Legislature(2003 - 2004)

02/04/2004 03:20 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 29-REAL PROPERTY TRANSACTIONS/LICENSEES                                                                                    
                                                                                                                                
Number 0058                                                                                                                     
                                                                                                                                
CHAIR ANDERSON  announced that the  only order of  business would                                                               
be SPONSOR SUBSTITUTE FOR HOUSE BILL  NO. 29, "An Act relating to                                                               
real  estate   licensees  and   real  estate   transactions;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
The committee took an at-ease from 3:21 p.m. to 3:22 p.m.                                                                       
                                                                                                                                
Number 0110                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG, sponsor, told  members SSHB 29 addresses                                                               
one section of  the real estate statute that has  been in dispute                                                               
and legal  disarray for  years.  He  said testimony  will outline                                                               
the  history and  background  of the  so-called  "law of  agency"                                                               
within the  real estate licensing  statute.  He pointed  out that                                                               
about six  years ago he  rewrote the  entire real estate  law and                                                               
even changed the  word "agent" to "licensee",  with the exception                                                               
of  this  one  provision,  the so-called  "396  section"  of  the                                                               
statute.                                                                                                                        
                                                                                                                                
REPRESENTATIVE   ROKEBERG  explained   that   this   bill  is   a                                                               
culmination of  eight years  of work  by the  people in  the real                                                               
estate  industry to  come  to grips  with  1992 legislation  that                                                               
implemented  the concept  of agency  representation for  both the                                                               
buyer and  seller and  refers to  "dual agency."   Representative                                                               
Rokeberg  said this  phenomenon of  the law  came about  in large                                                               
part  due to  the legal  community's  application of  the law  of                                                               
agency  in transactions  and activities  related to  real estate.                                                               
However,  he   said,  he  believes   the  application   of  these                                                               
principles has  been misapplied;  because of the  growth, change,                                                               
and dynamics  of the history  of the  application of the  law, it                                                               
has created a great deal of confusion on the part of the public.                                                                
                                                                                                                                
REPRESENTATIVE ROKEBERG  pointed out  that the  fundamental issue                                                               
is who  represents whom in a  real estate transaction.   Does the                                                               
licensee represent  the buyer or the  seller, or how and  in what                                                               
instances do  the responsibilities and duties  of that particular                                                               
licensee rest with the buyer,  seller, or broker in a transaction                                                               
in which there may be multiple levels of representation?                                                                        
                                                                                                                                
Number 0342                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  said last  year the legislature  took up                                                               
what he calls a "Band-Aid" bill:   it merely put a small patch on                                                               
the  [problem]  because  the  task   force  was  working  on  the                                                               
regulatory  and  statutory  fronts  in  an  effort  to  reach  an                                                               
agreement on a  new statute.  He said he  thinks the [task force]                                                               
did a good  job and made significant compromises  within the real                                                               
estate community.                                                                                                               
                                                                                                                                
REPRESENTATIVE ROKEBERG emphasized  that he is proud  to say this                                                               
bill represents a huge stride  forward for consumer protection in                                                               
Alaska.   The  legislature strives  to find  the balance  between                                                               
protecting the public and encouraging  commerce within the state,                                                               
he asserted.   He  noted that  he'll ask  that two  amendments be                                                               
considered later, but  requested that the details of  the bill be                                                               
reviewed by Ms. McConnochie.                                                                                                    
                                                                                                                                
Number 0429                                                                                                                     
                                                                                                                                
REPRESENTATIVE LYNN disclosed  that he is a  licensed real estate                                                               
broker with a company in Anchorage.                                                                                             
                                                                                                                                
REPRESENTATIVE  ROKEBERG noted  that  he is  also  a real  estate                                                               
broker.                                                                                                                         
                                                                                                                                
Number 0452                                                                                                                     
                                                                                                                                
PEGGY  ANN   McCONNOCHIE,  Representative,  Agency   Task  Force,                                                               
Legislative Committee, Alaska  Association of Realtors, testified                                                               
in support  of SSHB 29.   She said the association  believes this                                                               
is a huge  step forward in consumer protection;  the industry has                                                               
wanted  to address  [these issues]  for  a long  time and  thanks                                                               
Representative  Rokeberg  for  his   efforts.    Ms.  McConnochie                                                               
explained that  the real  estate industry  deals with  people who                                                               
have  never purchased  property  before, and  is responsible  for                                                               
helping  them; it  is important  to make  it the  best experience                                                               
possible.   She said  the [Alaska  Association of  Realtors] also                                                               
wants to help those individuals  in the investment area to ensure                                                               
that it is  understood what [realtors'] rights and  duties are to                                                               
them and what investors can expect from [realtors].                                                                             
                                                                                                                                
MS. McCONNOCHIE  provided background  information, saying  in the                                                               
past  the  agent  always  worked  for  the  seller;  it  was  not                                                               
necessarily what  a person [purchasing real  estate] believed was                                                               
true, however.   Many individuals  assumed, because an  agent was                                                               
[helping them]  to buy  property, that the  agent worked  for the                                                               
buyer.    She  told  the  committee that  the  first  agency  law                                                               
provided that a  seller could have an agent work  for him or her.                                                               
If a  buyer had  a realtor  who worked  for another  company, the                                                               
buyer's  agent  worked  for  him  or her.    However,  a  problem                                                               
occurred  when the  buyers  and sellers  used  agents who  worked                                                               
within  the  same  office.     She  stressed  the  importance  of                                                               
[correcting this problem].                                                                                                      
                                                                                                                                
