Legislature(2003 - 2004)

04/14/2003 03:22 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 257-REAL ESTATE LICENSEES:DUTIES & CLAIMS                                                                                  
Number 0045                                                                                                                     
CHAIR ANDERSON 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 0080                                                                                                                     
REPRESENTATIVE LYNN disclosed  that he is a  licensed real estate                                                               
agent,  associate  broker  licensee with  Prudential  Vista  Real                                                               
Estate of Anchorage.                                                                                                            
Number 0097                                                                                                                     
REPRESENTATIVE ROKEBERG, as sponsor of  HB 257, disclosed that he                                                               
is  a licensed  real estate  broker.   He said  that if  the bill                                                               
passes, it could  give some benefit to his  business, although he                                                               
is not actively pursuing real estate  at this time.  He explained                                                               
that  he is  still licensed  and could  sell real  estate in  the                                                               
REPRESENTATIVE  ROKEBERG  recalled  that  several  years  ago  he                                                               
sponsored a  bill which  rewrote most of  the Alaska  real estate                                                               
law.   With the help  of the  Alaska Association of  Realtors and                                                               
local [real estate] boards, the  occupational licensing laws [for                                                               
real  estate]  were substantially  updated  and  rewritten.   One                                                               
section  of the  real  estate law,  AS  08.88.396 [Disclosure  of                                                               
agency  to prospective  buyers and  sellers] was  not revised  in                                                               
anticipation of industry input.   Representative Rokeberg said he                                                               
has been  working with an industry  task force for the  last year                                                               
and a half, waiting for an overall  fix for this part of the law.                                                               
Because of the  complexity of this issue,  an industry -generated                                                               
solution is  not yet available,  he noted.   Members of  the real                                                               
estate industry are  currently working on a draft  of a different                                                               
bill, which will eventually come before this committee.                                                                         
Number 0333                                                                                                                     
REPRESENTATIVE ROKEBERG  testified that HB 257  exempts licensees                                                               
acting on  commercial real estate  transactions from  the current                                                               
disclosure  requirements.   In addition,  the bill  provides that                                                               
licensees handling exempt transactions have  the duty to act with                                                               
honesty, fairness,  and good faith in  representing both parties.                                                               
He explained that  these [three terms] are  legal standards which                                                               
are commonly  used in  the uniform commercial  code and  in other                                                               
commercial transactions.   These  standards protect  the interest                                                               
of the parties in the commercial activity.                                                                                      
REPRESENTATIVE ROKEBERG also  noted that HB 257  provides that if                                                               
a  licensee  fails  to properly  disclose  a  relationship,  [the                                                               
injured party]  can file a  claim against the Real  Estate Surety                                                               
Fund  but [cannot  file a  lawsuit]  in court.   A  retroactivity                                                               
clause in  the bill applies to  any actions pending in  court for                                                               
which a final judgment has not been rendered.                                                                                   
Number 0503                                                                                                                     
REPRESENTATIVE  ROKEBERG said  he  sponsored HB  257 because  the                                                               
industry is facing vexatious litigation.   He pointed out that 25                                                               
percent of  Alaska's domestic product  involves the sale  of real                                                               
estate,   commercial  brokerage   appraisal,  construction,   and                                                               
similar activities.   He said  that this legislature  should take                                                               
note  of these  activities and  their importance  to the  state's                                                               
[economy].    He  said  there's a  potential  class  action  suit                                                               
against every real  estate broker and licensee in  the state that                                                               
could  cost  millions  of  dollars  and  bring  the  real  estate                                                               
industry to its knees.                                                                                                          
REPRESENTATIVE  ROKEBERG pointed  out  that some  members of  the                                                               
real estate  profession are not  happy with HB  257.  He  said he                                                               
has  alerted  the  task  force  that if  it  could  not  craft  a                                                               
comprehensive solution  for this  matter, he intended  to proceed                                                               
on a small  version of the bill, until the  industry can work out                                                               
the larger solution.  He said he  is happy to work with all folks                                                               
in  the industry  to  resolve  this issue.    However, he  didn't                                                               
believe  it is  prudent for  the  legislature to  wait until  the                                                               
industry crafts a final resolution.                                                                                             
Number 0663                                                                                                                     
REPRESENTATIVE CRAWFORD asked  about Section 7, page  5, lines 6-                                                               
15, which deals with applicability  and retrospectivity.  He also                                                               
asked if  there were  any pending lawsuits  that this  bill would                                                               
REPRESENTATIVE ROKEBERG  said he  was aware  of only  one [court]                                                               
action that HB 257 would  affect, and indicated he supported that                                                               
[intervention] because  the legislature  has the right  to [write                                                               
laws that affect pending lawsuits].                                                                                             
Number 0719                                                                                                                     
REPRESENTATIVE  GATTO  asked who  will  be  the winners  and  the                                                               
losers if HB 257 passes.                                                                                                        
REPRESENTATIVE  ROKEBERG replied  that  the winners  will be  the                                                               
people of Alaska  if commerce can be conducted in  the way it was                                                               
before the current  law was written in the early  1990s.  He said                                                               
that the current  law has never worked properly.   Witnesses will                                                               
testify  today about  the barriers  erected by  the current  law,                                                               
such as  the [excessive]  amount of paperwork  it requires.   For                                                               
example, one commercial real estate  brokerage firm has developed                                                               
17 pages of forms to meet  the disclosure requirements as to what                                                               
type of  agency relationship the  broker has with the  buyer, the                                                               
seller, or both.                                                                                                                
REPRESENTATIVE  GATTO clarified  his  question to  ask who  would                                                               
gain and who  would lose monetarily under this bill.   He said he                                                               
guessed that  the people who  would gain monetarily would  be the                                                               
people who engage in the transactions.                                                                                          
REPRESENTATIVE ROKEBERG said  that is not the case.   He said the                                                               
current losers  are the  public and perhaps  the licensees.   The                                                               
only winner [under the current  law] is the person who's bringing                                                               
the lawsuit  [against the  commercial brokerage  firm].   He said                                                               
the  interests  of  the  consumer should  be  paramount  in  this                                                               
statute.     Therefore,   this  bill   specifically  deals   with                                                               
commercial  agents,  [under  circumstances]  where  there  is  no                                                               
defendable consumer  protection theory.   [Clients  of commercial                                                               
real  estate transactions  are]  sophisticated and  knowledgeable                                                               
parties.   The other [impetus  behind HB 257]  is to cut  off the                                                               
class-action  litigation  on  a  law  that  was  poorly  drafted,                                                               
difficult to  implement, and  has needed fixing  for a  number of                                                               
years.    [Even  though  the  industry]  couldn't  reach  general                                                               
consensus [on  how to repair  this law],  this bill cuts  off the                                                               
massive litigation that is occurring in the Lower 48.                                                                           
Number 0932                                                                                                                     
PEGGY  ANN  McCONNOCHIE,  Realtor;  Member,  Agency  Task  Force,                                                               
Alaska Association  of Realtors,  explained that  she has  been a                                                               
realtor  since  1982.   She  testified  that  [HB 257]  does  not                                                               
reflect realtors' standards of practice  in Alaska.  Furthermore,                                                               
no  other state  in the  country exempts  commercial real  estate                                                               
agents  from  disclosing  whom  they  work  for  to  the  buying,                                                               
selling, renting, or leasing public.                                                                                            
MS. McCONNOCHIE  noted that [Section 1,  the Legislative Findings                                                               
and Intent, page 1, lines 8-12] reads,                                                                                          
