Legislature(1993 - 1994)
08/10/1993 01:00 PM Senate L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATOR KELLY, Chairman, called the Senate Labor & Commerce
Committee meeting to order. Due to the lack of a quorum, the
meeting was considered a work session.
SENATOR KELLY introduced SB 206 (RESIDENTIAL REAL PROPERTY
TRANSFERS) as the only order of business and requested that Josh
Fink, committee aide, present an overview on the legislation.
JOSH FINK explained that SB 206 would remove real estate
professionals from liability for innocent misrepresentation in real
property transactions.
In 1982, the Alaska Supreme Court ruled in Bevins versus Ballard
that brokers who make an innocent misrepresentation to a purchaser
of property are liable for the misrepresentation. Alaska is one of
only three states that puts such an unjustified liability on real
estate professionals.
Moreover, in 1984, the Alaska Supreme Court ruled that the Alaska
Surety Fund does not cover innocent misrepresentationclaims. This
has made errors and omissions insurance for real estate
professionals more expensive and difficult to obtain in Alaska and
takes away protection for buyers.
The passage last year of the residential real property transfer
disclosure form has substantially increased brokers' liability risk
if they are to be held liable for innocent misrepresentations.
Written disclosures provided by the seller to the broker, then
forwarded by the broker to potential buyers, could place liability
on the broker for any misrepresentation the seller makes.
Mr. Fink said SB 206 would overturn the court decision of Bevins
versus Ballard, thus removing a real estate agent's liability for
innocent misrepresentation.
Number 035
SENATOR KELLY stated the committee would take testimony statewide
over the teleconference network and that It is his intent to have
a bill that is supported by the realtors ready to go the first day
of session in January.
Number 040
RICK HUNTER, President, Alaska Association of Realtors, testifying
from Wasilla, stated their support for SB 206 and noted the
committee had been provided with copies of a signed resolution from
the members of the realtor boards statewide urging passage of the
bill.
Number 047
SENATOR KELLY requested an update from Ron Johnson, Chairman of
the Alaska Real Estate Commission, on the status of the disclosure
form.
RON JOHNSON, testifying from the Kenai/Soldotna LIO, said the
Commission has amended and slightly adjusted the original form that
they had adopted and, with the concurrence of the Attorney
General's office, they have come to an agreement and eliminated
some of the things that the AG's office felt were not acceptable.
The final draft will be available for distribution in two to three
days.
Speaking on behalf of the Real Estate Commission, Mr. Johnson said
the position of the Commission is probably going to be neutral on
SB 206, which is aimed primarily at the real estate professional.
He said they are primarily a public interest group, and taking a
position would be throwing the support of the Real Estate
Commission behind licensees.
Number 075
KIRK WICKERSHAM, an Anchorage attorney and real estate broker
testifying in Anchorage, noted he is a former chair of the Alaska
Real Estate Commission.
Mr. Wickersham said that in a 1981 case, it was ruled that a buyer
had the absolute right to rely on any representation that they
received from an agent or seller, unless their reliance is
preposterous, irrational, or in bad faith. He said he does not
know of any other state or any other area of Alaska law where that
is the legal standard for conduct on the part of a party to a
transaction or a party to a lawsuit. He added that the combination
of the rulings by the court, as evolved over the last eleven to
twelve years in practice, has ended up being that the agent is
absolutely and vicariously liable for the two-year statute of
limitations on which a liability and action can be brought.
Mr. Wickersham stated his support for SB 206, but thinks that it
should be amended on line 6, which relates to information provided
to the transferee. He said that in recent years, there has been
more and more reliance by sellers on representations made about the
ability of the buyers to carry through on the transaction, and he
recommended that language be amended to read "provided to the
transferee or transferor."
Mr. Wickersham suggested that either this bill or a subsequent bill
should also deal with the possibility of making errors and
ommission insurance available to Alaska real estate agents.
In his closing comments, Mr. Wickersham said the provisions in SB
206 should have been part of the property disclosure law that was
passed in the 1992 session, and noted that it was part of the
original bill, but was dropped out of the final version.
Number 150
SENATOR KELLY asked Mr. Wickersham how he would go about
establishing E&O insurance in the State of Alaska. KIRK WICKERSHAM
responded that in the late eighties, the State of Kentucky
contracted with an E&O carrier to provide a standard coverage E&O
policy for all real estate licensees in Kentucky. A licensee in
Kentucky did not have to use the state plan, but had to provide his
own coverage. At that time, coverage was $60 per agent per year
for $1,000 deductible and $100,000 maximum payoff policy.
