02/04/2004 03:20 PM House L&C
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 4, 2004
3:20 p.m.
MEMBERS PRESENT
Representative Tom Anderson, Chair
Representative Carl Gatto, Vice Chair
Representative Nancy Dahlstrom
Representative Bob Lynn
Representative Norman Rokeberg
Representative Harry Crawford
Representative David Guttenberg
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 29
"An Act relating to real estate licensees and real estate
transactions; and providing for an effective date."
- MOVED CSSSHB 29(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 389
"An Act relating to certain monetary advances in which the
deposit or other negotiation of certain instruments to pay the
advances is delayed until a later date; and providing for an
effective date."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 29
SHORT TITLE: REAL PROPERTY TRANSACTIONS/LICENSEES
SPONSOR(S): REPRESENTATIVE(S) ROKEBERG
01/21/03 (H) PREFILE RELEASED (1/10/03)
01/21/03 (H) READ THE FIRST TIME - REFERRALS
01/21/03 (H) L&C, JUD
01/20/04 (H) SPONSOR SUBSTITUTE INTRODUCED
01/20/04 (H) READ THE FIRST TIME - REFERRALS
01/20/04 (H) L&C, JUD
02/04/04 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
PEGGY ANN McCONNOCHIE, Representative
Agency Task Force
Legislative Committee
Alaska Association of Realtors
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 29 and answered
questions.
MARK KORTING, Broker
RE/MAX Properties of Anchorage, Inc.
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SSHB 29, saying he
supports the position of the Alaska Association of Realtors.
PERRY UNDERWOOD, President and Broker
Coldwell Banker Fortune
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SSHB 29.
AUDREY FOLDOE, Representative
Agency Task Force
Alaska Association of Realtors
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of SSHB 29.
STEVE CLEARY, Executive Director
Alaska Public Interest Research Group (AkPIRG)
Anchorage, Alaska
POSITION STATEMENT: Commented on SSHB 29 and listed several
concerns.
LINDA GARRISON, Broker
No. 1 Buyer's Agency
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to SSHB 29.
DAVID GARRISON
No. 1 Buyer's Agency
Anchorage, Alaska
POSITION STATEMENT: Testified on SSHB 29.
CHRIS STEPHENS, Associate Broker
Bond, Stephens & Johnson
Anchorage, Alaska
POSITION STATEMENT: Testified in support SSHB 29 and
Amendment 1.
KIRK WICKERSHAM, Owner
For Sale By Owner Assistance Program, Inc.
Anchorage, Alaska
POSITION STATEMENT: Testified on SSHB 29.
ACTION NARRATIVE
TAPE 04-09, SIDE A
Number 0001
CHAIR TOM ANDERSON called the House Labor and Commerce Standing
Committee meeting to order at 3:20 p.m. Present at the call to
order were Representatives Anderson, Dahlstrom, Lynn, Rokeberg,
Crawford, and Guttenberg. Representative Gatto joined the
meeting as it was in progress.
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.
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:30 p.m.
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