     (1) the purpose of the requirement that a real estate                                                                      
     licensee make certain disclosures about the licensee's                                                                     
     representation  is to  provide  consumer protection  to                                                                    
     those people who  may not be familiar  with their legal                                                                    
     responsibilities  and  rely  in  part  on  real  estate                                                                    
     licensees for advice when  buying, selling, and leasing                                                                    
     real estate;                                                                                                               
MS. McCONNOCHIE  disagreed with the  description of  a commercial                                                               
real estate  transaction [on page  4, lines 16-23]  that involves                                                               
the sale  or lease of a  four-plex or larger structure,  the sale                                                               
of commercial  property worth  $100,000 or more,  or the  sale or                                                               
lease of  real estate having  a gross lease revenue  that exceeds                                                               
$12,000  a  year.    She  asked why  a  person  buying,  selling,                                                               
renting,  or  leasing  [under  these  circumstances]  needs  less                                                               
protection than a person buying a $300,000 residence.                                                                           
MS.  McCONNOCHIE said  that  the "Agency  Task  Force" has  spent                                                               
almost 11 months  rewriting [real estate] agency laws.   She said                                                               
the law is very complex; the rewrite  is not going to happen in a                                                               
day, and her  group wants it done correctly.   She said her group                                                               
appreciates the  past revisions  to the agency  law and  has long                                                               
recognized that the  current agency law does not work  as well as                                                               
it should.   However, [commercial  agent disclosure] needs  to be                                                               
thought through  and planned very  carefully; her group  does not                                                               
want  to come  back in  another year,  saying "Whoops,  we forgot                                                               
something; we'd  like to change it."   The Agency Task  Force has                                                               
proposed  regulation  changes  that  the  Department  of  Law  is                                                               
reviewing.   She  said she  hopes those  changes will  go through                                                               
quickly  because those  changes will  take  care of  some of  the                                                               
problems  evident in  the industry.   She  predicted a  wholesale                                                               
change in  agency law  in the  near future,  saying "If  we could                                                               
have it  to you  today, we would,  but we don't."   She  said the                                                               
[Alaska Association  of Realtors]  should complete its  review by                                                               
the end of the  month and she guaranteed that it  will be back to                                                               
the committee with  a completed bill.  In the  meantime, [HB 257]                                                               
does not do it, she said.                                                                                                       
MS.  McCONNOCHIE cautioned  against the  retroactive part  of the                                                               
bill because it does not protect  the public.  She said her group                                                               
believes that real  estate statutes must do two  things:  protect                                                               
the  buying,  selling, leasing,  and  renting  public and  assure                                                               
accountability on the part of  real estate agents.  She commended                                                               
Representative  Gatto's question  about  identifying the  winners                                                               
and losers  [of HB 257].   She said the  winner would be  a small                                                               
group  of  [commercial] real  estate  agents  who don't  want  to                                                               
follow  the agency  laws.   She reminded  committee members  that                                                               
buying  a  $100,000  commercial   property  or  four-plex  is  no                                                               
different than buying  a $300,000-$350,000 house.   She urged the                                                               
committee not to pass the bill out of committee.                                                                                
MS. McCONNOCHIE, in response  to Representative Rokeberg, replied                                                               
that  she is  speaking for  the Alaska  Association of  Realtors,                                                               
whose  president  will  testify  today that  the  association  is                                                               
opposed  to   the  bill.     The  Agency   Task  Force   and  the                                                               
[association's] legislative  committee met again today  to review                                                               
the bill and voted against HB 257.                                                                                              
Number 1217                                                                                                                     
SHAWN PAUL,  Associate Broker, ReMax of  Juneau; President-Elect,                                                               
Southeast  Board  of  Realtors,   explained  that  board  had  an                                                               
emergency  meeting today  and voted  against supporting  [HB 257]                                                               
for  many  of  the  reasons  outlined by  Ms.  McConnochie.    He                                                               
addressed  the question  of  who  wins and  who  loses [with  the                                                               
passage of  this bill].   He reiterated  that the losers  will be                                                               
the  buying, selling,  renting, and  leasing public;  the winners                                                               
will be those agents who  aren't following the disclosure laws or                                                               
the  [real   estate  industry's]  standards  of   practice.    He                                                               
highlighted  the  bill's  change  of "agent"  to  "licensee"  and                                                               
cautioned against doing away with the  concept of agent.  He said                                                               
[the Southeast Board  of Realtors] is opposed to the  "get out of                                                               
jail free" clause at the end of the bill [Section 7, page 5].                                                                   
REPRESENTATIVE ROKEBERG asked  if a person getting  a real estate                                                               
license has to know Alaska real estate law.                                                                                     
MR. PAUL replied yes.                                                                                                           
REPRESENTATIVE ROKEBERG asked what other  part of the real estate                                                               
law uses the word agent.                                                                                                        
MR. PAUL  said he understands that  the term agent is  a commonly                                                               
used term.                                                                                                                      
REPRESENTATIVE ROKEBERG  pointed out  that when  the rest  of the                                                               
real  estate  statutes  were  revised six  years  ago,  the  word                                                               
"licensee" replaced  the use of  "agent".  He also  asked whether                                                               
commercial  realtors  in  Anchorage and  larger  cities  practice                                                               
differently than those in Southeast Alaska.                                                                                     
Number 1376                                                                                                                     
MR. PAUL  said he doesn't  practice in Anchorage so  doesn't know                                                               
if there  are differences  in day-to-day practices.   He  said he                                                               
does  refer  clients to  Anchorage  professionals  who have  high                                                               
ethical  standards and  who  perform  a good  service.   He  said                                                               
realtors in  [Southeast Alaska] do  a fine job of  disclosure [to                                                               
clients].   In  response  to  Representative Rokeberg's  question                                                               
about the amount  of commercial activity in  Juneau and Southeast                                                               
Alaska, he deferred to other witnesses.                                                                                         
REPRESENTATIVE  CRAWFORD  asked   about  the  difference  between                                                               
"agent" and "licensee"  and asked why it was  necessary to change                                                               
these terms in the real estate statutes.                                                                                        
REPRESENTATIVE  ROKEBERG replied  that  there  was concern  about                                                               
what  agency means  in  common  law principle  of  agent and  its                                                               
application to  real estate  brokerage.  It's  a great  source of                                                               
confusion between the practitioners,  the public, and the courts.                                                               
There's no  use of the agency  principle laws in the  creation of                                                               
fiduciary relationships between any kind  of marketer of any kind                                                               
of commodity  in the  world, except  real estate  brokerage where                                                               
the term agent  comes into play, where one is  actually an agent.                                                               
When  the words  "broker" and  "agent" were  used in  real estate                                                               
law, the  original intention  was to indicate  the broker  as the                                                               
principle  and the  agent as  the subagent,  or the  relationship                                                               
between  the licensee  and the  broker,  not the  client and  the                                                               
licensee.  This  is where there's been a corruption.   The courts                                                               
have  corrupted that.   It's  a very  unique situation  under the                                                               
common law  where there's been  applications such as that.   What                                                               
"we" did  actually compounded the  confusion by statute  over the                                                               
years.   That's why when the  law was rewritten the  language was                                                               
changed  from "agent"  to  "licensee" because  the  agent is  the                                                               
agent   of   the   broker,   the   principle;   if   there's   an                                                               
agency/principle relationship,  it exists between the  broker and                                                               
the licensee.   Otherwise the  individual client, if there  is in                                                               
fact  an agency/principle  relationship  under the  law, will  be                                                               
