Legislature(1997 - 1998)
10/23/1997 02:11 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 33 - REAL ESTATE LICENSING CHAIRMAN ROKEBERG announced the first item of business, HB 33, "An Act relating to real estate licensing and the real estate surety fund; and providing for an effective date." Chairman Rokeberg noted the committee was continuing the public hearing on HB 33 from October 13. He further noted that this meeting was the fifth formal hearing and work session on HB 33, and that a number of other meetings had been held. Number 0010 Chairman Rokeberg stated, for the record, that he is a licensed real estate broker in the state of Alaska. However, due to his legislative duties, he is not particularly active as a broker. CHAIRMAN ROKEBERG noted an October 23, 1997, memorandum ("Proposed changes, questions and comments to draft CSHB 33 Version H") from himself to the committee that reflects a vast number of the changes to HB 33. The memorandum also contains some alternate language, and other issues brought before the committee during the October 13 work session, as well as the work session held with the Real Estate Commission on October 15. CHAIRMAN ROKEBERG stated he wanted to focus the meeting on the issues mentioned in the memorandum. Number 0037 BRIAN BRITT, Professional Community Association Manager, Pioneer Management Services, came forward to testify. He stated, "I've been in the business for 13 years. As the Chair indicated, I'm not actively -- active in the business, however I do have -- keep up with all the continuing education -- everything else that goes with that to maintain that designation and in the profession." MR. BRITT indicated he was interested in testifying on the issues relating to community associations. Chairman Rokeberg cautioned Mr. Britt that there had been some significant changes to Version H noted in the memorandum. MR. BRITT asked whether Section 9 had changed significantly. CHAIRMAN ROKEBERG noted a handout Mr. Britt had brought for the record. A brief discussion ensued regarding this handout. MR. BRITT commented that Sections 7, 9 and 20 of HB 33 specifically pertained to community association management. CHAIRMAN ROKEBERG replied that there were changes in Sections 7 and 9, and that Section 20 had been deleted. He requested Mr. Britt's opinion regarding the deletion of Section 20. MR. BRITT said, "As an example, on Section 20 it requires that a community association manager, or management company, purchase -- and I realize that this, with the incorporation into [the] real estate world of being a licensed real estate broker and sales -- that a -- for a company to try to obtain a million dollars bond, or more, is virtually impossible and/or is not economically feasible. If that were to take place, an association could not afford to have a community association manager working for them, because ..., in order to recoup the costs ..., they would have to charge an exorbitant amount of money. Now, that doesn't mean that an association cannot have money ..., in terms of bonding, to help protect ... their funds; as an association does, in fact, obtain bonding along with all the other insurance policies that they obtain: general liability, directors' and officers' liability, and so on. So ... that insurance is sufficient, if the association manages their business; sufficient to cover ... the funds that they have in cash that could be available. Number 0085 CHAIRMAN ROKEBERG asked, "As a typical example, what type of bonding is normally granted, or given, a property management to an association? What ... is normally required in the contract of management?" Number 0087 MR. BRITT replied, "First off, to call a community association manager, property manager's [a] misnomer to start with because we're not .... And I hate to split hairs but it really is a fine difference." MR. BRITT continued, "A community association management company does not provide a bond for an association's reserve funds. Two reasons why: One is the ability to be able to obtain that kind of insurance ...; two, the cost of obtaining that kind of insurance; and three, the association manager, ... if they're doing their job, should not have access directly to those funds, and thus not be necessary to have ... the bonding. And as I said, an association is able to obtain bonding at a reasonable rate for any and all funds that they would keep, whether it's $10,000 or $10 million, through the regular course of insuring all of the business that a community association might be involved in. And, as such, ... the association has the ability to ... include the manager in that coverage, so that if an association's funds are absconded with, misappropriated, whatever you want to call it sir, to be able to recoup. Now, an association has to be fiscally responsible for the management of their association. If they are not, ... then that coverage, or that protection, is not necessarily going to be available. And that takes some education on the part of everybody, including the associations and the homeowners, ... to know that." Number 0104 DEBRA BRITT, Professional Community Association Manager, Pioneer Management Services, came forward to testify. She noted that she has been practicing community association management for over ten years. "Alaska Housing [Alaska Housing Finance Corporation] has (indisc.--scratching) requirements for associations to carry fidelity bonds, (indisc.--scratching). As part of that requirement of recertification (indisc.) each association has to provide a copy of (indisc.) fidelity bond to Alaska Housing. So we've got a guard already there if you're going to stay on the Alaska Housing certification list. ... There is some protection there for the association, as far as verification of (indisc.). The other thing, too, is that the agents that we have been dealing with in the insurance field, also have added (indisc.) bond as named insured. And that, too, has been acceptable to Alaska Housing. In our office, part of our Alaska Housing recertification addressing insurance, we also submit to them a fiscal policy that is followed by the association (indisc.) our office in dealing with their (indisc.). Number 0116 MR. BRITT added, "So, in other words, ... there is an outside entity that ... is a watchdog for the association's (indisc.). Ultimately, an association manager, a homeowner, a board member of a homeowners' association, any one of those groups of people, if the association does not (indisc.) - is not fiscally responsible - can abscond with funds. [It] doesn't matter how much insurance you have, doesn't matter who's all watching, the point is that they have to be fiscally responsible." Number 0122 REPRESENTATIVE JOHN COWDERY asked how a property management is established. He then clarified his question: How is a community association manager hired and who does he represent? Number 0127 MR. BRITT answered, "A community association manager and management company is hired by the board of directors of a homeowners' association, and they represent the homeowners' association." Number 0129 REPRESENTATIVE COWDERY continued, "And say if there's a decision made that's unanimous ... what happens if ... there's legal expenses ... incurred over this, this issue? Where does that money come from?" Number 0133 MR. BRITT replied, "You need to be a little bit more specific 'cause that's a very general question." REPRESENTATIVE COWDERY continued, "Yeah, okay, say, say if they ... decide they're going to ... put a ..." MR. BRITT interjected, "[Are] You talking about the association, the homeowners (indisc.) ..." REPRESENTATIVE COWDERY replied, "Or the management." MR. BRITT responded, "Management doesn't decide anything .... The management company, if they're doing their job, ... execute[s] and carries out all of the decisions that are made by the board of directors of the homeowners' association, period." Number 0138 REPRESENTATIVE COWDERY continued, "So the board of directors, then, going back to that level, they may or may not have unanimous agreement." MR. BRITT agreed, "Absolutely ...." Number 0140 MS. BRITT added that there have been many issues where the board of directors is split and the majority overrules when voting occurs. Number 0143 MR. BRITT continued with an example, "Let's assume there's five members on the board, there's a three/two split on - on a decision, and as a result of the decision by the three that voted in favor of something, let's say there's a ... controversy to the point that litigation ... ensues. Is that where ... you're headed with this? Alright and so then, to the point that it is -- that there is .... CHAIRMAN ROKEBERG commented, "It's in their by-laws." MR. BRITT asked, "What's in their by-laws?" Number 0148 CHAIRMAN ROKEBERG continued, "The decision as to how the -- those decisions are made." Number 0152 A brief, mostly indiscernible discussion ensued among Representative Cowdery, Mr. Britt and Ms. Britt regarding the by- laws, covenants, conditions and restrictions. Representative Cowdery noted that those are normally recorded. Ms. Britt mentioned minutes are taken. MR. BRITT responded to Representative Cowdery's comment about recording, "Not just normally, always, because that's what creates an entity and all community associations are entities as a ... business." REPRESENTATIVE COWDERY then said, "So if somebody wanted a copy of them, he could go to the Frontier Building ...." Number 0155 MS. BRITT responded, "If they wanted a copy, we've gone back for some associations, depending (indisc.) various situation, back in history for an individual. The individuals normally -- we request that they put together what exactly are they looking for, do they mean minutes, do they need this that and that -- submit a letter to us so that we can follow through ... and provide those minutes. It's ... general public information to those individuals and owners. It goes in the resale certificate in most (indisc.--talked over)." Number 0162 MR. BRITT added that copies of the governing documents were available from the "state records department" or any title company. Number 0167 CHAIRMAN ROKEBERG noted that the committee has removed that provision from the bill at this point and asked Mr. Britt to move on to his other areas of concern. Number 0168 MR. BRITT continued, "The biggest issue that I have, and what the majority of the information in my handout provides, is ... the licensing of community association managers as real estate salesmen or as real estate brokers. First off, a real estate -- a community association management has absolutely nothing to do with real estate sales and brokering of properties. As a matter of fact, the business of property management has nothing to do with community association management, because community association management is the management of a business and its entity -- not involved in leasing, sales or renting, or anything that has to do with the ownership of that property. So to force a community association manager to do business, to have a real estate license, is about the same as having somebody learn how to fly a 747 when they're actually driving a bus -- just not the same business. Yes, it's transportation." MR. BRITT continued, "Do I think that the Real Estate Commission could be involved and could help to regulate and to insure to the consumer -- because I think that's what the REC's bottom line is -- they ... wish to help the consumer, protect them, to make people that are in our business accountable for what they do, to be educated and professional in their management style. However, to give them the license of real estate broker or salesman will do a number of things." MR. BRITT continued, "First off, a ... real estate broker doesn't want a community association manager to have the same function that they do without the education and all that goes with it. I've been a licensed real estate sale -- all the education, all the testing that goes with it, has absolutely nothing to do community association management." MR. BRITT finished, "There are many, many ways -- many organizations that would be willing to cooperate with the Real Estate Commission and/or any other group -- whether it's through occupational licensing or whatever group -- to help create the proper education and the proper (indisc.), so as to help the consumer, or having the people that are in that business be accountable for their actions." Number 0195 CHAIRMAN ROKEBERG stated, "Right now the general thrust of the transition in licensing procedures as [it] relates to community associations has