HB 267 - REAL ESTATE SALES LICENSEES/COM'N 1:03:03 PM CHAIR GATTO announced that the first order of business would be HOUSE BILL NO. 267, "An Act relating to the Real Estate Commission; and providing for an effective date." [Before the committee was CSHB 267(L&C).] CHAIR GATTO directed the committee's attention to Amendment 1 labeled 27-LS1111\B.2, Martin, 2/17/12. The committee took an at-ease from 1:04 p.m. to 1:06 p.m. 1:07:02 PM REPRESENTATIVE THOMPSON made a motion to adopt Amendment 1, labeled 27-LS1111\B.2, Martin, 2/17/12, which read: Page 4, following line 4: Insert a new bill section to read: "* Sec. 2. AS 08.88.305 is amended by adding a new subsection to read: (b) A person licensed as an associate real estate broker or a real estate salesperson may not be employed to perform activities requiring licensure under this chapter for more than one licensed real estate broker." Renumber the following bill sections accordingly. REPRESENTATIVE HOLMES objected for discussion purposes. 1:07:20 PM REPRESENTATIVE CATHY MUNOZ, Alaska State Legislature, speaking as one of the joint prime sponsors of HB 267, explained that Amendment 1 doesn't change any language in the legislation; rather, it provides clarification of the intention stated in the amendment. CHAIR GATTO added that Amendment 1 ensures that an individual may only work for one broker. Without Amendment 1, he opined, the existing language in CSHB 267(L&C) allows a licensed real estate assistant to work for more than one broker because the language doesn't prohibit it. Amendment 1 clarifies the legislation to ensure that [a licensed real estate broker] can only work for one broker. REPRESENTATIVE GRUENBERG surmised that Amendment 1 addresses ambiguity in Section 2 and inquired as to what the existing Section 2 does as opposed to what Section 2, as amended by Amendment 1, would do. 1:10:17 PM HILARY MARTIN, Attorney, Legislative Legal Counsel, Legislative Legal and Research Services, Legislative Affairs Agency (LAA), as the drafter, explained that the existing statute in Section 2 could have been read in different ways. The language could have been read to allow a licensed assistant to work for someone other than the broker that employs that licensed assistant. Therefore, the licensed assistant could have worked in another broker's office. The existing language could have also been read to mean that a licensed assistant could work for someone other than the broker who employs that licensed assistant. The [proposed] language in Section 2 clarifies that "a licensed assistant ... can work as a licensed assistant to another licensed salesperson or associate real estate broker as long as they both work for the same broker". CHAIR GATTO related his understanding that the original language allowed a [licensed assistant] to work for more than one licensed real estate broker because there was no prohibition. Therefore, he opined that the existing language wasn't unclear to him and he questioned whether it was unclear to [Ms. Martin] and that the language restricted the [licensed assistant to work for] only one broker. MS. MARTIN offered her belief, "The original language, it could have been read that you could work for another broker or it could have meant other than the broker who employs the salesperson, it could have been referring to the licensed person you're working for so that you could work for a different broker or you could work for a different licensee that's not the broker in your office." She opined that the language didn't clearly state that one could work for only one licensed real estate broker. CHAIR GATTO asked whether Amendment 1 would allow [a licensed assistant] to work for a broker in another state or another country. MS. MARTIN answered that she didn't know, but pointed out that it could be dependent upon how "licensed real estate broker" is defined. The committee took an at-ease from 1:14 p.m. to 1:16 p.m. REPRESENTATIVE GRUENBERG questioned whether Section 2 [in CSHB 267(L&C)] is necessary if the new Section 2 is clear. CHAIR GATTO pointed out that Section 2 [in CSHB 267(L&C)] consists of five paragraphs. In further response to Representative Gruenberg, Chair Gatto agreed with Representative Gruenberg that in Section 2, paragraphs (1)-(5) [of CSHB 267(L&C)] are conjunctive rather than disjunctive. REPRESENTATIVE HOLMES related that in the House Labor and Commerce Standing Committee it was clarified that in Section 2, paragraphs (1)-(5) are conjunctive and thus include all five paragraphs. REPRESENTATIVE GRUENBERG said that if those paragraphs remain, he would then make a motion to insert "and" [between paragraphs (4) and (5)] in order to ensure there is no question that those are conjunctive. 