04/19/2006 08:30 AM Senate JUDICIARY

               SB 307-LANDLORD REMEDIES; LATE FEE                                                                           
                                                                                                                                
8:40:28 AM                                                                                                                    
CHAIR RALPH SEEKINS announced SB 307 to be up for consideration.                                                                
                                                                                                                                
SENATOR  CON   BUNDE,  Sponsor,  introduced  the   bill.  SB  307                                                               
addresses  a problem  in  the  landlord/tenant relationship  that                                                               
surfaced due  to a  2002 Superior  Court decision,  which changed                                                               
the status  quo on  collection of  late rent  and late  fees. The                                                               
bill would return  the notification process back  to its original                                                               
process.                                                                                                                        
                                                                                                                                
Prior to 2002,  inclusion of a late fee on  the same 7-day notice                                                               
to  quit for  nonpayment of  rent was  an accepted  practice. The                                                               
court  ruled  that  this  was   illegal  and  required  that  the                                                               
landlords use an additional 10-day notice for the late fee.                                                                     
                                                                                                                                
Simple, clear language between landlord  and tenant is essential.                                                               
Replacing one  notice with two  notices, both with  different due                                                               
dates and amounts owed causes  problems, and a dispute invariably                                                               
ends up  in court. The  bill would  allow landlords to  return to                                                               
the same  7-day notice  requirement for  non-payment of  the rent                                                               
plus the additional late fee.                                                                                                   
                                                                                                                                
8:42:49 AM                                                                                                                    
Senator Hollis French joined the meeting.                                                                                       
                                                                                                                                
8:43:38 AM                                                                                                                    
BOB MAIER, Alaska Manufactured  Housing Association, testified in                                                               
support of the  bill. He said historically the  late was included                                                               
in  the  7-day  notice  to  quit of  non-payment  of  rent.  This                                                               
practice has been  going on since before  the Landlord-Tenant Act                                                               
was enacted. He asked the committee  to support the bill and gave                                                               
a comparative  example of an  electric bill that includes  a late                                                               
fee on the same notice with the same due date.                                                                                  
                                                                                                                                
8:46:02 AM                                                                                                                    
Senator Gene Therriault joined the meeting.                                                                                     
                                                                                                                                
SENATOR GRETCHEN GUESS asked Mr.  Maier whether a person could be                                                               
evicted for not paying a late fee even after paying the rent.                                                                   
                                                                                                                                
MR. MAIER  said yes but it  has never happened. A  landlord would                                                               
not  pursue an  action based  on a  late fee  due to  all of  the                                                               
additional costs  involved, including  court costs and  the costs                                                               
involved in re-renting the property.                                                                                            
                                                                                                                                
SENATOR  GUESS countered  that as  the bill  is written  it would                                                               
allow for an eviction based on the late fee.                                                                                    
                                                                                                                                
MR. MAIER agreed and said that  it has never been the practice of                                                               
a landlord to evict a person  based on non-payment of a late fee.                                                               
He said  he has sat  through over  400 eviction hearings  and has                                                               
never seen  a judge evict  on the basis of  a late fee  alone and                                                               
has never seen  an action brought forward on the  basis of a late                                                               
fee alone.                                                                                                                      
                                                                                                                                
8:48:38 AM                                                                                                                    
LEO REGNER, Landlord,  testified in support of the  bill. He said                                                               
the   contract  agreement   should   be   enforceable  with   one                                                               
notification to  quit. The  law as  currently written  allows the                                                               
tenant  to  extend the  problem  due  to  all of  the  additional                                                               
paperwork and waiting that both parties have to go through.                                                                     
                                                                                                                                
8:53:48 AM                                                                                                                    
WILLIAM WHIPPLE, Landlord,  testified in support of  the bill. He                                                               
voiced  support  of  the  previous  testimony  and  informed  the                                                               
committee of the  difficulty in evicting tenants  who have failed                                                               
to pay their rent.                                                                                                              
                                                                                                                                
