HOUSE BILL NO. 33 "An Act relating to real estate licensing and the real estate surety fund; and providing for an effective date." REPRESENTATIVE NORMAN ROKEBERG, SPONSOR, testified in support of HB 33. He observed that the legislation represents four years of hard work by members of the real estate community, the Alaska Real Estate Commission, the House Labor and Commerce Committee and the sponsor. The legislation is the result of a task force formed in 1994 by the Alaska Real Estate Commission to take up the issues of property management and community association management. There are no regulations for community association management in the state of Alaska. He maintained that the legislation enhances consumer protections. There are 2,200 real estate licenses in the state of Alaska. He referred to an unlicensed individual that embezzled $57 thousand dollars from 18 separate community associations in Anchorage. He observed that the Commission rewrote a significant portion of the real estate chapter. The Commission is given more authority to regulate licensees. The legislation also expands educational opportunities. Representative Rokeberg noted that he is a commercial real estate broker, licensed in the state of Alaska. He emphasized that he has not sold a house in 25 years. Under current statute, Representative Rokeberg is required to take at least 8 of the 20 required hours every two years on selling houses. The legislation creates specialties for education. The legislation updates the provisions for when a license is required, for office locations, branch offices, record keeping, contracts and signs. Fees are only due when there is a written existing contract. The Conflict of Interest declarations are expanded as the result of a 1995 Legislative Budget and Audit Committee audit. It proscribes prohibited conduct of unlicensed activity by adopting language promulgated by the Mississippi Real Estate Commission. This language has been tested in federal courts. Exceptions are expanded to 20 under AS 161. Representative Rokeberg observed that Amendment C would add an additional exception (copy on file). Amendment C would allow management by a natural person of property for another person without a fee, other than the reimbursement of expenses (copy on file). Condominium and townhouse associations can continue to manage their own activities. A unit owner resident in an association project has the right to manage that project for a profit. Only individuals that manage more than one association would be covered under the statute. Representative Rokeberg emphasized that the interests of real estate practitioners and the public have been balanced by the legislation. He observed that the legislation has wide support among real estate groups and the Administration. Representative Rokeberg provided members with Amendments A, B and C (copy on file). He stated that Amendment A contains language clarifications. He reviewed Amendment A. He noted that there are three references to deletion of "a mobile home or." He explained that mobile home dealers were inadvertently swept into real estate activities. The amendment clarifies that real estate licensees do not wish to have exclusive right to manage mobile home parks. Representative Rokeberg observed that Amendment B incorporates recommendations by the Alaska Chapter of Community Associations. Definitions of conduct of investigation and community association accounts are clarified. Association fund's may not be commingled with funds of other associations or the licensee's. Representative Rokeberg noted that Amendment C was added at the request of Representative Cowdery. This amendment would allow a person to have another person manage their property without a fee. In response to a question by Co-Chair Hanley, Representative Rokeberg clarified that the proposed amendments were not drafted by Alaska Legal Services. Alaska Legal Services did review the amendments. Co-Chair Hanley noted that Representative Rokeberg could legally sell a house. He observed that Representative Rokeberg would not be required to take refresher classes on selling a house. He questioned if there is a prohibition on selling houses if that portion of the education update is not taken. Representative Rokeberg emphasized that there is a 20-hour mandate for continuing education. Specialty classes represent 8 of the 20 hours. He would not have to take the residential sale portion. Co-Chair Hanley stressed that education requirements are set to assure that the statues are understood "across the board". He reiterated that the legislation allows sell of homes by licensees that are not required to take that portion of the educational requirements. Representative Rokeberg noted that the original legislation would have created different types of licenses. He observed that the proposal was controversial among the real estate community. The legislation represents a consensus position. Representative Rokeberg noted that the legislation would grant current community association managers that can demonstrate that they have performed the function for 24 months a limited community association license. A limited community association license would restrict their activity to management of associations only. They would be forbidden to participate in other types of real estate activities. Representative Rokeberg noted that the legislation provides for the expansion of the education requirements for pre- licensing to include community association management topics. Representative Rokeberg asserted that the legislation would improve real estate education. Co-Chair Hanley noted that the legislation prevents the Alaska Real Estate Commission from saying that the 20-hour requirement cannot be taken in two days. In response to a question by Representative Martin, Representative Rokeberg explained that the legislation allows associations to manage themselves or retain the services of a resident owner to