HOUSE BILL NO. 81 "An Act relating to an exemption from the regulation of construction contractors." REPRESENTATIVE CATHY TILTON, SPONSOR, provided a brief summary of the bill. She explained that HB 81 related to the licensing of residential contractors. The bill did not prevent owner-built Alaskan housing, selling an owner-built home, or propose a new licensure. Due to a loophole in current law, the "owner-builder exemption" created a situation where unlicensed contractors had engaged in business while avoiding requirements for licensing, bonding, and insurance. She reported that the language change in the new committee substitute was developed through discussions between the Homebuilders Association, individual Alaskans, and the Department of Labor and Workforce Development. The bill "reasonably" included all individuals engaged in home construction as a regular course of business under the existing residential contracting licensure. She relayed personal experience of building her own home and stated that its common practice for people living in rural areas to construct their own home. She noted that according to existing statute an owner-builder was allowed to sell their home after two years. DANIEL BELLERIVE, STAFF, REPRESENTATIVE CATHY TILTON, reviewed the sectional analysis (copy on file) for the committee substitute (CS). He read the analysis from a prepared document: Section 1(Page 1,lines 3-8) - Section 1adds a new section stating that the intent of this bill is not to limit the freedom and ability of a person to construct or sell their own home. Section 2 (Page 1,lines 9-15) - Section 2 adds a new subsection directing that the department shall investigate and take action if the notice and circumstances of a sale under AS 08.18.161(11) indicate that the owner is operating a business that requires them to register as a contractor under this chapter. Section 3 (Page line 1through Page line 11) - Section 3 accomplishes three things. 1. Page 2, lines 23-25 adds clarification explicitly stating that AS 08.18.161(9) refers to existing structures. 2. Page 2, lines 30 and 31 expand the exemption in AS 08.18.161(11) to include owners acting as their own contractor, as well as hired workers or subcontractors. Previously this exemption strictly applied to workers hired on an hourly basis. 3. Page 3, lines 3-7 add a requirement for an owner- builder to provide notification if they advertise or sell their home build under AS 08.18.161(11) before the two year period in statute. Section 4 clarifies that for the purposes of this section, construction begins when the owner begins the actual construction work or enters into an agreement labor, act as a subcontractor, or provide materials for the construction. 3:18:02 PM Representative Gattis wanted clarification about when construction ended. She wondered whether an owner-builder could sell their house if it was not completed and the owner discontinued construction. Mr. Bellerive replied that regardless of the level of completeness if the construction was ceased then the period of construction was over and the owner could sell the house. Representative Gattis asked whether the owner had to fill out a form or notify government in order to sell the unfinished house. Mr. Bellerive responded in the negative. Representative Guttenberg referenced the two year period provision and wanted to know the legal definition of the period of construction. Mr. Bellerive answered that a specific definition for a period of construction did not exist in statute. He indicated that the two year period referred to the two year period after the construction ended. He added that regardless of the level of completion the house could be sold two years after construction had ceased. Representative Guttenberg referred to page 3, line 5, the words, "…on forms provided by the department." He wondered how the home builder found out that a form had to be filled out in order to sell the house, especially if the owner was not using a bank or realtor. He asked how the state was going to monitor owner-built house sales by owner. Mr. Bellerive replied that an owner-builder living in the house would qualify for exemption 9 and was further protected from any obligation to submit notice. He cited page 2, line 23 and read the following: (9) [(10)] a person working on and existing structure on that person's own property, whether occupied by the person or not, and a person working on that person's own existing residence, whether owned by the person or not… Mr. Bellerive detailed that the definition of a residence was "an existing home being a residence previously occupied as a residence." Regardless of what the subjective view of a completed home was, if the owner-builder was claiming the house as a residence exemption 9 applied instead of exemption 11. Representative Guttenberg was still unclear about what the difference was between exemption 9 and exemption 11. He read page 3, lines 3 through 5: …an owner who advertises the structure under construction for sale or sells the structure during the period of construction or within two years after the period of construction ends shall file, on forms provided by the department… Co-Chair Thompson voiced that the bill was not moving out of committee today and he would help provide clarity at a later date. 3:23:40 PM Representative Kawasaki referred to the new language under exemption 11. He deduced that the language seemed to place the obligation on the person selling the house to obtain the forms. He was uncertain about "the effect" of the language. Mr. Bellerive deferred to the department. Representative Gara surmised that the provision only applied to an owner-builder and not someone assisting with the construction. He asked for confirmation. Representative Tilton confirmed the statement was correct. Representative Gara provided a scenario where someone build a cabin and occupied it unfinished for a period of over 10 years then finally completed construction and sold it after two years. He wondered how that was allowed under the bill. Mr. Bellerive commented that in the particular scenario the only requirement for the owner would be to notify the department. He reported that the department did not have the authority to prohibit someone from selling their own property and emphasized the use of the word notify, since permission was not required. The notification ensured that the sale was not viewed as a business transaction. HB 81 was HEARD and HELD in committee for further consideration. 3:27:08 PM Co-Chair Thompson reviewed the agenda for the following morning meeting.