Subsequently, other states have adopted that format, and he said it
is his understanding the main impediment to Alaska establishing a
program like that is laws such as Bevins and Cousin which make
agents unreasonably liable and insurers loath to cover them. He
said he thinks that the only cost to the State of Kentucky was an
administrative cost of going out to bid with the state program.
Senator Kelly requested that staff contact the director of
insurance for the State of Alaska for more information on what the
major impediments of a program such as that might be in Alaska. He
also requested that Mr. Wickersham submit his suggested amendment
and the rationale for it in writing to the committee for its
consideration.
Number 192
DAVID SOMMERS, President-elect of the Alaska Association of
Realtors in Fairbanks, stated his strong support for SB 206.
Number 205
PAMELA THROOP, a broker with Remax of Fairbanks testifying from
Fairbanks, related that her company has had only one lawsuit, which
is still not resolved, filed against it since it went into business
over nine years ago. She has E&O insurance, but her insurance
carrier has been fighting this suit since 1986. She said everyone
agrees that her company did not nothing wrong in the transactions,
and that information was willfully and knowingly withheld by the
seller. She estimated that this suit has probably cost the
insurance carrier close to $106,000, and it is still not resolved.
Ms. Throop stated her support for SB 206, as well as the disclosure
law, but thinks the form needs modification. She added that she
would like to see the state adopt uniform building codes that apply
to single family residences whether they are built in Bush Alaska
or in a municipality.
Number 251
BILL ALLEN of Allen Realty in Fairbanks said he thinks it is
imperative that SB 206 passes. From an economic standpoint, he
does not feel his broker fee or commission really covers
guaranteeing a seller's representation on the sale or transfer of
a property.
Mr. Allen agrees with Mr. Wickersham's comments on "e and o"
insurance, and said he hopes that the Division of Insurance and the
Alaska Real Estate Commission will explore the possibility of
establishing it in Alaska.
Number 280
WALTER WOOD, a broker at Valdez Realty in Valdez, testified from
Valdez in support of SB 206, stating that he agrees with Mr.
Wickersham's suggestion that the legislation leaves out
responsibilities to the buyer and that it should be included in the
bill.
Number 304
PEGGY ANN MCCONNOCHI, broker/owner of a real estate company in
Juneau and a past president of the Alaska Association of Realtors,
voiced her support for SB 206.
Ms. McConnochi said the current situation puts the real estate
agent in the position of having unjustifiable liability for
inadvertent misrepresentations by sellers. That liability is even
greater now with the advent of property disclosures, for which she
is a great proponent. When a real estate agent is passing
information from a seller to a buyer, they are put into a position
where they are responsible for whatever those statements are.
Ms. McConnochi also supports Mr. Wickersham's suggested amendment
to the bill.
Number 330
FRANK MICHEL, Legislative Chair of the Alaska Association of
Realtors testifying from the Matsu LIO, voiced his support for Mr.
Wickersham's suggested amendment.
Number 340
BOB ROGERS, a broker with Rogers Realty testifying from the Matsu
LIO, stated his support for Mr. Wickersham's amendment and said it
will release realtors from harassing lawsuits. He said his agency
was involved in a such a lawsuit, which it won, but it has cost him
thousands of dollars. He added that innocent misrepresentation is
just that, however, he believes that when agents do make deliberate
misrepresentations, they should be held liable for them.
Number 366
BONNIE AULABAUGH, broker/owner of Chelsea Realty in Kodiak,
expressed her appreciation to Senator Kelly for introducing SB 206,
stating it is a much needed piece of legislation. She noted that
the Kodiak Board of Realtors, of which she is president, also
supports the legislation. She urged passage of the legislation, as
well as making affordable E&O insurance available to real estate
professionals in the state.
Number 390
LARRY CLARK, an associate broker with Remax Properties in
Anchorage, as well as president of the Anchorage Multiple Listing
Service (AMLS), stated the board's support for SB 206. He said
AMLS has put together a real estate property transfer form, which
was approved by the Alaska Real Estate Commission, and they are
trying to be the lead factor in a high tech information system.
Number 400
SENATOR KELLY pointed out that there has been a new format for the
disclosure form agreed to by the Attorney General and the Alaska
Real Estate Commission. LARRY CLARK said AMLS realtors will start
using that form when it becomes available.