manage the association for a profit. Representative Mulder disclosed that he has a real estate license. In response to a question by Representative Mulder, Representative Rokeberg noted that the Commission cannot assess civil penalties. The legislation would allow a civil penalty of up to $5 thousand dollars beyond the amount that the person benefited. He noted that the activity would have to be egregious before the Department of Law would prosecute. The Alaska Real Estate Commission requested the authority to assess fines. The Commission did not have any authority over non-licensed activity. Representative Mulder asked if other boards are allowed to assess fines. RON JOHNSON, PRESIDENT, KENAI PENINSULA BOARD OF REALTORS testified on HB 33. He referred to Amendment A. He noted that "financial institution" would be substituted for "banks" on page 18, line 4. He questioned if the Federal Deposit Insurance Corporation (FDIC) covers financial institutions. If they are not covered by FDIC they would not be insured funds. He suggested that "sales person" could be replaced with "real estate services licensee". He asserted that mobile homes are not a real estate item. He observed that a restriction on the number of hours that can be taken in a day would hurt rural areas. He maintained that the ability of person to retain information is not affected by the amount hours that they sit in a chair. Representative Rokeberg noted that "financial institution" was inserted on the request of the State Bank and Securities Commission. He stressed that to the best of his knowledge "real estate services licensee" is used where it can be used. He observed that there are three types of licenses. He stressed that the term licensee cannot be used to distinguish between other types of licenses. ART CLARK, REAL ESTATE UNLIMITED, ANCHORAGE testified in support of HB 33. He observed that he also represents the Alaska Association of Realtors and is on the Board of Directors for the Community Association Institute. He spoke in support of the amendments. He spoke against limiting the number of educational hours that can be taken in a day. LARRY SPENCER, ALASKA REAL ESTATE COMMISSION explained that there are seven members on the Commission. There are two public members, one from each judicial district and two members at large. Judicial district members are licensees. Co-Chair Therriault expressed concern that the legislation would overrule policy set by the Commission. He questioned why the Commission felt the number of educational hours should be restricted to 7 per day. DEBRA BRITT, PIONEER MANAGMENT ANCHORAGE testified in support of HB 33. She noted that she manages community associations. She spoke in support of the amendments. SHANE OSOWSKI, PRESIDENT, COMMUNITY ASSOCIATIONS INSTITUTE, ANCHORAGE testified in support of HB 33. He observed that he is an attorney practicing real estate construction law. He noted that Representative Rokeberg has incorporated his comments into the bill. He spoke in support of the amendments. DAVID GARRISON, ASSOCIATE BROKER, ANCHORAGE testified in support of HB 33. He questioned the affect of section 30, page 19. WILLIAM BRADY, REMAX, ANCHORAGE testified in support of HB 33. He noted that he is also the Chairman of Industry Issues for the State Association of Realtors. He spoke in support of the amendments. He clarified that the intent is to break down educational requirements of licensees who are practicing in different areas of real estate. He maintained that it is not fair to a commercial agent or a property manager to take classes dealing with residential property sales. The legislation would allow licensees to take the core hours specific to their area of expertise. He noted that the Commission is not recommending a limit on hours that can be taken in a day. (Tape Change, HFC 98 - 26, Side 1) JOHN CARMAN, HOME STATE MORTGAGE, ANCHORAGE testified in support of HB 33. He spoke in support of the provision to exclude unlicensed parties from receiving fees from real estate transactions. CLAIR RAMSEY, REAL ESTATE COMMISSION, ANCHORAGE testified in support of HB 33 and urged the Committee to pass HB 33 during this legislative session. RON POLLOCH, JACK WHITE REAL ESTATE, ANCHORAGE testified in support of HB 33. He observed that the legislation balances many interests. The legislation clarifies that an unlicensed person cannot receive a fee. He referred to the civil penalty provisions. He noted that the Alaska Real Estate Commission has no jurisdiction against an unlicensed person performing a licensed activity. ERIC DYRUD, ANCHORAGE BOARD OF REALTORS, ANCHORAGE testified in support of HB 33. He urged prompt passage of the legislation. BOB BAER, TOTEM, ANCHORAGE testified in support of HB 33. He is also chairman of Concern Advocates for Real Estate Services. Mr. Spencer testified in support of HB 33. He stated that he is a member at large of the Alaska Real Estate Commission. He emphasized that the legislation represents over four years of work. The Alaska Real Estate Commission has passed a resolution in support of civil penalties for unlicensed activities. Currently, unlicensed activities are referred to the Department of Law. He observed that the Division of Occupational Licensing has limited attorney time. Only egregious offenses are pursued. The Alaska Real Estate Commission recognizes the need to restate and reinterpret current laws restricting fees or commissions to licensed persons. He emphasized that the legislation enhances consumer protection by regulating the practice of professional management of condominium associations. Co-Chair Therriault asked the position of the Alaska Real Estate Commission regarding to the number of training hours that can be taken per day. Mr. Spencer noted that the Commission has taken actions in the education areas to make the 20-hour component more effective. The Commission originally recommended limiting training to seven hours per day. Marketing