Legislature(2003 - 2004)

04/28/2003 02:10 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 257 - DISCLOSURES BY REAL ESTATE LICENSEES                                                                                 
                                                                                                                                
Number 0058                                                                                                                     
                                                                                                                                
CHAIR McGUIRE  announced that the  first order of  business would                                                               
be  HOUSE  BILL NO.  257,  "An  Act  relating to  the  disclosure                                                               
requirements for  real estate  licensees, to  disciplinary action                                                               
against real  estate licensees, to  private actions  against real                                                               
estate   licensees,   and   to  real   estate   licensee   agency                                                               
relationships, fiduciary duties, and  other duties; and providing                                                               
for an effective date."                                                                                                         
                                                                                                                                
Number 0063                                                                                                                     
                                                                                                                                
REPRESENTATIVE  SAMUELS moved  to  adopt  the proposed  committee                                                               
substitute  (CS) for  [HB 257],  Version 23-LS0893\Q,  Bannister,                                                               
4/28/03, as the work draft.   There being no objection, Version Q                                                               
was before the committee.                                                                                                       
                                                                                                                                
Number 0093                                                                                                                     
                                                                                                                                
REPRESENTATIVE   NORMAN  ROKEBERG,   Alaska  State   Legislature,                                                               
sponsor, said that  HB 257 was engendered by what  he termed "the                                                               
disquieting nature  of the commerce  in the real  estate business                                                               
in this  state," two  lawsuits, and  a statute  which he  said he                                                               
considered to  be broken.   He  said he calls  HB 257  an interim                                                               
bill  intended  to clarify  the  current  situation so  that  the                                                               
commerce  of  the state  can  continue.    He mentioned  that  25                                                               
percent of the "state domestic product"  is made up of the "chain                                                               
of  real estate  transactions and  all activity  revolving around                                                               
the  real  estate  industry."     Thus,  he  added,  "it  exceeds                                                               
everything  but  petroleum."     The  real  estate  component  of                                                               
Alaska's economy is paramount in importance, he remarked.                                                                       
                                                                                                                                
REPRESENTATIVE ROKEBERG said:                                                                                                   
                                                                                                                                
     I rewrote the entire real  estate title ... a few years                                                                    
     back, and I  left one section open -  this issue that's                                                                    
     about dual  agency.  I asked  at that time that  a task                                                                    
     force undertake  that; there was  a task  force working                                                                    
     on  it then,  but I've  been  waiting seven  years.   I                                                                    
     worked this last  year with [an] Alaska  state board of                                                                    
     realtors'  task force  on rewriting  a bill,  and we're                                                                    
     still working on  that.  But we reached  a deadline and                                                                    
     ... told folks  that unless we could get  something - a                                                                    
     comprehensive bill - passed this  year, I'd introduce a                                                                    
     stopgap measure to  try to make sure  that business and                                                                    
     commerce  (indisc.) continue.    And  that's what  this                                                                    
     measure is; ... this is a stopgap measure.                                                                                 
                                                                                                                                
     It  speaks to  two issues.    One is  the exemption  of                                                                    
     commercial  real  estate  activity  from  the  problems                                                                    
     revolving around  disclosure under  dual agency  in the                                                                    
     statute, which  is [AS]  08.88.396, and  the definition                                                                    
     [of]  what a  commercial  real  estate transaction  is.                                                                    
     Then it  goes on to  indicate ...  in Section 7  of the                                                                    
     bill ... - page 5, ...  [subsections] (f) and (g) - ...                                                                    
     what ... needs to be done.                                                                                                 
                                                                                                                                
Number 0300                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG  turned  attention  to  subsection  (g),                                                               
which read:                                                                                                                     
                                                                                                                                
     (g)  The failure  of  the licensee  to  make a  written                                                                    
     disclosure as required  by this section or  to obtain a                                                                    
     written acknowledgment  or consent as required  by this                                                                    
     section  does  not give  a  person  a cause  of  action                                                                    
     against the  licensee for the  failure.   However, this                                                                    
     subsection does  not limit a  person's ability  to take                                                                    
     any other  action or pursue  any other remedy  to which                                                                    
     the person may be entitled under other law.                                                                                
                                                                                                                                
REPRESENTATIVE ROKEBERG  said that basically, if  the legislature                                                               
adopts this language, it means  that the "paperwork ... revolving                                                               
around the  current statutory requirements of  acknowledgement of                                                               
disclosure" - whether  by seller's agent, buyer's  agent, or dual                                                               
agent  - doesn't,  in and  of  itself, give  rise to  a cause  of                                                               
action.   Instead, it gives rise  to a "license action."   So, if                                                               
there is  an error, there  are sanctions  that can be  applied by                                                               
the  Real  Estate   Commission.    He  relayed   that  "this"  is                                                               
consistent with  the current [statute pertaining  to] conflict of                                                               
interest  in that  if there  is  an apparent  conflict between  a                                                               
licensee  and  his/her client  and  a  failure to  disclose,  any                                                               
sanctions  or remedies  are  limited  to a  license  action.   In                                                               
addition, specific  language in  subsection (g) permits  a person                                                               
to take  any other action or  pursue any other remedy  allowed by                                                               
law.                                                                                                                            
                                                                                                                                
REPRESENTATIVE ROKEBERG  assured the  committee that HB  257 does                                                               
not  diminish   consumers'  rights  because  it   only  addresses                                                               
clerical  errors   and  timing  errors   regarding  [dual-agency]                                                               
disclosures pertaining to  [commercial] real estate transactions.                                                               
He  opined  that  current  statute   is  so  unclear  about  when                                                               
disclosure is  supposed to occur,  that it creates  a stultifying                                                               
atmosphere.   He  reiterated that  HB  257 is  merely an  interim                                                               
step,  and  its  goal  is  to  ensure  that  what  he  termed  an                                                               
administrative problem does not rise  to a major cause of action.                                                               
He noted that  Section 9 does apply to one  of the aforementioned                                                               
lawsuits, which is  still "at bar" and which speaks  to "the very                                                               
issue contained in this bill."                                                                                                  
                                                                                                                                
Number 0510                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG turned attention  to page 4, lines 26-31.                                                               
He said:                                                                                                                        
                                                                                                                                
     What we had to do,  if we're going to exempt commercial                                                                    
     real  estate   transactions,  we  had  to   define  it,                                                                    
     because, formerly,  under the  title now,  a commercial                                                                    
     real estate  transaction is defined  as a  fourplex and                                                                    
     above.     So   it's  not   inclusive  as   to  leasing                                                                    
     activities.    Let me  just  say,  for the  record,  on                                                                    
     [lines  24-25], page  4,  the  [term] "commercial  real                                                                    
     estate  transaction"  is  there.   So,  as  relates  to                                                                    
     [paragraph] (3),  about leasing, it's my  intention - I                                                                    
     think  the  language is  clear  -  that this  does  not                                                                    
     include residential leasing transactions.                                                                                  
                                                                                                                                
REPRESENTATIVE ROKEBERG  then touched on the  details of proposed                                                               
AS 08.88.396(e), which read:                                                                                                    
                                                                                                                                
     (e)   The provisions of  (a) -  (c) of this  section do                                                                    
     not apply to a commercial  real estate transaction that                                                                    
     involves                                                                                                                   
          (1)  the sale or lease of real estate that                                                                            
     contains  a  building  having eight  or  more  separate                                                                    
     living units;                                                                                                              
          (2)  the sale of real estate that has a purchase                                                                      
     price of  $250,000 or more in  value for nonresidential                                                                    
     use; or                                                                                                                    
          (3)  the sale or lease of real estate having a                                                                        
     gross lease revenue that exceeds $12,000 a year.                                                                           
                                                                                                                                
REPRESENTATIVE ROKEBERG,  with regard to a  potential conflict of                                                               
interest, noted that he is a  licensed real estate broker and has                                                               
had his license  for 30 years, though currently he  is not active                                                               
and has  not received a  real estate commission for  eight years.                                                               
He offered  that he can  speak from experience on  the activities                                                               
of a commercial broker, and  detailed some of his accomplishments                                                               
during the  time he  was active in  the industry,  which included                                                               
dual-agency situations.                                                                                                         
                                                                                                                                