MS. McCONNOCHIE  noted that the National  Association of Realtors                                                               
- a trade  organization with almost a million  members across the                                                               
U.S. and  the world  - did  a couple  of surveys.   In  1990, the                                                               
first survey asked people who'd  used an agent to either buy/sell                                                               
or  rent/lease the  following question:   Whom  do you  think the                                                               
agent represented?   In 75  percent of the responses,  the people                                                               
believed they were being represented.   At that time, the concept                                                               
of buyers' agents  didn't exist.  The results of  this survey was                                                               
surprising, she said.                                                                                                           
                                                                                                                                
Number 0638                                                                                                                     
                                                                                                                                
MS. McCONNOCHIE reported that a  [legal case] in Honolulu woke up                                                               
everyone.    In this  particular  case,  a  seller was  sued  for                                                               
something  that an  agent  with another  company  said about  the                                                               
property.   The agent worked  for the seller,  but was a  part of                                                               
another  firm.   This kind  of [situation]  is called  "vicarious                                                               
liability,"  she added.    This lawsuit  really  put realtors  on                                                               
notice that it was necessary to  change the law to protect buyers                                                               
and  sellers  from  misdeeds by  agents  and,  likewise,  protect                                                               
agents from misdeeds by buyers and sellers.                                                                                     
                                                                                                                                
MS.  McCONNOCHIE  noted that  a  Federal  Trade Commission  (FTC)                                                               
study showed  the same  results:  in  too many  instances, people                                                               
believed the [real estate] agent was  working for them.  She said                                                               
there  was  a  landslide  of agency  legislation  throughout  the                                                               
United States.   Ms. McConnochie  said, thanks  to Representative                                                               
Rokeberg's  efforts, Alaska  was  the 13th  state  to get  agency                                                               
legislation passed.                                                                                                             
                                                                                                                                
Number 0728                                                                                                                     
                                                                                                                                
MS. McCONNOCHIE  reported that after the  legislation passed, the                                                               
Alaska  Association  of  Realtors recognized  that  more  changes                                                               
would be  necessary, so  the Agency Task  Force began  looking at                                                               
how others  were dealing with  the concept of agency;  there were                                                               
divergent issues  and no agreement  on what  should be done.   In                                                               
the  summer of  2003,  the  task force  began  to  work with  the                                                               
association members  from all over  Alaska to come  to agreement.                                                               
The task force looked at  what Washington, Montana, Nebraska, and                                                               
Colorado were doing.  Some  states had gone through three changes                                                               
in  agency laws,  and  one  question looked  at  was whether  the                                                               
changes actually helped consumers.   The task force believes that                                                               
any change made must protect the public, she noted.                                                                             
                                                                                                                                
Number 0999                                                                                                                     
                                                                                                                                
MS. McCONNOCHIE  told the  members no  change in  the legislation                                                               
will help  without educating the  public and licensees,  which is                                                               
why [January 1,  2005] is the effective date  of the legislation.                                                               
The Alaska  Association of Realtors' members  are volunteering to                                                               
work  with the  Alaska Real  Estate Commission  [to educate]  the                                                               
public on how the law will  change.  There is a massive education                                                               
component to this bill, she said.   Another component is that the                                                               
[Alaska  Real Estate  Commission]  will be  directed  to put  the                                                               
statutes and  regulations into a  pamphlet that will be  given to                                                               
people before an individual enters  into any sort of relationship                                                               
with a real estate professional, she explained.                                                                                 
                                                                                                                                
MS. McCONNOCHIE said the Alaska  Association of Realtors believes                                                               
that in  order for them to  work in an honest  and forthright way                                                               
in the  business, it  is important to  do everything  possible to                                                               
protect the consumer.  She said  this bill will help redesign the                                                               
industry and will serve the  buying, selling, and leasing public.                                                               
Ms. McConnochie urged members to support it.                                                                                    
                                                                                                                                
Number 1092                                                                                                                     
                                                                                                                                
REPRESENTATIVE GATTO  commented that it  is a "flag" to  him when                                                               
he hears  that one agency,  with different agents,  can represent                                                               
both the  buyer and the seller.   This sounds very  much like the                                                               
old  way  of doing  things.    He shared  that  he  has had  some                                                               
experience with  that sort  of situation  and believes  it should                                                               
not  have occurred.   He  said he  is concerned  that the  agency                                                               
would  receive the  commission,  but both  the  buyer and  seller                                                               
would not  be equally represented.   He asked Ms.  McConnochie if                                                               
that is a concern of the association.                                                                                           
                                                                                                                                
Number 1156                                                                                                                     
                                                                                                                                
MS. McCONNOCHIE  responded that there  is an issue  of designated                                                               
agencies.   The way the law  stands today, two agents  within the                                                               
same office cannot have one  agent representing the buyer and one                                                               
representing  the seller,  she said;  by law,  both agents  would                                                               
represent the  seller.  She explained  that if one of  the agents                                                               
was dealing  with the buyer  under a buyer-agency format  and one                                                               
agent was the listing agent, then  it would be necessary to enter                                                               
into a dual-agency situation.                                                                                                   
                                                                                                                                