vicarious liable for the act of  the licensee, an issue that came                                                               
up on the floor  of the House just last week.   He explained that                                                               
vicarious liability is actually being  created on the part of the                                                               
clientele,  which isn't  the  intent.   It  gets complicated,  he                                                               
REPRESENTATIVE  ROKEBERG  explained  that [HB  257]  removes  the                                                               
requirement that commercial agents  make disclosure and allows an                                                               
injured  client  to [seek  financial  redress]  through the  real                                                               
estate  surety  fund.    It's  a simple  approach,  he  said,  an                                                               
"interim  stop-gap measure."   He  noted his  disappointment with                                                               
the testimony [in opposition to HB 257].                                                                                        
Number 1533                                                                                                                     
REPRESENTATIVE GATTO confirmed that Mr.  Paul works for ReMax [of                                                               
Juneau],  that  he  is  an  associate broker,  an  agent,  and  a                                                               
licensee.  Representative Gatto asked  if Mr. Paul uses the words                                                               
agent and license interchangeably.                                                                                              
MR. PAUL  replied that  an agent has  received a  license through                                                               
the state and that every licensee is an agent.                                                                                  
REPRESENTATIVE  ROKEBERG  explained  that under  Alaska  statute,                                                               
[real estate  professionals] are  licensees, which is  the source                                                               
of the confusion.                                                                                                               
Number 1586                                                                                                                     
REPRESENTATIVE CRAWFORD said that when  he has contracted with an                                                               
agent to buy  property, that person was acting as  his agent.  He                                                               
said he doesn't  understand why the legislature  changed the term                                                               
[agent] to licensee.                                                                                                            
Number 1613                                                                                                                     
REPRESENTATIVE ROKEBERG clarified that  the real estate person is                                                               
not  his  agent  but  his contractee.    He  said  Representative                                                               
Crawford contracted  with this person  to perform a service.   So                                                               
the person has  a contractual obligation with him.   To establish                                                               
the agency/principle relationship is  not accurate other than the                                                               
superior courts  in Alaska corrupted  the [distinction]  by using                                                               
that common  law principle.  The  real estate person is  not your                                                               
agent, the  person is your  contractee that performs  duties that                                                               
arise out of  the nature of the relationship.   They don't have a                                                               
common  law principal/agency  relationship.   In Alaska  law, the                                                               
[real estate]  listings belong to  the broker; they  don't belong                                                               
to the  licensee, which  is problematic because  it gets  into an                                                               
area  called "subagency."   He  indicated the  need to  eliminate                                                               
that [area  of law].  Part  of the problem is  public perception,                                                               
the public  believes that  special duties arise  out of  the fact                                                               
that  they're dealing  with this  licensee.   Although duties  do                                                               
exist, the  question is with  regard to  the scope of  duties and                                                               
whether the agency/principle relationship exists.                                                                               
Number 1672                                                                                                                     
REPRESENTATIVE CRAWFORD  recounted occasions  when he  has bought                                                               
houses  and never  communicated with  the  sellers.   He said  he                                                               
thought the  real estate licensee was  working as his agent.   He                                                               
noted that  when he  represents his fellow  ironworkers as  a job                                                               
steward,  he's  acting  as  their  agent.    He  said  he  didn't                                                               
understand  [why agent  is  not  an accurate  term  for a  person                                                               
selling real  estate].   This bill  appears to  take some  of the                                                               
[disclosure] responsibility away from the licensee.                                                                             
REPRESENTATIVE ROKEBERG said that  Representative Crawford may be                                                               
confused because  of the way  this one  section of the  law still                                                               
reads.    In Representative  Crawford's  case,  [the real  estate                                                               
licensee]  would  be a  buyer's  agent  because that's  what  the                                                               
statute says.   However,  the point  is that  the courts  and the                                                               
practice   has   been   that   there's   been   this   artificial                                                               
agency/principle  relationship  established.     Under  the  real                                                               
estate statutes  written around 1991  or 1992, there  could arise                                                               
situations of dual agency in which  the buyer's agent is also the                                                               
seller's agent.  He said there  are duties between the client and                                                               
the particular  licensee; those duties  should be defined  not as                                                               
an agent/principle  relationship but as a  contract relationship.                                                               
He pointed  out that  one issue  in HB 257  is to  help consumers                                                               
understand  what  they'll  get   [from  a  real  estate  licensee                                                               
handling   commercial  property].      [The   issue]  is   pretty                                                               
complicated,  he  admitted.     All  [HB  257   does]  is  exempt                                                               
commercial agents [from disclosure requirements].                                                                               
Number 1765                                                                                                                     
REPRESENTATIVE  GUTTENBERG asked  if  Representative Rokeberg  is                                                               
changing the  word "agent"  to "licensee"  because of  some court                                                               
REPRESENTATIVE  ROKEBERG replied  yes, in  part.   He added  that                                                               
this change  [in terminology]  will make this  part of  the [real                                                               
estate] law conform with the rest  of the statute, which uses the                                                               
term licensee  not agent.   This bill is really  pretty innocent,                                                               
except for what it does for commercial agents, he remarked.                                                                     
Number 1809                                                                                                                     
REPRESENTATIVE DAHLSTROM  inquired as to  how the public  is best                                                               
served by removing the disclosure [requirement].                                                                                
REPRESENTATIVE ROKEBERG  explained that the bill  does not remove                                                               
disclosure [responsibility  from all  real estate  licensees]; it                                                               
just exempts commercial agents from  disclosure.  [A forthcoming]                                                               
bill will  change that, but this  bill doesn't.  It  only exempts                                                               
commercial agents and makes any  [subsequent] lawsuits subject to                                                               
surety fund recoveries.                                                                                                         
REPRESENTATIVE  DAHLSTROM  confirmed   that  a  regular  licensee                                                               
[selling   residential  real   estate]   is   not  exempt   [from                                                               
disclosure], only [a licensee selling] commercial property.                                                                     
REPRESENTATIVE  ROKEBERG confirmed  that  [HB  257] won't  affect                                                               
most of  the people  testifying today  unless they  do commercial                                                               
REPRESENTATIVE DAHLSTROM  asked what percentage of  [real estate]                                                               
business is commercial.                                                                                                         
REPRESENTATIVE ROKEBERG said it depends on the locale.                                                                          
Number 1872                                                                                                                     
CAROLE  WINTON, Licensed  Real Estate  Broker; President,  Alaska                                                               
Association  of Realtors,  informed  the committee  that she  has                                                               
been licensed since 1974 and  does [residential] sales as well as                                                               
commercial  leases and  sales.   She noted  that she  has been  a                                                               
member  of  the  [association's]  Agency  Task  Force  since  its                                                               
inception  June 2002.   The  group  has met  almost weekly,  with                                                               
Representative  Rokeberg in  attendance most  of the  time.   She                                                               
said she  appreciates his sponsoring  a bill handling  the agency                                                               
changes that  are necessary  for the real  estate industry.   She                                                               
clarified that  all real  estate brokers  are licensed  under the                                                               
same license;  there is  no separate  license for  people selling                                                               
commercial real  estate.  Therefore,  it would be  very difficult                                                               
for some licensees  to abide by rules of agency  while others did                                                               
MS. WINTON  said [the  Agency Task  Force] has  tried [addressing                                                               
the  problem]  through  two directions;  the  first  was  through                                                               
regulation changes.  Those changes  passed the board of directors                                                               
[of the Alaska  Association of Realtors] last  September and were                                                               