1:17:57 PM REPRESENTATIVE GRUENBERG inquired as to what the proposed Section 2 in Amendment 1 would do that Section 2 in CSHB 267(L&C) doesn't. MS. MARTIN offered her belief that a licensed assistant is a separate arrangement and this clarifies that one can only work as a licensed assistant to a licensed salesperson or a licensed real estate broker and the licensed assistant has to work for someone who works for the same broker as the licensed assistant. In further response to Representative Gruenberg, Ms. Martin confirmed that she believes that [the language in Section 2 of CSHB 267(L&C) and the language in proposed Amendment 1] are appropriate. CHAIR GATTO posed a scenario in which a [licensed assistant] working in Canada wanted to also work in Alaska. MS. MARTIN pointed out that the individual would have to be licensed in Alaska in order to work for a broker in Alaska. She related her understanding that the individual would have to relinquish their broker's license [as is the case when a broker has a license] from another state. CHAIR GATTO highlighted that that's true for brokers, but this is a discussion about a licensed real estate salesperson. The question he said is whether a licensed real estate salesperson in Whitehorse, Canada, could fly to Anchorage, Alaska, to request employment with a second broker. Therefore, he questioned whether Alaska's law would only apply to a second broker in the same state and exclude the rest of the planet. MS. MARTIN said she believed so. REPRESENTATIVE LYNN noted that licensees other than the real estate broker aren't really employees but rather independent contractors. Therefore, he questioned whether the term employee should be used under employment. CHAIR GATTO directed attention to the language on page 4, lines 19-22, and asked if that refers to the broker. REPRESENTATIVE LYNN reiterated that the licensed real estate salesperson is an independent contractor and it would be extremely rare not to be. However, a situation in which a licensed assistant who doesn't perform listings or sales but simply works for a broker may well be an employment situation. Those independent contractors working for the broker are paid a share of the commission; the [independent contractor] isn't paid directly but rather is only paid by the broker. Therefore, the language needs to clarify that typically the employment situation only apples to a licensed assistant who is working for a wage rather than a commission. 1:22:09 PM REPRESENTATIVE GRUENBERG indicated agreement with Representative Lynn's comments. However, he suggested that it would be easier to utilize the existing Section 2 of CSHB 267(L&C) and amend it as follows: Page 4, line 10, preceding "if": Insert "only" Page 4, line 22, following ";": Insert "and" REPRESENTATIVE GRUENBERG also suggested inserting a new subsection to read: "The person licensed as an associate real estate broker or a real estate salesperson is not employed to perform activities [requiring licensure under this chapter for more than one licensed real estate broker.]" The aforementioned approach would result in everything being in one place in statute as the current drafting is a bit confusing, he opined. With regard to Representative Lynn's concern regarding the use of the term "employed", Representative Gruenberg suggested seeking the advice of the industry. 1:26:01 PM DON HABEGER, Director, Division of Corporations, Business, and Professional Licensing, Department of Commerce, Community & Economic Development (DCCED), said he, too, would defer to industry in regard to the use of the terms "employed by" or "contracted with". 1:26:56 PM ERROL CHAMPION, President, Southeast Alaska Board of Realtors; Member, Board of Directors, Alaska Association of Realtors, informed the committee that although he has a broker's license, the regulations are written in such a way that since he works for a broker as a licensed independent he is referred to as an associate broker. There can only be one broker per organization. Mr. Champion stated that he could work for himself and be an independent broker. He then related support for HB 267. CHAIR GATTO inquired as to whether Mr. Champion is an employee of the broker or a contractor of the broker. MR. CHAMPION clarified that he is a licensed independent contractor. CHAIR GATTO surmised then that Mr. Champion isn't an employee. MR. CHAMPION related that in terms of normal employee relations, no benefits are provided and he has to function on his own. However, he cautioned the committee that may not be the case for every broker in Alaska because he knew that some brokers have employees, albeit these employees don't practice real estate. CHAIR GATTO clarified that the legislation only addresses associate real estate brokers and real estate salespersons. He clarified that he wanted to ascertain, under the rules of a contractor, whether there are employees who do the same thing as the [licensed independent] contractor. MR. CHAMPION explained that he could employ a licensed assistant to help him with his work. CHAIR GATTO surmised, though, that such an assistant wouldn't be a real estate salesperson or licensed associate [real estate broker]. MR. CHAMPION informed the committee that the assistant is licensed by the Division of Corporations, Business, and Professional Licensing and has taken training and passed the test. In further response to Chair Gatto, he acknowledged that the assistant would be working for him. CHAIR GATTO inquired as to whether the [licensed assistant] is employed by the broker. MR. CHAMPION stated that the license of the [licensed assistant] must hang in the office of the broker. In response to Representative Lynn, Mr. Champion confirmed that the [licensed assistant] doesn't perform listings and sales. REPRESENTATIVE LYNN likened licensed assistants to legislative staff as licensed assistants make phone calls, address escrow matters, coordinate with the lender, etcetera. Without a license it's very easy to venture into licensed activities, he opined. Therefore, in order to prevent [an assistant] from venturing into licensed activities, there's a real estate license and the licensed assistant is paid a wage rather than a commission. MR. CHAMPION stated his agreement. 