Number 455
ELOUISE SCHMIDT, a real estate broker in Anchorage, said she was
first licensed in Alaska as a real estate agent in 1965, and that
the real estate profession has come a long way since that time.
She believes that the new disclosure form, which states that the
seller will be responsible for the information provided to the
buyer, is a big step forward. She strongly urged passage of SB 206
and its suggested amendment.
Number 505
SENATOR SALO said that right now, realtors are highly motivated to
learn everything they can about the property, but she is concerned
that with this change in the law, it might have the effect of the
realtors not wanting to know everything about the property. MS.
SCHMIDT said she did not think that would happen, especially with
the new property information sheet that the seller must fill out.
Number 555
SENATOR KELLY asked if the new law covered all real estate
transactions. KIRK WICKERSHAM clarified that the property
disclosure law that was adopted in 1992 covers single family and
duplexes. It does not cover multi-family, commercial land, etc.
SB 206 would cover any real estate transactions.
Number 590
GIL KIRSCHWITZ, an Anchorage real estate broker, voiced his support
for SB 206, stating it is much needed. He also stated his support
for the suggested amendment.
Number 603
ANGELITO CORRE of Anchorage told the committee that approximately
two years ago he was involved in a transaction as a selling agent,
where the owners of the property stated there were no problems with
the property. However, it was later discovered that there was a
problem with the foundation of the dwelling, and the buyer filed a
lawsuit against Mr. Coore, which was settled out of court for
several thousands of dollars. He said as a broker who relied on
the information he had on hand, he does not feel that he should
have been held responsible in that case.
Number 665
JEAN SMITH, an Anchorage real estate broker for the past 35 years,
stated her support for SB 206. She also supports a property
disclosure form, although it is no guarantee that the seller is
going to tell everything, and there may be things that the seller
is really not aware of.
TAPE 93-31, SIDE B
Number 015
SENATOR SALO asked if the real estate profession has an ethics
code, and is a license pulled based on ethical violations. MS.
SMITH acknowledged that they do have an ethics code, and if a
grievance is filed, at some point in time the Alaska Real Estate
Commission can pull a license, or suspend it, or take whatever
action they deem necessary.
Number 045
CHARLES MCKEE of Anchorage stated his opposition to SB 206 because
he feels that the state has misrepresented him in the past. He
also expressed his dissatisfaction with the insurance industry in
the state.
Number 100
GREG ERKINS, an Anchorage real estate broker, said his first
transaction as a realtor involved an innocent misrepresentation
which he settled for a sum rather than paying an attorney to go to
court over the case. Now if he is asked by a buyer about a
particular aspect of a property that he does not have knowledge of,
he advises the buyer to contact someone who has the expertise in
that particular area.
Number 190
SENATOR SALO asked Mr. Erkins if the fact that AHFC can ask for a
waiver from buyers is something that causes him problems. MR.
ERKINS answered that AHFC removes themselves from liability, but
doesn't remove the real estate agent from liability. He added that
most institutions can do that.
Number 204
SENATOR SALO expressed her concern that now there are some
environmental problems regarding transactions on houses that we
maybe didn't have 15 years ago. She said waivers, such as on
underground storage tanks, is a more serious and a more prevalent
issue than it used to be, so this inequity is a bigger inequity
now.
Number 255
PAT SWAIN, an associate broker and co-owner of Jack White Co., a
company in business in Anchorage for 40 years, read portions of a
letter from their vice president of residential sales. The letter
says that when the court established liability for realtors'
innocent misrepresentations, it created liability which makes a
realtor liable for failure to tell a purchaser something the
realtor does not know. It goes on to say that what may not be
obvious to many lay people is how the Alaska Supreme Court has
singled out real estate professionals for liability which has never
been applied to other professionals.
Number 290
CHUCK HYLAN, a real estate broker with Remax Properties, stated his
support for SB 206 and the proposed amendment. He added that there
are some marginal properties out there that for a brokerage fee, an
individual just does not want to deal with it. On some of those
properties, it could be very beneficial to have the real estate
experience of an individual who has 10 or 20 years of experience.
He also spoke to the problems created by underground storage tanks.
Number 342
SENATOR KELLY thanked all the participants and said he was
optimistic for the legislation's chance of passage, probably with
the amendment. He then adjourned the meeting.
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