Legislature(1993 - 1994)
03/10/1994 03:00 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 353 - CONDOMINIUM ASSOCIATION MANAGEMENT Number 050 REP. JEANNETTE JAMES, Prime Sponsor of HB 353, stated that HB 353 was introduced to correct a glitch in the law. In 1963 when the condominium law was enacted there was a requirement for an outside audit for condo associations on an annual basis. When the law was changed in 1985 it eliminated the audit requirement. Rep. James stated there is a committee substitute for HB 353 that changes the law so that the requirements of condominiums built before 1987 are the same as condominiums built after 1987. Number 087 BILL McNULL, attorney, President of the Board of Directors of the Alaska Chapter of Community Association Institute, testified on HB 353. Mr. McNull stated that the concern of the association is the expense of an audit for a small condominium complex; i.e., 8-12 unit building. Mr. McNull explained that an audit is approximately $2,500.00 to $3,500.00 for a condo complex of this size. MR. McNULL stated that the requirement includes using a certified public accountant (CPA). MR. McNULL stated that the secondary market has requirements that include annual audits of larger condo complexes by CPA's. MR. McNULL suggested that HB 353 state that there is no audit required unless required by the secondary market or the association chooses to have the audit done. MR. McNULL stated that each association requires that the members pay money into a reserve account and should be periodically looked at by a CPA to make sure they are in order. Number 160 REP. JAMES commented that whether or not there needs to be an audit is a matter of philosophy. She added that the condominium association should be able to decide for themselves if they want one through their bylaws. REP. JAMES asserted that if the requirement was to have an audit every five years instead of annually the expense would be the same. REP. JAMES added that AS 34.08 is specific in its requirement of the kinds of records you have to keep. These records are required to be available to the members at any time and could be used by the secondary market instead of an audit. Number 196 MR. McNULL stated that it's the responsibility of each board to keep the complex marketable and this includes the ability to get financing on the secondary market. Number 215 TRACEY RICKER, Property Manager, Remax of Southeast, testified in opposition of HB 353. She said she has been a property manager in Juneau for ten years and stated that in her experience an outside independent review of condominium associations should be required at least annually. She added that small complexes may not need an annual review. MS. RICKER stated that there are three types of reviews that a CPA can perform that would be effective. She said the committee may want to require an annual audit by an Outside CPA for associations of 50 condos or more and something less for 50 and under. Number 245 CHAIRMAN HUDSON asked what the differences were between the two committee substitutes. Number 255 REP. JAMES stated one change was to "level the playing field" between those condos built before 1987 and those after. The other change provides for an audit if the board or manager determines one is needed. REP. MACKIE stated that present law requires an audit and the CS would not require one. Number 280 REP. JAMES responded that the old law enacted in 1965 required an audit every year by an Outside accountant. The law changed in 1985, requiring that condos built after 1987 did not have to have an audit. REP. JAMES asserted that the state should not be telling condo associations that they need to have an audit. She believed they should choose for themselves. Number 299 REP. MACKIE asked if there were any other areas of business where state law requires audits. Number 303 MS. RICKER responded that it is good practice to establish a review by an independent party on an annual basis for the comfort of all parties involved. Number 320 CHAIRMAN HUDSON stated he supported the language in the CS that allows for owner discretion in requiring audits or reviews. Number 330 MS. RICKER stated she thinks a minimum standard should be established by the state. She added that the standard should be that a review or compilation by an independent party or an independent CPA should be done annually based on the size of the complex. Number 340 REP. PORTER asked if it was her understanding that the present law does not require any audits now. Number 350 MS. RICKER responded that those associations that opt in to the Universal Common Interest Ownership Act are required to have audits. Number 360 REP. MACKIE asked if he was correct in his understanding that this legislation would take out the requirement for audits for everyone. Number 371 MS. RICKER responded that he was correct. Number 374 REP. JAMES added that she felt it was out of the realm of the state to require that associations of people should have their books audited. REP. SITTON stated that he believes a secondary audit is the function of a loan application. He added that he believes government has gone too far in micromanaging the public's affairs. Number 420 REP. PORTER moved the adoption of the 3/9/94 committee substitute. No objections were heard; it was so ordered. REP PORTER moved passage of CSHB 353(L&C) with zero fiscal note. No objections were heard; it was so ordered.
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