HB 253 - MECHANIC/MATERIALMEN LIENS  1:14:39 PM CHAIR RAMRAS announced that the first order of business would be HOUSE BILL NO. 253, "An Act relating to the time periods affecting certain liens related to providing labor, material, service, or equipment to real property, including buildings and other improvements." 1:15:16 PM DON HEBIGER, Staff, Representative Jay Ramras, Alaska State Legislature, explained that HB 253 came at the request of constituents. This legislation extends by 30 days the period of time in which a mechanic or material man may work with a customer for payment or settlement of a bill or an invoice before being able to file a lien. Therefore, the time period would be changed from 90 days to 120 days. CHAIR RAMRAS, speaking as the sponsor, relayed that HB 253 addresses those who live in a diesel-dependant community. He explained that the harder a boiler works the more inclined it is to go out and rarely does the boiler go out during normal business hours. Therefore, bills for such services are often high and in cases in which there is other damage, such as water damage, the insurance claims can take time. Moreover, the check for insurance claims can be made to the occupant rather than the individual who actually performed the work/repair. Chair Ramras mentioned that the Home Builder's Association is opposed to HB 253 and believes that [the mechanic/material man] should secure a promise of payment for the work. 1:21:14 PM ROCKY PAVEY, President, Rocky's Heating Service, opined that small business is the economic backbone of any community. This legislation will help small businesses across the state in terms of securing payment for their hard work. The intent of HB 253, he offered, is to extend the amount of time allowed to file a mechanic's lien by another 30 days. He characterized it as a timing issue, and explained that when he does work for a customer at the beginning of the month, the bill isn't generated until the end of the month. Once customers receive the bill, they often feel they have 30 days to pay the bill. Therefore, companies face 60 days before payment is received from a multitude of customers. He noted that if a customer calls and requests an extension, it's often given. However, he said it shouldn't be at the company's own peril. In such a case, after 75-85 days of nonpayment the company faces making a judgment call around regarding whether to file a lien against the individual. [Chair Ramras passed the gavel to Vice Chair Dahlstrom.] MR. PAVEY characterized HB 253, which adds 30 more days, as a "win-win situation" for the contractor as well as the homeowner. After the 90 day period has expired, the company would know within 10-15 days whether the customer is going to pay or not. This legislation allows small businesses to provide better payment terms to customers without filing a lien, creating an adversarial relationship, and damaging the credit history of the customers. [Vice Chair Dahlstrom returned the gavel to Chair Ramras.] MR. PAVEY acknowledged that the Alaska Homebuilder's Association has pointed out that small businesses have the ability to file a notice of intent to lien. However, he said it doesn't necessarily work in the service industry as it does in new home construction when only one to two customers are dealt with once or twice a month. Mr. Pavey pointed out that it's very difficult to get a customer to sign something. Furthermore, there are often cases in which the property owner/landlord, business owner, or homeowner isn't present when the work is done. "It really is quite impractical to assume that we can file one of the notice of right to lien papers every single service call," he emphasized. Furthermore, to expect his technicians to track down owners to sign the notice of lien would create a massive amount of paperwork. The aforementioned would be unnecessary if HB 253 is passed. Mr. Pavey informed the committee that his company has lost tens of thousands of dollars, perhaps even hundreds of thousands of dollars, from customers who take advantage of the current 90-day timeframe. Providing the additional 30 days would weed out those customers who are struggling but intend to pay the bill from those who are working the system. Unlike an automobile repair shop or other shop to which equipment is brought to the shop, the heating services industry can't hold the equipment until payment is received. Mr. Pavey encouraged the committee to give careful consideration to HB 253. 