HOUSE BILL NO. 169 "An Act relating to the educational requirements for certain real estate brokers, associate brokers, and salespersons with new or suspended licenses; and allowing real estate brokers to hire certain experts to review real estate transactions; and providing for an effective date." Representative Rokeberg related that HB 169 provides for 20 hours of post-licensing education for realtors. It also provides that lawyers may assist brokers in supervising all transactions. 2:47:20 PM PEGGY ANN MCCONNOCHIE, ALASKA ASSOCIATION OF REALTORS, explained that 18 states currently require post-licensing education. This bill would reduce the number of claims to the real estate commission. She explained that realtor associations are in favor of this bill. It will provide additional consumer protection by having well-trained realtors. The effective date is timely. Ms. McConnochie explained that the supervision aspect of the bill is aimed at the larger brokers in the state who supervise many transactions per month. They need to be away to make sure that documents are properly filed prior to closing. This provision allows a broker to hire a real estate attorney to review transactions and will help to better serve the public. She reported that this aspect is missing from HB 29. Representative Croft commented that the continuing education portion of the bill is fine. He voiced concerns about Section 14, the review of transactions. Ms. McConnochie replied that this section makes it clear that a large broker can employ an attorney and have no conflict in statute. Representative Croft asked who the attorney represents. Ms. McConnochie replied the broker, who is ultimately responsible for all decisions. Representative Croft worried that there is a sense that the attorney is looking out for the buyer's interests when he or she is only looking out for the broker's interests. Ms. McConnochie replied that there would not be the opportunity to have that false perception because the attorneys would never meet the buyers. Representative Croft maintained that the broker always has an ability to hire an attorney to look at the documents. He opined that the attorney is only looking after the broker's interests. Ms. McConnochie restated the purpose of the review. There is no implication that the lawyer is partial to the buyer, seller, landlord, or tenant. 2:53:13 PM Representative Foster inquired if the post-licensing education would require a realtor in Nome to buy an airplane ticket to the class. Ms. McConnochie replied that that person could take the class by correspondence. 2:54:11 PM BRAD FLEUTSCH, ALASKA REAL ESTATE COMMISSION, stated support for the continuing education elements of the bill. He noted that there is a problem with Section 14. There is no requirement in the bill that the attorney be licensed in Alaska or have knowledge of real estate law. The Alaska Real Estate Commission has no ability to supervise such a position. He explained that the completed file has all of the forms and legal requirements, and it is the last responsibility the broker has to the client. He requested to have Section 14 dropped or fixed. 2:57:08 PM Representative Hawker recalled that he has often sought a non-Alaskan lawyer with good results. Mr. Fleutsch stressed that it is Alaska real estate law that is being reviewed. Representative Hawker asked if an attorney practicing in Alaska has to be licensed to practice real estate law. Mr. Fleutsch suggested amending Section 14 to say "licensed Alaska attorney". Representative Hawker said that is inherent in statute. Mr. Fleutsch offered that it should not be limited to attorneys, but accountants could also be included. The purpose of this aspect of HB 169 is just to review the file, which the Real Estate Commission feels is very important. Representative Kelly asked if the attorney does anything that a broker does not do. Mr. Fleutsch replied that he does not know. Representative Kelly suggested language that would include an associate broker or an attorney acting as an associate broker. He shared concerns similar to Representative Croft's. Representative Croft suggested that the broker could hire an accountant or other professionals. He questioned the need for this part of the bill. He said that Section 14 is either unnecessary or unclear. 3:02:11 PM Representative Hawker read from Section 14, "The broker may pay the attorney or associated broker from a fee, commission, or other compensation received by the broker in a real estate transaction payment." He asked if that is prohibited in statute, as covered in Section 15. Representative Rokeberg replied that is true. He opined that this provision is needed in statute for clarification. Currently under Chapter 8, lawyers can sell real estate. He pointed out that the Real Estate Commission has no power to discipline attorneys, and emphasized that the broker is still responsible for all transactions. There are no restrictions on a large brokerage house or a commercial real estate brokerage house to not use an attorney to supervise the actual documents of a transaction. That needs to be clear. He emphasized that the bill should be passed in its current state. 