MS.  McCONNOCHIE said  realtors  find this  reprehensible.   This                                                               
bill  has done  what other  states such  as Montana,  Washington,                                                               
Nevada, and Colorado have done, which  is to split it and call it                                                               
"designated agency."   It is the broker's  responsibility to have                                                               
on file how to deal with  a designated agency, because in essence                                                               
the broker  will be  supervising one agent  who works  solely for                                                               
the buyer  and one  agent who  works solely  for the  seller, she                                                               
explained.   The broker  will be the  neutral licensee  to ensure                                                               
the agents are doing the best job possible for both clients.                                                                    
                                                                                                                                
MS.  McCONNOCHIE further  explained  that each  broker must  have                                                               
rules and regulations in its  policy and procedures manual, which                                                               
is available to  the public and states how it  will deal with the                                                               
protection  of the  client's interest.   The  Alaska Real  Estate                                                               
Commission   will  have   to  put   together  sample   rules  and                                                               
procedures, and  the Alaska Association  of Realtors is  ready to                                                               
provide some sample pages.   Noting that this bill replaces "dual                                                               
agency" with  "neutral licensee", she  said when one  agent deals                                                               
with both the buyer and the  seller, there is a written procedure                                                               
detailing what the agent can and cannot do.                                                                                     
                                                                                                                                
Number 1338                                                                                                                     
                                                                                                                                
REPRESENTATIVE GATTO pointed  out there is a great  deal of small                                                               
print that he believes consumers  don't read.  Usually a consumer                                                               
is told  in a  brief summary  what each page  covers and  is then                                                               
asked to sign on  pages 4 and 9, for example.   Thus the consumer                                                               
won't know what is covered, and  the agent will know the consumer                                                               
doesn't know because he/she just signed  it and handed it back to                                                               
the  agent.   Only  the  agent  will  know  what the  rules  are.                                                               
Representative  Gatto asked  how there  could be  assurances that                                                               
clients  know what  the  rules  are, and  whether  there will  be                                                               
classes, for example.                                                                                                           
                                                                                                                                
MS. McCONNOCHIE  responded that  Representative Gatto's  point is                                                               
the primary  reason why  education is so  important.   The Alaska                                                               
Association  of   Realtors  is   very  excited   about  educating                                                               
licensees, she said, noting that  she'll be one of the educators.                                                               
One  problem  in  Alaska  is that  real  estate  offices  provide                                                               
clients  with a  different form.   With  this bill,  every office                                                               
will provide the exact same form to clients.                                                                                    
                                                                                                                                
Number 1509                                                                                                                     
                                                                                                                                
REPRESENTATIVE GUTTENBERG  told members "flags" go  up when there                                                               
are two  agents in the  same agency,  with a neutral  third party                                                               
overseeing the  agents.   He pointed  out that  there is  a clear                                                               
economic interest involved  and said he sees  a different outcome                                                               
in that case.   He recalled that Representative  Rokeberg and Ms.                                                               
McConnochie had referred to compromises  within the industry, and                                                               
asked  if   there  were  consumer  groups   represented  in  this                                                               
deliberation.                                                                                                                   
                                                                                                                                
Number 1550                                                                                                                     
                                                                                                                                
MS.  McCONNOCHIE  responded  that   [the  Alaska  Association  of                                                               
Realtors] is a consumer advocate.   Realtors dealing closely with                                                               
customers and clients must look  after them.  She emphasized that                                                               
the association puts aside what  is easiest for [the industry] in                                                               
an  effort to  protect consumers.    This bill  will define  what                                                               
broker supervision is, especially in the designated-agency case.                                                                
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  offered  his understanding  that  Ms.                                                               
McConnochie was  saying no outside [industry]  consumer advocates                                                               
were involved [in developing this bill].                                                                                        
                                                                                                                                
MS.  McCONNOCHIE replied  that  Representative  Rokeberg and  his                                                               
staff  were  involved.   Comments  from  the  staff who  are  not                                                               
steeped  in  the  world  of   the  real  estate  [industry]  were                                                               
refreshing, she remarked.   She added that  the consumer advocate                                                               
was Representative Rokeberg.                                                                                                    
                                                                                                                                
REPRESENTATIVE  ROKEBERG asked  Ms. McConnochie  to comment  with                                                               
respect  to the  dissent from  various factions  within the  real                                                               
estate industry.   He  said the bill  defaults to  the consumer's                                                               
side, rather than  the industry's side, almost  universally.  The                                                               
central issue is at what point  in the transaction this law would                                                               
"kick in."   He explained that the bill adopts  the same consumer                                                               
principles that  are in  the current law,  which he  believes are                                                               
consumer-oriented.                                                                                                              
                                                                                                                                
REPRESENTATIVE ROKEBERG said he believes  the law should not kick                                                               
in until there is a contract  involved, not just when an agent is                                                               
showing property.   However, the  industry chose to come  down on                                                               
the side  of the consumer  and left the  [time the law]  would be                                                               
applicable  at the  point of  assistance.   Saying this  industry                                                               
advocates for the  public every day, he  challenged the committee                                                               
to find  any other  commodity or property  to purchase  where two                                                               
different people represent  a buyer.  He said  the entire purpose                                                               
of the  bill is to  protect consumers from conflicts  of interest                                                               
or ensure their interests are  properly represented.  In response                                                               
to Representative  Guttenberg's question,  he said there  were no                                                               
[outside  consumer advocacy  groups  included in  the process  of                                                               
developing this bill].                                                                                                          
                                                                                                                                