not been decided by the committee, but at this juncture they're entertaining discussions about having limited licenses for community association managers or provisional licenses, one (indisc.) distinction being whether one would ultimately have to pass a real estate examination." CHAIRMAN ROKEBERG continued, "And that's the distinction that we're ... trying to deal with right now: whether we should, in essence, grandfather existing community association managers and not require them [to] pass a real estate exam; or, after a period of time, for example three and a half years, ... make them be able to pass that examination. ... So that's ... kind of where the issue is in terms of that area right now .... Also the bill provides a special core curricula be developed by the Real Estate Commission for community association managers, as well as other specialties within ... the real estate industry." Number 0209 REPRESENTATIVE BILL HUDSON requested that witnesses state the section numbers of HB 33 they are commenting on. Number 0212 MR. BRITT responded that he was commenting on Sections 7 and 9. Number 0214 REPRESENTATIVE HUDSON noted he had a copy of the memorandum being discussed. Number 0216 MR. BRITT added, "Our industry, I would have to say, is ... not opposed to having the Real Estate Commission be the governing body over community association managers. Nationally, they're opposed to that -- people in this business are opposed to that, but at the same time, the one thing that we agree with is that there are many people that are in this industry that have absolutely no education, and little or no experience in the community association management business -- and that scares the hell out of us, to be quite honest with you -- and it's not the right thing for the community association." MR. BRITT continued, "So if it takes something like the Real Estate Commission that -- if we're under the auspice of that organization, then so be it. One thing I caution you is ... be careful about what you wish for because it may not be what everybody wants, and it may not, in fact, provide ... the ultimate goal of what all this action (indisc.) take." MR BRITT stated, "I've added a section on a proposed language for Section 9 that would -- ... it's additional language or an additional license, if you will, called community association managers. So instead of having just real estate sales, real estate brokers, community association (indisc.) -- and for that matter, maybe there should be a fourth one called property manager ...." Number 0232 CHAIRMAN ROKEBERG commented that a certain stage of HB 33's development had an endorsement concept with the split specialties. However, because of the number of problems with that approach, particularly the real estate industry's inability to accept that concept as a major change in their way of doing business, another method is being tried. Number 0238 CHAIRMAN ROKEBERG asked if there were any statutory or legal restrictions preventing entrance into the business of community association management in Alaska. Chairman Rokeberg indicated he was referring to legislation written. Number 0241 MR. BRITT responded in the negative, expressing that that was part of the problem. Number 0243 CHAIRMAN ROKEBERG asked, " And there's no real consumer protection as far as the (indisc.) beyond the business relationships and contractual agreements between community association managers and these associations throughout the state, is that correct?" Number 0246 MR. BRITT agreed, " However, be cautious again. Just because somebody has a broker's license, doesn't mean that ... a community association has any protection of any kind, because there is ... absolutely no educational process within the Real Estate Commission to help a community association and ... their operation." Number 0248 CHAIRMAN ROKEBERG stated, "But we are ... addressing that in part, and if you listen to the testimony today, that will undoubtably come up ... and hopefully that will, I think, make a major step toward increasing the competency of the people in that type of business. I have a couple of questions that ... are (indisc.) technical things. Do community associations typically have a trust account as well as an operating account when they deal with the funds of an association?" MR. BRITT questioned, "You're speaking of ... a reserve account or a capital expenditures?" CHAIRMAN ROKEBERG replied, "Well, that would be ... another account ...." MR. BRITT said, "There are no trust accounts." Number 0257 MS. BRITT added, "(Indisc.--talked over) two accounts, the general operating account which relates back to the general operating budget and then also reserve accounts ..." CHAIRMAN ROKEBERG added, "Reserve accounts and/or there could be an ... investment account." MR. BRITT continued, "Well that investment account is ... the reserve account -- it's part ... of what they call capital expenditures, for future (indisc.)." Number 0264 REPRESENTATIVE COWDERY asked, "Do you think the system as it stands now is broke? Does it need fixing? ... I understand ... that we've had some frauds that existed, but ... can we legislate that out of the system ...?" Number 0268 MS. BRITT replied she didn't know if it was possible to ever really legislate out dishonesty, but she noted it is always possible to improve upon what is currently being done. She recommended working with the community association managers, and letting them be more active in the creation of bills and the creation of licensing. MS. BRITT continued, "I've served with Grayce Oakley on the original task force on the continuing education side, and I worked with Wiley Brooks (ph) on that. ... Our original goal was to incorporate some of the current required real estate classes and combine them with community association management courses that are already available through a national organization -- and I think you've got it in the hand-out, (indisc.) education requirements .... I'm a real stickler about continuing education and, and training and things like this in our office, but ... I think we need more participation in that. Number 0281 MR. BRITT added, "Mr. Chair, one last thing to answer ... your question, sir. Has the Real Estate Commission been able to eliminate and, and all of the legislation that has come down, to prevent anybody in the real estate business, whether they're a licensed real estate agent or broker, from doing a similar thing that has happened as of recently with a community association? ... I'm not trying to be unfair, but you just can't do that. So, but - but can we -- can the Real Estate Commission help, and does it help absolutely? We're a strong proponent of them. It's not that we're against what they're trying to do or what the real estate world is trying to do; we just want to make sure that we do this properly." MR. BRITT continued, "One last thing is that ... Debra Britt and myself are the first professional community association managers in the state. We did that with the desire to upgrade the educational system or people that are in this business because it became known that if you don't have a PCAM [Professional Community Association Manager], it's very difficult to manage ... some associations, because they wanted that level of expertise and that level of commitment to the industry in order to have them as a ... manager of ... their association, of their (indisc.--scratching)." Number 0297 MS. BRITT added that their certification has encouraged other community association managers to become certified through the national organization. She noted that in order for association managers to keep their certification, they must go outside Alaska for the continuing education. She said she would love to see that brought to Alaska. Number 0304 CHAIRMAN ROKEBERG requested that the committee members hold their questions until the end of testimony. Number 0315 NIEL THOMAS, Associate Broker, Fortune Properties, Incorporated, came forward to testify. He noted that he was speaking for himself as a licensee, and not necessarily for his company. MR. THOMAS stated that he didn't have much to add beyond his October 16 letter. He commented that Chairman Rokeberg's October 23 memorandum apparently contains all of his suggestions for changes to Version H. He offered to answer any questions regarding his suggestions. Number 0332 CHAIRMAN ROKEBERG stated, "(Indisc.) I had the answers to your questions ... in regard to -- (indisc.) item number two ..., I think that the committee appreciates you bringing this up, because this is some language that was left over from the endorsement concept. I think we need to look at that and ... remove or modify the language in that particular -- that was one thing that did slip through the cracks regarding that (indisc.). The original concept (indisc.) included the specialized endorsements and now it does not, therefore I think that that language does need to be modified." CHAIRMAN ROKEBERG continued, "Additionally, the issue on civil fines .... I think everybody in this room should be aware that we are granting in this bill some greater authority to the commission. And also on item 4, page 5, line 3, I think that's a good point, that we might want to adopt (indisc.--coughing) so, that you brought forward to us, because, matter of fact, perhaps, if Miss Oakley might want to respond for that particular question. In other words, why would surety funds (indisc.) money [be] made allowable, putting together courses for the general public, is that what that is?" Number 0362 GRAYCE OAKLEY, Executive Administrator, Real Estate Commission, came forward to testify. She stated, "I assume that's the one that you're referring to (indisc.). At the time that the surety fund was last, the last completed audit ..., the last one that the commission called for -- there was an attorney general opinion that gave a very narrow definition of what was in 091 as to what we could do." MS. OAKLEY explained, "And so the attempt here was to try to specify the types of ... courses. And when we put in the one -- the thing that was the hot issue at the time, and still is, I think, more than warm, is property disclosure. And we had envisioned putting together a course that would be for the general public as far as how, how they could adequately, and give them some training. We were looking at doing some videos that could be checked out to [the] library system of how they would fill out a disclosure form for buyers and sellers, because whether they're working with a licensed agent or not, they are still required to do. That was the type of general public courses that we were talking about, that we saw as being within the scope of the surety fund." MS. OAKLEY continued, "Another one that has been challenged as to whether it could, surety fund can be used or not, and it currently is not, with the exception of ... Terry McGilberry 's (ph) position, which is wholly funded by the surety fund -- any of the participation in the real estate license law official organization. It's a wonderful training ground for commission members to find out what's happening with other commissions ... so we don't have to reinvent the wheel with everything." MS. OAKLEY stated, "We don't have any ... specific formalized training for new commission members as they come on the commission. We would like to be able to use some of ... the education appropriation to train the commission members to do their job better ... as it relates to what's happening in the rest of the country. Those are the kinds of things that we were thinking about when we, when the task force, added ... those particular categories ...." Number 0399 CHAIRMAN ROKEBERG stated, "Well we might want to take a look at that again .... There's a couple other things that Niel [Niel Thomas] brought up ... about some property management (indisc.), everything. I think the exemptions pretty well take it up. ... I'm looking forward to some other testimony today, hopefully on the issue of the affinity groups and relocation .... There is also a memorandum (indisc.) legal opinion ...." Number 0408 CHAIRMAN ROKEBERG called a brief at ease (no time noted). Number 0409 CHAIRMAN ROKEBERG called Stephen Vlahovich to testify. Number 0417 STEPHEN VLAHOVICH, Associate Broker, Associated Brokers, Incorporated; Board of Directors, Glenn Haven Condominium Association, came forward to testify on HB 33. MR. VLAHOVICH noted that last year, when HB 33 first came out, he commented on the condominium management association issue in writing to Chairman Rokeberg, and also testified. He