forwarded  to the  Real Estate  Commission, which  approved them.                                                               
The Department  of Law is  now reviewing  the changes.   She said                                                               
that Representative Rokeberg had  alerted the association that he                                                               
would take  action.  She  emphasized that  she would like  to see                                                               
[the solution]  done right  the first  time, [thereby  avoiding a                                                               
subsequent  request] to  the  legislature for  a  revision.   Ms.                                                               
Winton explained  that the second  part of the  proposed solution                                                               
is  a  statute  change,  which would  reflect  the  standards  of                                                               
practice in the  industry today.  This bill does  not reflect the                                                               
industry's current standards of practice, she observed.                                                                         
MS.  WINTON  noted that  a  real  estate licensee  must  disclose                                                               
whether he  or she is  the agent of the  buyer, the agent  of the                                                               
seller, or  a dual  agent.   She said  that most  licensees don't                                                               
have any problem doing  that; it is the law.   She said she's not                                                               
sure why  some realtors doing  commercial work in other  parts of                                                               
the state have a problem with  disclosure.  She said that clients                                                               
want to  know up  front who  the licensee is  working for  -- the                                                               
buyer,  the  seller, or  both.    The  law  has a  provision  for                                                               
[notifying the  client of dual  agency]; it is  clearly described                                                               
and is used all the time, she said.                                                                                             
MS.  WINTON   explained  that  consumer  protection   and  public                                                               
awareness  are   the  primary  goals   of  the  changes   in  the                                                               
regulations and  statutes.   The public  should be  well informed                                                               
and should know for whom the licensee works.                                                                                    
Number 2011                                                                                                                     
REPRESENTATIVE ROKEBERG noted that  he removed the [reference to]                                                               
rental   activities  from   [HB   257]  based   on  his   earlier                                                               
conversation with her.  He asked  why Ms. Winton stated that this                                                               
bill doesn't  reflect standards of  practice in the  industry and                                                               
questioned  if   it  is  because  the   bill  exempts  commercial                                                               
transactions from disclosure.                                                                                                   
MS. WINTON confirmed his statement.                                                                                             
CHAIR ANDERSON restated Ms. Winton's  position that this standard                                                               
of practice [of disclosure] is  relevant to all realtors and this                                                               
bill  exempts  one  group of  realtors  [those  doing  commercial                                                               
MS.  WINTON agreed.   She  said  all of  a sudden  in this  bill,                                                               
commercial realtors  don't have  to tell  their clients  for whom                                                               
they are working.                                                                                                               
Number 2046                                                                                                                     
REPRESENTATIVE   GATTO    referenced   the    applicability   and                                                               
retrospectivity  clause  in Section  7,  page  5, and  asked  Ms.                                                               
Winton her opinion of this provision, which reads:                                                                              
     "(a) The provisions of this  Act apply to a real estate                                                                    
     transaction  that  occurs  before,  on,  or  after  the                                                                    
     effective date  of this  Act, and  to that  extent, are                                                                    
      (b)...applies to an action pending in a court in the                                                                      
     state in which a final judgment has not been rendered                                                                      
       before the effective date of this Act and, to that                                                                       
     extent, is retrospective..."                                                                                               
CHAIR  ANDERSON confirmed  that Ms.  Winton is  president of  the                                                               
Alaska Association  of Realtors.   He asked how many  members are                                                               
commercial realtors versus residential realtors.                                                                                
Number 2130                                                                                                                     
MS. WINTON  said that realtors  don't distinguish  between people                                                               
who deal in commercial or residential property.                                                                                 
CHAIR ANDERSON cited the letter  in the members' bill packet from                                                               
the company of Bond, Stephens  & Johnson, which offers commercial                                                               
real estate services.  He asked  if any members of that firm were                                                               
active in the Alaska Association of Realtors.                                                                                   
MS. WINTON  said she did not  have a list of  association members                                                               
at hand.                                                                                                                        
CHAIR ANDERSON  confirmed that the association  includes realtors                                                               
who  handle commercial  and residential  property,  and that  the                                                               
association members  voted, urging the [House  Labor and Commerce                                                               
Standing] Committee to vote against this bill.                                                                                  
REPRESENTATIVE   ROKEBERG   asked   whether   the   association's                                                               
legislative committee  or the full  membership voted  against the                                                               
MS.  WINTON explained  that the  legislative  committee with  the                                                               
approval of the  president is tantamount to  getting the approval                                                               
of the board of directors.                                                                                                      
Number 2179                                                                                                                     
REPRESENTATIVE ROKEBERG said  he has been a broker  in Alaska for                                                               
almost 30  years.  He  asked if commercial real  estate licensees                                                               
are active in the Alaska Association of Realtors.                                                                               
MS.  WINTON replied  that the  association includes  quite a  few                                                               
commercial  brokers.    She  said   she  doesn't  know  how  many                                                               
commercial  brokers  are  licensed  in  the  state.    There  are                                                               
licensees who are not realtors, she  said.  Realtors conform to a                                                               
higher code of ethics.                                                                                                          
REPRESENTATIVE ROKEBERG asked  if, generally speaking, commercial                                                               
realtors are not involved in the association.                                                                                   
MS. WINTON responded  that she has no way of  knowing that, since                                                               
the  association doesn't  distinguish  between realtors  handling                                                               
residential and commercial property.                                                                                            
REPRESENTATIVE  ROKEBERG  said  that   in  Anchorage,  there  are                                                               
realtors  who   specialize  in  commercial  activity.     In  his                                                               
experience,   commercial   brokers   are  not   active   in   the                                                               
association,  which  tends  to  focus  on  residential  brokerage                                                               
CHAIR   ANDERSON  asked   if  there's   a  commercial   brokerage                                                               
MS.  WINTON  replied  yes;  it's a  subsidiary  of  the  National                                                               
Association  of   Realtors.    She  explained   that  the  Alaska                                                               
Association of  Realtors is one  of the  50 state members  of the                                                               
National Association of Realtors.                                                                                               
Number 2249                                                                                                                     
REPRESENTATIVE CRAWFORD  explained that  he is looking  at buying                                                               
some  acreage  for  commercial  purposes.   When  he  called  the                                                               
realtor  listed on  the sign,  the person  asked if  he would  be                                                               
using his own  agent or if he  would like this company  to be his                                                               
agent  for a  dual  agency.   He  noted that  this  is a  typical                                                               
conversation in  his experience  and asked  what would  change if                                                               
[HB 257] passed.                                                                                                                
MS. WINTON replied  that the realtor wouldn't have  to advise him                                                               
that he has the option of using  his own agent or of working with                                                               
that realtor.   According to current state law,  the broker needs                                                               
to  inform the  client during  the  first main  contact that  the                                                               
broker is working  for the seller, or can work  for both with the                                                               
approval of the seller and the buyer.                                                                                           
REPRESENTATIVE CRAWFORD  asked if the  bill takes away  the right                                                               
of [court] action  against a realtor who  doesn't disclose [these                                                               
Number 2329                                                                                                                     
CHAIR  ANDERSON  asked  for  an  example  of  how  HB  257  would                                                               
adversely affect the consumer.                                                                                                  
Number 2370                                                                                                                     
MS. McCONNOCHIE  said a consumer  would call a broker  whose sign                                                               