Number 1876                                                                                                                     
                                                                                                                                
MARK  KORTING,  Broker,  RE/MAX Properties  of  Anchorage,  Inc.,                                                               
testified in support of SSHB  29, specifying that he supports the                                                               
position of the Alaska Association of Realtors on the bill.                                                                     
                                                                                                                                
Number 1897                                                                                                                     
                                                                                                                                
PERRY UNDERWOOD,  President and Broker, Coldwell  Banker Fortune,                                                               
testified in support  of SSHB 29.  He told  the members he served                                                               
on the  task force  Ms. McConnochie referred  to.   Mr. Underwood                                                               
acknowledged  that  each  of  the "red  flags"  the  members  had                                                               
mentioned is  legitimate; however,  the current law  does nothing                                                               
but promote  these red flags and  continues to be a  bad deal for                                                               
consumers.                                                                                                                      
                                                                                                                                
MR. UNDERWOOD  summarized five main  points of the bill.   First,                                                               
it requires a  thorough disclosure by the licensees.   Second, it                                                               
eliminates the implied requirement that  the licensee must act as                                                               
an  agent  for  the  consumer while  permitting  the  traditional                                                               
agent/client  relationship   if  the  parties  so   choose.    He                                                               
commented  that  this  bill  gives  the  consumer  more  choices.                                                               
Third, it  eliminates dual  agency and  the problems  inherent in                                                               
dual  agencies, and  yet it  allows  agencies to  sell their  own                                                               
listings.                                                                                                                       
                                                                                                                                
MR. UNDERWOOD  continued, saying the  fourth thing the  bill does                                                               
is  move the  relationship  with  the consumer  to  the level  of                                                               
licensee  actually representing  the consumer,  rather than  with                                                               
the relationship  being with  the broker, who  may never  meet or                                                               
have any conversation with the  consumer.  Yet the bill maintains                                                               
brokers' requirement of supervision.   Fifth, it grants consumers                                                               
protection  from  vicarious  liability that  the  consumer  would                                                               
normally assume in a traditional  client-agent relationship.  Mr.                                                               
Underwood urged members  to support this bill because  it will be                                                               
great for the consumers of Alaska.                                                                                              
                                                                                                                                
Number 1990                                                                                                                     
                                                                                                                                
REPRESENTATIVE  LYNN  asked  if  there  has  been  work  done  on                                                               
defining  a "dual  agency"; he  expressed concern  about how  the                                                               
courts might interpret this term.                                                                                               
                                                                                                                                
REPRESENTATIVE  ROKEBERG  responded  that  this  bill  terminates                                                               
common  law agency  and codifies  the definitions.   He  said the                                                               
legislature is within its [authority to do that].                                                                               
                                                                                                                                
Number 2042                                                                                                                     
                                                                                                                                
AUDREY   FOLDOE,  Representative,   Agency  Task   Force,  Alaska                                                               
Association of  Realtors, testified in  support of SSHB 29.   She                                                               
told the  members that she was  first licensed in Alaska  in 1976                                                               
and since  that time has  continuously supported  herself through                                                               
the sale  of real estate.   She managed  the firm she  worked for                                                               
from 1980 to 1990, when she  purchased it.  During that time, she                                                               
managed up to  20 agents at one  time, she added.   At that time,                                                               
the agents were representing the  seller, when most of the buyers                                                               
thought the agents were representing them.                                                                                      
                                                                                                                                
MS.  FOLDOE said  she  has  served 8  years  on  the Real  Estate                                                               
Commission  and 13  years on  the Fairbanks  North Star  Borough.                                                               
She  said  she doesn't  believe  this  bill  answers all  of  the                                                               
problems the  [real estate  industry] has, but  believes it  is a                                                               
big move  forward.  The majority  of buyers and sellers  are much                                                               
better informed than [consumers] were  a few years ago, she said.                                                               
Ms. Foldoe  suggested "specific assistance"  is the  most awkward                                                               
area because the agent must begin  to tell the consumer whom they                                                               
are working  for at  the time  of the  specific assistance.   She                                                               
said  it isn't  defined in  the present  law; however,  with this                                                               
bill it would be clearly defined.                                                                                               
                                                                                                                                
Number 2170                                                                                                                     
                                                                                                                                
STEVE   CLEARY,  Executive   Director,  Alaska   Public  Interest                                                               
Research  Group  (AkPIRG),  testified  on SSHB  29,  noting  that                                                               
AkPIRG  is the  oldest consumer  advocacy  group in  Alaska.   He                                                               
explained that  he came to  the meeting  to testify on  the other                                                               
bill, but has  been taking notes and educating  himself, since he                                                               
just purchased his first home in October.                                                                                       
                                                                                                                                