referred to page 24, line 8, item 16 in the exceptions ("an owner of a unit of a self-managed community association managing the community association without remuneration;"). He requested that the phrase "without remuneration" be deleted. Number 0433 CHAIRMAN ROKEBERG noted that there had been discussion about that issue in a previous committee meeting. He asked Mr. Vlahovich to explain his position on the removal of the phrase in question. Chairman Rokeberg noted that he understood Mr. Vlahovich's position to also favor allowing a member of a community association to be reimbursed. Number 0441 MR. VLAHOVICH stated, mentioning his 80-unit association, that a unit owner of a self-managed association would not be willing to manage the project without remuneration. He continued, "The reality of the world is nobody's going to do it. So you're still stuck that you're going to have to hire somebody to manage your project, ... they're going to have to be licensed, and this is just taking property rights away from the owners of the units and the board of directors of the condo association. And I don't think in (indisc.) statutes of the state of Alaska that there's anything prohibiting the board of directors from being compensated, or a member of the units being compensated. Number 0458 CHAIRMAN ROKEBERG answered, "I think you're probably right about that, there is -- it doesn't speak to that, and that's exactly right, and ... this, as it's written, would restrict that. On that point, I think we had some testimony at a Real Estate Commission work session about an instance in Juneau whereas people would actually -- were in the same kind of a situation, where there were members of the community association. ... They'd split the duties up 'cause they didn't have a professional management company available to them, or (indisc.) didn't pursue that, and, in order to reimburse themselves for costs incurred on this division of labor, they gave themselves expense honorarium." CHAIRMAN ROKEBERG continued, "So then it becomes a question about whether it's remuneration or not. It would -- it's my opinion ... and it's something that we might want to make clearer, that any repayment for costs incurred and so forth by members of the association in the course of any of the management activity of self-management should not be restricted. But you're indicating ... that there should be a compensation and profit for that management, then?" Number 0478 MR. VLAHOVICH replied, "I would think that you'd just have the statement, 'An owner of a unit of a self-managed condo association manage the association at the direction of the board of directors,' period." Number 0480 CHAIRMAN ROKEBERG asked, "What about the ability to reimburse for expenses and so forth, would that ..." Number 0483 MR. VLAHOVICH replied, "I don't think it's the business of the real estate licensing whether they reimburse their people or not. I think that's a corporate decision made by the board of directors, duly elected by the owners of the unit[s]. That would allow them to do what they needed to do, in whatever financial circumstances the association is in, and, also, if they went outside of their ownership, they'd have to have a licensee." Number 0491 CHAIRMAN ROKEBERG said there is nothing in the legislation that restricts the association from managing itself; profit-making is the issue. Number 0493 MR. VLAHOVICH said, "Well,(indisc.) what you're stating is the only time you can do this is if you do it without remuneration, without pay ...." CHAIRMAN ROKEBERG added, "Unless you're licensed, you're a licensee, then .... That's what it says exactly." MR. VLAHOVICH continued, "A resident manager could be compensated, but if they're an owner, they wouldn't be able to do (indisc.). So you could have a tenant in somebody's leased condo, that you could hire and compensate, but you couldn't do it as an owner. That doesn't make sense to me ...." Number 0505 CHAIRMAN ROKEBERG said, "Well, there is (indisc.) distinction. The resident manager typically is one that ... resides on a rental premise, not on (indisc.) community association property ...." Number 0510 MR. VLAHOVICH asked, "Is that logical? You can hire a resident in a rental condo but if the owner of a unit wants to take on that job, you couldn't pay 'em?" Number 0514 CHAIRMAN ROKEBERG responded that he understood Mr. Vlahovich's point, and noted that Mr. Vlahovich was advocating for his position. Number 0517 MR. VLAHOVICH added, "And I've talked to other board[s] of directors and explained this particular item and they are all against it ...." CHAIRMAN ROKEBERG asked Mr. Vlahovich if he meant that other board members wished to retain a resident of the association and pay that resident a profitable, over-expense type of remuneration." MR. VLAHOVICH answered, "Pay them period." CHAIRMAN ROKEBERG continued, "Well, I think there's a distinction about -- I think the committee and myself, I would not object to having a member that performs any function being reimbursed for their expenses. ... That's clearly the case. And you can have a nonprofit association that self-manages itself and covers all their costs without running afoul of what remuneration would be." MR. VLAHOVICH asked, "(Indisc.) how would you determine -- say one corner of a unit is going have that as their office ..." CHAIRMAN ROKEBERG answered, "That's all for the board of directors and your by-laws, and it's all common sense .... That's the distinction I make .... Hopefully that helps ease some of your concerns, but I take it, it doesn't ...." There was a brief discussion between Chairman Rokeberg and Mr. Vlahovich about reimbursement. Chairman Rokeberg stated that reimbursement could be for expenses or costs of time. He commented that the language needed to be clarified, and "remuneration" defined. Number 0554 ERIC DYRUD, Broker, Associated Brokers, Incorporated; Legislative Committee, Anchorage Board of REALTORS , came forward to testify. Mr. Dyrud noted that he also sits in on the commission meetings for the association. MR. DYRUD, as a private individual, suggested an additional change providing for the revocation of a broker's or associate broker's license if a felony is involved. He noted this change corrects an omission in the language: A convicted felon cannot receive a license, but there is no provision in the language that allows a license to be revoked if a licensed person is convicted of a felony. Mr. Dyrud noted he had language with him to make that change. MR. DYRUD, in his second item of concern, spoke for the legislative committee of the Anchorage Board of REALTORS on the "E and O" insurance question. CHAIRMAN ROKEBERG interjected that there had been feedback from the commission. The commission believes that underwriting is available. He stated that there's been a general consensus at this stage, subject to further revision, of a $150 per annum maximum ceiling. In addition, he noted, a "tail" would be added to the policies, and it would be ensured that the premiums be paid directly to the underwriter, not to the commission. MR. DYRUD said he had not seen that proposal. TAPE 97-66, SIDE B Number 0008 CHAIRMAN ROKEBERG stated that it would be appropriate to revisit this paragraph mentioned for further review, if the legislative committee of the Anchorage Board of REALTORS wished. MR. DYRUD indicated the legislative committee would be interested in doing that. CHAIRMAN ROKEBERG commented that an agreement, more or less, had been made to that effect with Mr. Dyrud's group at the last meeting. The agreement was that the paragraph in question would be removed if there were no indications of interest or feasibility. He noted that apparently it is feasible. Number 0013 MR. DYRUD, testifying again as an individual, noted some concern regarding "affinity groups or rebates or however you might wish to word those." He mentioned some discussion about changes to a current disclosure regulation that is a prohibition against paying rebates or fees to individuals or non-licensed individuals. MR. DYRUD commented that the committee had received an opinion from Legal Services, Division of Legal and Research Services, Legislative Affairs Agency. This opinion said, he related, "that it did not appear that the regulation affected the statute, and that there was prohibition against other payments." He asked for clarification, noting he had been told a rebate could be paid to a non-licensed individual but had not been unable to find any specific language referring to that situation. Mr. Dyrud mentioned affinity groups and recommended inclusion of Mississippi's language discussing those items into HB 33. CHAIRMAN ROKEBERG stated that he had previously cut Mr. Thomas short on the same subject. He requested that Mr. Thomas "explain to the committee what an affinity group is and how -- what that circumstance is, and also any - any further information regarding real (indisc.)." Number 0030 MR. THOMAS stated that currently there are two situations being hotly debated in the industry, referring to Internet discussion groups among real estate agents around the country. MR. THOMAS explained, "Let me try to describe it without putting any bias into it .... The one situation's what you might call relocation company situation, and it comes up this way: A corporation transferring its employees around the country will not necessarily use its own staff to coordinate the process by which those employees get their houses listed for sale; or how those employees, once they go to a new community, hook up with a real estate agent to buy another house. They'll out-source that and sign a contract with a third-party organization to provide those services." MR. THOMAS continued, "The job of that third-party contractor is to locate qualified real estate brokers to provide marketing services for those employees' homes. Or, in the case of an employee coming into a community, that third-party contractor will recommend that employee use certain real estate agents that they might have in their network. That sort of thing has been going on for a long time. Where it has provoked some ... controversy in the Real Estate Commission is how these affinity groups, these relocation companies, get paid." MR. THOMAS continued, "It used to be that these relocation companies uniformly went to the corporations that hired them: ARCO [ARCO Alaska, Incorporated], BP [BP Exploration (Alaska) Incorporated], or whoever; negotiated a contract which had fees built into it, and that's how they secured their compensation. At some point in the last couple of years that practice changed, and it now, in many cases, works differently. ... It goes like this: Third-party relocation company calls up a real estate agent who actually may already be marketing a piece of property for a corporate employee who's leaving town and says, 'In order for us to be able to perform our functions for this company -- this company is not paying us, so we want you, as the real estate agent, to pay us.'" MR. THOMAS continued, "And so, whether or not they actually initiated the business that that real estate company received, a (indisc.) incoming corporate employee or a corporate employee who's having his house listed for sale -- instead, what happens is that a portion of that real estate commission that would be earned in that state gets sent out. And the fees are typically 20 to 30 or 35, or in some cases 40 percent -- gets sent out to the third-party contractor." MR. THOMAS continued, "Why is this happening? Basically, because the real agents in many communities and many brokerages are willing to pay it. And, it, in effect, reduces the corporate burden of supporting the third-party relocation function. Well, this becomes controversial because the question becomes, from the real estate agents who feel like they wouldn't want to have to pay these kinds of fees: 'Why are we doing this and sending this money to these sort of third-party entities?'" MR. THOMAS continued, "The Real Estate Commission's response in Alaska has been to say, 'We don't see any reason to make this practice illegal, but we think people ought to know about it.'" Mr. Thomas related a recent situation at his brokerage: A settlement statement had come through with no mention of the referral fee the brokerage was committed to paying to a third-party relocation company. The brokerage contacted the title company for a corrected settlement statement listing the referral fee, but the title company said the relocation company had not wanted that fee information disclosed. Mr. Thomas said the