SENATE LABOR AND COMMERCE COMMITTEE January 27, 1998 1:38 P.M. MEMBERS PRESENT Senator Loren Leman, Chairman Senator Jerry Mackie, Vice Chairman Senator Tim Kelly MEMBERS ABSENT Senator Mike Miller Senator Lyman Hoffman COMMITTEE CALENDAR SENATE BILL NO. 235 "An Act extending the termination date of the Board of Certified Real Estate Appraisers." HEARD AND HELD SENATE BILL NO. 195 "An Act relating to common law liens, to remedies, costs, and fees imposed for the registration, filing, or recording of certain nonconsensual common law liens, and to penalties for recording common law liens." MOVED SB 195 OUT OF COMMITTEE PREVIOUS SENATE COMMITTEE ACTION SB 235 - No previous action to consider. SB 195 - No previous action to consider. WITNESS REGISTER Ms. Catherine Reardon, Director Division of Occupational Licensing Department of Commerce and Economic Development P.O. Box 110806 Juneau, AK 99811-0806 POSITION STATEMENT: Supported SB 235. Mr. John B. Wolfe, Chairman Board of Certified Real Estate Appraisers P.O. Box 240365 Douglas, AK 99824 POSITION STATEMENT: Supported SB 235. Mr. Tim Benintendi, Staff Senator Tim Kelly State Capitol Bldg. Juneau, AK 99811-1182 POSITION STATEMENT: Commented on SB 195. Mr. Doug Wooliver, Administrative Attorney Alaska Court System 820 W. 4th Ave. Anchorage, AK 99501 POSITION STATEMENT: Supported SB 195. Mr. Cliff John Groh, Atty. Municipality of Anchorage P.O. Box 196650 Anchorage, AK 99519 POSITION STATEMENT: Supported SB 195. Ms. Sharon Young, State Recorder 3601 C Street, #1180 Anchorage, AK 99503 POSITION STATEMENT: Supported SB 195. ACTION NARRATIVE TAPE 98-2, SIDE A Number 001 SB 235 - BOARD OF CERTIFIED REAL ESTATE APPRAISERS CHAIRMAN LEMAN called the Senate Labor and Commerce Committee meeting to order at 1:38 p.m. and announced SB 235 to be up for consideration. MS. CATHERINE REARDON, Director, Division of Occupational Licensing, supported SB 235. She noted there was a $0 fiscal note, although there is a cost of $35,500 for the Board of Real Estate Appraisers that is already built into their budget. They agreed that it is in the public's interest and necessary due to federal requirements to have licensing of real estate appraisers. SENATOR LEMAN asked if there were other issues regarding real estate appraisers that she would like to mention. MS. REARDON answered not at this time. Number 63 MR. JOHN WOLF, Chairman, Real Estate Appraisers Board, supported SB 235. He said the Board has identified three areas that would require statutory change. The first in priority is to license trainees. Currently it's just an option. The change would be to AS 08.87.310 (a). The reason is that now there are only five certified trainees in Alaska and there are many more than that who are working as appraisal assistants. They are unlicensed and under the supervision of a certified appraiser, but there is no requirement for them to have any training whatsoever. Board members know of some people who function in this capacity for three or four years and actually complete appraisal reports and have it co-signed by the supervising appraiser. Approximately half of the United States require licensing of trainees now. The Board's next concern is mandatory state certification of all real estate appraisers. Currently State law says you must be a certified appraiser only for federally related transactions. This means any privately funded sales transactions can be done by someone who is not certified. Finally, the Board would like to increase the continuing education requirements to 40 hours for each biannual renewal period. Currently the number of hours required is in regulation, but under AS 08.87.020 (3) there is a requirement that we not exceed the federal minimums in education and training experience. So we are capped at whatever the federal minimum is. MR. WOLF said that currently there are 174 certified appraisers - 83 of them are general appraisers who appraise commercial properties and 84 residential appraisers. There are five trainees and two courtesy licenses issued to out-of-state appraisers. SENATOR KELLY asked if a general appraiser could appraise residential property. MR. WOLF answered yes, but a residential appraiser can appraise anything up to 10 units as long as the income is not required in the appraisal. CHAIRMAN LEMAN asked if there was consensus on these issues within the profession. MR. WOLF replied that all of these things were approved by the Board unanimously, but there are probably differing opinions within the industry. He hasn't found anyone against the licensing of trainees. CHAIRMAN LEMAN commented he couldn't see why anyone would care about being licensed if they were already doing work under a certified appraiser. MR. WOLF replied there is a quality issue in terms of the report that is completed by someone who is not certified competing with a report by someone who is fully certified. CHAIRMAN LEMAN asked if they had a professional society that discussed this issue like engineers have. He would never think of signing off on someone else's work unless he was integrally involved in preparing it. MR. WOLF responded that they both work to higher standards than some other people. CHAIRMAN LEMAN asked if charges had ever been brought against anyone who is operating this way. MS. REARDON resounded from the audience negatively. CHAIRMAN LEMAN asked the committee if they had any problems with amending the bill to include these changes if they had support from within the profession. SENATOR KELLY replied that one of his concerns is not if they have support in the profession, but from people who are trying to join the profession. In his experience, these types of boards tend to try to raise the gates on new entries creating monopolies for a small group of people. SENATOR MACKIE agreed with Senator Kelly and suggested leaving the bill as it is and dealing with the other issues in separate legislation. He moved SB 235 from committee with individual recommendations. CHAIRMAN LEMAN objected for purposes of discussion. MR. WOLF responded that the Board had no problem with the bill going through in its current form. He was merely expressing three items that they recently adopted. He explained that the mandatory licensing would affect some people who are doing appraisals and are not involved in a federally related transaction, but it wouldn't change any current standard or