was posted on a commercial property.   The broker would give some                                                               
information  about  the  property.     The  consumer  might  have                                                               
concerns about  the use of  the property and the  required zoning                                                               
for  the  commercial  enterprise.    The  broker  would  have  no                                                               
responsibility to tell  the seller whether the  current zoning is                                                               
applicable for the client's use.                                                                                                
TAPE 03-34, SIDE B                                                                                                            
Number 2380                                                                                                                     
MS.  McCONNOCHIE   explained  that  the  broker   would  have  no                                                               
responsibility  to  the  owner  or  the seller  --  only  to  the                                                               
broker's   own  pocketbook.     She   described  that   [lack  of                                                               
responsibility] as the fatal flaw [in HB 257].                                                                                  
REPRESENTATIVE   ROKEBERG  said   he   took   exception  to   Ms.                                                               
McConnochie's description;  he said  that's not the  intention of                                                               
the bill.                                                                                                                       
REPRESENTATIVE CRAWFORD  said that he learned  from other sources                                                               
that  a good  portion of  this property  was listed  as wetlands.                                                               
The first  agent he talked  to said he  could use his  own agent.                                                               
He  asked if  there's any  wrong doing  since that  broker didn't                                                               
have  a responsibility  to  disclose the  wetland  status of  the                                                               
MS. McCONNOCHIE  said disclosing  information about  the property                                                               
is a  separate issue than  disclosing agency  requirements [e.g.,                                                               
who the broker is working for].   The basic information about the                                                               
type of property would still  have to be disclosed, regardless of                                                               
whether the  broker was or  wasn't his  agent.  A  broker working                                                               
for the  buyer would  help the  buyer figure out  how to  use the                                                               
REPRESENTATIVE  ROKEBERG directed  attention to  the language  on                                                               
page 4, lines  30-31, requiring that licensees have  to "act with                                                               
honesty,  fairness, and  good faith"  in representing  or dealing                                                               
with these people.   He said the standards change  in HB 257, but                                                               
realtors  will still  be responsible,  and standards  of practice                                                               
and legal standards will apply.                                                                                                 
REPRESENTATIVE GATTO  said that honesty, fairness  and good faith                                                               
are  laudable, and  if  everyone followed  them,  laws and  bills                                                               
would not be necessary.                                                                                                         
REPRESENTATIVE  ROKEBERG replied  that  the  courts must  enforce                                                               
these [behaviors].                                                                                                              
Number 2293                                                                                                                     
REPRESENTATIVE  GUTTENBERG asked  if  there are  any court  cases                                                               
involving the failure [of realtors] to disclose.                                                                                
MS. WINTON  replied that  the one case  she knows  about involved                                                               
residential property.                                                                                                           
Number 2274                                                                                                                     
TRACEY   RICKER,  Broker,   Ricker  and   Associates;  President,                                                               
Southeast Board of Realtors, stated  the board's position that it                                                               
does not support  [HB 257] as written.  She  said she would defer                                                               
to other  witnesses waiting  to testify.   She  expressed concern                                                               
why,  when  the  industry  is trying  to  simplify  the  existing                                                               
disclosure  law  of agency,  the  bill  excludes commercial  real                                                               
estate  transactions.   Why would  the bill  diminish any  public                                                               
protection in this industry, she asked.                                                                                         
Number 2237                                                                                                                     
REPRESENTATIVE  ROKEBERG  stated  that  in  his  30  years  as  a                                                               
commercial broker  this [disclosure]  law, as  it has  evolved in                                                               
the past decade,  has made his practice almost  impossible.  When                                                               
he has  to file this  kind of paperwork [referencing  the 17-page                                                               
sample disclosure forms], he said he  can't even talk to a client                                                               
who  has to  send all  these  forms to  his legal  staff back  in                                                               
Detroit.   He  stated  that  he is  being  put  out of  business.                                                               
Therefore,  [HB  257] is  trying  to  balance  the needs  of  the                                                               
general public  and those  of the commercial  public.   He stated                                                               
that  the amount  of commercial  activity  that goes  on in  this                                                               
community and  Southeast Alaska is  a thimbleful of what  goes on                                                               
in the rest  of the state.  He said  although he appreciates [the                                                               
witnesses'] concerns, [HB 257 doesn't  harm] the practice of real                                                               
estate  in Southeastern  Alaska.    This section  of  the law  is                                                               
upsetting and  destroying commerce  in this  state, he  said, and                                                               
it's creating a  moving target for lawyers.   There's always been                                                               
tension  between  brokers  of  residential  and  commercial  real                                                               
estate, he added.                                                                                                               
MS. RICKER clarified that she is also a commercial broker.                                                                      
Number 2168                                                                                                                     
JEANNIE  JOHNSON, Licensed  Broker, explained  that she  has been                                                               
licensed in Alaska  for 28 years.  She has  practiced 20 of those                                                               
years  in Anchorage  and  eight  years in  Juneau  and does  both                                                               
residential   and  commercial   transactions.     She  said   she                                                               
appreciates  Representative  Rokeberg's  work on  behalf  of  the                                                               
industry;  he has  been the  [legislative] workhorse  for a  very                                                               
long  time.    However,  she  expressed  concern  about  HB  257.                                                               
Regarding questions [raised today]  about realtors and commercial                                                               
agents,  the  premier designation  of  a  commercial real  estate                                                               
broker  is  a  Certified  Commercial  Investment  Member  (CCIM),                                                               
issued through the National Association of Realtors.                                                                            
MS.  JOHNSON  said  she  has  two concerns  with  HB  257.    The                                                               
[standards for exclusions in HB 257]  are very low.  For example,                                                               
exempting  transactions  of   four-plex  [residential  units]  or                                                               
$100,000;  she said  that  a  Fortune 500  company  would not  be                                                               
dealing with  such small transactions.   Therefore, she suggested                                                               
making the limits [for exempted  transactions] higher.  She asked                                                               
if the Prudential lawsuit would  be affected by the retroactivity                                                               
clause of this bill.                                                                                                            
Number 2094                                                                                                                     
REPRESENTATIVE ROKEBERG said the  pending case involves a $50,000                                                               
MS.  JOHNSON  confirmed that  the  [affected]  case was  not  the                                                               
Prudential   suit.     She  expressed   her  concern   about  the                                                               
retroactivity of this bill.   She informed the committee that she                                                               
has just  returned from a  convention of the Association  of Real                                                               
Estate  Licensed Law  Officials  (ARELLO), attended  by U.S.  and                                                               
Canadian commissioners  who regulate real estate  licensing.  She                                                               
said Alaska  is now famous  for one particular court  case, which                                                               
she  cannot  discuss   because  she  sits  on   the  Real  Estate                                                               
Commission, who  will eventually  adjudicate [issues  related to]                                                               
that suit.                                                                                                                      
REPRESENTATIVE  ROKEBERG said  the  Prudential  lawsuit has  been                                                               
settled in court and a  disciplinary action is pending before the                                                               
Real  Estate  Commission.    The Prudential  suit  would  not  be                                                               
affected by  HB 257 because  there has  been a final  judgment or                                                               
settlement.   He noted that  there's another case [in  court that                                                               
may be the subject of] a class  action lawsuit.  In that case the                                                               
defendants have done everything they  can to settle the case, but                                                               
[the plaintiffs have  not made] an effort to [show]  there was an                                                               
injury to  any person.   He stated that there's  ulterior motives                                                               
[harmful to  the real estate  industry], and that's why  [HB 257]                                                               