brokerage's response was to tell the title company that this disclosure was required by the Real Estate Commission's new regulation. MR. THOMAS continued, "So, you get the sense that these third-party relocation services are somewhat embarrassed about all of this -- and the Real Estate Commission up to date has said, 'Well, it's probably okay, at least we're not gonna choose to make it illegal, but we want everybody to know, buyer and seller, that these fees are being sent out of state -- in effect, reducing the income that would otherwise may be get spent on marketing services, or for the benefit of Alaska's consumers.' Now, not every real estate commission in the country has taken the same view about this, and that's where you've heard about Mississippi, and that's why there's some language on the table here." CHAIRMAN ROKEBERG clarified Mr. Thomas had been speaking specifically about the "relocation function." MR. THOMAS stated that the Mississippi Real Estate Commission took a different point of view. He said they simply wanted to make this practice illegal altogether (Mississippi Real Estate Commission Rule IV.A.5: "... No licensee shall knowingly pay a commission, or other compensation to a licensed person knowing that licensee will in turn pay a portion or all of that which is received to a person who does not hold a real estate license."). MR. THOMAS said that the state of Alaska's Real Estate Commission's choice has been different from Mississippi's. He noted, "The legislature has the opportunity, I would think, to consider whether or not it wanted, by statute, to make that process illegal. Whether or not the Real Estate Commission could or would do it here by regulations, I don't think anyone knows. I'm just describing the issue as we understand it at the moment. That's the so-called relocation scenario." Number 0087 MR. THOMAS stated, "The other issue is somewhat different and similar in many ways. It's the so-called affinity group question. ... It comes up in a variety of ways. The COSTCO [COSTCO Wholesale] example is the one you're going to see here fairly ... soon." MR. THOMAS explained, "It goes this way: You live in Alaska and you have a piece of property you would like to sell. If you go to a local real estate company you can negotiate with them whatever fees they would charge you to list your property for sale. However, you may spot an ad in the newspaper, or somewhere else, that says if you will come to COSTCO, and join COSTCO, and pay them a particular type of membership fee, they will refer you to the brokerage that they use in your community which has already agreed to discount their fees by a substantial amount. In other words, you would pay less if you use that broker and go through the COSTCO network." MR. THOMAS continued, "There's a variety of other affinity group operations of that sort around. If you're in certain airline club miles, or you're part of certain other kinds of organizations, you may discover that, if you work with a brokerage that's part of their network and marketing your properties for sale, or if you buy a house through this particular brokerage that's tied into their network, ... you've got certain kinds of other benefits coming. You may get airline miles, you may get reduced prices on other goods and services, insurance, and all kinds of other things." MR. THOMAS continued, "What makes this whole area controversial in the real estate industry is, is it a good idea to, in effect, subsidize a lot of other business activities out of real estate commissions? And should the Real Estate Commission in Alaska be concerned about those activities? If you want to look at a parallel, the state insurance commission is concerned about those issues for insurance carriers. For instance, in the title insurance industry, it used to be fairly common for title insurance companies who compete for business to go to real estate companies and say, 'What sort of things can we do for you? How can we spend money, or help you do things, in order to get your business -- to have you send us people to buy title insurance?'" MR. THOMAS continued, "The state of Alaska insurance commission took a dim view of that and said this: 'When you spend a lot of insurance money to buy real estate agents' business, you're, in effect, weakening your position as insurance carriers.' Well, it's possible to picture the state Real Estate Commission here using the same kind of reasoning to say, 'Things that weaken the economic stability of the real estate industry in Alaska are not good things for Alaska's consumers.' ... I'm throwing these ideas on the table, not to suggest to you what the answers are [but] ... to describe what the issue is. It's a national issue, it's being talked about all over the place, and it's good that you're taking the time to become aware of it." Number 0114 CHAIRMAN ROKEBERG asked Mr. Dyrud if he could add anything to Mr. Thomas's testimony, and if he had any reasons why the continuation and growth of affinity and relocation service activities could be injurious to the state of Alaska's economy and people. Number 0124 MR. DYRUD responded that he felt it was a "tender trap." He noted he hated to single out COSTCO Wholesale because "they're not the only ones doing it, but they're talking about a straight cash rebate to the consumer." CHAIRMAN ROKEBERG asked how that could be negative for the public. MR. DYRUD replied that giving rebates back effectively asks other clients, not associated with the clients receiving rebates, to subsidize those marketing efforts or the level of service provided falls. Number 0132 CHAIRMAN ROKEBERG questioned if Mr. Dyrud meant that the small "mom-and-pop" real estate brokerage firm in Anchorage, employing three to five people, could not compete with a company that has sales of $16 billion a year and a $2.5 billion market "cap" on Wall Street. Number 0136 MR. DYRUD responded that a small firm can and does compete with a large firm, although not in the same scale. There was a brief interchange between Mr. Dyrud and Chairman Rokeberg about the difficulty of going up against the "big boys." MR. DYRUD said he thinks the consumer expects a certain level of service, but doesn't end up getting that service, and doesn't realize it, when rebates are involved. He stated, "You finally get to the point where, if you aren't getting the compensation, you can't do the advertising -- you can't do a lot of the things that you normally do." Number 0142 REPRESENTATIVE JOE RYAN asked if the previous witness's testimony described Coldwell Banker Property Unlimited, Incorporated (Coldwell Banker), fairly well. Number 0147 MR. DYRUD replied that the testimony might describe several firms. In response to comments about money going out of state, he said that most of those are franchises. If it is company-owned, like Coldwell Banker, the money would go out of state. If it is a locally-owned franchise, only a percentage of the money involved goes outside Alaska. Depending on the franchise, that amount might be something like 4 or 6 percent. MR. DYRUD noted that if COSTCO Wholesale did have such a rebate program, the money would very definitely go out of state. Number 0153 REPRESENTATIVE RYAN questioned, "Where COSTCO is making agreement with a broker or brokers to offer a discount to get an increase in business. It seems to be a fairly ...." MR. DYRUD explained, "They're not actually asking for discounts -- they're willing to pay the normal commission, but they're asking (indisc.) broker to pay COSTCO -- I understand it's 35 percent, and then COSTCO, in turn, rebates to the member 29 percent as a cash rebate." A brief discussion ensued, bringing up the terms "kick-back" and "baksheesh." REPRESENTATIVE RYAN continued, stating he was interested in how this issue was going to be delineated. MR. DYRUD responded that he, as well as Chairman Rokeberg and Ms. Oakley, think the state of Mississippi has accomplished this. In that case, the Mississippi Real Estate Commission passed a regulation or rule prohibiting that type of conduct. He noted that Mississippi's actions have been subjected to court review and were upheld. Mr. Dyrud commented that including such "legislation" in HB 33 would probably eliminate a lot of problems. MR. DYRUD also stated that the state board of REALTORS was having a "key working group" meeting on October 24 at the Anchorage Board of REALTORS . Number 0153 ART CLARK, Real Estate Unlimited, LLC (Limited Liability Company); Board of Directors, Anchorage Board of REALTORS ; Board of Directors, Community Association Institute (CAI), came forward to testify. He stated that he was on the "key work group" mentioned by Mr. Dyrud. Mr. Clark described the October 24 meeting as a "legislative committee meeting." Mr. Clark stated that he would be speaking today as a private individual. MR. CLARK noted that he wanted to reiterate a couple of items Mr. Britt had mentioned earlier regarding licensing for community association managers. Mr. Clark said that there is a lot of concern in the real estate industry about giving community association managers real estate licenses; and there is some equal concern from the community association management side about giving all real estate agents carte blanche to become community association managers. MR. CLARK stated that he does both community association management and real estate. He has been doing community association management for about a year and a half, having joined a friend who was already involved in the field. He said that both areas require different skills, and the committee needs take this fact into consideration in its deliberations. Mr. Clark noted there were a lot of concerns about this meeting's proceedings, stating that he had talked with people involved in community association management and his comments came from that direction. Number 0195 CHAIRMAN ROKEBERG questioned Mr. Clark, "As I indicated earlier, we are considering, in the transition phase, a couple of different alternatives in terms of the licensing for existing community association managers: one of which is ... a limited license, which would ... grandfather these people in, and ... then basically allow them to continue operating -- with any new entries in the business, they'd have to become licensed." CHAIRMAN ROKEBERG continued, "The other one was provisional license. I believe the distinction I made was that if they -- they would be grandfathered in, but they would be required after a period of, say, three and a half years - (indisc.) would include this licensing cycle plus one additional licensing cycle - ... to pass a real estate examination, therefore, to become a licensed realtor or then they would no longer be able to do business .... And the way people would do this -- they'd have to have a year or two years of experience before they could petition ... the commission for a provisional, or a limited license. How does that type of a -- those two different choices -- or do we have another choice, or what?" Number 0211 MR. CLARK stated some confusion on his part. He said he had talked with quite a few association managers and many said their concern was that they did not want to sell real estate. Mr. Clark did not think there was a lot of opposition to taking the classes and passing the examination from community association managers. Mr. Clark commented he was not sure what Chairman Rokeberg meant by provisional licensing. Number 0218 CHAIRMAN ROKEBERG clarified the distinction between limited and provisional licensing: One form would lead to an eventual required examination or exit from the business; the other form would be a strict grandfathering, an indefinite license. He noted that anyone entering the business would have to pass the real estate examination. Number 0221 MR. CLARK noted he understood. He stated that it didn't seem to make a great deal of difference. The concern on the community association management side was still valid, he said, because the questions asked on the real estate examination do not cover community association management at this time, and the skills necessary for community association management are not covered at all in the pre-licensing. MR. CLARK stated that he could not speak for the association managers, noting he already has a real estate license. He thought, however, the association managers would probably prefer being grandfathered in, especially since they do not plan to do any real estate work. That option, he noted, however, would probably not be acceptable to the real estate community. MR. CLARK suggested, as he thought