REPRESENTATIVE ROKEBERG then  turned to the issue  of dual agency                                                               
and said:                                                                                                                       
                                                                                                                                
Number 0753                                                                                                                     
                                                                                                                                
     We'll   talk  ...   about   the   application  of   the                                                                    
     "principles  of agency"  to this  subject. ...  There's                                                                    
     been a  court interpretation  that those  licensees and                                                                    
     brokers that  act under their client  relationships are                                                                    
     acting under  the "common law  of agency,"  whereas the                                                                    
     principal  and agent  does  directly  link between  the                                                                    
     client  and that  particular licensee.   I  submit that                                                                    
     that's a wrongheaded and  legally faulty provision. ...                                                                    
     And even the  current common language of  a real estate                                                                    
     agent  related  to  the agency  principal  relationship                                                                    
     between the broker, as the  principal, and the agent as                                                                    
     the agent  of the principal  are (indisc).   So there's                                                                    
     been  a corruption;  there's been  a corruption  in the                                                                    
     case law and everything else.                                                                                              
                                                                                                                                
REPRESENTATIVE ROKEBERG went on to say:                                                                                         
                                                                                                                                
     And one  of the worst  things, [which is] what  I think                                                                    
     the committee  should take  notice of,  is that  if the                                                                    
     continuation  of "common  law agency"  is to  relate to                                                                    
     the licensee  and client relationship, then  that gives                                                                    
     rise  to enormous  vicarious liability  on the  part of                                                                    
     that client.   So  the average citizen  is going  to be                                                                    
     exposed.  If  we continue down this  path, legally, and                                                                    
     the fiction of [an]  agency principal relationship that                                                                    
     arises  between  the client  and  the  agent, then  the                                                                    
     significant vicarious liability ...  could arise and be                                                                    
     directed  towards the  average  citizen.   And I  think                                                                    
     that's not a good public policy.                                                                                           
                                                                                                                                
REPRESENTATIVE  ROKEBERG  offered  that  HB 257  is  designed  to                                                               
clarify  this issue.   He  then mentioned  a couple  of his  past                                                               
clients  and a  leasing situation  in which  he'd served  as dual                                                               
agent, to illustrate the problems  facing those who serve in that                                                               
capacity.    He  said,  "When   you're  in  an  agency  principal                                                               
relationship,  fiduciary duties  arise,  and that's  the crux  of                                                               
this  matter:   How  much can  you speak?"    Once a  dual-agency                                                               
situation is  established and [a  broker] has two  masters, under                                                               
"agency  law"  he/she  cannot  discuss  price  terms  or  certain                                                               
conditions that  would divulge  or disadvantage  one side  of the                                                               
transaction or the other.  He  submitted that it is impossible to                                                               
perform one's  duties as a dual  agent "without being able  to do                                                               
that,"  and  offered a  further  personal  example pertaining  to                                                               
leasing to  illustrate the difficulties  that could arise  if one                                                               
is prohibited  from discussing certain things  with one's clients                                                               
simply because one is a dual agent.                                                                                             
                                                                                                                                
Number 1210                                                                                                                     
                                                                                                                                
CHRIS  STEPHENS,  Associate  Broker; Bond,  Stephens  &  Johnson,                                                               
Inc., noted that his company is  a commercial real estate firm in                                                               
Anchorage, that  there are others  at the location from  which he                                                               
is  testifying  that  share  his  sentiments,  and  that  he  has                                                               
submitted a  letter to the committee.   He said that  there is no                                                               
way on  earth a commercial broker  can do his/her job  under dual                                                               
agency as defined under current Alaska law.  He elaborated:                                                                     
                                                                                                                                
     We absolutely  have to  have the  ability to  put these                                                                    
     transactions  together and  to work  with both  parties                                                                    
     effectively,  and  [we] can't  do  that  under the  law                                                                    
     because the law says we  have to be silent when there's                                                                    
     dual  agency.   And it's  an absolutely  ... impossible                                                                    
     position.   We  have dual  agency in  roughly half  the                                                                    
     transactions that we do.   So, it's not for the benefit                                                                    
     of  the public  or the  state or  the commerce  to have                                                                    
     this  restriction, which  is an  essential  part of  us                                                                    
     being able to do our job.                                                                                                  
                                                                                                                                
     The second point is, is  on the form of the disclosure.                                                                    
     ... The reality  is that the disclosure  forms that are                                                                    
     required end  up being so  darned burdensome.   In many                                                                    
     cases we're  dealing with  companies from  outside this                                                                    
     state ...,  having to run  these forms back  and forth,                                                                    
     some  of  the  corporations  won't even  look  at  them                                                                    
     because they've got  to send them to  their real estate                                                                    
     law  department; it  just becomes  a nightmare  almost.                                                                    
     We're  not selling  houses,  we're  not selling  people                                                                    
     homes,  we're not  in business.   We're  doing business                                                                    
     transactions  with people  involved  in  commerce.   So                                                                    
     it's a totally different situation.                                                                                        
                                                                                                                                
MR.  STEPHENS concluded  by  saying  that he  and  others at  his                                                               
location  are concerned  about [the  current situation]  and urge                                                               
the bill's passage.                                                                                                             
                                                                                                                                
Number 1351                                                                                                                     
                                                                                                                                
JOE LoMONACO,  Associate Broker; Bond, Stephens  & Johnson, Inc.,                                                               
noted that he  has been in the real estate  industry in Anchorage                                                               
for  27  years.   He  opined  that  confusion pertaining  to  the                                                               
current statute  and its  various interpretations  has increased.                                                               
He said  that his fears and  concerns surround the risk  of being                                                               
held civilly or criminally liable  because of this confusion.  He                                                               
noted that some of the  more sophisticated clients refuse to sign                                                               
the required disclosure forms.  He urged passage of HB 257.                                                                     
                                                                                                                                
Number 1412                                                                                                                     
                                                                                                                                
CLAYTON HALVERSON,  Associate Broker;  Bond, Stephens  & Johnson,                                                               
Inc.,  remarked  that  there is  a  distinct  difference  between                                                               
residential [transactions] and  commercial [transactions].  Those                                                               
involved in commercial  transactions are generally businesspeople                                                               
who  are  very  knowledgeable   about  the  pending  transaction,                                                               
sometimes more so  than the transaction brokers.   He opined that                                                               
under the current  law, such transaction brokers are  not able to                                                               
provide the  kind of service  that they are obligated  to provide                                                               
their clients.                                                                                                                  
                                                                                                                                
Number 1471                                                                                                                     
                                                                                                                                
ROBERT ARMS,  Associate Broker; Bond,  Stephens &  Johnson, Inc.,                                                               
said  that  the  difference between  residential  and  commercial                                                               
transactions  is dramatic.   In  many cases,  a commercial  agent                                                               
will represent  a customer and  find a  user for a  property, and                                                               
the  whole  transaction  will  happen  without  it  reaching  the                                                               
multiple listing service (MLS) system.   It's all done privately,                                                               
it's  all done  confidentially, and  it's a  completely different                                                               
situation than  what occurs  for a  residential transaction.   He                                                               
said that he supported everyone else's comments.                                                                                
                                                                                                                                
MR. STEPHENS  again urged passage  of HB 257.   In response  to a                                                               
question, he said  that [his firm] has spent  over $12,000 having                                                               
disclosure  forms developed  that  would meet  current  law.   He                                                               
relayed that  he's had  clients who've  simply handed  the forms,                                                               
without first reading them, to  their attorneys, and has had some                                                               
clients who've refused to accept  or review the forms altogether.                                                               
He  opined  that [the  current  disclosure  requirements] do  not                                                               
serve any purpose and make  an already difficult process more so.                                                               
In  response  to further  questions,  he  acknowledged that  some                                                               
clients  could  simply  go  find  brokers  that  are  willing  to                                                               
participate  in  a transaction  without  abiding  by the  current                                                               
disclosure  requirements.   He  also relayed  that  his firm  has                                                               
provided  the committee  with copies  of  the various  disclosure                                                               
forms required by current law.                                                                                                  
                                                                                                                                