is before the committee.                                                                                                        
MS.   JOHNSON   reiterated   her   concern   about   the   bill's                                                               
retroactivity  provision,  which sets  a  precedent.   There  are                                                               
other [court cases]  pending in the residential  field, and she's                                                               
expressed  concern about  a "get  out of  jail free  card."   She                                                               
said,  "We  work very  long  and  hard  in  this industry  to  be                                                               
Number 1986                                                                                                                     
REPRESENTATIVE   ROKEBERG  disagreed   that  [the   retroactivity                                                               
clause] is  a "get out of  jail free card."   The legislature can                                                               
act  retroactively, he  explained.   He  said  he has  personally                                                               
brought before  this committee  a number  of [statutory  fixes to                                                               
court] cases.   This is  not [the case  of] a bad  actor [getting                                                               
off the hook], he said.                                                                                                         
MS. JOHNSON suggested that the  retroactivity clause be clarified                                                               
because  other members  of the  committee have  read it  the same                                                               
Number 1950                                                                                                                     
JIM  WAKEFIELD said  he would  forgo  his testimony  in favor  of                                                               
other witnesses.                                                                                                                
Number 1939                                                                                                                     
JEAN  KAY,  President,  Valley Board  of  Realtors;  Real  Estate                                                               
Agent,  ReMax of  Wasilla; board  member,  Alaska Association  of                                                               
Realtors, explained  that she was  speaking only for part  of her                                                               
membership  because she  was unable  to poll  all of  the members                                                               
before this hearing.  She testified  that HB 257 does not reflect                                                               
the  standards of  practice of  the real  estate industry  today.                                                               
The Alaska  Association of Realtors  has been working  since 2002                                                               
on  the  issue of  agency  disclosure.   She  reiterated  earlier                                                               
testimony   that  the   association's   effort   has  taken   two                                                               
directions:    proposed regulation  changes  to  the Real  Estate                                                               
Commission  and  proposed  statutory  changes  that  reflect  the                                                               
standards  of practice  of the  industry in  this country.   This                                                               
committee  [of  the Alaska  Association  of  Realtors] has  spent                                                               
countless  hours meeting  twice a  month, and  a number  of state                                                               
laws  were reviewed  and  are still  under  consideration by  the                                                               
committee.    She  stated  that HB  257  primarily  promotes  the                                                               
interests of commercial realtors.                                                                                               
MS.  KAY noted  that [classifying]  a four-plex  as a  commercial                                                               
[transaction] doesn't  make sense.   Owner-occupied  financing is                                                               
available through FHA [Federal  Housing Administration] for four-                                                               
plexes,  and  many  times  those   buyers  and  sellers  are  not                                                               
sophisticated.    She   said  that  the  primary   goal  of  both                                                               
regulation  changes  and  the proposed  statue  change  has  been                                                               
consumer protection.   Consumers  need to be  aware for  whom the                                                               
agents work and how they are  compensated.  She said that this is                                                               
realtors'  livelihood;  how  they  treat  people  makes  all  the                                                               
difference.   She asked  that HB  257 not  pass out  of committee                                                               
until the Agency Task Force has  a chance to present its findings                                                               
of fact.   Some states that  have passed real estate  agency laws                                                               
are having to revise them because of errors, she mentioned.                                                                     
Number 1767                                                                                                                     
PADDY  COAN, Associate  Broker, Valley  Office, Prudential  Vista                                                               
Real   Estate;  past   president,  Valley   Board  of   Realtors;                                                               
Secretary,  Alaska  Association   of  Realtors,  President-Elect,                                                               
Wasilla  Chamber  of  Commerce,  said  that  she  was  originally                                                               
licensed  in 1982.   She  supervises  40 agents  working in  land                                                               
sales,  residential sales,  property  management, and  commercial                                                               
sales and leasing.  She testified  that in the first three months                                                               
of  2003,   her  office  closed   $25  million  in   real  estate                                                               
MS. COAN said  that currently, real estate licensees  can be sued                                                               
and held  liable for damages,  including punitive damages,  for a                                                               
failure to  disclose dual agency  in writing in a  timely manner.                                                               
She  said  that [this  liability  situation]  does not  help  the                                                               
public.    She said  she  prefers  that dissatisfied  buyers  and                                                               
sellers come to  brokerages to resolve problems  rather than file                                                               
court  cases  over  technicalities.    She  proposed  eliminating                                                               
lawsuits  over technical  violations  of the  disclosure law  and                                                               
having the real estate commission  handle failures to comply with                                                               
licensing laws.   In her  area, which  is the fasting  growing in                                                               
the   state,   [dual   agency]   disclosures   for   construction                                                               
[transactions] are very difficult [to  determine].  She said that                                                               
the  [Agency] Task  Force  has  learned how  difficult  it is  to                                                               
determine when  dual agency  must be disclosed.   For  example, a                                                               
broker could meet someone at an  open house, and the person could                                                               
decide right then  to write an offer on the  property; the broker                                                               
could technically be in violation of timely disclosure.                                                                         
MS. COAN  noted that under HB  257, buyers and sellers  can still                                                               
file complaints with  brokers; they can make a  claim against the                                                               
surety fund;  and they can  still, if defrauded, bring  a lawsuit                                                               
to the  court.  Commercial practitioners  understand that there's                                                               
a period  of due diligence  [to disclose agency].   In commercial                                                               
transactions, there's usually a  greater degree of sophistication                                                               
of the  parties.  There's  no loss  of consumer protection  in HB
257, she testified.   Ms. Coan clarified that this  bill does not                                                               
exempt   commercial   practitioners;    it   exempts   commercial                                                               
transactions.   In her office,  she supervises people who  do all                                                               
types  of  real   estate  activities,  and  they   would  not  be                                                               
prohibited  from  disclosing  their   agency.    The  transaction                                                               
[whether  residential  or commercial]  would  be  the event  that                                                               
would  change  that  [requirement  to  disclose].    She  thanked                                                               
Representative Rokeberg  for introducing HB 257,  and stated that                                                               
she supports the bill.                                                                                                          
Number 1585                                                                                                                     
DON ZIMMERMAN,  RealEstateAlternative.com, testified that  he has                                                               
sold real estate since 1985.  He  spoke in support of HB 257.  He                                                               
said he'd like for the Agency  Task Force to continue its work on                                                               
the issue.  He reiterated that  [under HB 257], the disclosure is                                                               
determined by  the type  of transaction.   He agreed  that buyers                                                               
are more sophisticated  than they were 10 years ago.   He pointed                                                               
out  that buyers  can use  the  Internet to  research agents  and                                                               
properties.   Even on the  residential side, he  noted, consumers                                                               
can go  to classes before  they engage  in any transactions.   He                                                               
said  he didn't'  believe HB  257 in  any way  harms the  public.                                                               
Legislation should  consider real estate licensees  as members of                                                               
the public  who need  protection.   He recommended  [raising] the                                                               
limits  [on exempted  transactions] on  page 4,  line 20,  but he                                                               
would  prefer  [the  exemption]   being  confined  to  commercial                                                               
transactions  and  eliminating  any reference  to  dollar  limits                                                               
because those change with the times.                                                                                            
Number 1500                                                                                                                     
MARK LEE, CCIM (Certified  Commercial Investment Member), Broker,                                                               
Lee Realty,  testified that  his practice  is in  commercial real                                                               
estate only.   He said he  does primarily leasing and  some sales                                                               
of  commercial land.   He  commented that  the $12,000  lease, on                                                               