Mr. Britt had also indicated earlier, a reexamination of the endorsement concept with regards to community association management. He noted that the concepts of the property management and commercial real estate endorsements have a lot of opposition in the real estate industry; however, he said, it is possible to apply the "apples and oranges" analogy when looking at real estate and association management. Number 0240 CHAIRMAN ROKEBERG responded that a third possibility, from among the infinite possibilities available, could be a special license category for community association managers. He noted this option would require an establishment of a full pre-licensing education regimen. MR. CLARK stated he did not think there would be very much argument from the community association management side regarding the need for pre-licensing education. CHAIRMAN ROKEBERG added, "Just let me say in passing that there's been some additional provisions put in the exemptions regarding association managers .... We have allowed the collection of rents by receptionists or staff people for people in the property management area, but also, fees can be collected by staff people (indisc.) aren't duly licensed -- so that's an exemption." CHAIRMAN ROKEBERG continued, "What we've done there is endeavoring and also bookkeeping-type functions, per se, are exempt. In other words, a community association firm or a property management firm, respectively, could hire bookkeepers that would not have to be licensed individuals to perform this function, and that's - those are broadening of the exemptions." Number 0259 MS. OAKLEY commented that Mr. Britt had alluded to the fact, and Chairman Rokeberg had said very specifically, that the examination, pre-licensing and education, as it now stands, does not contain anything specifically about community association managers. She noted, "We're well aware of that, because right now there's no license required. ... We were also very much aware that if they were licensed, whether it was under the endorsement concept, or whether it's something else that's worked out, that both the exam and education would have to be relooked at, and the curriculum and the exam questions, and so on, redone to incorporate those ... areas." Number 0269 CHAIRMAN ROKEBERG asked Mr. Clark for his opinion on Mr. Vlahovich's point regarding compensation of association members for management duties. Number 0273 MR. CLARK stated he was not familiar with Mr. Vlahovich's association, but he did have an opinion and thought he understood Mr. Vlahovich's point. In smaller associations, where it is not a very good idea to go with a management company in terms of basic economics, Mr. Clark commented that some compensation for a person handling management duties on a day-to-day basis would probably be a requirement because the job does become quite onerous. MR. CLARK stated that the members of the board of directors already put in a lot of time. He noted that the business of running an association - doing the resale certificates, paying the bills, sending notices to homeowners that they're delinquent or in violation of house rules - can be a time-consuming process. CHAIRMAN ROKEBERG commented that it sounded like a business opportunity to him. MR. CLARK noted it could be, but on the other hand, some of the associations with eight or nine units don't have enough income to hire an association management company. Number 0295 CHAIRMAN ROKEBERG noted Mr. Clark has been a realtor for many years, and a real estate broker, and has "had many hats." He confirmed that Mr. Clark has done both property management and community association management work. Chairman Rokeberg asked Mr. Clark, "When you get paid for property management and get paid for community association management, is there any difference between the two?" MR. CLARK replied in the affirmative. CHAIRMAN ROKEBERG clarified, "No, I mean the payment you get ...." MR. CLARK replied, "Oh the payment -- money's all the same, all green." CHAIRMAN ROKEBERG confirmed that Mr. Clark had answered his question. Number 0317 RON JOHNSON, Broker, ERA Real Estate Specialists; Representative, Kenai Peninsula Board of REALTORS , testified via teleconference from Kenai on HB 33. MR. JOHNSON stated that there was some discussion relative to the common interest ownership Act during the testimony on community association management. He said, "The common interest ownership Act kind of addresses most of what they're required to do, and I think that ... we might want to look at it from that perspective. For want of a better term, throw 'em out of the real estate license language and leave 'em under the horizontal regimes, or the common interest ownership Act. Maybe clearly define and maybe put some additional requirements on 'em .... We're just clouding the issue. I think we're getting a discussion that's not benefitting us as such." MR. JOHNSON went on to his next point. He referred to page 14, line 8 of Version H, relative to the reciprocal licensing ("A person who holds a valid active real estate license issued by a state or other jurisdiction with which the commission has negotiated a reciprocal licensing agreement shall be granted an equivalent real estate license in this state if the person applies to the commission and pays the required fees.") He noted he did not see language requiring someone coming in from another state to go through the approximately three hour course on license law relative to the state of Alaska licensing. Number 0341 MS. OAKLEY responded that there is a Section 263 immediately following, labeled "licensing by endorsement." She explained, "It does have the requirement for the three hours of license law instruction and passing the state portion of the exam. This one was added ... simply in the event that the state did sign a reciprocal agreement with any other state -- it would allow us to recognize the license from that state, but ... it also has that requirement for a reciprocal agreement to be in effect. ... The commission ... does not have any reciprocal agreements with any other states at this point." Number 0356 MR. JOHNSON then referred to page 15, lines 7,8 and 9 ("may do real estate business only through a principal office or from a branch office registered by the broker by whom the licensee is employed."). He noted he was concerned that could be interpreted to say he has to sit in an office and do business. He noted the evolvement of the "virtual office concept," and suggested that language might need to be addressed and rewritten somewhat. 0362 CHAIRMAN ROKEBERG replied that Mr. Thomas had brought the same language to his attention, referring to the examples of sales, construction and home offices. He commented, "I think, even if we were to add language that says nothing (indisc.) excludes the use of marketing offices or other (indisc.). The idea is to ... have a registered -- it has to be a registered office is the issue -- that was the problem." Number 0370 MR. JOHNSON replied his concern was the indication he had to do all of his business out of that office. Mr. Johnson additionally stated he had some concern about the discussion of Section 08.88.341, page 16, relative to personal services contract listings ("All real estate personal service contracts must be in writing and must be signed by the broker or by an authorized agent of the broker as well as by the client or an authorized agent of the client for whose benefit the real estate licensees will act. All real estate personal service contracts must have a definite expiration date that may be renewed or extended only by a written agreement signed by the client or the client's authorized agent."). MR. JOHNSON said, "One of the suggestions that is in here that -- it says 'all real estate contracts,' and I would call the attention, obviously, that 'personal service contract,' i.e. marketing listing, marketing agreement or a procurement agreement isn't a real estate contract -- because by, if I'm not mistaken, Black's Law describes real estate contracts as those documents required to transfer ownership or possession of real estate. And, well, I've been called a lot of things -- I've never been called real estate." Number 0386 CHAIRMAN ROKEBERG referred to the October 23, 1997, memorandum, and noted proposed changes. The committee has two different sets of language before it. One refers to "real estate employment contracts," the other to "listings and management agreements." He further noted that the language "personal service contracts" is no longer being considered. One of the latest suggestions of the Real Estate Commission for that language is "real estate employment contracts." Number 0390 MR. JOHNSON noted that change was acceptable to him. He emphasized his concern was the suggestion to go back to "listings and management contracts." He stated his thoughts on the listing contract and management contract concept, "As long as we keep the 'contract' word in there, we're okay, because it (indisc.) to water down the effect of it." CHAIRMAN ROKEBERG confirmed that Mr. Johnson was in favor of the change to "real estate employment contract" over "listing and management." MR. JOHNSON agreed. Number 0402 ROBERT E. BAER, Associate Broker, Totem Realty, Incorporated, came forward to testify. He stated he has been an Anchorage resident for 32 years, and involved in the banking and real estate industries for that time. He noted that he has been with Totem Realty, Incorporated, for 21 years. MR. BAER stated he had some concerns over interpretation of the recent regulation as it applies to rebates and asked for explanation. Number 0413 CHAIRMAN ROKEBERG asked if Mr. Baer was referring to the October 23, 1997, memorandum to the committee from Tamara Brandt Cook, Director of the Division of Legal and Research Services, Legislative Affairs Agency. Chairman Rokeberg further asked if Mr. Baer was concerned about the issue of the affinity, sales and relocation. Memorandum text, Tamara Brandt Cook, October 23, 1997: You have asked whether 12 AAC 64.130(4) adopted by the Real Estate Commission conflicts with AS 08.88.161(5). In my opinion it does not. AS 08.88.161(5) provides: "Unless licensed as a real estate broker, associate real estate broker, or real estate salesman, a natural person, foreign or domestic corporation, or partnership, or limited partnership, or other entity may not ... (5) assist in or direct the procuring of prospective buyers or the negotiation of a transaction which results or is calculated to result in the sale, exchange, rent, lease, auction, or purchase of real estate ..." The regulation at issue does not grant authority to pay an unlicensed person or receive compensation from an unlicensed person in connection with a real estate transaction. Rather, it is a disclosure requirement. 