MR. CLEARY reminded  the members that AkPIRG opposed  HB 257 last                                                               
year,  which was  the beginning  of  changes that  Representative                                                               
Rokeberg brought before the committee today  in SSHB 29.  He said                                                               
he  shares the  concerns expressed  by Representatives  Gatto and                                                               
Guttenberg with respect to the dual  agency issue.  There is also                                                               
concern  that   this  bill   may  decrease   confidentiality  and                                                               
accountability that  licensees are  providing for consumers.   He                                                               
commented   that  he   also  has   concerns  about   the  neutral                                                               
facilitator  and  how  that  neutrality  is  guaranteed  for  the                                                               
consumer; he said his concern  may be because he isn't completely                                                               
versed on the issues.                                                                                                           
                                                                                                                                
REPRESENTATIVE ROKEBERG  replied that he'll work  with Mr. Cleary                                                               
to  ensure  that  he  has  a clear  understanding  of  what  this                                                               
legislation does.   He said this  is an enormous step  forward in                                                               
consumer protection.  It is  his objective to have AkPIRG endorse                                                               
this  bill, he  explained.   He emphasized  that this  bill would                                                               
eliminate dual  agency issues and  some associated problems.   It                                                               
will provide a code of  conduct [to ensure] that the expectations                                                               
and legal  requirements for  both the  consumer and  the licensee                                                               
are set forth in statute, he explained.                                                                                         
                                                                                                                                
Number 2312                                                                                                                     
                                                                                                                                
LINDA  GARRISON, Broker,  No. 1  Buyer's Agency,  said there  has                                                               
been more  discussion about  consumer protection  in one  hour of                                                               
testimony on  this bill than  in the  entire process for  HB 257.                                                               
Agreeing that SSHB 29 continues  what HB 257 started [last year],                                                               
she  said  Representative  Gatto's question  concerning  consumer                                                               
feedback is an important one.  She cited a recent example.                                                                      
                                                                                                                                
TAPE 04-9, SIDE B                                                                                                             
Number 2361                                                                                                                     
                                                                                                                                
MS. GARRISON  said current law has  worked well for decades.   If                                                               
the common  law of "agency"  is eliminated, there no  longer will                                                               
be  clients, because  with  clients there  is  a fiduciary  duty.                                                               
This  bill  abrogates  common law  and  basically  eliminates  an                                                               
agent's   or  licensee's   fiduciary  duty,   such  as   loyalty,                                                               
accountability, and obedience.   She said she  feels the consumer                                                               
deserves better.                                                                                                                
                                                                                                                                
MS.  GARRISON  shared  her belief  that  "designated  agency"  is                                                               
nothing  more than  an  undisclosed dual  agency.   Referring  to                                                               
Representative Gatto's  mention of  the conflict there,  she said                                                               
those  conflicts  exist.     For  example,  where   there  is  an                                                               
experienced agent  [on one side]  and an inexperienced  agent [on                                                               
the other], she  asked how that benefits the consumer.   She also                                                               
questioned how the records would be kept confidential.                                                                          
                                                                                                                                
MS. GARRISON suggested "designated  agency" is just a smokescreen                                                               
for dual agency.  She said  she has a hard time understanding how                                                               
a neutral licensee  relationship can exist.   The sellers deserve                                                               
representation, she  said, as do  the buyers.  Ms.  Garrison went                                                               
on to say  she doesn't see a  need for a pamphlet.   She reported                                                               
that she'd given a copy of SSHB  29 to her clients and that there                                                               
were a  lot of negative comments.   She urged members  to look at                                                               
this legislation very  closely.  On another  issue, she suggested                                                               
that   additional  education   requirements  be   implemented  to                                                               
increased  to 200  hours [of  education] before  taking the  real                                                               
estate license examination.                                                                                                     
                                                                                                                                
Number 2246                                                                                                                     
                                                                                                                                
DAVID GARRISON,  No. 1  Buyer's Agency,  testified in  support of                                                               
SSHB  29.    He  pointed  out that  there  is  such  a  transient                                                               
population, many of whom are  familiar with the "agency" concept,                                                               
that it does not  [make sense] to change all the  rules.  He told                                                               
the  members he  supports the  idea  of providing  a booklet  [to                                                               
clients] which describes a buyer's  agent and seller's agent [and                                                               
the  rules  that apply].    Mr.  Garrison  said he  believes  the                                                               
neutral-facilitator  idea is  nothing  more  than "dual  agency."                                                               
"Specific assistance" is being defined  in the new regulations by                                                               
the Alaska Real  Estate Commission, he said, and thus  he sees no                                                               
need to  address that [in  the bill].   On Tuesday, he  noted, he                                                               
brought SSHB  29 to  the attention of  the Alaska  Association of                                                               
Independent Brokers, who were unaware of it.                                                                                    
                                                                                                                                
CHAIR ANDERSON replied  that this bill was scheduled  a week ago.                                                               
He  told Mr.  Garrison  he  can view  all  scheduled hearings  on                                                               
legislation on BASIS [via the Internet].                                                                                        
                                                                                                                                
MR.  GARRISON,  in response  to  a  question from  Representative                                                               
Rokeberg, explained  that the  Alaska Association  of Independent                                                               
Brokers has  been meeting at  Denny's every Tuesday for  the last                                                               
20 years.   These are brokers who aren't members  of large firms.                                                               
He invited Representative Rokeberg to join them any Tuesday.                                                                    
                                                                                                                                