1:30:53 PM REPRESENTATIVE LYNN further clarified that a licensed salesperson receives a commission. The money from the real estate sale goes to the broker only and the broker gives the licensee a percentage of that sale, depending upon the commission split. He surmised, though, that the licensed assistant typically receives a wage not a commission. He reiterated his earlier comments that it's very easy for someone to unwittingly do something that only a real estate licensee is allowed to do. CHAIR GATTO posed an example in which he decides to sell his house and calls a [real estate] agent rather than a broker. The agent secures a buyer for the house. The agent works for the broker and sometimes there are two brokers, one for the seller and one for the buyer. REPRESENTATIVE LYNN explained that although a licensee may fill out the paperwork for the listing, the listing belongs to the broker. Oftentimes, when a licensee goes to a different broker, the listings of the licensee remain with the first broker as does any commission that results from that listing/sale. MR. CHAMPION agreed with Representative Lynn's explanation and reiterated that all listings belong to the brokers not the agent. Furthermore, if an agent moves from one broker to another, it would be up to the broker under which the listing was obtained to determine whether the agent can take the listing. He doubted that the agent would be allowed to take the listing to his/her new broker. 1:33:28 PM REPRESENTATIVE LYNN disclosed that he is a licensed Alaska real estate associate broker, and thus he has a conflict of interest. REPRESENTATIVE GRUENBERG observed that the term "employs" is in current law. He suggested that any use of that term throughout the legislation should be reviewed regarding whether it should be changed or a definition of it specified in the legislation. CHAIR GATTO pointed out that the term "employed" can be found in AS 08.88.305 as follows: Sec. 08.88.305. Multiple business operations. A person licensed as a real estate broker may own, operate, or be employed by multiple corporations, partnerships, or other business organizations engaging in activities for which a license is required under this chapter, provided that each business organization is registered with the commission, and that the principal offices of all of the business organizations share a single physical address. REPRESENTATIVE HOLMES related that the term "to employ" is defined in a dictionary as "to either engage the services of or provide a job that pays wages". Therefore, she surmised that the term "employ" includes contract. If the desire is to change the language, she suggested that it should be changed to "employ and contract with" throughout the legislation. 1:35:30 PM REPRESENTATIVE PRUITT expressed the need to be cautious because the Internal Revenue Service (IRS) separates the two and there are 20 different distinct criteria. Therefore, he suggested seeking council from Legislative Legal and Research Services. CHAIR GATTO agreed. He then directed attention to AS 08.88.910, as follows: Sec. 08.88.910. Application to independent contractors. The provisions of this chapter that apply to employment relationships and employees also apply to contracting relationships and independent contractors. REPRESENTATIVE GRUENBERG recalled that provision was enacted in 1998. Prior to 1998, either a court/agency adjudicated whether a person was truly an employee when they have many of the indices of being an employee. The broker just said that [the employee] is an independent contractor so that the broker wouldn't have to withhold wages, taxes, and etcetera. He opined that it has been a big deal in the real estate industry. CHAIR GATTO surmised then that withholding is another hitch. REPRESENTATIVE LYNN mentioned that independent contractors are also responsible for their own working hours. Independent contractors are in business for themselves. REPRESENTATIVE HOLMES ventured her belief that AS 08.88.910 does clarify that within this entire chapter, references to employment relationships and employees also refers to contracting relationships and independent contractors. Therefore, she opined that the terms "employ" and "employment" can be used. REPRESENTATIVE PRUITT agreed that it seems that state law has done due diligence to provide clarity in this particular section, but it doesn't mean that the clarity exists for the IRS. REPRESENTATIVE THOMPSON withdrew Amendment 1. 1:44:27 PM REPRESENTATIVE GRUENBERG made a motion to adopt Conceptual Amendment 2, as follows: Page 4, line 10, preceding "if": Insert "only" Insert a new subsection to read: "The person licensed as an associate real estate broker or a real estate salesperson is not employed to perform activities requiring licensure under this chapter for more than one licensed real estate broker;" Renumber accordingly. Page 4, line 22, following ";": Insert "and" REPRESENTATIVE HOLMES objected for discussion purposes. The committee took an at-ease from 1:48 p.m. to 1:52 p.m. MS. MARTIN said that if the intent is to clarify for whom a licensed assistant can perform those activities, then Conceptual Amendment 2 accomplishes that. REPRESENTATIVE HOLMES expressed the need to ensure no ambiguities are created in terms of what people can and can't do by placing the language in