12 AAC 64.130(4) provides: "The following acts, in addition to those specified elsewhere in this chapter, are grounds for revocation or suspension of a license: ... (4) any payment or receipt of any rebate or compensation from any licensee or any unlicensed person, entity, or association in a real estate transaction without disclosing the specific names and amounts, in writing, to the principals of that transaction at the time that the following documents are signed: (A) the listing contract; (B) the receipt and agreement to purchase; (C) the settlement statement." The regulation makes the failure to disclose certain payments by or to persons other than the principals of a real estate transaction independent grounds for the revocation or suspension of a license regardless of wheter the payments are, themselves, permitted under the law. Obviously, the disclosure of payments could, in some circumstances, reveal a violation of AS 08.88.401(b) which is a class A misdemeanor. That subsection states: "A person (1) who is not a real estate broker licensed in this state may not accept a fee or commission for the performance of an act for which a license is required by this chapter except that a real estate broker validly licensed in another state may accept a fee or commission or a portion of a fee or a commission for assisting a real estate broker licensed in this state in the performance of an act for which a license is required by this chapter; (2) who is a real estate salesman licensed in this state may not accept a fee or commission for the performance of an act for which a license is required by this chapter unless acceptance is authorized by the broker who employs the salesman." MR. BAER agreed and stated, "I think there's been a misunderstanding on the part of members of the Real Estate Commission and, perhaps, employees of the state, and surely members of the real estate community regarding the fact that, perhaps, other fees that have not been allowed in the past may now be paid as a result of this regulation to unlicensed people." MR. BAER continued, "For example, a recent - a past member of the Real Estate Commission, and perhaps a past chairman -- I'm not sure if he was the chairman or not - was recently advertising in the paper for direct rebates to purchasers of real estate in the state of Alaska, rebates of commissions. This is a clear violation of anything that I've ever known (indisc.) to exist. We've been concerned in the past about buying people a lunch or buying them a nice gift when they buy a house, and now we have rebates, and apparently that's being allowed by the Real Estate Commission." Number 0432 CHAIRMAN ROKEBERG commented that his reading of Ms. Cook's memorandum mentioned above leads him to believe that, at this time, rebates of any kind, type or form would be prohibited by "our statute," as would affinity groups. He noted that the concept of affinity groups and relocation services is a major issue, and this should be brought to the attention of the Real Estate Commission, which can check with the attorney general's office for a corroborating opinion. Chairman Rokeberg said that doesn't alleviate the committee's concern to make sure the statute or regulations are in conformance with the best interests of the Alaskan public. Chairman Rokeberg asked Mr. Baer if he presently, or had in the past, participated with any relocation companies. Number 0456 MR. BAER answered yes to both parts of Chairman Rokeberg's question. Number 0457 CHAIRMAN ROKEBERG questioned, "Isn't it true that, in the past, they typically had taken a relatively smaller fee and now have come up some 350 percent in what (indisc.) charging the local agents ...?" Chairman Rokeberg asked for some background information. Number 0460 MR. BAER replied that was correct. He recalled a few years ago the fees may have been as low as 15 percent, rising to 25, then to 30 or 35. He said the fees are now pushing 40 percent. Mr. Baer referred to Representative Ryan's previous question regarding Coldwell Banker, stating there was no comparison at all. He noted he would be glad to explain at greater length. MR. BAER continued, "The relocation companies are really providing no service. I have built houses, or had houses built, for people in Anchorage and 15 years later they come back and ask to have the house -- to have me list the house for sale, and I list the property and a month later, I get a letter from a relocation saying, '(Indisc.) we'd like to refer Mr. So-and-so to you and ... we'd like you to market his property. ... In return for this, we expect a 35 percent commission. I basically have to do that or he doesn't get his relocation benefits. It's absolutely ludicrous, ... it's unbelievable that that can happen, and it happens all the time." MR. BAER continued, "And one of the problems, by the way, with the regulation, is that it says that the - that any referral fees have to be mentioned on the listing. A lot of these listings are listed prior to our ever knowing that (indisc.) be a referral fee, but yet we're put in a position where we can't say no because the supposed referring company or the relocation company might tell us a month later that they're going to come in and for this outgoing ARCO employee to get his benefits, we're going to have to pay 35 percent of our commission to them, or he doesn't get the benefits. And for a guy who's -- I had ... a house built for 10 or 15 years ago, and he's a good friend and a good client, wants to list his property with me, I shouldn't have to pay anyone any ... other money, any referral fees, but under the existing practices, we have to do that. They provide no service at all." 0496 CHAIRMAN ROKEBERG confirmed that Mr. Baer had received his M.B.A., had close to two decades banking experience and had a strong background in economics. He asked Mr. Baer, "Could you explain to the committee, and make a distinction, if you could, between (indisc.) relocation and the affinity group? What negative impacts that would have on the economy, number one, of Alaska and Anchorage; and also, secondarily, what impacts would it have on individual consumers if these things are allowed to continue, such as they are?" TAPE 97-67, SIDE A Number 0001 MR. BAER asked, "To get back to this rebate issue -- I am concerned that there have been advertisements running allowing rebates, and I'd like to know: Number one, what your feeling is on it; and number two, what the Real Estate Commission will do about that; and number three, is this letter from somebody in Juneau what we need as a final interpretation of the statute and the regulation?" Number 0005 CHAIRMAN ROKEBERG responded, "Well, as I mentioned before, I've asked Miss Oakley to ask the attorney general's office through her auspices to corroborate this, particularly in light of the practices (indisc.) ongoing, and I think she will give it her ... foremost attention." Number 0008 MR. BAER questioned whether that response would be in six months, or a year or two. CHAIRMAN ROKEBERG replied that the previous response had been in less than 24 hours. He further noting that Ms. Oakley needed to have the direction of the administration. CHAIRMAN ROKEBERG stated, "We intend to put it in statute, but it's important to make sure that it's going to be clear, but ... there seems to be an opportunity at hand here by the enforcement of existing statutory and regulatory scheme here to at least have a ... chilling effect on the affinity group growth potentially ... may well be here -- that's the legal opinion." Number 0016 MR. BAER stated, " You asked the -- for me to differentiate, if I may, between relocation companies and affinity groups, and I think most people here have a basic understanding of what relocation companies are, but let me give you just a brief synopsis, if I see it. Basically, it's ... a transfer company, if you will, that is contracted with large companies or small companies in Anchorage (indisc.) all over the nation, to assist outgoing employees or incoming employees in meeting their housing needs." MR. BAER continued, "Those relocation companies are basically just -- they act as almost as, I hate to say the word brokers, but maybe as - as conduits, if I may, for money that goes from ... the community to those relocation companies. They charge a fee for referring, or not referring, buyers and sellers to specific real estate agents and their companies. And for that they receive a fee and the fee, as I mentioned before, is quite large; it goes from 25 to 40 percent. That money leaves the state, it never comes back. It's gone, and that's kind of unfortunate, I think." MR. BAER stated, "I don't think there's any -- there's very, very little service provided for that fee. ... And one of the - there's several bad things with that -- bad ways in which that can occur. I think the state of Alaska, not only with the money leaving, but also with individuals. I recently had a ... buyer, who was an employee of an oil company, who was referred to me by an individual at that oil company, and three weeks later I received a nice letter from a relocation company, saying, 'We have so-and-so moving to Anchorage and we'd like to refer him to you.' Well, I already had his name and was working with him -- 'and in return for this we want a 35 percent commission.'" MR. BAER related, "So I took him on as a client because [of] my relationship with the oil company and with the person who really referred him, and once in a while - I'm sure it never happened to you, Representative Rokeberg - but once in a while, one of these buyers may buy a for sale by owner, as opposed to a listed property. And in this case, that happened to me, and I continued to want ... to service the buyer, but I couldn't very well enter into the transaction without a fee. So we talked about a fee and it ended up that if I had to pay -- we were talking. I guess I could mention specifics, but probably just to write this up, I showed him the property, to do a few things I was going to do a reduced fee somewhere in the one and a half to two and a half percent area. ... I was put in a position that I didn't want to be put in, but 35 percent of that fee was going to have to go to the relocation company ...." CHAIRMAN ROKEBERG questioned, "You're (indisc.) a fee with the - the (indisc.), the property owner who was selling it?" MR. BAER relied, "In this case, it was going to be somehow negotiated between the buyer and the seller. The fee was going to come, but I was going to have to pay 35 percent of it (indisc.) relocation company. I just decided, in my mind, that that was a - a luxury that I... just couldn't afford, because we have a lot of liability, as you know, and as Grayce [Grayce Oakley] well knows, as real estate agents." MR. BAER continued, "These relocation companies have no liability; they sign off everything. The properties are sold basically as is, and they have no liability down the road, or they don't feel that they do, so the local agent has all that liability. I cannot afford to take that kind of a liability on ... a small commission. So, in this case, unfortunately, the person that introduced this gentleman to me, the buyer himself, and well, I guess primarily those two parties were both hurt, and the fact that they didn't have professional services rendered. And the reason that they didn't was because there was a relocation company involved." MR. BAER continued, "Affinity groups, and I'll try to be brief. I guess there were some excellent descriptions of what affinity groups were and what they do a little bit earlier. If we need further elaboration on that, I can do it, but I think ..." CHAIRMAN ROKEBERG clarified, "How about the impact?" MR. BAER responded, "The impact is tremendous. If we are going to have our commissions reduced ... by 30 to 35 percent, and have that money leave the state, once again, we cannot continue to accept liability that we have in transactions. I don't think that we're going to be able to provide many of the repairs ... and some of the defense classes that ... are subsequently related to real estate transactions that have closed. There'll just be more liability, but fewer dollars to pay it. There'll be less advertising and representing sellers." MR. BAER state, "There a lot ... of reasons why I - I don't think it's right, and in addition, I guess ... my main concern, is that we're talking about rebates to unlicensed, unprofessional - in terms of real estate - companies that will really have no bearing upon the transaction. It's basically -- in New York we used to call it 'payola,' -- I don't know what they call it in Juneau or Anchorage, but it's just kind of money under the table, because it's money that's spent ... and leaves the state - it doesn't do the state or the consumer any good. And if we can -- and that, of course, is the rebate question, because these affinity groups are talking about rebating funds to buyers and sellers." Number 0072 CHAIRMAN ROKEBERG commented, "Because wouldn't the consumer think that, 'Oh, well, I can get $200 back if I go out to COSTCO and sign up for their real estate referral program -- they're actually going to sell my house and give me some money. Isn't this a wonderful thing.' I mean, so what's wrong with that?" Number 0075 MR. BAER replied that the consumer would receive some money, but the majority of those funds would go to COSTCO Wholesale, or go to whatever affinity group in question, but not to the individual. Number 0078 CHAIRMAN ROKEBERG stated, "So you're suggesting there's some economic violence, because they're really providing no services whatsoever?" Number 0080 MR. BAER strongly agreed. He mentioned that he had been schooled to understand real estate agents had to be professional, pay their fees, and pay their real estate license dollars which, he noted, are going up substantially. Mr. Baer stated real estate agents had to provide insurance, keep up with continuing education and fulfill all the other requirements. He said, "We have a lot of liability that accrues with that." MR. BAER commented he had been told yesterday that rebates were okay as long as they were disclosed, although this may have changed because it appears that regulation doesn't override the statute. He noted he thought there was a great deal of misunderstanding not only on the part of the state and