REPRESENTATIVE GARA  noted that  there is a  provision in  HB 257                                                               
which  says that  "the law  of agency"  won't apply,  anymore, to                                                               
real estate agents  "in this context."  He asked  for examples of                                                               
how "the  law of agency" has  proven to be unfair  to real estate                                                               
agents.  He  also noted that there is a  retroactive provision in                                                               
HB 257 which would allow it to  reverse a jury verdict.  He asked                                                               
for comments on that provision.                                                                                                 
                                                                                                                                
MR.  STEPHENS offered  the following  as example  of the  problem                                                               
encountered with dual agency:                                                                                                   
                                                                                                                                
     If you're  an agent, and  let's say you have  a listing                                                                    
     and  you're out  soliciting  buyers,  and let's  assume                                                                    
     that you  get three offers  - one from an  agent within                                                                    
     your company,  which that (indisc.)  now a  dual agent,                                                                    
     and  two  other offers  from  agents,  let's say,  [of]                                                                    
     other companies  - and you're  in your  conference room                                                                    
     reviewing  these  offers  to decide  which  one  you're                                                                    
     going to move forward with  or perhaps counter and why,                                                                    
     and  (indisc.) a  very  detailed process.    So you  go                                                                    
     through  the  offers from  one  other  company; you  go                                                                    
     through it in  detail.  You go through  the next offer,                                                                    
     from another company,  in detail.  Now, you  get to the                                                                    
     offer brought  in from  an agent  in your  own company.                                                                    
     Currently, you have to tell  that seller, "I'm sorry, I                                                                    
     cannot comment  on this  offer."   Now that  doesn't do                                                                    
     that  seller any  good at  all, or  anyone any  good at                                                                    
     all.  That's  a perfect example of the  kinds of things                                                                    
     that we run into all the time.                                                                                             
                                                                                                                                
Number 1750                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GARA  said, however,  that  there  is "a  law  of                                                               
agency" that  defines the  duties between  people who  are agents                                                               
and the  people who they represent.   And HB 257  seems to exempt                                                               
real estate  agents from "the  law of  agency," he remarked.   He                                                               
said  that   he  understands  that   sometimes  there   might  be                                                               
requirements  of "the  law of  agency"  that don't  seem to  help                                                               
people in a particular circumstance,  but he is wondering whether                                                               
"the law of agency  is a burden to Mr. Stephens  in some way and,                                                               
if so, what that burden is.                                                                                                     
                                                                                                                                
MR. STEPHENS acknowledged that he  is not that familiar with "the                                                               
law of  agency."  He  added, however, that  "in trying to  do our                                                               
job, when we are dealing with  people wanting to buy and sell and                                                               
lease  commercial real  estate, we  have to  be able  to talk  to                                                               
them, and  in dual agency,  we can't -  but we've been  hired for                                                               
our  expertise."   That's where  the problem  is.   The types  of                                                               
transactions at issue require someone  with a lot of expertise in                                                               
the field  of commercial  real estate to  make them  go together.                                                               
That's why such brokers are  hired; yet current law inhibits them                                                               
from providing  that expertise,  he opined.   With regard  to the                                                               
retroactivity  provision  of HB  257,  he  suggested that  others                                                               
could better testify to that issue.                                                                                             
                                                                                                                                
REPRESENTATIVE ROKEBERG  noted that Section  8, found on  page 5,                                                               
line 15, repeals  Section 7 on June  30, 2005.  He  said that the                                                               
reason this  sunset provision is  included is because  Section 7,                                                               
the  exemption  for  commercial   real  estate  transactions,  is                                                               
intended  to  be  a  stopgap  measure  until  more  comprehensive                                                               
legislation can be put in place.                                                                                                
                                                                                                                                
REPRESENTATIVE  GARA remarked  that  of the  two  changes HB  257                                                               
purports  to  make,  he  understands   one  very  well,  that  of                                                               
exempting  commercial realtors  from  some  rules governing  dual                                                               
agency in revealing details to  the various parties involved in a                                                               
transaction.    The change  he  said  he seeks  clarification  on                                                               
pertains to the current law  that some people have said prohibits                                                               
a  realtor from  representing  both a  buyer and  a  seller.   He                                                               
remarked, however, that  the current law does  not prohibit this,                                                               
as  long as  the realtor  discloses that  he/she is  representing                                                               
both buyer and seller.  "So what am I missing there?" he asked.                                                                 
                                                                                                                                
Number 1952                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  agreed that under current  law, an agent                                                               
can represent  the buyer; the seller;  or both, as a  dual agent.                                                               
The difficulties arise because of  interpretations which say that                                                               
when two licensees from the  same brokerage company represent the                                                               
buyer and  the seller,  it becomes  a dual-agency  situation and,                                                               
therefore,  both  parties must  agree  to  having both  licensees                                                               
continue with the  transaction.  That can work,  he remarked, but                                                               
the problem then becomes one of  what can a licensee do to advise                                                               
his/her client.   He said that the problem  is particularly acute                                                               
in the commercial  arena, and he called it the  "duct tape rule,"                                                               
likening  it  to  slapping  duct  tape over  the  mouths  of  the                                                               
licensees whose goal is to merely put a deal together.                                                                          
                                                                                                                                
REPRESENTATIVE  GARA  said  he still  doesn't  understand  why  a                                                               
realtor, right  now, can't give  advice to  a client, as  long as                                                               
he/she discloses that  there might be a potential  conflict.  "Am                                                               
I right  that if  they do  disclose, then  they can  say whatever                                                               
they  want,"  he  asked,  adding,  "That's  the  issue  I'd  like                                                               
addressed."                                                                                                                     
                                                                                                                                
CHAIR McGUIRE surmised that the  problem revolves around the fact                                                               
that once  an agent  has signed  a person  on as  his/her client,                                                               
under the principles  of "agency law," he/she  then has fiduciary                                                               
responsibilities to that client as  the principal.  She suggested                                                               
that even  disclosing to  both clients that  he/she is  acting on                                                               
behalf of both  of them does not discharge  the agent's fiduciary                                                               
duties to  both clients  or make it  easier for  communication to                                                               
occur in a commercial setting.                                                                                                  
                                                                                                                                
REPRESENTATIVE  ROKEBERG  said  that  the issue  becomes  how  to                                                               
determine whether  one is breaching  one's fiduciary  duties with                                                               
regard  to what  information is  being discussed.   He  said that                                                               
these  same   dual-agency  problems  are  true   for  residential                                                               
transactions as well,  but HB 257 does  not addressed residential                                                               
transactions  at  all.    He  indicated  that  the  comprehensive                                                               
legislation still to  be developed will address  all the problems                                                               
currently faced by clients and agents.                                                                                          
                                                                                                                                
Number 2092                                                                                                                     
                                                                                                                                
DAVE FEEKEN,  Legislative Chair,  Alaska Association  of Realtors                                                               
(AAR), turned  attention to page  5, lines 10-14,  subsection (g)                                                               
of  Version Q,  and said  that  this language  clarifies that  it                                                               
pertains  only   to  the  written   disclosure  required   by  AS                                                               
08.88.396, rather  than to the  whole concept of disclosure.   He                                                               
said that  the AAR  is very  much in  support of  this clarifying                                                               
language.  He mentioned that the  board of directors [of the AAR]                                                               
has   had   lengthy   debate    regarding   the   definition   of                                                               
"sophisticated   and   knowledgeable   commercial   real   estate                                                               
transactions,"  and  has  provided  the  sponsor  with  suggested                                                               
language to  redefine "the  limit."  He  also mentioned  that the                                                               
AAR now has a "no opposition as  amended" position on HB 257.  He                                                               
noted that there are a  number of states that exempt "commercial,                                                               
single  agency only,  transactions from  disclosure."   He added,                                                               
"The  dual-agency situation  ... still  requires a  disclosure in                                                               
all  states  in  this  country,  right  along  with  conflict  of                                                               
interest."                                                                                                                      
                                                                                                                                