3:06:44 PM BARBARA RAMSEY, CHAIR, ALASKA REAL ESTATE COMMISSION, ANCHORAGE, (via teleconference) testified in support of the legislation, but expressed concern with page 8, lines 19-24. She recommended the deletion of Section 14. She stressed that the Commission does not want to regulate attorneys. 3:10:01 PM Representative Kelly asked if Ms. Ramsey is saying that the current statute provides that a broker could hire assistant brokers and retain attorneys to help review these files, and those costs are permitted to be taken by the broker from transaction fees. Ms. Ramsey clarified that an associate broker is already allowed in regulations - 12AAC.64.125, Section B. She pointed out that the provision regarding attorneys is not currently allowed. She opined that they should be paid as a business expense, as an employee. 3:11:59 PM Representative Rokeberg spoke in support of retaining Section 14. 3:13:38 PM Representative Croft noted concerns by the Real Estate Commission. He argued that any profession could be hired to look up documents, but its different when they get a portion of the fee because then they have an interest in the transaction. That is why real estate law is so specific about who gets the fee. 3:14:44 PM Representative Rokeberg maintained that Amendment 1 would conform the legislation. There is no intent for a "kick back". Co-Chair Meyer MOVED to ADOPT Amendment 1: Page 9, line 26, following "date": Insert "of secs. 1-11 and 16" Page 9, line 29, following "date": Insert "of secs. 1-11 and 16" Page 10, line 1, following "date": Insert "of secs. 1-11 and 16" Co-Chair Chenault OBJECTED for the purpose of discussion. Ms. Nobrega explained that the amendment would conform the effective dates to the appropriate sections. Co-Chair Chenault REMOVED his OBJECTION to adopt Amendment 1. There being NO OBJECTION, Amendment 1 was adopted. 3:17:54 PM Representative Croft MOVED to ADOPT Conceptual Amendment 2: Delete section 14, page 8, lines 14 - 25. Representative Rokeberg noted that some members of the Commission disagree with the concern over section 14. The issue is whether the Commission can properly supervise the lawyers. He did not agree with these concerns. He maintained that there is no formal position of the Commission. 3:18:32 PM Representative Hawker OBJECTED for the purpose of discussion. He referred to Ms. Ramsey's letter and disputed her concerns. He concluded that her objections were irrelevant to the issue at hand. Representative Kelly questioned if the broker alone is punished for infractions. 3:22:45 PM Representative Rokeberg replied that is correct. The broker is ultimately responsible. Representative Croft responded that there ought to be some power over the person that receives the fee. He concluded that the Commission should have control over the lawyers or the fee should be removed. He argued that the compensation should not be based on "their saying yes". 3:25:36 PM Representative Rokeberg directed the committee to page 8, line 23, "received by the broker". He explained that the broker receives the money and then allocates it to the attorney or associate broker. Direct compensation from commissions is not being given to the lawyer. 3:26:47 PM Representative Weyhrauch questioned why Section 14 would be necessary. The real estate broker may contract with and pay an attorney to assist the broker in real estate transactions. He observed applications of malpractice. 3:28:51 PM Representative Croft pointed out that the attorney's pay would be dependent on receiving a percentage of the broker's commission. He reiterated his concerns. Representative Weyhrauch maintained that attorneys would not base their pay on a commission. Ms. Nobrega noted that associate brokers and brokers are also dependent on receipt of the commission. Representative Weyhrauch stressed the importance of the public's trust of attorneys. 3:31:12 PM Ms. Ramsey agreed with remarks by Representative Croft. She noted that the Real Estate Commission approved the pursuit of legislation for post-licensing in March 4,2004. On February 8, 2005, she received the first draft of HB 169. She observed that the issue was first discussed on March thth 15. On the 24 of March she sent a letter addressing concerns to Representative Rokeberg. On April 4, she spoke with Representative Rokeberg about her concerns. The state association did not discuss the issue with the Commission, the entity that must enforce the provision. 3:34:11 PM Representative Rokeberg took exception to the objections. Representative Kelly suggested that the last sentence be dropped. 3:35:33 PM Representative Croft WITHDREW Conceptual Amendment 2. HB 169 was HELD for further consideration. 3:36:54 PM