the Real Estate Commission, but surely on the part of the real estate agents. Mr. Baer stated that there would be a great deal of misunderstanding if any affinity groups began operating in Alaska in the next month or two. He strongly suggested the committee add the two paragraphs in the Mississippi court decision to the existing version of HB 33. Number 0094 MS. OAKLEY added that the April issue of Alaska Real Estate News, the commission's newsletter, has an article specifically about affinity groups. The article takes a single house transaction done under four different scenarios and describes what the dollar impact would be to the buyer, the seller and the real estate agent involved in each scenario. Ms. Oakley noted it was a very clear, concise breakdown written by a reporter for the agency law quarterly. Number 0102 MR. BAER added, "Representative Ryan asked if this were not analogous to Coldwell Banker, for example, which is the case that he brought up. What we're dealing with, ... franchised real estate companies -- we're dealing with professionals who render a lot of service to their franchisees. There (indisc.) differing opinions on that, but there is a fee paid, sometimes of 3 to 6 percent ... of the commission for that association. It goes into ... national advertising, a lot of other things. So I don't think there's any comparison between - or should be any - ... it's a completely different topic, I think: franchise real estate companies versus affinity groups versus relocation companies." Number 0120 LISA HERRINGTON, Fortune Properties, Incorporated, came forward to testify on HB 33. She noted that she was representing herself and not her company. MS. HERRINGTON stated she wanted to make a comment on two issues: "1) is the condominium association, which I'm heavily involved in. I would like to see some kind of -- after dealing with these associations, many of them do not respond to the (indisc.) in a timely manner. ... You order them and ten days can go by and ... you don't have the resale certificate -- that they expect to be paid up front. And then 2) is that, right now, in order to sell a condominium, a seller is paying out at least $250 or more for having the resale certificate prepared, and transferring the name from one owner to the other. And if there's any updates or anything (indisc.) number of fees being charged. It would be nice if, in the future, that they disclosed their fees ... in their contract so that people are aware of what they're getting into - because a lot of these fees are ... coming out after the fact." CHAIRMAN ROKEBERG commented, "That's an excellent idea and I think something that may be beyond the scope of the statute, but ... that's why I think the commission, having oversight, would be able to probably get a regulation that would mandate ... either a payment only be partial till delivery and that those certificates must be delivered in a timely fashion for full payment. And with some kind of incentive, retention basis. ... Something like that really is more appropriate for regulation than statute, although we may put something ... regarding that, authorizing the commission to look at resale certificates and limited ...." MS. HERRINGTON continued, "The second loophole, Chairman Rokeberg, is that right now the buyer has to sign for the resale certificate and they have five days to review that and rescind it with no penalty at any time during the five days; but if the buyer ... is not around to accept or is not willing to accept that resale certificate, there's a loophole there as to how much time once it's prepared and ready to be delivered, that they have to accept it. ... So that's another issue, that there's a little loophole right now about acceptance -- ... the time period that the buyer has to accept the resale certificate -- because sometimes it goes on for weeks ...." CHAIRMAN ROKEBERG asked if Alaska Housing Finance Corporation (AHFC) had set these rules up. MS. OAKLEY made a reference to AS 34.08. MS. HERRINGTON continued, "We've got this five day thing where the buyers have to sign, but then there's nothing about once it's ready, how quickly are they supposed to (indisc.). They can give ... it to the selling agent, and they sit there and the buyers don't come in to (indisc.) pick it up, and then at the end they don't want to close on the transaction. And they fall under the five day thing." CHAIRMAN ROKEBERG noted it might be more appropriate to look at that situation under AS 34.08. MS. HERRINGTON continued, "And the second thing I'm here to talk about is the affinity groups and the relocation companies. ... I think the affinity groups are a spin-off to some degree of the relocation companies, because the relocation companies have gone in and worked deals with these companies ... as far as people that are relocating them. So far as, and commanding, or demanding, I should say, fees, whether or not they actually refer them to us or not. And, in most instances, ... if the customer does not go with their program, they are threatened with -- that they will not receive their benefits, which is a direct rebate." MS. HERRINGTON stated, "So I think the affinity groups have -- who are seeing what's going on in the relocation market, and so that they're coming in such as COSTCOs and saying, 'Well, we're going to give a rebate of 35 percent to anyone who buys or sells through our program. They will sign up with our executive membership, they will not have to pay the executive membership, but they will be part,' ... -- they say that they would like to be part of that membership. ... They can be part of the membership without actually paying the money until ... their due date. ... They sign up for a year, and say if you sign up September 1 and (indisc.) middle of the year you want to become part of that executive membership -- they don't have to pay that executive membership fee until their due date rolls around." MS. HERRINGTON continued, "In the meantime -- ... and the other part of their program is that once they go into a market area and sign up several, maybe two or three, real estate companies, maybe just one - they encourage that company to go out under their care program, which is called Consumer Affinity Real Estate Services, and go out and get all the companies around town to sign up with their program and get their people into the program. So that, in effect, is going around, getting all these corporations, (indisc.) businesses and so forth to come into their COSTCO program and become part of their family of services." MS. HERRINGTON continued, "Which creates a real monopoly when you're talking about real estate -- creates a real monopoly in the marketplace which I don't think, in the end, is good for the homeowner or the buying public. Because now, all of a sudden, ... if all the business is shifted into one area, I'm not so sure ... that we would even have a multiple listing service down the road -- that they could dictate prices and ... the services that people are going to get. ... Right now we provide a lot of services, but if the business is going into ... the hands of one company, they could limit their services to what the people are paying for. ... There could be a lot of repercussions from that." Number 0209 CHAIRMAN ROKEBERG recognized that Mr. Vlahovich had a comment to add. Number 0212 MR. VLAHOVICH, referring to the COSTCO Wholesale discussion, mentioned a conversation he had that morning with a gentleman in California associated with AmeriNet Financial Systems, Incorporated, which Mr. Vlahovich called the "front" for COSTCO Wholesale. He noted that this company will be handling all the real estate related business COSTCO does. MR. VLAHOVICH stated, "And the program, as he explained it to me ... is there will be no fee cutting request upon COSTCO's part (indisc.) participating realtors. There will be a 35 percent referral fee which is standard in the 'relo' [relocation] business ... and 29 percent of that will be a rebate back to the consumer. On top of it, they will rebate through AmeriNet Financial Services nine tenths of a percent of the fees for the loans that they originate and this, he said, is a concept under one-stop shopping." Number 0236 CHAIRMAN ROKEBERG interjected, "Vertical integration? They own a title company too?" MR. VLAHOVICH agreed that it was vertical integration. He added, "They have a relationship with First American and First American has negotiated to give discounted rates on title insurance and escrow." CHAIRMAN ROKEBERG commented, "Discounted rates, so ... we should call the Division of Insurance immediately." MR. VLAHOVICH continued, "The only thing they won't have is a real estate company themselves. PHH Home Equity [PHH Home Equity, Incorporated], most of the 'relo' companies, own a real estate license someplace so that they can be paid referral fees." CHAIRMAN ROKEBERG commented, "HSS (ph) ... they actually own Coldwell Banker and Century 21, don't they?" MR. VLAHOVICH added, "I mean the 'relo' firm itself owns a (indisc.) broker's license -- someplace for them to receive money. (indisc.) that's, in essence, was this morning's (indisc.) COSTCO ...." CHAIRMAN ROKEBERG replied, "That's excellent information. ... So they are active ...-- we've heard the rumors -- but they are very active in the marketplace." MR. VLAHOVICH answered, "Yes, and they are not going to be exclusive to any one company in the real estate industry .... The John L. Scott [John L. Scott Realty, Incorporated] relationship in Seattle, the Pacific Northwest, was because Lenox Scott is a personal friend of the president of COSTCO's. ... But in the rest of the United States they will pick multiple companies to represent them." CHAIRMAN ROKEBERG noted that he was familiar with the Scott (ph) brokerage in Seattle. (Indisc.) I think they're the largest residential broker in ...." Number 0249 MR. JOHNSON referred to Ms. Cook's memorandum. He stated, "On the second page it says 'A person who is not a real estate broker licensed in this state may not accept a fee or a commission for performance of an act for which a license is required,' and on and on and on. Now, this ... affinity thing, while it troubles me somewhat as well as you guys, but I'm in a littler town so ... obviously I'm not gonna get stepped on as hard, but I'm ... afraid it's a fact of life, it's a change of the way that we're doing business." MR. JOHNSON continued, "If Joe Blow up [at] the local service station gives you a referral, ... that's not an act that requires a real estate license. He's just giving you a name, he's just giving you a person that's possibly gonna be able to help you make some money. So that person is not even covered by whether or not we can pay him a fee, that's my opinion on that. The fact that ... we're focusing on activity that is required to be licensed, and I think that we're putting some of the things that are required to be licensed in the ... wrong bin." MR. JOHNSON stated, "I don't see where -- as much as I disagree with the concept of what the affinity groups are doing, I happen to be with ERA [ERA Real Estate Specialists in Kenai], ERA is (indisc.) well owned by HFS (ph), and we are getting flooded with affinity stuff. ... It's a fact of life, it's a change the way that we're -- we're ... doing business." MR. JOHNSON commented, "Take a look at the ... frequent flier miles. How many years ago did people spend most of their money with cash because it was a better way to do business? Now, you use credit cards so you can get frequent flier miles. There was a session at the national association of REALTORS in San Francisco last year where the number one economic (indisc.) said anybody that uses cash is foolish 'cause they don't get free miles for cash." MR. JOHNSON continued, "So I think we're just looking at a way that our business is changing. It's changing drastically, and it's changing extremely rapidly, and I think, rather than figure out a way to try to legislate -- to copy Mississippi, which I imagine is going to be just a goldmine for them to try to enforce that kind of law -- I would say probably closer to a restraint of trade then anything. Rather than spending our time worrying about this kind of thing, and legislating, try to - to stop the oncoming lion, we (indisc.) better look to simplifying things, simplifying our lives and requirements, so we can get on about the business of providing the kind of service that people will ... beat a path to our door to pay for ...." Number 0285 CHAIRMAN ROKEBERG thanked Mr. Johnson for bringing "that ERA additional conglomerate