requirements for becoming an appraiser. It's just that during that period of time when you're gaining experience, the required 1,500 hours in a 24-month period, you would be a trainee rather than unlicensed appraiser. SENATOR KELLY asked what the advantage was if you are putting in the same amount of time. MR. WOLF answered that there are people functioning as an assistant who have absolutely no intention of ever becoming an appraiser and have never taken any training or education. SENATOR KELLY asked if they want to license trainees, were they talking about adding some kind of educational requirement. MR. WOLF responded that there is now a 75-hour requirement in place. They are not adding a trainee classification. CHAIRMAN LEMAN asked if a trainee could not engage in the practice of real estate appraisal under the direct supervision of a certified real estate appraiser unless they were a registered trainee. MR. WOLF said that is correct. CHAIRMAN LEMAN said he would like to see these ideas written down before they pass the bill from committee. SENATOR KELLY requested that Ms. Reardon look at the proposed amendments also and submit a position paper on what the Division thinks at that stage. CHAIRMAN LEMAN affirmed that request and said they would hold the bill. SENATOR MACKIE withdrew his motion. Number 409 SB 195 - COMMON LAW LIENS CHAIRMAN LEMAN announced SB 195 to be up for consideration and that it was introduced by request through the Rules Committee. MR. TIM BENINTENDI, Staff to the Senate Rules Committee, explained that SB 195 addresses the emerging problem of filing of nuisance liens in this State with the intention of retribution. Such liens have been filed against property owned by public officials and others who have fallen in disfavor with certain groups or individuals who embrace an opposing philosophical or political view. The liens rarely have true commercial foundation, but are used as a harassment tactic. The practice has now surfaced in Alaska as several municipal officials can attest from the Municipality of Anchorage. SB 195 makes it a misdemeanor to record a non-consensual common law lien without court approval. It would ease the process of releasing a lien and would provide for filing a notice of invalid lien by attorneys of public officials. It would also set out penalties against those who file such nuisance liens. It has two $0 fiscal notes and has a wide variety of support in the public sector. CHAIRMAN LEMAN asked if the Department of Law would represent someone in the legislative branch of government. MR. BENINTENDI said that the Legislative Legal Department would represent them. He understands that municipal attorneys would represent their people. MR. WOOLIVER, Alaska Court System, testified that the court system asked for this bill to be introduced to address this growing problem of recording common law liens against real and personal property in Alaska which is an enormous problem in some other states. Although these liens are meaningless, they still cloud title that is typically discovered when someone goes to sell or borrow against their property. Typically these liens are for several hundred thousand, if not millions, of dollars. No action can be taken on a property until this lien is cleared up. In the past generally one has to file a lawsuit to get these resolved. Suing someone for a common law lien can be frustrating experience because they don't believe they are subject to the jurisdiction of the court and you end up in a paper war in addition to trying to get a lien removed, Mr. Wooliver said. Under current law there are several ways people can legitimately file liens and this bill doesn't seek to frustrate those. For example there are material liens, mechanics liens, fishermen liens, etc. and all of these liens are typically tied to a specific piece of property for work done on the property. There is an actual tie between the lien and what the person has done. Common law liens are not accompanied by any kind of valid court judgement and aren't tied to work done or goods or services provided. They are typically filed against public officials who have run afoul of someone who has recorded the lien. SB 195 seeks to address this problem in three ways. First there are expedited procedures to have a lien removed or declared invalid if one is filed against a person. There are two aspects to that. An attorney representing an official could record a notice of invalid lien and it would become invalid and not have to go to court. The second option is for someone who is not an official who can petition the court and attach an affidavit explaining the predicament. The the court can have a hearing within 20 days. If the person doesn't show up, the court enters a notice of invalid lien and records that. If a person does show up and the court finds this is an invalid lien, then court records a notice of invalid lien and the person who is the lien claimant would pay costs and actual and reasonable attorney fees. The second prong is that it provides for civil damages and third, it makes the filing of a bogus common law lien a class A misdemeanor. Number 525 MR. CLIFF JOHN GROH, Municipality of Anchorage, strongly supported this bill. He explained there have been 43 false liens filed against municipal officials in Anchorage. These filings are getting to be more common. He explained some of the financing problems one can run into with liens filed on their properties. MS. SHARON YOUNG, State Recorder, testified in addition to Mr. Groh's testimony that these types of liens are definitely becoming more frequent in Alaska as everywhere else in the United States. They are definitely becoming a tool with which people are using the public record to get at people they are discontent with. She definitely supports this bill from the standpoint of the recording system in general. TAPE 98-2, SIDE B MS. YOUNG said she did not want recorders placed in the role of having to review documents for substantive content or validity. That concern is resolved with this bill. CHAIRMAN LEMAN asked if her office sends a notice to an owner when a lien is filed. MS. YOUNG replied that there is no notice provision by her office. SENATOR MACKIE moved to pass SB 195 out of committee with individual recommendations. There were no objections and it was so ordered. CHAIRMAN LEMAN adjourned the meeting at 2:25 p.m.