page 4, line  23, is the equivalent of a  $1,000 lease per month.                                                               
Leasing should  be on  a completely  different plane  because the                                                               
broker  is   dealing  with  commercial  people   and  with  small                                                               
businesses that  have their  bankers' advice.   He'd like  to see                                                               
leasing  excluded  [from  disclosure  requirements]  because  the                                                               
agent  always represents  the  property owner.    The person  out                                                               
looking for  space to lease  certainly has enough  business savvy                                                               
to recognize that fact.  He  supports this bill and would like to                                                               
see it move forward.                                                                                                            
REPRESENTATIVE  ROKEBERG asked  Mr.  Lee about  his statement  to                                                               
exclude leasing activities.  He  asked if he would exclude leases                                                               
below $12,000 a year or raise the leasing limit.                                                                                
Number 1399                                                                                                                     
MR. LEE replied that he deals  with leases for very small spaces,                                                               
and they  range from $650 to  $3,000 a month.   He suggested that                                                               
leasing activities  be exempt from  disclosure requirements.   He                                                               
said  the   general  public   understands  the   leasing  agent's                                                               
Number 1353                                                                                                                     
HOWARD  TRICKEY, Prudential  Vista; Prudential  Jack White,  said                                                               
his comments would be limited to  subsection (g) on page 5, lines                                                               
1-5, and  subsection (b), on page  5, lines 12-15.   He said that                                                               
subsection (g) does  not change or eliminate the  obligation of a                                                               
residential broker  to make a  dual agency disclosure.   All that                                                               
this section does is protect  the broker from a frivolous lawsuit                                                               
where  there's been  no  harm  or damage  done  to  any buyer  or                                                               
consumer.    Subsection (g)  is  intended  to treat  a  technical                                                               
failure to  disclose a dual  agency relationship in writing  in a                                                               
timely fashion.   He said that it proposes to  treat that failure                                                               
as a licensure  violation for which disciplinary  action could be                                                               
taken  against  the agency.    If  there's  actual loss  or  harm                                                               
suffered [because of] a technical  violation, a buyer may bring a                                                               
claim under the  [real estate surety] fund.   The subsection does                                                               
not change  a buyer's right under  common law to bring  a tort or                                                               
negligence action.                                                                                                              
MR. TRICKEY  noted that this  change is consistent with  the only                                                               
ruling on this  subject by the Alaska Supreme Court  in 1979 in a                                                               
case entitled Deeds  Beets(ph) v. Meiers Real  Estate Agent (ph).                                                             
He  said  that   the  supreme  court  ruled   that  an  innocent,                                                               
unintentional failure to  make a disclosure should  not give rise                                                               
to a  claim to disgorge  a commission  or turn over  a commission                                                               
after  an actual  damage or  loss  to the  buyer.   He said  that                                                               
subsection  (g)  protects real  estate  agents  and brokers  from                                                               
frivolous lawsuits in  cases when they have made  a disclosure of                                                               
the  agency  relationship   in  good  faith  but   may  not  have                                                               
technically made it in writing in a timely fashion.                                                                             
Number 1201                                                                                                                     
MR. TRICKEY said he is  currently defending Prudential Vista in a                                                               
class action lawsuit  over a technical violation  of the statute.                                                               
He  said the  lawsuit  seeks  that the  agents  and brokers,  who                                                               
represented the sellers  and buyers in the  transactions and made                                                               
disclosure but didn't make the  disclosure timely, should forfeit                                                               
all commissions earned  over the past six years.   He warned that                                                               
such a  ruling would have  a devastating impact on  the industry.                                                               
That case also  seeks punitive damages for  a technical violation                                                               
of  the   statute,  which  the  Alaska   Supreme  Court  wouldn't                                                               
recognize as a  breach of a fiduciary duty under  the common law.                                                               
[He] said  he supports a  proposed [amendment] to  subsection (g)                                                               
that is before the committee.                                                                                                   
Number 1138                                                                                                                     
MR.  TRICKEY  said  subsection  (b)  [applies  retroactively]  to                                                               
pending  cases for  which  no final  judgment  has been  entered.                                                               
When some  people object to a  "get out of jail  free card," they                                                               
are referring  to the  well-known Bonnie  Mehner case,  which has                                                               
been  settled,  he  noted.     He  said  that  the  applicability                                                               
[provision] in  Section 7  would not change  the outcome  of that                                                               
case,  with  its  judgment  for  compensatory  damages,  nor  the                                                               
pending disciplinary proceedings.  The  court found that she made                                                               
a material  misrepresentation, and  the two  proposed amendments,                                                               
which he supports, would not change  that outcome.  [Under HB 257                                                               
and the  two proposed amendments,]  no buyer is  left unprotected                                                               
where  they   suffer  an   actual  loss  as   the  result   of  a                                                               
misrepresentation or  fraud or deceit.   The  proposed amendments                                                               
to Section  6, subsections  (g) and (f)  [would prohibit]  a suit                                                               
based on a  technical violation of failure to  make disclosure in                                                               
a  timely  fashion.    These  proposed  changes  do  not  relieve                                                               
residential  brokers of  their  obligation  to make  disclosures.                                                               
These  two  subsections,  Section  6(g)  and  Section  7(b),  are                                                               
applicable only to residential brokers.   He said he doesn't have                                                               
any comments  to make on  the commercial brokerage  provisions of                                                               
the  bill.   He  also commented  that if  this  bill passes,  the                                                               
losers would be  the lawyers bringing frivolous  lawsuits.  After                                                               
these two  sections [are amended],  no buyers or  consumers would                                                               
lose, he said.                                                                                                                  
Number 0985                                                                                                                     
RICK   FULLER,  Owner/Broker,   Prudential  Vista   Real  Estate,                                                               
responded to  a question from  Representative Rokeberg  about why                                                               
[HB 257] is  important to him.   He explained that he  has been a                                                               
broker  for  28  years,  and  was chairman  of  the  Real  Estate                                                               
Commission  for five  years.   He said  that his  company has  an                                                               
outstanding  reputation, is  proactive in  solving problems,  and                                                               
doesn't have  a rash  of litigation.   He  said he  doesn't think                                                               
that  the  litigator [who  has  a  filed  a lawsuit  against  his                                                               
company] is going  to get class action status;  however, he wants                                                               
to stop  that possibility.  He  said that this court  case is not                                                               
about solving  problems; it's about  using a  technical violation                                                               
to strip his  company and the industry of the  right to practice.                                                               
He said  that the  losers would  be the  public because  the real                                                               
estate industry does  a very good job of buying  and selling real                                                               
estate.    He  said  his  company is  being  sued  on  a  $50,000                                                               
transaction  by owners  of companies  that do  a billion  dollars                                                               
worth  of business  annually.   He said  he has  a reputation  of                                                               
taking complaint  referrals and solving  them.  He noted  that no                                                               
other  attorneys or  clients have  jumped on  the [class  action]                                                               
bandwagon.  He  said he objects to an attorney  getting rich on a                                                               
Number 0827                                                                                                                     
CHRIS  STEPHENS,  CCIM,  President,  Bond,  Stephens  &  Johnson,                                                               
explained  that  he's  in  a  conference  room  with  five  other                                                               
brokers; another  three had  to leave earlier.   He  authored the                                                               
[April 14,  2003] letter in  the members' packets.   He explained                                                               
that his company  is the largest commercial  brokerage company in                                                               
the state.   The company has 12 agents and  last year the company                                                               
did  200  exclusively  commercial transactions,  worth  $300-$400                                                               
million.  He  has been in the  business 22 years and  most of the                                                               
company's agents have five or more years of experience.                                                                         