affiliation to my attention ...." He added, "But your opinion is the existing statute (indisc.) prohibit somebody getting a referral fee?" MR. JOHNSON answered, "I can't see where it does, because a referral is nothing more, in most cases, than, 'Hey, Joe Blow down the street said he wants to buy a house.' And I can't see where the license is required to do that and if a license isn't required to do that, I can just pay him to do all kinds of stuff." CHAIRMAN ROKEBERG stated that he wasn't reading the existing statute the same way Mr. Johnson was. Number 0291 MR. JOHNSON said, "I've seen this kind of interpretation before, and it's really clear what it says, but it's not real clear what it means." Number 0300 MR. BAER confirmed with Mr. Johnson that Mr. Johnson was a former member of the Real Estate Commission. Mr. Baer then asked Mr. Johnson, "Are you saying that you can pay the guy at the gas station ... a commission for a referral?" Number 0304 MR. JOHNSON replied, "I don't know that you can pay him a commission, but you can certainly pay him a quarter, or a $50 or a $100 bill -- if that's what you want to pay him for being kind of a bird dog." MR. BAER requested Ms. Oakley's opinion. Number 0308 MS. OAKLEY said, "With the way the regulation of 130, number four, was ... amended in 1994 and then again in ... '96 (indisc.) this year, I think that that says that it can be done as long as it's disclosed. Now, I had not seen this legal opinion prior to that time, but that was the thought that the commission had in '94 when they amended that a rebate or a referral fee was okay as long as it was disclosed." Number 0317 MR. JOHNSON agreed. Number 0318 MR. BAER referred to the "blue book" pertaining to Alaskan real estate statute. He confirmed with Ms. Oakley that the most recent copy came out in November 1995. Mr. Baer stated it was his understanding a person had to be licensed to receive a commission of any kind. He noted he had assumed a commission included any kind of payment and wanted to know if he was wrong. Number 0324 CHAIRMAN ROKEBERG stated that clear direction had been given, requesting the Real Estate Commission to seek a further legal opinion. He noted the committee would take this matter under advisement. Number 0331 JOHN LEVY, Realty Executives Alaska, came forward to testify. He stated he has been a licensee for the past eight years in Anchorage and would be speaking his individual opinion. MR. LEVY stated that he wanted to bring up a couple of other points that were overlooked in the affinity group/relocation company discussion. He noted, in some ways, these two groups were the same, and an opportunity currently exists to "close that door ...." MR. LEVY continued, "Whether they be referral payments to ... the gas station attendant down the street, or to outside organizations coming in and ... really, extorting money from agents in the community. ... I would defer it to you, Mr. Chairman, on whether that would best be done through legislation. It ... hasn't happened through regulation in the past, for whatever reason -- or through interpretation of the statute." MR. LEVY stated, "I think a couple of ... points that need to be brought up. One is that the average agent in Anchorage, I think, closes probably 12 to 18 transactions a year, which would translate to probably between 20 and 30 thousand dollars a year in commission. If a third of that had to be given up -- and of course the door is already open on some agents working with the 'relo' business, but if the door is ... opened up so that becomes area- wide, commissions start dropping. Many agents will get out of the profession, it'll be harder for those that are in the profession to provide the service to the consumer, and, as ... Ms. Herrington stated earlier, you'll have more and more of the business concentrated in just a few hands, which, I think, is ... very damaging, ultimately, to the consumer, both in their ability to choose representation, as well as the quality of representation which they'll ... be able to choose." MR. LEVY commented, "Secondly, I think there's some discussion about the impact it will have on local financing, particularly with these affinity groups that -- if that's considered a seller concession under Alaska Housing regulations, it may in a fact reduce the amount of the loan on some of those -- and I think that needs to be investigated thoroughly as well." MR. LEVY noted, "I just wanted to not only reiterate those comments, and the concern, not only that previous speakers have talked about money going out of the state, but what I've seen, when I've worked both sides ... of both 'relo' deals. And where I think it's detrimental to the consumer, is you have outside companies, say in Texas, dictating how we do a transaction on a property in Anchorage, that are totally unfamiliar with local conditions. They don't know about building types, they don't know about 'sump' pumps, water conditions and other things, and yet they're negotiating contracts and dictating ... what the agents have to do and, as previous speakers have said, there's no liability in those transactions for them." MR. LEVY stated, "So if you have an opportunity now, before the ... barn doors open -- and we already see some of these groups coming up, I think it would be an excellent opportunity ... for this state to set an example and ultimately (indisc.) the consumers." Number 0380 BETH SIMPSON, Associate Broker, Dynamic Properties, came forward to testify. She noted she was speaking from her individual opinion. MS. SIMPSON stated that she had owned a small company for about eight years before she joined Dynamic Properties. She told the committee it had cost her 40 to 50 percent of her gross income to operate her company. She commented that she thought the percentages probably weren't much different for large companies in Anchorage today, noting the costs of advertising and so forth. MS. SIMPSON stated, "I think any agents, ... any brokerages at this time that are really considering doing affinity business are being very short-sighted -- looking, possibly, at the greed of having the bulk of the business in the community centered in their one company. I think that if those companies today, whose brokers are going after this kind of business aggressively, and looking forward to it, are not going to be really thrilled when it ends up in one company." MS. SIMPSON continued, "I think that if it's costing them 40 to 50 percent to do business now, and that business all gets located in one, two or three companies here locally, we're going to see a tremendous number of agents decline -- the number of agents, as well as the number of brokerages close within the next two to three years. I think that we won't see real estate at all as we know it today in three to five years." MS. SIMPSON said, "I think that, when it comes to these 'relo' companies, that the real estate agents themselves, with the fees being paid out of their pockets, and what are being used to fund the benefits that the 'relo' companies and their corporate transferees are promoting to those employees -- and I really would like to see that Mississippi law, which was upheld at the federal court level, incorporated in Alaska. And if it doesn't happen, I think that you'll see 1800 people become commercial real estate agents rather than residential real estate agents." Number 0412 CHAIRMAN ROKEBERG commented, "This goes to everybody in the ... real estate community. ... They could be helpful to the committee and their own cause if they can help define the arguments for the economic and consumer protection, or public protection benefits on both sides of this issue. ... We'd be most interested in having some ... further written testimony on this issue in the next couple of months." Number 0419 CHAIRMAN ROKEBERG closed public hearing on HB 33. As part of the adjournment, he noted that he wanted to bring up a couple of issues with Ms. Oakley of the Real Estate Commission. There was some discussion regarding Ms. Oakley's title of "executive administrator" which is specified in statute as "executive secretary." Number 0430 CHAIRMAN ROKEBERG stated that he had received many comments directly from people concerned about the new course notification change, from 30 to 90 days, in regulation. MS. OAKLEY responded that there had been no notification requirement previous to the 90-day rule. CHAIRMAN ROKEBERG asked, "Didn't they have to have approval though ...?" MS. OAKLEY replied courses had to be approved but no reporting of when those courses would be offered had been required. She noted the Real Estate Commission received many questions about available courses but did not have that information. She commented that 60 days had been proposed in regulation but the commission adopted a 90-day rule; she did not have an explanation for this change. Ms. Oakley noted having the course information allows the commission to act as a "clearinghouse" for related calls and inquiries. CHAIRMAN ROKEBERG stated he has heard there can be instances when nationally known and well-qualified "instructor-speakers" may come to the community without enough notice for the commission or a designee to give approval with the 90-day requirement. MS. OAKLEY said she was not sure that was a valid argument, noting that such instructors' schedules are "pretty much set a year or so in advance ...." CHAIRMAN ROKEBERG replied that the 90-day period seemed rather long. He commented the Real Estate Commission itself met on a 90- day cycle. He asked if the commission could designate someone like the executive administrator to approve courses. MS. OAKLEY responded that was not currently possible, but could be done if HB 33 passes. Right now course approval has to go to the full commission. She noted that the 90-day requirement was for courses offered to licensees statewide and said if a large company brought in an instructor to provide a course for the company's licensees, then the notice requirement would not apply. Ms. Oakley stated the intent of the requirement was to give the commission that course information so they could answer questions. The commission, she said, is working toward having the course information available on the Internet. She said the list of required courses is already available. In conclusion, she felt the issue was more appropriately addressed by regulation, not statute. CHAIRMAN ROKEBERG noted he tended to agree, but had been hearing complaints about the commission's action from the public. Number 0496 CHAIRMAN ROKEBERG asked Ms. Oakley if it was allowable, under Alaskan law, for an individual to put himself out as a buyer's agent but then collect money from the listing side for the seller. MS. OAKLEY stated this was legal under the existing statute but the statute says that, if the buyer's agent is going to be compensated by some party other than the person the buyer's agent is representing, this intent must be disclosed up front. CHAIRMAN ROKEBERG replied, "That's the strangest thing about that ... because that turns them into either a dual agent or the agent of the seller, then, if he's compensated by the seller." MS. OAKLEY noted it is money that is coming out of the transaction. CHAIRMAN ROKEBERG commented that was the whole problem, stating the "courts have muddled this issue up because of these things ...." He noted that his position was, "How can a buyer's agent be the buyer's agent and be compensated by anybody else but the buyer? ... The Chair's considering making that the law of the state." MS. OAKLEY comment that both she and Chairman Rokeberg went back far enough as licensees to remember when that was very specifically the case, "that if you were representing a buyer, you were paid by the buyer, no question about it ...." CHAIRMAN ROKEBERG added, "In the commercial aspect too, if you put yourself out as a tenant's rep, unless you - you did disclose to them, then you'd have to be compensated. (Indisc.) commercial guys go in and negotiate a reduced commission just to offset that." MS. OAKLEY continued, "And that's the way I first handled buyer representation, as well. ... There are a number of court cases that have evolved over the years that say that who is paying does not determine the agency." CHAIRMAN ROKEBERG responded that there has been the growth in Alaska of several "buyer-brokers agencies and businesses," and to him, these businesses are not following the "real basics of the common law." CHAIRMAN ROKEBERG indicated HB 33 would be held for further consideration.
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