the subsection rather than the statute as a whole. MS. MARTIN offered that Conceptual Amendment 2 would clarify licensed assistants but not change anything else currently in statute. She explained that she originally proposed a separate subsection in Amendment 1 because she understood the goal was to have it be a rule for every licensed real estate salesperson or associate real estate broker. However, if the intent is to merely refer to licensed assistants, then it's fine as a [paragraph]. In response to Chair Gatto, Ms. Martin explained that a licensed assistant has to be licensed and thus would have to be a real estate salesperson or an associate real estate broker. In further response to Chair Gatto, she related her understanding that a licensed assistant is a special relationship that is entered into separate from other relationships, which is why there is a separate subsection addressing licensed assistants. 1:55:58 PM REPRESENTATIVE HOLMES noted her understanding that the sponsor of HB 267 is amenable to Conceptual Amendment 2. MS. MARTIN directed the committee's attention to existing AS 08.88.398, which in part says: A licensed real estate salesperson or licensed associate real estate broker may act as a licensed assistant to a real estate licensee other than the broker who employs the salesperson or associate broker if MS. MARTIN said that language is referring to a licensed individual who acts as an assistant to another licensee. In response to questions, Ms. Martin opined that the use of the language "may act" is fine since the relationship [between the licensed assistant and another licensed salesperson or associate real estate broker] is clarified by paragraphs (1)-(5). REPRESENTATIVE HOLMES removed her objection to Conceptual Amendment 2. There being no further objection, Conceptual Amendment 2 was adopted. 2:00:54 PM REPRESENTATIVE GRUENBERG made a motion to adopt Amendment 3, labeled 27-LS1111\B.1, Martin, 2/14/12, which read: Page 1, line 1, following "Commission;": Insert "relating to temporary permits issued by  the Real Estate Commission; relating to licensed  assistants who are employed by other real estate  licensees; relating to contributions by a real estate  licensee to a charitable organization;" REPRESENTATIVE HOLMES objected for discussion purposes. REPRESENTATIVE GRUENBERG asked if, in light of the prior changes, Amendment 3 "will do the trick." MS. MARTIN replied yes. REPRESENTATIVE HOLMES withdrew her objection to Amendment 3. There being no further objection, Amendment 3 was adopted. CHAIR GATTO asked whether the passage of CSHB 267(L&C), as amended, would prevent an individual from working for a broker in Los Angeles in the winter and then working for a broker in Anchorage in the summer. He said he isn't in favor of preventing an individual from working two jobs, which it seems to do because the legislation says [the licensed assistant] can work for only one broker. REPRESENTATIVE LYNN explained that he was a licensed broker in California and after moving to Alaska obtained an Alaska license. The California license was inactive once he was in Alaska, but had he returned to California he could've worked in California. Although he could have actively practiced in both states, he couldn't practice in California because he wasn't with a broker in California. In further response to Chair Gatto, Representative Lynn recalled that a [licensee] moving to another state to work does have to take action. He informed the committee that he is a licensee now, but since being in the legislature he has been in referral status only. REPRESENTATIVE GRUENBERG referred to AS 08.88.161, which says: "Sec. 08.88.161. License required. Unless licensed as a real estate broker, associate real estate broker, or real estate salesperson in this state, a person may not, except as otherwise provided in this chapter," 2:07:10 PM CHAIR GATTO clarified that he is trying to ascertain whether an individual can hold multiple licenses [from various states]. MR. CHAMPION specified that in Alaska one must have an Alaska license to practice real estate. CHAIR GATTO pointed out that the language specifies that an individual may only work for one real estate broker. He posed a scenario in which a licensed individual works for a broker in Los Angeles and doesn't deactivate his California license while living in Alaska. In such a situation, could the licensed individual work for a broker in Alaska. He likened this situation to a driver's license in that an individual who obtains a driver's license in one state, but moves to another state has to forfeit their driver's license from the state from which they move before being allowed to obtain a driver's license from the state to which they moved. MR. CHAMPION explained that in Alaska a real estate license is a two-year license. He further explained that he could request his license to be inactive and continue to pay a fee and his Alaska real estate license would continue to be with the broker for which he works. During that time in which his Alaska real estate license is inactive, in another state he could acquire a license to the point of being a broker. If he were to return to Alaska and wanted to practice real estate, he would have to reactivate his Alaska license. CHAIR GATTO asked if in the aforementioned situation, Mr. Champion would have to deactivate his real estate license from another state. MR. CHAMPION said he couldn't speak to the rules of other states. 