1:27:49 PM REPRESENTATIVE GATTO asked Mr. Pavey whether any of his clients are opposed to HB 253. MR. PAVEY said that he didn't know. However, he didn't believe providing extra time to pay the bill would negatively impact his customers. He reiterated his belief that HB 253 is a "win-win situation." In further response to Representative Gatto, Mr. Pavey related that colleagues who perform similar work, including plumbing, mechanics, or electrical, and with whom he has spoken are in support of [HB 253]. Mr. Pavey reiterated that the 120 days provides the extra days necessary to weed out those who absolutely aren't going to pay versus those who will. With regard to the suggestion of a time period of 180 days, he said that the longer he has to work with the customer the better. Still, 120 days is sufficient. CHAIR RAMRAS noted that Lobbyist Ashley Reed and bankers are opposed to HB 253. He further noted that bankers don't want another entity before their lien. MR. PAVEY, in response to Chair Ramras, shared examples of services his company provides and the price of each. For example, the standard rate for annual servicing is $325; after- hours calls incur an additional $50 fee. 1:31:42 PM GRACE RUDY, Overhead Door Company, concurred with Mr. Pavey's testimony. In response to questions, Ms. Rudy indicated that her company also has after-hours callouts for which the owner of the building isn't really known. In these cases, the company is going on a call in good faith, trusting that the customer will pay the bill. She informed the committee that the Overhead Door Company charges $120 an hour during normal hours and $180 an hour for after-hour calls. The company also charges for travel. Therefore, a service call will be a minimum of $120. In further response to questions, Ms. Rudy related that the Overhead Door Company employs an average of 13 employees and Rocky's Heating Service employs 16 employees. 1:34:12 PM WAYNE LONG, Wayne's Air Supply, concurred with the comments of the previous two speakers. He related that he's currently working with an insurance company that owes him $5,000. In response to questions, he recounted the specifics of the case in which he performed work for a customer who made a claim with an insurance company that says the check is the mail while the homeowner has a different story. He noted that companies want to be fair and just and the extra time would be helpful in making the decision whether to file a lien. 1:36:14 PM JIM SLATER, Slater Construction, offered his belief that extending the time period beyond 120 days would be beneficial. He related that he has been in numerous situations in which he has had to place a lien on a customer's property. He recounted an example wherein the existing lien timeframe of 90 days was insufficient to prevent court services and paperwork, which are expensive. For small repair services the 120 days should be fine, however, for contractors a longer time period would be more appropriate as it would limit or minimize issues for the homeowner, subcontractor, and suppliers, all of which are at a disadvantage under the 90-day time period. He opined that a 180-day time period would be more advantageous for everyone. If a lien needs to be filed, there are other issues, such as honesty and credibility, involved beyond just the funds owed. In response to questions, Mr. Slater informed the committee that he is a general contractor who either works on his own or subcontracts out his work with bills that total $10,000 or more. Although extending the timeframe is desirable, he suggested that the lien issues should be reviewed as well. He informed the committee that when claims are filed, it doesn't go to small claims court because it involves property and deeds of trust, which are Alaska Superior Court issues. Due to the amount of cases in Fairbanks, it can take a year to a year-and-a-half to merely obtain a court date at the Alaska Superior Court. 1:40:26 PM REPRESENTATIVE GRUENBERG offered his understanding that HB 253 will benefit homeowners as well as companies since it will help avoid additional legal fees. CHAIR RAMRAS highlighted the difficulty some have when trying to pay their [service/repair] bills as well as home heating bills. He reiterated the further costly impact of diesel-dependent communities. He then reviewed the next committee of referral for HB 253, which is the House Rules Standing Committee. MR. PAVEY, in response to comments, reiterated that HB 253 will provide one more tool by which to protect his business's financial well-being, and in turn that of his clients. He, again, characterized HB 253 as a "win-win situation." 1:47:05 PM REPRESENTATIVE GATTO asked whether the goal of HB 253 could be accomplished through a borough ordinance. CHAIR RAMRAS answered that he didn't believe so, as it's in statute. He opined that it's likely a similar issue in other communities and thus would be meaningful throughout the state. He noted that the smaller the business the less access it has to the legal system due to the cost and the time involved. This legislation protects small contractors and allows for those who are merely slow to pay rather than those who just aren't going to pay. MR. PAVEY concurred. REPRESENTATIVE GATTO noted, however, that ordinances can make statutes more restrictive. Therefore, he asked if the time period could be reduced by an ordinance, even if the legislation is passed. REPRESENTATIVE GRUENBERG replied no, adding that's because of the language of HB 253. CHAIR RAMRAS, after ascertaining that no one else wished to testify, closed public testimony on HB 253. REPRESENTATIVE HERRON disclosed that passage of HB 253 would benefit the small businesses he owns in Bethel. REPRESENTATIVE GRUENBERG objected, thus requiring Representative Herron to vote. 1:51:18 PM REPRESENTATIVE DAHLSTROM moved to report HB 253 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 253 was reported from the House Judiciary Standing Committee.