Number 2134                                                                                                                     
                                                                                                                                
CHRIS  STEPHENS, Associate  Broker;  Bond,  Stephens, &  Johnson,                                                               
testified in  support of Amendment  1 [text provided later].   He                                                               
said it provides for non-signature  requirements of disclosure by                                                               
businesses with  sales of  over $2  million in  net worth  in the                                                               
previous  year.    This  is  a  recognition  of  the  reality  of                                                               
commercial  real estate  in trying  to get  acknowledgements from                                                               
organizations that are sometimes just about impossible, he said.                                                                
                                                                                                                                
MR. STEPHENS  said some organizations find  it equally difficult,                                                               
but don't happen  to be publicly traded.  He  noted that he'd sat                                                               
on the committee that worked on  this bill and was impressed with                                                               
the tremendous  amount of cooperation  and work to bring  forth a                                                               
bill  that tried  to  recognize  all the  elements  of the  [real                                                               
estate] industry.   Mr. Stephens said his  company specializes in                                                               
commercial real estate, which is  very different from residential                                                               
real  estate,  so  there  was  an  effort  to  accommodate  [that                                                               
difference] as  best as possible.   He added  that Representative                                                               
Rokeberg's amendment  is a  small change in  the [language].   In                                                               
response to a question from  Chair Anderson, Mr. Stephens said he                                                               
supports the  bill with or  without Amendment 1, but  believes it                                                               
would be much better with it.                                                                                                   
                                                                                                                                
Number 2025                                                                                                                     
                                                                                                                                
KIRK  WICKERSHAM, Owner,  For Sale  By Owner  Assistance Program,                                                               
Inc., read the following into the record:                                                                                       
                                                                                                                                
     This   bill  deals   with  the   legal  and   practical                                                                    
     relationship  between  real  estate licensees  and  the                                                                    
     consuming  public, between  real  estate licensees  and                                                                    
     their clients,  and between each  other.   It abolishes                                                                    
     the  common law  of agency  as applied  to real  estate                                                                    
     licensees  and their  clients, and  replaces it  with a                                                                    
     term called "representation."                                                                                              
                                                                                                                                
MR.  WICKERSHAM  said representation  handles  90  percent to  95                                                               
percent of  the comments made  by Ms.  Garrison.  He  opined that                                                               
the  bill   will  improve  relationships  between   the  licensed                                                               
professionals and the public in  what is normally the largest and                                                               
most significant transaction in someone's  life - the purchase of                                                               
a home.                                                                                                                         
                                                                                                                                
MR. WICKERSHAM  noted that  he is a  lawyer, real  estate broker,                                                               
and former  chairman of  the Alaska  Real Estate  Commission, and                                                               
served on the  task force [that developed this  legislation].  He                                                               
said  his company  is a  licensed real  estate firm,  but doesn't                                                               
have agents,  so he  has no  dog in  this fight.   Saying  he was                                                               
testifying as a person who has devoted  a lot of time in the last                                                               
two  years  working on  this  issue,  he  continued to  read  the                                                               
following testimony:                                                                                                            
                                                                                                                                
     In the  early 1980s,  a series  of state  supreme court                                                                    
     cases [were  heard in  which] ...  a real  estate agent                                                                    
     owed his or her client  fiduciary duties similar to the                                                                    
     duties  a   lawyer  owed  a  client   in  a  litigation                                                                    
     situation -  or similar  to the  duties an  attorney in                                                                    
     fact  owes  to  his  or   her  principal.    The  legal                                                                    
     structure   of   a    real   estate   transaction   was                                                                    
     adversarial.                                                                                                               
                                                                                                                                
     At that time, all  agents, including those working with                                                                    
     the buyer, were  legally working for the  seller.  This                                                                    
     created a  huge clash  between perception  and reality,                                                                    
     and  Alaska,  along  with  the  rest  of  the  country,                                                                    
     discovered  that  the  consuming  public  expected  and                                                                    
     demanded  that  the agent  working  with  the buyer  be                                                                    
     working for  the buyer.   This  gave rise  to exclusive                                                                    
     buyers' agents, and as a  result there are buyer agents                                                                    
     operating today in all the major markets in the state.                                                                     
                                                                                                                                
Number 1938                                                                                                                     
                                                                                                                                
MR. WICKERSHAM continued:                                                                                                       
                                                                                                                                
     Large  firms,  however,  with  many  agents,  had  many                                                                    
     listings  and represented  many  buyers.   These  firms                                                                    
     quickly  ran  into  conflicts.   The  concept  of  dual                                                                    
     agency,  in   which  the  company  and   sometimes  the                                                                    
     individual  agent represented  both the  buyer and  the                                                                    
     seller, took  hold.  Today,  40 or 50 percent  of agent                                                                    
     transactions involve dual agency.                                                                                          
                                                                                                                                
     I was  a lawyer long  before I  was a realtor,  and the                                                                    
     notion of  dual agency  is alien to  me.   However, the                                                                    
     consuming   public   is   apparently   used   to   this                                                                    
     arrangement, and relatively  few problems have actually                                                                    
     come  up over  the years,  considered in  the light  of                                                                    
     billions  of dollars  of transactions  each  year.   In                                                                    
     fact,  the amount  of litigation  by consumers  against                                                                    
     real estate licensees  is a fraction of what  it was 15                                                                    
     years ago.  And this is good.                                                                                              
                                                                                                                                