REPRESENTATIVE GRUENBERG  opined that subsection (g)  immunizes a                                                               
licensee  even from  a deliberate  concealment  of a  disclosure.                                                               
Why is that good public policy? he asked.                                                                                       
                                                                                                                                
MR. FEEKEN  said that the  AAR does not interpret  subsection (g)                                                               
as immunizing an  agent for concealment.  "We're  saying that the                                                               
rest of the statute still  stands," he added; under AS 08.88.396,                                                               
the agent still  has the duty to disclose.   However, if either a                                                               
buyer  or   seller  doesn't  sign   "at  the  time   of  specific                                                               
assistance,"  then that  is considered  a  clerical or  technical                                                               
violation;  it  does  not remove  the  licensee's  obligation  to                                                               
disclose.                                                                                                                       
                                                                                                                                
REPRESENTATIVE GRUENBERG  said that a  right without a  remedy is                                                               
pretty specious.   The only way  something can be enforced  is to                                                               
provide  a remedy  in the  law; one  remedy, traditionally,  is a                                                               
civil  remedy,  which is  often  the  most effective  because  it                                                               
provides  an  immediate  private  remedy  without  having  to  go                                                               
through   a  governmental   bureaucracy.      According  to   his                                                               
interpretation of  subsection (g), he said,  it's an immunization                                                               
of licensee  for the failure  to make  a written disclosure.   So                                                               
again, why is that good public policy?                                                                                          
                                                                                                                                
Number 2281                                                                                                                     
                                                                                                                                
MR. FEEKEN  pointed out  that the  second sentence  of subsection                                                               
(g) says:                                                                                                                       
                                                                                                                                
     However,  this subsection  does  not  limit a  person's                                                                    
     ability to  take any other  action or pursue  any other                                                                    
     remedy to which the person  may be entitled under other                                                                    
     law.                                                                                                                       
                                                                                                                                
MR. FEEKEN  said that  proposed AS 08.88.396  says that  an agent                                                               
shall disclose  at the point  of specific assistance,  which most                                                               
people interpret to  mean when the agent first  starts helping to                                                               
locate  a  property  or  when   he/she  first  becomes  aware  of                                                               
confidential  information.   The obligation  to disclose  has not                                                               
been removed, he  opined.  Instead, he also  opined, the language                                                               
in  subsection (g)  means that  if one  doesn't get  that written                                                               
disclosure within  a particular timeframe, it  is just considered                                                               
a clerical mistake.                                                                                                             
                                                                                                                                
CHAIR McGUIRE remarked  that one of the things that  has come out                                                               
of  the  aforementioned  litigation  and some  of  the  resulting                                                               
discussions  is that  people  have become  aware  that there  are                                                               
alternatives   to  dual   agency.     She   referenced  her   own                                                               
neighborhood  in which  the sole  real  estate agent  represented                                                               
both  the homebuilder  and potential  buyers, many  of whom  were                                                               
first-time  homebuyers and  didn't  realize that  dual agency  is                                                               
only one  alternative.  What  has begun to happen,  she remarked,                                                               
is that  now a form is  being offered, first thing,  to potential                                                               
buyers regarding dual agency.                                                                                                   
                                                                                                                                
TAPE 03-44, SIDE B                                                                                                            
Number 2385                                                                                                                     
                                                                                                                                
CHAIR  McGUIRE   indicated  that  she  is   unsure  whether  mere                                                               
sanctions  on  an agent's  license  are  going  to be  enough  to                                                               
encourage an  agent to do all  he/she can to inform  consumers of                                                               
their rights.                                                                                                                   
                                                                                                                                
MR.  FEEKEN  said he  understood  Chair  McGuire's concern.    He                                                               
offered,  however,   that  "the  specific  assistance   issue  is                                                               
something that's debated in an  open-house environment and in [a]                                                               
new-construction  environment  as  to when  that  happens."    He                                                               
posited  that   most  agents  comply   with  AS   08.88.396,  but                                                               
acknowledged  that perhaps  such is  not  the practice  in a  hot                                                               
market.  He  remarked that there have been a  lot of changes made                                                               
in the industry  in the last 15 months due  to the aforementioned                                                               
lawsuit.                                                                                                                        
                                                                                                                                
CHAIR McGUIRE  opined that those  changes have been  positive for                                                               
consumers, particularly that of  forcing agents to give consumers                                                               
a  form  explaining  their  relationship  right  at  the  outset.                                                               
Subsection (g)  is taking away  consumers' remedy,  she remarked,                                                               
and so agents  would no longer have the force  of law behind them                                                               
ensuring that they did the right thing for consumers.                                                                           
                                                                                                                                
MR. FEEKEN  argued that the  consumer would still have  the right                                                               
to  bring a  cause  of action  if the  agent  failed to  disclose                                                               
verbally.    Subsection (g)  only  pertains  to circumstances  in                                                               
which  the agent  does  not  make the  disclosure  in writing  or                                                               
obtain written  verification of  disclosure.   He opined  that it                                                               
would  be  in  the  agent's   best  interest  to  obtain  written                                                               
verification of  disclosure.  He  remarked that  undisclosed dual                                                               
agency  constitutes a  fraudulent  act and  as  such would  still                                                               
entitle  the consumer  to bring  a cause  of action,  adding that                                                               
subsection (g) only pertains to  the "written technicality of the                                                               
disclosure."                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG pointed  out,  however,  that for  many                                                               
years,  the   "statute  of  frauds"  has   required  real  estate                                                               
transactions - contracts  - to be in writing because  they are so                                                               
important  to the  people  involved in  those  transactions.   In                                                               
fact, having things in writing  is important to the legal system,                                                               
as well,  in reducing problems  of proof,  he said, because  if a                                                               
consumer  bringing  a  suit claims  that  he/she  never  received                                                               
verbal disclosure, the defendant - the  agent - can then show the                                                               
court the written acknowledgement of  disclosure.  Once the forms                                                               
are created,  it is easy to  provide them to consumers,  and they                                                               
make it easy to prove in court that proper disclosure did occur.                                                                
                                                                                                                                
Number 2146                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG pointed  out, however,  that one  of the                                                               
problems revolves  around when  to make such  a disclosure.   The                                                               
timing of the disclosure has  become an issue:  Should disclosure                                                               
happen when a person attends an  open house?  After a person asks                                                               
an agent  a couple of  questions?  When  a person responds  to an                                                               
add in  the paper?  He  opined that a potential  buyer should not                                                               
have to  sign a form at  those points in time,  and remarked that                                                               
agents in  small communities have  no choice  but to act  as dual                                                               
agents.    He  suggested  that  the  aforementioned  lawsuit  and                                                               
current  statute  have  created   artificial  barriers  that  are                                                               
ludicrous  to abide  by.   He  again reiterated  that  HB 257  is                                                               
merely a "Band-Aid  bill" that will be replaced by  a later, more                                                               
comprehensive bill.   Current law is badly  drafted, he remarked,                                                               
in  that   it  doesn't  give   clear  direction   regarding  when                                                               
disclosure should occur.                                                                                                        
                                                                                                                                
CHAIR McGUIRE  argued, however, that  in order for something  - a                                                               
contract, a  transaction, a  warranty -  to really  be meaningful                                                               
for a  consumer, it  should be  in writing.   Relying on  a claim                                                               
that disclosure occurred orally is  not sufficient, and is likely                                                               
to engender more litigation.                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG offered that  disclosure would still have                                                               
to occur  in writing; subsection  (g) merely  addresses instances                                                               
when such  does not  occur at the  exact moment  the relationship                                                               
started.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  GARA said  he agrees  that  the disclosure  forms                                                               
should be  in writing, but  does not  agree that proof  of verbal                                                               
disclosure should  be sufficient to  preclude a cause  of action.                                                               
Regardless, he observed, subsection  (g) is really poorly written                                                               
in that it makes it very vague  as to whether someone has a cause                                                               
of action for a  failure to disclose.  He stated  that if all the                                                               
sponsor  wants  to  do  is   exempt  technical  violations,  then                                                               
subsection  (g)  needs  to be  rewritten  because,  as  currently                                                               
written,  it appears  to  exempt much  more  than just  technical                                                               
violations.                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GARA   noted  that   contrary  to   Mr.  Feeken's                                                               
statement  that the  AAR now  has no  position regarding  HB 257,                                                               
Carole Winton,  president of  the AAR, sent  a letter  via e-mail                                                               
that says  the AAR does not  support HB 257.   In particular, the                                                               
letter  states   about  the  applicability   and  retrospectivity                                                               
provision:  "This is  a real slap in the face  to the law abiding                                                               
majority of real  estate practitioners in Alaska."   He asked Mr.                                                               
Feeken to explain  why the AAR no longer has  a problem with that                                                               
provision.                                                                                                                      
                                                                                                                                