8:57:39 AM                                                                                                                    
STEVE   CLEARY,  Executive   Director,  Alaska   Public  Interest                                                               
Research Group  (AkPIRG), testified in  opposition to SB  307. He                                                               
asserted that  late fees should  not be  treated as rent  and the                                                               
bill would cause that to happen.                                                                                                
                                                                                                                                
8:58:55 AM                                                                                                                    
PAT  LUBY,   Executive  Director,   AARP  Alaska,   testified  in                                                               
opposition to the bill. He  cautioned the committee that the bill                                                               
would allow  for landlords to  impose unreasonable late  fees and                                                               
that the bill would force the  courts to include that late fee in                                                               
the rent.  AkPIRG agrees with  the attorney general's  office and                                                               
with the court on the issue.                                                                                                    
                                                                                                                                
ED SNIFFEN, Assistant Attorney General,  Department of Law (DOL),                                                               
testified that the DOL has  already provided comments to the bill                                                               
sponsor  in the  previous  committee hearing.  Senator Guess  has                                                               
highlighted some  issues with the  bill. Currently if a  late fee                                                               
is assessed  the landlord has the  right to give a  10-day notice                                                               
and the recipient  has the opportunity to schedule  a hearing and                                                               
challenge the reasonableness  of that late fee. If  a person does                                                               
not pay  the late fee, the  judge must decide whether  failure to                                                               
pay  constitutes   a  material  non-compliance  with   the  lease                                                               
agreement.                                                                                                                      
                                                                                                                                
Hence,  the court  is forced  to  apply a  different standard  of                                                               
review to  the failure  to pay  rent and the  failure to  pay the                                                               
late  fee. Combining  these  two issues  into  one hearing  would                                                               
allow the court to  evict a tenant for failing to  pay a late fee                                                               
and it  wouldn't necessarily need to  consider the reasonableness                                                               
of the  late fee. The  DOL does not take  a position on  the bill                                                               
but   the  committee   should  understand   the  impact   of  the                                                               
legislation, he stated.                                                                                                         
                                                                                                                                
9:03:47 AM                                                                                                                    
SENATOR FRENCH said for the record  he has done two evictions for                                                               
non-payment of  rent and they  were over  10 years ago.  He asked                                                               
Mr. Sniffen  if there  was anything  in the  law that  outlines a                                                               
maximum late fee proportional to the rent.                                                                                      
                                                                                                                                
MR. SNIFFEN said  no but courts are unlikely to  allow a late fee                                                               
that is greater than the rent.                                                                                                  
                                                                                                                                
SENATOR  FRENCH referred  to  Mr. Sniffen's  letter  in the  bill                                                               
packet regarding the  possibility of moving everything  to a ten-                                                               
day notice.  He asked him  to review  the letter dated  March 22,                                                               
2006  from Mr.  Maier,  which  claims that  going  to the  10-day                                                               
notice would be a disaster for the tenant.                                                                                      
                                                                                                                                
MR. SNIFFEN responded that he spoke  to Mr. Maier about the issue                                                               
of landlords  being able to  evict tenants and stated  that there                                                               
are a number  of ways for landlords to evict  tenants. He said he                                                               
would read the letter and get back to the committee.                                                                            
                                                                                                                                
SENATOR  FRENCH said  his experience  is that  25 percent  of the                                                               
people he rents  to are young people renting for  the first time.                                                               
He said  when they sign  the lease  they generally don't  know to                                                               
what  obligation they  are signing.  He expressed  agreement with                                                               
the one time  notice and said he is looking  for a procedure that                                                               
is more efficient yet protects both sides.                                                                                      
                                                                                                                                
9:09:08 AM                                                                                                                    
WAYNE  STEVENS,  President  and  CEO,  Alaska  State  Chamber  of                                                               
Commerce, testified  in support  of the bill.  He said  the court                                                               
decision  created unnecessary  confusion  and  disruption to  the                                                               
rental and leasing services in Alaska.                                                                                          
                                                                                                                                
CHAIR  SEEKINS saw  no further  testimony  and held  the bill  in                                                               
committee.