     Dual  agency is  specifically  provided  for in  Alaska                                                                    
     statutes.   But it  has inherent problems  under Alaska                                                                    
     court decisions.   Under Alaska case law,  an agent has                                                                    
     duties to his client -  among other things - to divulge                                                                    
     to  his  client   confidential  information  about  his                                                                    
     bargaining  adversary,  and  to  try to  get  the  best                                                                    
     possible price  and terms  for his  client.   These two                                                                    
     duties  are  impossible  when  one  is  a  dual  agent,                                                                    
     working for both parties.                                                                                                  
                                                                                                                                
     Most licensees  are probably dual agents.   Despite the                                                                    
     fact  that transactions  seem  to  go smoothly,  agency                                                                    
     disclosures are made, and  consumers seem to understand                                                                    
     how  dual  agents   operate,  these  conflicting  legal                                                                    
     duties   and   loyalties   have  given   the   industry                                                                    
     significant heartburn over the years.                                                                                      
                                                                                                                                
     The realtor task force began  by considering reforms to                                                                    
     the  legal  concept  and   duties  involved  with  dual                                                                    
     agency,  but  soon  came to  the  conclusion  that  the                                                                    
     entire  legal notion  of  agency -  the  notion of  the                                                                    
     licensee as a hired combatant  for his or her client in                                                                    
     an adversarial  conflict - simply does  not reflect the                                                                    
     way real estate is bought and sold.                                                                                        
                                                                                                                                
     It never  has.  Real  estate transactions are  not like                                                                    
     lawsuits where  the parties are adversarial  from start                                                                    
     to finish.  They  are basically cooperative ventures in                                                                    
     which conflicts can  arise.  In other words,  in a real                                                                    
     estate transaction, unlike a  lawsuit, each party needs                                                                    
     what  the  other  offers,  so both  can  "win"  at  the                                                                    
     conclusion.                                                                                                                
                                                                                                                                
Number 1872                                                                                                                     
                                                                                                                                
MR. WICKERSHAM continued:                                                                                                       
                                                                                                                                
     This  proposal, at  its simplest,  brings the  law into                                                                    
     conformance  with this  actual practice.   The  realtor                                                                    
     who  helps a  family find  a  house is  not a  predator                                                                    
     looking  to  exploit  an  advantage; he  or  she  is  a                                                                    
     helper.   The concept  of the agent's  bargaining [with                                                                    
     an]  adversary  is replaced  with  the  concept of  the                                                                    
     consuming public.                                                                                                          
                                                                                                                                
     Likewise, the  concept of agency  - trying  to discover                                                                    
     weaknesses  on the  other side  and exploit  them -  is                                                                    
     replaced with  the concept of representation  - being a                                                                    
     good, solid advocate for the client.                                                                                       
                                                                                                                                
     Instead of dual agency, the  bill creates the role of a                                                                    
     neutral middleman,  a professional  who just  helps the                                                                    
     parties  come   together  and  close   the  transaction                                                                    
     without  advocating for  either  side.   This, too,  is                                                                    
     just  common  sense.   The  bill  acknowledges for  the                                                                    
     first time that  within the same firm,  one realtor can                                                                    
     adequately   represent  the   buyer  and   another  can                                                                    
     adequately represent  the seller.   The  bill clarifies                                                                    
     and strengthens the  licensee's requirement to disclose                                                                    
     his or her relationship to the parties.                                                                                    
                                                                                                                                
     What's in  it for the  real estate industry?   They can                                                                    
     exhale for  the first time  in about 15  years, because                                                                    
     the law  will reflect the  practice.  What's in  it for                                                                    
     the  consumer?   Greater  clarity,  a  better level  of                                                                    
     service,  and common  sense.   Likewise,  the law  will                                                                    
     reflect  the  public's  expectations.   Also,  the  law                                                                    
     eliminates a  strange and harsh element  of agency law:                                                                    
     the  client's  vicarious  liability for  his  realtor's                                                                    
     transgressions.                                                                                                            
                                                                                                                                
Number 1818                                                                                                                     
                                                                                                                                
MR. WICKERSHAM  referred to Ms.  McConnochie's testimony  about a                                                               
case in  Hawaii.  He  said an Alaska  Supreme Court case  holds a                                                               
client liable  for the misrepresentations  of his/her agent.   It                                                               
was actually an agent in another  firm, he added.  Mr. Wickersham                                                               
said it  isn't appropriate.   He continued to read  his testimony                                                               
into the record:                                                                                                                
                                                                                                                                
     There is one  final point I would like to  raise.  This                                                                    
     bill does  not define  the only  possible relationships                                                                    
     between the realtor and his/her  client.  For instance,                                                                    
     my company  would not  fit into  the bill's  concept of                                                                    
     conventional representation.   Other real  estate firms                                                                    
     also offer a nontraditional mix  of services.  All this                                                                    
     enhances consumer choice.                                                                                                  
                                                                                                                                
     This bill ensures that  innovation and consumer choice,                                                                    
     as  represented  by  my company  and  others,  will  be                                                                    
     preserved.  The realtor task  force has been clear from                                                                    
     the  very  start that  it  wants  to preserve  consumer                                                                    
     choice.   Please ensure that  this remains in  the bill                                                                    
     as it moves forward to adoption.                                                                                           
                                                                                                                                