Number 1898                                                                                                                     
                                                                                                                                
MR. FEEKEN  offered his understanding that  the applicability and                                                               
retrospectivity  provision   -  Section  9  -   only  applies  to                                                               
subsection (g),  which, he opined,  only deals with  technical or                                                               
clerical   disclosure,  rather   than  the   actual  process   of                                                               
disclosure.  He added:                                                                                                          
                                                                                                                                
     One of  the issues  that's came up  out of  the "Mehner                                                                  
     lawsuit" was, the common practice  in the industry was,                                                                    
     in  a  dual-agency  residential transaction,  that  the                                                                    
     seller of  the property, during the  process of listing                                                                    
     a  property,  would allow  for  dual  agency, in  other                                                                    
     words, that  that agent or someone  within that company                                                                    
     to  sell that  property;  "preauthorizing"  it was  the                                                                    
     terms used.   Within that lawsuit,  the definition that                                                                    
     came  back out  said, "No,  that practice  can't happen                                                                    
     because  the principals  have to  know  who each  other                                                                    
     is," which  was never  the intent  of the  original [AS                                                                    
     08.88.396].                                                                                                                
                                                                                                                                
     So, it would put the burden  upon the agent who has the                                                                    
     listing; if  a buyer comes  along and says, "I  want to                                                                    
     see that property,"  if you're to go by  what the judge                                                                    
     and  the attorneys  were saying  out  of that  lawsuit,                                                                    
     that agent has  to run back out and get  that seller to                                                                    
     sign  a form  saying  it's  okay for  him  to show  his                                                                    
     house.  That is  the written technical difficulty we're                                                                    
     trying to  put the  Band-Aid on  ... until  this larger                                                                    
     bill  can be  introduced,  which  totally revamps  this                                                                    
     process of agency disclosure.                                                                                              
                                                                                                                                
REPRESENTATIVE GARA  referred again  to Ms. Winton's  letter, and                                                               
read  from the  third paragraph  from  the bottom  which says  in                                                               
part:   "Fiduciary Duty -  This provision is  simply embarrassing                                                               
to  professionals  that  endorse   the  National  Association  of                                                               
Realtors code of  ethics."  He asked:  What  about the removal of                                                               
the "law  of agency's"  fiduciary duty?   Is  that no  longer the                                                               
position of [the AAR]?                                                                                                          
                                                                                                                                
MR.  FEEKEN  replied that  the  AAR  is  not dealing  with  those                                                               
issues.   He relayed that he'd  been involved in the  creation of                                                               
AS 08.88.396, which  had been enacted at a  time when "subagency"                                                               
was  common  within  the  industry.   The  current  language  was                                                               
intended to let  the seller know that the agent  working with the                                                               
buyer was the  buyer's agent, and to disclose  the possibility of                                                               
dual agency on an in-house  [situation] or the same agent working                                                               
with both the buyer and seller.   The industry has changed a lot,                                                               
he added, and  subagency is not even available in  most states in                                                               
the  country.   "The  concept  of abrogating  the  common law  by                                                               
simply  putting a  line in  like that  has been  attempted in  13                                                               
states and it's  failed in 13 states; [you've] got  to replace it                                                               
with  something,"  he  stated.    With  regard  to  Ms.  Winton's                                                               
statement, he  said that he did  not understand how one  could be                                                               
honest, be fair, act in good  faith, and still not have fiduciary                                                               
duty.  It's just not practical, he added.                                                                                       
                                                                                                                                
Number 1762                                                                                                                     
                                                                                                                                
REPRESENTATIVE GARA  remarked that  Ms. Winton's letter  seems to                                                               
state that AAR  has a problem with abrogating "the  common law of                                                               
agency," in that  it says in part:  "The  National Association of                                                               
Realtors  does  not  recommend abrogation  of  the  common  law."                                                               
Representative Gara  asked:  "What  is it about this  new version                                                               
of the bill that resolves that concern?"                                                                                        
                                                                                                                                
MR. FEEKEN  replied:  "It  doesn't address  that, and I  guess my                                                               
point  is  ... that  that  line  is  not enforceable  (indisc.  -                                                               
someone else talking] it hasn't  been replaced with anything.  If                                                               
you abrogate the common law, what law  are you going to use?"  He                                                               
remarked  that when  Colorado attempted  to  abrogate common  law                                                               
with regard  to disclosure, "it took  65 pages to replace  it, of                                                               
the duties  of the  agent."   He surmised that  if an  issue came                                                               
before a judge, even though  the proposed legislation might state                                                               
that the  common law of  agency does not apply,  without anything                                                               
in its place, the judge will "go right back to common law."                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG pointed out that  HB 257 only repeals the                                                               
"common law principles of agency," not all common law.                                                                          
                                                                                                                                
REPRESENTATIVE GARA  said that's the problem:   "we're abrogating                                                               
the law  that provides  the duties."   That's  not just  a little                                                               
technical thing  that's being  abrogated; if  the "common  law of                                                               
agency" imposes the  fiduciary duties, and it  is abrogated, then                                                               
so too are the duties.  Why is  that a good thing? he asked.  Why                                                               
are not Ms. Winton's comment right on point?                                                                                    
                                                                                                                                
REPRESENTATIVE  ROKEBERG   argued  that  it  would   only  affect                                                               
commercial transactions, and  then only for two  years until more                                                               
comprehensive legislation can be introduced and enacted.                                                                        
                                                                                                                                
REPRESENTATIVE GARA said he understood those points.                                                                            
                                                                                                                                
REPRESENTATIVE ROKEBERG opined  that doing as HB  257 proposes is                                                               
acceptable   because   the   parties   involved   in   commercial                                                               
transactions  are  sophisticated  and  understand  the  rules  of                                                               
engagement.                                                                                                                     
                                                                                                                                
Number 1647                                                                                                                     
                                                                                                                                
REPRESENTATIVE GARA  asked Representative Rokeberg whether  he is                                                               
claiming  that  everyone  who purchases  a  commercial  piece  of                                                               
property is  so sophisticated that  he/she does not need  to made                                                               
aware of his/her agent's potential conflict of interest.                                                                        
                                                                                                                                
REPRESENTATIVE   ROKEBERG  replied   that  although   nothing  is                                                               
absolute,  by   and  large,  people  who   engage  in  commercial                                                               
transactions  should   have  their  own  agents,   advisors,  and                                                               
accountants,  and should  be and  are protected  under commercial                                                               
law.                                                                                                                            
                                                                                                                                
REPRESENTATIVE GARA  said that the  concept that one  cannot rely                                                               
on the agent and should instead  arm one's self with a battery of                                                               
other agents and an attorney is shocking to him.                                                                                
                                                                                                                                
REPRESENTATIVE ROKEBERG  said that  as a  matter of  course, he'd                                                               
advised  all of  his  clients  to have  their  own attorneys  and                                                               
accountants.  He  indicated that current law is an  insult to him                                                               
and  his own  personal ethics  because it  implies that  an agent                                                               
can't act in an ethical manner when  serving as a dual agent.  He                                                               
remarked  that  every   other  state  in  the   country  is  also                                                               
struggling with this issue.  He  said that for a number of years,                                                               
he and  his staff have been  working with people in  the industry                                                               
to try to find a solution.                                                                                                      
                                                                                                                                
REPRESENTATIVE OGG asked  why the burden to inform  - to disclose                                                               
dual agency - in writing is considered onerous.                                                                                 
                                                                                                                                