courses were eliminated. Computer courses were eliminated. Credit for people that arrive late was eliminated. The real estate industry resisted the seven- hour restriction. The Alaska Real Estate Commission concluded that they did not have documentation to support the premise that educational quality would be more effective with a seven hour per day limit. The Commission also recognized the difficulty of individuals in rural areas that have to fly in to take educational classes. The Alaska Real Estate Commission does not regulate the number of hours per day. Representative Rokeberg spoke in support of section 7. He noted that expansion the 20-hour biannual educational requirement was discussed. Co-Chair Therriault noted that section 7 on pages 5 and 6 delineates the specific types of courses that the Commission must accept. Representative Rokeberg stated that section 7 balances competing interests within the industry. He noted that the Commission has not always recognized courses offered at national conventions. He noted that the conventions offer six-day courses with tuition of $1 thousand dollars or more. He pointed out that these nationally recognized courses lead to professional designations. Mr. Spencer reviewed educational requirements. He noted that the bill conforms to recommendations of the Alaska Real Estate Commission Task Force. Representative Rokeberg stated that there is a need to write regulations into law. He observed the importance of real estate law. In response to a question by Representative Grussendorf, Mr. Spencer noted that property managers do not generally sell houses. He added that a small number of individuals are involved in strictly commercial real estate. Co-Chair Therriault expressed concerns that individuals who are not required to take continuing education relating to residential sales may sell a house. Representative Rokeberg maintained that there are only 5 - 6 uniquely specialized individuals. Mr. Spencer noted that next year's core courses include ethics, disclosure and agency contracts. CATHERINE REARDON, DIRECTOR, DIVISION OF OCCUPATIONAL LICENSING, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT testified in support of HB 33. She maintained that the legislation provides enhanced consumer protection and fixes some holes in the statutes. In response to a question by Representative Mulder, Ms. Reardon noted that the Board of Architects and Land Surveyors has a similar statute that permits them to charge people committing an unlicensed activity. She noted that the Division has requested similar civil penalty authority. Money could be collected through garnishment of permanent fund dividends. She stressed that the civil penalties will contribute to enforcement of licensing laws. Representative Mulder noted that the reciprocity section was deleted. Representative Rokeberg noted that there are no reciprocity arrangements with other states. Co-Chair Therriault referred to section 7, subsection (4). This subsection would mandate that the Commission approve "courses offered and attended at a national convention for real estate licenses if the courses were approved for continuing education credit by the real estate licensing board of the state in which the convention was held." He questioned why the state of Alaska should recognize educational requirements of states that do not recognized Alaskan real estate licenses. Representative Rokeberg clarified that the Commission did not request section 7, subsection (4). Representative Kelly pointed out that convention courses would focus on the issues that cross state boundaries. Co-Chair Therriault questioned why the decision is not left to the Alaska Real Estate Commission. Representative Kelly stressed that real estate courses are difficult to find. Representative Rokeberg asserted that the legislation expands opportunities for education to better courses. Representative Davis stated that subsection (4) seems to give the courses credibility. In response to a question by Co-Chair Therriault, Ms. Reardon noted that the Commission currently has subpoena power. Ms. Reardon noted that other regulatory agencies issue fines. In response to a question by Representative Mulder, Representative Rokeberg observed that the Endorsement Concept has been deleted from the legislation. Representative Davies expressed concern with page 3, line 25. Representative Rokeberg noted that existing law requires the Commission to publish disciplinary actions three times. The legislation would allow the Commission to release the information in their newsletter. Representative Davies suggested that "must" be changed to "shall" on page 5, line 31 and a caveat be added stating that "unless the Commission finds in writing reasons for disallowing" a course it will be approved. Representative Davies questioned the deletion of "natural" on page 6, line 25. Representative Rokeberg spoke in support of deleting "natural". In response to a question by Representative Mulder, Representative Rokeberg noted that section 1, on page 1 clarifies that real estate can mean an interest in a mobile home. The legislation exempts real estate licensees from mobile home dealer licensing requirements. Ms. Reardon noted that there are other problems with statutes relating to mobile home dealer licensing. Co-Chair Therriault referred to section 48, page 28. He noted that section 48 states that the chapter does not apply to a person who manages a total of four or fewer residential units for other persons. He interpreted the statute to state that a person who manages a total of four or fewer residential units for other persons is exempt from the Title. He suggested that they could sell a home. He noted that the person should not be exempted from the provisions of the Title. The activity should be exempted. Mr. Reardon added that page 30, line 1 should exempt the bookkeeper or accounting function not the person. HB 33 was HELD in Committee for further consideration.