Number 1728                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  moved to adopt Amendment  1, labeled 23-                                                               
LS0189\W.2, Bannister, 1/21/04, which read:                                                                                     
                                                                                                                                
     Page 11, line 27, through page 12, line 3:                                                                                 
     Delete all material and insert:                                                                                            
          "Sec. 08.88.690.  Exemptions.  A real estate                                                                        
     licensee is  exempt from the signature  requirements of                                                                    
     AS 08.88.600  - 08.88.695  when  the licensee  provides                                                                    
     specific assistance to                                                                                                     
               (1)  a corporation that issues publicly traded                                                                   
     securities;                                                                                                                
               (2)  a business that has a net worth in the                                                                      
     previous  calendar  year  of  $2,000,000  or  more,  if  the                                                               
     business requests the exemption from the licensee; or                                                                      
               (3)  a governmental agency; in this paragraph,                                                                   
     "governmental agency"  means a department,  division, public                                                               
     agency,    political    subdivision,   or    other    public                                                               
     instrumentality   of  the   state  or   federal  government,                                                               
     including  the University  of  Alaska,  the Alaska  Railroad                                                               
     Corporation,  the Alaska  Housing  Finance Corporation,  the                                                               
     Alaska  Industrial  Development  and Export  Authority,  and                                                               
     other public corporations."                                                                                                
                                                                                                                                
Number 1694                                                                                                                     
                                                                                                                                
REPRESENTATIVE GUTTENBERG objected for purposes of discussion.                                                                  
                                                                                                                                
REPRESENTATIVE  ROKEBERG  explained  that Amendment  1  basically                                                               
exempts  commercial  real  estate  transactions  from  this  law.                                                               
Subsection  (2) allows  for the  business to  take the  action of                                                               
requesting  an exemption  from the  licensee.   A  high-net-worth                                                               
individual wouldn't  qualify under  this; it would  have to  be a                                                               
business.   This  amendment exempts  [the commercial  real estate                                                               
industry] from the issue of representation under the bill.                                                                      
                                                                                                                                
REPRESENTATIVE ROKEBERG pointed out that  this bill is to protect                                                               
the  public,  but  large, sophisticated  investors  do  not  need                                                               
consumer protection.   He said a tremendous  amount of logistical                                                               
business issues arise  from having to do paperwork  to ensure the                                                               
consumer  is  protected  when  it  is  actually  superfluous  and                                                               
burdens a commercial transaction.                                                                                               
                                                                                                                                
Number 1593                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUTTENBERG asked  for  examples  of other  public                                                               
agencies [as written on page 1, line 10].                                                                                       
                                                                                                                                
REPRESENTATIVE ROKEBERG  responded that they'd include  the [U.S.                                                               
Securities   and   Exchange   Commission  (SEC)],   which   makes                                                               
differentiations  in  terms  of  the  sophistication  of  buyers.                                                               
There are requirements  like net worth to  enter into memberships                                                               
and  limited partnerships.    This  is not  an  uncommon type  of                                                               
threshold  issue where  a threshold  is  codified for  membership                                                               
into a  certain class or not,  he said.  He  summarized that this                                                               
is saying there is sufficient  money or sophistication that would                                                               
reflect that [consumer] protection would not be necessary.                                                                      
                                                                                                                                
Number 1559                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUTTENBERG removed  his objection.   [No  further                                                               
objection was stated, and Amendment 1 was treated as adopted.]                                                                  
                                                                                                                                
Number 1471                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  moved to adopt Amendment  2, labeled 23-                                                               
LS0189\W.3, Bannister, 2/3/04, which read:                                                                                      
                                                                                                                                
     Page 8, line 17:                                                                                                           
     Delete "whom the neutral licensee represents or"                                                                           
                                                                                                                                
     Page 8, line 20:                                                                                                           
     Delete "whom the licensee represents or"                                                                                   
                                                                                                                                
     Page 8, line 21:                                                                                                           
     Delete "whom the licensee represents or"                                                                                   
                                                                                                                                
     Page 10, line 3, following "licensee":                                                                                     
     Insert "represents or"                                                                                                     
                                                                                                                                
     Page 10, line 6, following "completes the":                                                                                
     Insert "representation or"                                                                                                 
                                                                                                                                
CHAIR ANDERSON objected for purposes of discussion.                                                                             
                                                                                                                                
REPRESENTATIVE ROKEBERG  explained that the word  "represents" is                                                               
not appropriate;  under the bill,  the neutral licensee  does not                                                               
represent either party.  This clarifies the meaning of the bill.                                                                
                                                                                                                                
Number 1460                                                                                                                     
                                                                                                                                
CHAIR ANDERSON  removed his  objection.   There being  no further                                                               
objection, he announced that Amendment 2 was adopted.                                                                           
                                                                                                                                
Number 1449                                                                                                                     
                                                                                                                                
REPRESENTATIVE LYNN moved  to report SSHB 29, as  amended, out of                                                               
committee  with individual  recommendations and  the accompanying                                                               
fiscal  notes.   There  being no  objection,  CSSSHB 29(L&C)  was                                                               
reported from the House Labor and Commerce Standing Committee.                                                                  

Document Name Date/Time Subjects