MR.  FEEKEN  said that  problems  arise  in instances  where  the                                                               
person to whom the disclosure must  be made is not standing right                                                               
there where  the agent  can hand  him/her the  disclosure notice.                                                               
Sometimes   portions  of   the   transaction,   with  regard   to                                                               
information  that must  be disclosed,  occur over  the telephone;                                                               
however, according  to the specific requirements  currently in AS                                                               
08.88.396, information must be disclosed  in writing.  Therefore,                                                               
it's not that  written disclosure doesn't happen,  it's just that                                                               
it  doesn't  happen  at  the   exact  same  time  as  the  verbal                                                               
disclosure; this  is the technical  issue that subsection  (g) is                                                               
intended to  address.  He  confirmed that subsection (g)  is also                                                               
intended  to  address the  issue  of  the seller  approving,  via                                                               
written acknowledgement, of a dual-agency situation.                                                                            
                                                                                                                                
REPRESENTATIVE  OGG asked  whether delivering  written disclosure                                                               
or acknowledgement could be done via fax, e-mail, or courier.                                                                   
                                                                                                                                
Number 1390                                                                                                                     
                                                                                                                                
MR.  FEEKEN  pointed  out  that  current  law  says  the  written                                                               
disclosure or acknowledgement must occur  at the same time as the                                                               
verbal  disclosure  or  acknowledgement.    Such  is  not  always                                                               
possible, he remarked,  adding that sometimes the  person to whom                                                               
the  written disclosure  is presented  or from  whom the  written                                                               
acknowledgement is  asked either does  not have the  authority or                                                               
must get the documents reviewed first.                                                                                          
                                                                                                                                
REPRESENTATIVE OGG remarked that  subsection (g) does not mention                                                               
the technical violation  that the sponsor has  indicated he wants                                                               
to  address.   He suggested  that perhaps  a reference  to and  a                                                               
definition of what constitutes the  technical violation should be                                                               
included in the bill.                                                                                                           
                                                                                                                                
MR. FEEKEN said that is a good suggestion.                                                                                      
                                                                                                                                
REPRESENTATIVE  GRUENBERG, on  that  point, referred  to page  4,                                                               
line  6, and  suggested that  the language  "at the  time of  the                                                               
initial contact" should be amended  by adding something along the                                                               
lines of,  "or as  close as  possible thereto".   He  opined that                                                               
currently, subsection (g)  is overbroad.  He said  he agreed with                                                               
Representative Gara with regard to  the issue of throwing out the                                                               
"common law  principles of  agency."  That's  a complete  body of                                                               
law, and  it will have a  lot of unintended consequences  if this                                                               
legislation  exempts  even  commercial real  estate  transactions                                                               
from  the entire  "restatement of  agency";  "I couldn't  support                                                               
that," he added.  He then  asked Mr. Feeken whether he'd yet read                                                               
Judge Christen's decision on the Mehner case.                                                                                 
                                                                                                                                
MR. FEEKEN said he had not.                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG mentioned  that  one  of the  decisions                                                               
arrived at  from the  issues surrounding that  case was  that not                                                               
all intentional  torts give  rise to  damages, because  even when                                                               
the tort  is intentional, the  conduct must still  satisfy either                                                               
the "outrageous"  or "reckless  indifference" requirements  of AS                                                               
09.17.020(b).  Thus, he surmised,  one could get punitive damages                                                               
only if  one is able  to prove  by clear and  convincing evidence                                                               
that the action  was either outrageous, including  acts done with                                                               
malice or bad motives, or  recklessly indifferent to the interest                                                               
of another person.   He opined that the judge's  finding that she                                                               
could  not give  punitive damages  to a  particular defendant  in                                                               
that case  - McAlpine  - is  either a  serious misreading  of the                                                               
statute or there is a problem with the statute.                                                                                 
                                                                                                                                
Number 0958                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG  asked Mr. Feeken  if he sees  a problem                                                               
with that interpretation of the  punitive damages statute, "where                                                               
it's one broker suing another for stealing a commission."                                                                       
                                                                                                                                
MR. FEEKEN said no.                                                                                                             
                                                                                                                                
REPRESENTATIVE  HOLM   said  that  giving  up   the  "common  law                                                               
principles of  agency" bothers him  because his  understanding is                                                               
that once  he hires someone  to do  something for him,  then that                                                               
person will act as his principal  agent in his best interest.  He                                                               
noted that he  has never read a law that  says someone must treat                                                               
another honestly,  fairly, and in  good faith.  Although  such is                                                               
good sentiment, it doesn't really  mean anything because it's all                                                               
based on  "some level  of association"  that is not  in law.   He                                                               
questioned  whether  an agent  could  really  represent both  the                                                               
buyer and seller and still be "evenhanded."                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM  surmised that  the only  way an  agent could                                                               
really do so  would be if that agent was  really just looking out                                                               
for his/her  own best interest.   He asked:  "Is  that what we're                                                               
saying here,  [that] this  is done  for the  purpose of  the real                                                               
estate agent?  ... Where do  the purchasers and the  renters, the                                                               
lessors and the lessee, where do  they fit into [it]? ... Do they                                                               
give up  their rights to  having ... some  kind of agency  law at                                                               
all?"  Because  if they do that,  then no one acts  in their best                                                               
interest, necessarily.                                                                                                          
                                                                                                                                
REPRESENTATIVE HOLM said:                                                                                                       
                                                                                                                                
     If you hire  someone, usually you're paying  them to do                                                                    
     business in  your best interest.   But the way  this is                                                                    
     written,  to me,  business  will be  done  in the  real                                                                    
     estate  broker's best  interest, regardless  of whether                                                                    
     or not it's [in] my  best interest ..., whether I'm the                                                                    
     lessor or lessee. ... If I  hire a real estate agent, I                                                                    
     would want them to be working for me.                                                                                      
                                                                                                                                
Number 0665                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM said that although  he may not understand all                                                               
of the  principles of agency, he  knows how they affect  him as a                                                               
businessman.   If he purchases  property, he explained,  he wants                                                               
to truly feel comfortable that the  agent he hires, that he pays,                                                               
is working in his best  interest.  Notwithstanding the claim that                                                               
this  bill  is   a  "Band-Aid"  approach,  to   write  law  which                                                               
stipulates that  the "common  law principles  of agency"  will no                                                               
longer  apply  leaves  him  wondering what  will  happen  in  the                                                               
meantime, he remarked.                                                                                                          
                                                                                                                                
REPRESENTATIVE ROKEBERG opined that  strict interpretation of the                                                               
current  law hinders  commerce,  in that  transactions cannot  be                                                               
concluded  properly.    He  remarked   that  HB  257  has  narrow                                                               
application, affecting commercial  real estate transactions; with                                                               
regard  to residential  transactions, the  bill only  pertains to                                                               
the timeframe  in which  written documentation  is received.   He                                                               
again reiterated that HB 257 is  merely an interim bill, and that                                                               
a more  permanent solution is  being drafted.  "All  we're trying                                                               
to  do  here   is  reduce  the  liability   ...  for  unnecessary                                                               
litigation, and  to move forward  so we can make  progress here,"                                                               
he added.                                                                                                                       
                                                                                                                                
CHAIR McGUIRE suggested that they  simply wait for that permanent                                                               
solution, rather than taking this interim step.                                                                                 
                                                                                                                                
REPRESENTATIVE ROKEBERG  pointed out,  however, that the  firm of                                                               
Bond, Stephens &  Johnson, Inc., alone does  between $300 million                                                               
and $400 million in business  a year, approximately half of which                                                               
is  under  dual  agency.   Waiting  for  the  more  comprehensive                                                               
legislation,  he opined,  will shut  down such  firms and  have a                                                               
negative  impact  on  business.     Agents  are  fearful  of  the                                                               
potential liability  resulting from  the aforementioned  case and                                                               
are in  need of legislation  that will  keep the balance  until a                                                               
more permanent solution is in place, he added.                                                                                  
                                                                                                                                