2:09:32 PM NORMAN ROKEBERG, Alaska Real Estate Coalition, explained that it's allowable for an individual to work with referrals or an out-of-state broker to work with an Alaskan licensee. He then related his belief that one can have licenses from various states and practice real estate in those states. With regard to HB 267, Section 2 specifically relates only to licensed assistants. As a point of clarification, Mr. Rokeberg stated that there could be assistants in employment relationships that aren't licensed. Regarding Amendment 2, Mr. Rokeberg said that if it relates only to AS 08.88.398, then it's agreeable to him. He opined that there shouldn't be any problems or questions regarding cooperation or interstate commerce as it relates to real estate transactions. REPRESENTATIVE GRUENBERG disclosed that his late father was an industrial real estate broker in California and worked in various states. He surmised that the aforementioned would continue to be permissible upon passage of HB 267. MR. ROKEBERG concurred, adding that the only question revolves around the real estate licensed assistant. He told the committee he is currently representing the Alaska Real Estate Coalition, which consists of (indisc.) and real estate licensees that aren't necessarily members of the Realtors Association; these are individuals who are interested in enhancing the public policy and education of Alaskans regarding issues of real property and other real estate issues. Mr. Rokeberg related support for HB 267. 2:15:27 PM DAVID SOMERS, Industry Issues Chairman, Alaska Association of Realtors, related that he has been a broker in Fairbanks for 47 years. He then related his support for [CSHB 267(L&C), as amended]. CHAIR GATTO, after having ascertained that no one else wished to testify, closed public testimony on HB 267. REPRESENTATIVE PRUITT inquired as to what the licensed assistant does. MR. CHAMPION offered his understanding that a "licensed assistant" is a contracted individual that is different than a full licensee that represents buyers and sellers, an associate broker who has taken advanced training and acquired the broker's license, and the broker. A licensed assistant is simply an individual that likely works guaranteed hours with guaranteed earnings. A licensed assistant enjoys the rights a license provides, such that the licensed assistant can show property, discuss terms and conditions, and go out on appraisals and inspections. A regular employee can't do the aforementioned, he said. In fact, statute prohibits a regular employee from discussing many details of a real estate sale, including the price. REPRESENTATIVE LYNN concurred, adding that basically licensed assistants perform those duties that a salesperson is too busy to do, such as coordination with loan companies, advertising, escrow issues, and showing property. He echoed his earlier comment that licensed assistants don't receive a commission. He then reminded the committee that if any of the aforementioned duties are performed by an unlicensed individual, it would be problematic. In response to Chair Gatto, Representative Lynn confirmed that a homeowner can put his own home for sale without having a license. 2:20:02 PM REPRESENTATIVE PRUITT surmised then that a broker and an assistant broker will be able to go to California and sell real estate. He questioned whether a licensed assistant [in Alaska] would be able to go to California and work at a real estate agency in California. MR. CHAMPION replied yes, but clarified that the individual must have a license from the state in which he is practicing real estate. MR. ROKEBERG added that it's important to understand that under the contractual employment relationship between a broker or an associate broker and another sales agency as an assistant, the assistant remains under the umbrella of the broker. The broker has to supervisor the licensee, which is a standard practice. Mr. Rokeberg opined that a [licensed assistant] couldn't practice in various states. REPRESENTATIVE PRUITT recalled that the discussion has been that [a licensed assistant] isn't an employee. He opined that if [a licensed assistant] holds a license [in one state and then moves to another state for work], there is no reason he/she should have to forfeit his/her license in the state from which he/she originally was licensed. He clarified that his concern is regarding whether this legislation prohibits a licensed assistant from practicing in another state in which he/she is licensed and then from working as a licensed assistant in the state in which he originally holds a license and to which he returns. CHAIR GATTO inquired as to the situation in which a licensed assistant wants to move within Alaska, say between Fairbanks and Anchorage. REPRESENTATIVE LYNN explained that a licensee working for a licensed broker can go anywhere in Alaska to list and sell property. Although typically there would be a referral from a broker or a salesperson in the area, there's nothing stopping the licensee from taking a listing anywhere in the state. Representative Lynn clarified that a licensee can't work for two brokers within the state, either simultaneously or independently. 2:26:50 PM REPRESENTATIVE THOMPSON moved to report CSHB 267(L&C), as amended, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, 2d CSHB 267(JUD) was reported from the House Judiciary Standing Committee.