of the report.
1:43:13 PM
SENATOR MEYER joined the committee.
SENATOR STEVENS asked what the current recommendation is for an
extension.
MS. CURTIS said she favors four years. The two years proposed in
the bill is acceptable but it means they would begin that audit
work next year.
SENATOR STEVENS asked what it would mean to the audit division
if the bill was amended to four years.
MS. CURTIS said it depends on the year, but next year they will
be very busy with 10 sunset audits.
CHAIR COSTELLO asked if the bill passed several years ago
requiring audits for the departments weighs into the workload.
MS. CURTIS replied it affects her workload but not the audit
staff, and that has been deleted for FY2017 going forward.
1:45:45 PM
SARAH CHAMBERS, Operations Manager, Division of Corporations,
Business and Professional Licensing, Department of Commerce,
Community and Economic Development (DCCED), Juneau, Alaska,
introduced herself.
CHAIR COSTELLO asked her to discuss the financial status of the
Real Estate Commission and comment on the findings in the audit.
MS. CHAMBERS said the Real Estate Commission is in a strong
fiscal condition and has a healthy surplus. With regard to the
recommendations, timely investigations has been a recurring
theme for all boards and commissions, not just the Real Estate
Commission. To address this problem, a new chief investigator
has made structural changes to improve caseload management.
There is also improved engagement and professionalism between
the investigative unit and the Real Estate Commission in an
effort to reduce the number of investigations and the time lag
identified in the audit. In 2015 there were 116 total cases and
only 36 were investigations.
She described the errors and omissions insurance as a sticky
wicket. The initial delay was a result of spending about a year
to get guidance from the Department of Law, followed by a delay
to try to understand how the pieces work together. Once the
commission and the division adopted regulations, a public
invitation for insurers to bid went out in November 2015 and
there was no response. Two comments were that the structure of
providing E&O insurance was not attractive because the insurers
couldn't assess their risk. Insurers had no information on the
risk pool being presented and the $300 cap the division set in
regulation for an annual premium (the cap that sales people and
brokers would pay) was not attractive in the current market. The
division is actively working with the commission to discern the
next step, including an analysis of whether or not new
regulations need to be adopted to raise the premium.
1:51:47 PM
SENATOR STEVENS asked how long it will be before the commission
has E&) insurance.
MS. CHAMBERS replied the hope is to have a plan within the next
year. She pointed out that the E&O policy isn't required in
statute, but a clause within the statute says that if the
commission doesn't have an E&O policy, none of the brokers and
licensees would be required to carry E&O insurance.
SENATOR STEVENS asked what length extension she supports.
MS. CHAMBERS replied the division would work with the timeframe
stated in the bill but having longer might be more efficient and
effective.
1:54:49 PM
SENATOR STEVENS expressed hesitation to extend the sunset to
four years.
MS. CHAMBERS clarified that the commission has seven members,
the majority of which are licensees.
1:55:37 PM
ED MARTIN, representing himself, Cooper Landing, Alaska, stated
the commission ought to be extended a minimum. He expressed
appreciation that the legislature is trying to keep costs down.
1:57:24 PM
TRACI BARICKMAN, Member, Alaska Real Estate Commission,
testified in support of HB 290. She related her personal
experience as a professional realtor. She said the board
operates within its budget and does not burden the state. She
related that most complaints that are filed have a legitimate
foundation and often licensees are disciplined through
education, fines and sometimes suspension or revocation of their
license. She said the commission works to keep regulations up to
date with the constantly changing real estate industry. The
sunset audit last year concluded the commission is serving the
public interest and recommended an extension with the condition
of obtaining a master insurance policy. They are working through
that process and a shorter extension will make it more
difficult. She stressed that to terminate or not extend the
commission would take away an important guardian for consumer
protection.
CHAIR COSTELLO asked if she is saying it would be challenging to
meet the condition of obtaining an E&O policy if the commission
is extended just two years.
MS. BARICKMAN replied she believes it will take at least two
years. She noted that most realtors already carry E&O insurance
and during a recent commission meeting she recommended removing
subsection (e) of the E&O insurance statute. That voids the
requirement for brokers and licensees to carry E&O insurance if
the commission is unable to obtain a master policy. It's not
possible to get a master policy until there is some historical
data and apparently that is lacking.
2:02:34 PM
SENATOR STEVENS asked if she is saying that most licensees carry
E&O insurance regardless of whether the commission does.
MS. BARICKMAN answered yes.
SENATOR STEVENS asked what the exposure is to the public if a
licensee doesn't have this insurance.
MS. BARICKMAN replied the brokers are most at risk.
2:04:23 PM
CHAIR COSTELLO closed public testimony on HB 290. She asked if
there were any questions.
SENATOR STEVENS asked to hear from the department about whether
the public and brokers would be protected if there wasn't a
requirement for the commission to carry a master E&O policy.
2:05:23 PM
MS. CHAMBERS related that the statute says brokers and
salespersons must carry errors and omissions insurance, but they
are exempt from that requirement as long as the Real Estate
Commission doesn't have a master E&O policy. Once the commission
has a policy, everyone under their governance must also carry a
policy either privately or through the master policy. She noted
that a bill that removes the exemption is moving through the
process, but it hasn't passed.
2:06:59 PM
CHAIR COSTELLO found no further questions and solicited a
motion.
2:07:05 PM
SENATOR GIESSEL moved to report HB 290, labeled 29-LS1345\W,
from committee with individual recommendations and attached
fiscal note(s).
2:07:17 PM
At ease
2:07:26 PM
CHAIR COSTELLO announced that without objection, HB 290 passed
from the Senate Labor and Commerce Standing Committee.