Number 0392                                                                                                                     
                                                                                                                                
HOWARD S.  TRICKEY, Attorney at  Law; Jermain, Dunnagan  & Owens,                                                               
PC,  indicated  that   he  would  be  speaking   to  proposed  AS                                                               
08.88.396(g)  and its  retrospective  application  [on behalf  of                                                               
Prudential  Vista  Real Estate  and  Prudential  Jack White  Real                                                               
Estate].    He said  that  the  purpose  of the  legislation,  as                                                               
drafted, is to  address the following problem.   Currently, there                                                               
is  a  perception  that every  dual-agency  transaction  done  in                                                               
Alaska  in  recent  years  was not  properly  documented.    This                                                               
contention is based  upon the requirement that there  be a signed                                                               
acknowledgement,  from  both  buyer  and  seller,  every  time  a                                                               
prospective  buyer wants  to see  a  house listed  with the  same                                                               
broker.   For example,  if the  broker has a  house and  a "house                                                               
showing," which  is common in many  areas, each time a  new buyer                                                               
even walks into that house,  the current statutory requirement is                                                               
that the  broker obtain  a written consent  from both  seller and                                                               
buyer in order to show the house.                                                                                               
                                                                                                                                
MR.  TRICKEY offered  that current  law is  ambiguous in  that it                                                               
requires the disclosure  when there's a specific  assistance.  He                                                               
opined  that subsection  (g)  is intended  to  merely and  solely                                                               
protect  agents  and  brokers  from  liability  for  a  technical                                                               
statutory violation  involving the  timing of when  they document                                                               
the written  disclosure.   It really  is to  protect them  from a                                                               
recordkeeping  requirement, he  added.   Subsection (g)  does not                                                               
abrogate  the responsibility  to  make a  written disclosure;  it                                                               
does not  abrogate agents' liability  in the event that  there is                                                               
actual  harm  or  loss  because someone  was  engaged  in  fraud,                                                               
intentional     misconduct,      negligence,     or     negligent                                                               
misrepresentation.     He  said  that  the   second  sentence  of                                                               
subsection (g)  was drafted  to preserve any  cause of  action or                                                               
claim that  a buyer, who has  suffered injury or harm  or damage,                                                               
may  have under  the  common  law of  either  tort principles  or                                                               
contract principles.                                                                                                            
                                                                                                                                
MR. TRICKEY  attempted to assure  members that subsection  (g) is                                                               
not  intended  to protect  agents  or  brokers when  someone  has                                                               
actually suffered  harm or loss.   Under the second  [sentence of                                                               
subsection (g)], any buyer would still  have the right to bring a                                                               
claim based  on a  tort or  contract theory.   The intent  of the                                                               
legislation is very narrow and limited,  he opined, in that it is                                                               
intended to protect  from liability a failure  to timely document                                                               
the  written disclosure  still required  of  a residential  agent                                                               
when acting in a dual-agency capacity.                                                                                          
                                                                                                                                
MR. TRICKEY  said of the  retroactivity provision that it  is not                                                               
intended to set aside  a jury verdict.  He said  he is unaware of                                                               
any  jury verdict  involving any  action that  has resulted  in a                                                               
trial  and a  verdict  that's  been rendered.    He attempted  to                                                               
assure members  that HB 257  will not  change and would  not have                                                               
changed the result  of the Mehner case, wherein,  he offered, the                                                             
judge found  that the defendant committed  intentional misconduct                                                               
and made  misrepresentations in  a transaction.   He  opined that                                                               
the retroactivity provision is necessary  to protect those in the                                                               
industry  when there  is  a technical  violation  of the  statute                                                               
involving the documenting  of the written-disclosure requirement,                                                               
which, he also  opined, causes no harm to a  buyer and seeks only                                                               
the forfeiture  of the  commission that the  agent earned  in the                                                               
transaction.                                                                                                                    
                                                                                                                                
TAPE 03-45, SIDE A                                                                                                            
Number 0001                                                                                                                     
                                                                                                                                
MR.  TRICKEY, in  response to  a question,  mentioned that  he is                                                               
speaking  on   behalf  of  Prudential   Vista  Real   Estate  and                                                               
Prudential  Jack White  Real  Estate, and  is  involved with  co-                                                               
counsel  in  defending those  firms  in  a class-action  lawsuit,                                                               
which, he proffered, seeks to  disgorge all commissions earned by                                                               
those firms over the past six years.                                                                                            
                                                                                                                                
REPRESENTATIVE   GARA  surmised   that  what   is  intended   via                                                               
subsection (g) is  that if agents fail to disclose,  to a client,                                                               
dual agency or a conflict, then  they would be liable, but if the                                                               
agents  do disclose  but just  don't do  a written  disclosure in                                                               
time, that  fact doesn't  make the  agents liable.   He  asked if                                                               
that was a fair summary, if he had 90 percent of it right.                                                                      
                                                                                                                                
MR. TRICKEY told Representative Gara  that he did have 90 percent                                                               
of it right,  because statute requires disclosure  of dual agency                                                               
and  defines conflict  of interest.    Therefore, if  there is  a                                                               
conflict as defined by that  statute, there is a different remedy                                                               
for an  undisclosed conflict.   In other  words, "conflict"  is a                                                               
technical term under the statute.                                                                                               
                                                                                                                                
REPRESENTATIVE  GARA opined  that  if the  aforementioned is  the                                                               
intent of subsection (g), then  it needs to be rewritten because,                                                               
currently, it seems to imply,  though unintentionally, that if an                                                               
agent fails to disclose, then there is no [cause of] action.                                                                    
                                                                                                                                
MR. TRICKEY noted  that failure to make a  written disclosure, at                                                               
all, would result in a licensure  action.  He reiterated that the                                                               
purpose  of  subsection (g)  is  to  prevent someone  from  being                                                               
liable for the technical failure to document the disclosure.                                                                    
                                                                                                                                
REPRESENTATIVE GARA said that the  language, as written, does not                                                               
make him feel comfortable that that is all they are doing.                                                                      
                                                                                                                                
[Following    was   some    discussion   about    Mr.   Trickey's                                                               
aforementioned class-action  lawsuit and  whether the  court will                                                               
hold that actual harm must occur before damages are awarded.]                                                                   
                                                                                                                                
Number 0401                                                                                                                     
                                                                                                                                
CHAIR McGUIRE  opined that subsection  (g) is written  so vaguely                                                               
that it gives the impression  that failure to make any disclosure                                                               
at all does not  give a person a cause of action.   At a minimum,                                                               
she suggested,  it should be  rewritten to clarify that  the duty                                                               
itself still  exists and it is  only the [timing of]  the written                                                               
disclosure  that  is  addressed  in subsection  (g).    She  also                                                               
pondered  whether  the committee  should  consider  the issue  of                                                               
actual harm.  For example,  perhaps the language should stipulate                                                               
that the failure  to provide written disclosure  within a certain                                                               
timeframe must cause actual harm.                                                                                               
                                                                                                                                
MR. TRICKEY confirmed  that he'd assisted in the  drafting of the                                                               
current language in subsection (g),  and said he thought that the                                                               
language is clear  in its intent when read in  the context of the                                                               
entire statute, because proposed  AS 08.88.396(a) and (b) require                                                               
the  disclosure to  be  in  writing.   "Subsection  (g) does  not                                                               
abrogate that requirement;  it simply, we thought,  made it clear                                                               
that it just does not give rise  to a cause of action against the                                                               
licensee for failure  to do that," he added,  mentioning that the                                                               
second sentence in  subsection (g) was written as  it was because                                                               
they  did not  want it  to interfere  with any  legal claim  by a                                                               
person who suffers actual harm.                                                                                                 
                                                                                                                                
REPRESENTATIVE ROKEBERG,  making reference to  the aforementioned                                                               
class-action lawsuit, said,  "The focus of the  legislation is to                                                               
cut off  a fishing expedition  by counsel,  and the scope  of the                                                               
commissions he's asking for disgorgement  and the discovery alone                                                               
could run  into hundreds  of thousands of  dollars."   That's why                                                               
the issue  warrants interim legislation,  he opined,  because the                                                               
scope  of  the  aforementioned   class-action  lawsuit  is  quite                                                               
substantial.                                                                                                                    
                                                                                                                                
CHAIR  McGUIRE indicated  that regardless  of whether  HB 257  is                                                               
warranted,  the  language in  subsection  (g)  does not  seem  to                                                               
address the specific problem, as purported.                                                                                     
                                                                                                                                
REPRESENTATIVE   GRUENBERG  turned   attention   to  Section   9,                                                               
subsection (b), and  asked whether its effect will  be to dismiss                                                               
the aforementioned class-action lawsuit.                                                                                        
                                                                                                                                
MR. TRICKEY replied, "That's correct  ...; it would be correct as                                                               
to the claim in the suit for the violation of the statute."                                                                     
                                                                                                                                
[Following  was  some  discussion  on the  issue  of  legislation                                                               
specifically designed  to influence  pending court cases,  and on                                                               
the issue of prior legislatures' intentions.]                                                                                   
                                                                                                                                
Number 1029                                                                                                                     
                                                                                                                                
LINDA S. GARRISON,  Broker, AAR #1 Buyer's Agency,  said that [HB
257] is  a bad  law, adding  that its  creation was  very rushed.                                                               
Why the  hurry, she asked,  why the sunset?   She noted  that Mr.                                                               
Trickey  has  said  that  HB  257 is  necessary  to  protect  the                                                               
industry  so  that commissions  are  not  disgorged.   She  spoke                                                               
against abrogating  common law, and  remarked that she  has heard                                                               
no one explain how these proposed  changes will help the public -                                                               
the  consumer.   She  noted that  her  firm has  chosen  to be  a                                                               
single-agency office:  it exclusively represents buyers.                                                                        
                                                                                                                                
MS.  GARRISON  opined   that  state  law  is   not  difficult  to                                                               
understand.   It's  very  simple:   an  agent  can represent  the                                                               
seller, or the  buyer, or, in certain case,  can [undertake] dual                                                               
agency.   She explained  that the  term "specific  assistance" is                                                               
defined by  some people  in the  industry as  the writing  of the                                                               
contract, but countered  that that is way too late.   Instead, an                                                               
agent should explain to the  consumer right up front what his/her                                                               
agency relationship is  and what types of  situations could arise                                                               
because of that relationship.                                                                                                   
                                                                                                                                
MS. GARRISON  said that  HB 257  could be  called a  "real estate                                                               
protection Act."  It is  the flexibility to comply with statutory                                                               
requirements  without driving  away the  client; in  other words,                                                               
she opined, it is like saying,  "We don't want to tell buyers ...                                                               
[and] sellers the  whole story because, if we do,  they won't let                                                               
us be  a dual agent."   [House Bill 257] is  designed to preserve                                                               
dual  agency, it  is designed  to  take liability  away from  the                                                               
professional  in  the field,  and  it  is  an attempt  to  weaken                                                               
Alaskan statutes.   She suggested that it is as  if proponents of                                                               
HB 257 are saying, "Rather than  comply with the law, we're going                                                               
to work to dilute the law until it serves our purpose."                                                                         
                                                                                                                                
MS.   GARRISON  stated   that   written   disclosure  should   be                                                               
immediately  upon  first contact,  and  listed  ways in  which  a                                                               
record  of that  disclosure could  be  made and  kept, that  that                                                               
disclosure was  indeed made on  first contact.   On the  issue of                                                               
what constitutes  a commercial real estate  transaction, she said                                                               
that the  definition in the  bill is  not accurate:   $250,000 is                                                               
about the  average price  of a  home, and  an annual  gross lease                                                               
revenue  of  $12,000  is [easily  achieved  in  many  residential                                                               
leases].  She remarked that any  time she hears that something is                                                               
going  to block  the public  - block  the consumer  - from  legal                                                               
recourse, it  gives her concern.   She opined that the  reason HB
257 is  before the committee  is because the industry  got caught                                                               
doing  something it  wasn't supposed  to  do and  is now  seeking                                                               
legislative relief.   Current statute works just fine  - it's not                                                               
broken  -  she said  in  conclusion,  adding  that she  does  not                                                               
support HB 257  at all and strongly urges the  committee to table                                                               
it.                                                                                                                             
                                                                                                                                
Number 1265                                                                                                                     
                                                                                                                                
DAVID  A.  GARRISON, Associate  Broker,  AAR  #1 Buyer's  Agency,                                                               
referred to  page 3,  line 16,  in which  "agency" is  changed to                                                               
"real  estate licensee  relationships".   He  said,  "We need  to                                                               
discuss agency, not  the relationship of a  real estate licensee.                                                               
Referring then to  page 3, line 23, in which  "an agent" is being                                                               
changed to "a  real estate licensee", he opined  that the purpose                                                               
of that change is to allow  agents to say that their relationship                                                               
is  with brokers  rather than  buyers or  sellers, and  thus they                                                               
could be  governed more  by regulation rather  than statute.   He                                                               
remarked that  this should be  stopped, and that an  agent should                                                               
stay an agent - for either the buyer or the seller.                                                                             
                                                                                                                                
MR. GARRISON stated  that the judge was very clear  in the Mehner                                                             
case regarding  dual agency.  It  is very difficult to  be a dual                                                               
agent and, thus,  there should be a higher  standard of awareness                                                               
for the person  entering into such deal, that both  the buyer and                                                               
the seller  - or  the lessee  and lessor -  have a  really strong                                                               
understanding of what  it means to be entering into  that type of                                                               
a relationship.   Turning to the bill's definition  of what would                                                               
constitutes a  commercial real estate transaction,  he noted that                                                               
a  duplex would  fall  outside of  that  definition but  probably                                                               
couldn't rent for under $12,000 a year.                                                                                         
                                                                                                                                
MR. GARRISON said  that nothing in current law  prevents an agent                                                               
from representing the seller, and  opined that there are very few                                                               
people who broker commercial transactions  for the very wealthy -                                                               
who some  consider to  be "sophisticated" in  the matter  of such                                                               
transactions  - and  are perhaps  encumbered by  the current  law                                                               
regarding  dual-agency disclosure.    There are  many people,  he                                                               
noted,  that  for  one  reason   or  another  are  entering  into                                                               
commercial  real  estate transactions  for  the  first time,  and                                                               
these folks  are not knowledgeable  about the real  estate market                                                               
and everything  there is to  know about such transactions.   Such                                                               
people aren't  sophisticated buyers or  sellers; they need  to be                                                               
protected, and the  agents need to disclose  whom they're working                                                               
for.                                                                                                                            
                                                                                                                                
MR. GARRISON stated that HB  257 goes totally against the general                                                               
public.  He relayed that recently he'd  taken a client of his - a                                                               
buyer -  to an open house,  and the agent holding  the open house                                                               
insisted that she  was there to represent the buyer.   Members of                                                               
the general  public just  walking into  such a  situation without                                                               
any prior  knowledge would  have relied upon  her to  assist them                                                               
and deal with  them fairly, and might never realize  that she was                                                               
actually  representing the  seller.   Mr. Garrison  remarked that                                                               
the current law  needs to be enforced and that  agents need to be                                                               
educated  on that  law; if  it takes  lawsuits to  get agents  to                                                               
realize that  they need  to abide  by the  law, then  that remedy                                                               
should remain intact.                                                                                                           
                                                                                                                                
Number 1532                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  explained that the changes  from "agent"                                                               
to  "real estate  licensee"  and from  "agency"  to "real  estate                                                               
licensee  relationships" are  simply conforming  amendments, ones                                                               
that he'd  anticipated would  have been done  some time  ago, but                                                               
since those  changes had yet to  occur, he'd included them  in HB
257.                                                                                                                            
                                                                                                                                
CHAIR McGUIRE  surmised, then, that those  changes simply reflect                                                               
current terms of art, and  indicated that the substantive changes                                                               
in the bill pertain to dual agency and disclosure.                                                                              
                                                                                                                                
CHAIR McGUIRE,  after determining that  there was no  one further                                                               
to testify,  closed public  testimony and  indicated that  HB 257                                                               
would be held over.                                                                                                             

Document Name Date/Time Subjects