Number 0703                                                                                                                     
MR. STEPHENS  referred to  several unintentional  drafting errors                                                               
in  HB 257.   He  stated that  HB 257  is trying  to rectify  two                                                               
issues in  current law:   dual  agency and  disclosure.   He said                                                               
that in a  dual agency situation, the law  prohibits brokers from                                                               
discussing  price or  terms with  a client.   Dual  agency occurs                                                               
when the  broker has an  established relationship with  the other                                                               
party or if the  other agent works for the same  company.  If the                                                               
buyer is brought  in by an agent from another  company, then it's                                                               
not dual  agency.   The aforementioned  leads to  some ridiculous                                                               
situations.  His  company experiences a large  proportion of dual                                                               
agency  commercial  transactions for  several  of  reasons.   Mr.                                                               
Stephens explained  that [Alaska] has  a very small  business and                                                               
investment  community.   So  he  ends up  dealing  with the  same                                                               
people and the organizations on  all sides of a transaction quite                                                               
frequently.   He said the  result is a dual  agency relationship.                                                               
All commercial  property [transactions]  tend to be  complex; the                                                               
agents  know one  another and  talk about  their properties.   He                                                               
noted that his firm has been  hired by his clients because of its                                                               
tremendous  expertise,  but  the  law  prohibits  his  firm  from                                                               
[exercising  that expertise].    He described  the  loser as  the                                                               
person who wants  to put these transactions  together; his agents                                                               
can't say anything because of the dual agency statutes.                                                                         
MR.  STEPHENS described  a recent  situation, in  which he  had a                                                               
property  he was  selling for  the heirs  of an  estate.   He had                                                               
three offers, two  from agents outside his company,  and one from                                                               
agents in  his company.   He said he sat  down with the  heirs to                                                               
review  these offers  and  to  decide which  of  these offers  to                                                               
counter  and pursue.    He could  discuss the  first  two but  he                                                               
couldn't discuss the offer from an  agent within his company.  He                                                               
concluded that  [this legal restraint]  doesn't help  the public,                                                               
the consumer, or the economy.   To try to do business under these                                                               
circumstances is  just about  impossible, he said.   He  said the                                                               
current law is making criminals  of honest people, who are trying                                                               
to do the best they can for their clients.                                                                                      
Number 0519                                                                                                                     
MR.  STEPHENS next  discussed the  disclosure forms,  included in                                                               
his letter to  the committee, which was developed  by an attorney                                                               
for his  company so it  could comply with the  law.  He  said the                                                               
paperwork  is  voluminous.   He  said  he  deals  with a  lot  of                                                               
national  companies, and  their [representatives]  just put  [the                                                               
disclosure  forms]   aside  because  they  might   not  have  the                                                               
authority to  sign them and they  don't want to take  the time to                                                               
send them to their national  real estate department someplace [to                                                               
be reviewed].   Local businesses don't  know what to do  with the                                                               
forms  either,  he said.    His  company  is trying  to  transact                                                               
[business]  and these  [forms]  aren't helping.    He deals  with                                                               
experienced  business  people  who,  if  they  want  somebody  to                                                               
represent them, will say so.                                                                                                    
MR. STEPHENS stated  that, contrary to the  prior testimony, this                                                               
[sophisticated  understanding  of  agency and  disclosure]  is  a                                                               
standard of practice  of commercial real estate  in Anchorage and                                                               
in Alaska  for the  past 22 years.   He said  he also  works with                                                               
national brokers selling properties  to people outside the state.                                                               
He noted  that another five  people are waiting patiently  at his                                                               
site to testify.                                                                                                                
CHAIR ANDERSON announced that the bill  will not be passed out of                                                               
committee today  because of the  number of people who  still want                                                               
to testify.                                                                                                                     
Number 0302                                                                                                                     
REPRESENTATIVE ROKEBERG invited him to send written comments.                                                                   
MR. STEPHENS  stated there were other  people extremely concerned                                                               
about the  bill who wanted  to testify.   He said  several agents                                                               
from  other companies  had already  left because  they could  not                                                               
stay  for the  whole hearing.   The  following people  introduced                                                               
themselves:    Stuart  Bond,  Tim  Spernak,  Joe  LoMonaco,  Greg                                                               
Johnson, Mike McElligott, Bob Arms, and Marc Dunne.                                                                             
CHAIR  ANDERSON  noted that  these  agents  were members  of  Mr.                                                               
Stephens' firm.                                                                                                                 
Number 0212                                                                                                                     
TOM MARTIN,  Broker, A+ Realty,  stated that  he has been  in the                                                               
real estate  industry since  1991, is the  past president  of the                                                               
Kodiak  Board   of  Realtors,  and  does   both  residential  and                                                               
commercial  work.   He  said  he disagrees  with  the  bill.   He                                                               
mentioned  recent  regulatory  changes  that  are  improving  the                                                               
standards  of practice  within  the industry.    He compared  the                                                               
[unethical] practices  of Arthur Anderson [a  national accounting                                                               
firm]  with common  practices in  the real  estate industry.   He                                                               
noted that "all of  a sudden when the stuff hits  the fan, it was                                                               
looked  at from  a totally  different perspective."   Mr.  Martin                                                               
described the  need to carefully  disclose agency  to individuals                                                               
who  have  limited  knowledge  of   the  English  language.    He                                                               
recommended increasing the  [threshold for commercial exemptions]                                                               
in Section 6, changing the $100,000  limit on page 4, line 20, to                                                               
$500 million  and changing the  $12,000 a  year limit on  page 4,                                                               
line 23,  to $1 million.   He  favored letting the  courts settle                                                               
litigation [rather  than including  the retroactive clause  in HB
Number 0076                                                                                                                     
DAVE FEEKEN, Chair, Legislative  Committee, Alaska Association of                                                               
Realtors; ReMax of  the Peninsula, summarized the  history of the                                                               
disclosure issue.  In 1984, there  was a lawsuit in Hawaii, where                                                               
the standard real estate practice  was subagency, that is, a real                                                               
estate agent represented  the seller only.   The lawsuit inspired                                                               
a  federal  review  of  agency   practices  in  the  real  estate                                                               
industry.  That  commission found that 80  percent of [consumers]                                                               
who  were   working  with   an  agent   thought  the   agent  was                                                               
representing  them.   This prompted  the National  Association of                                                               
Realtors (NAR) [tape ends mid-statement.]                                                                                       
TAPE 03-35, SIDE A                                                                                                            
Number 0010                                                                                                                     
MR. FEEKEN  recounted that NAR  agreed to push  agency disclosure                                                               
laws in  all states  in order to  prevent the  nationalization of                                                               
the real  estate industry.   He cited  a 1989 case  in Minnesota,                                                               
the Edina Real  Estate case, that dealt with  an undisclosed dual                                                               
agency situation  very similar to  the class action  suit pending                                                               
in  Alaska.   He  explained  that there  are  two  types of  dual                                                               
agency:   disclosed, consensual  dual agency  that is  legal, and                                                               
undisclosed dual agency, which is illegal  in all 50 states.  The                                                               
result  of  undisclosed dual  agency  can  be the  forfeiture  of                                                               
commission  if found  guilty, recession  of the  contract, fraud,                                                               
punitive damages,  and the  loss of license.   Mr.  Feeken opined                                                               
that this bill trivializes what  the two lawsuits and the federal                                                               
government consider  a very important consumer  protection issue.                                                               
He stated that Representative Rokeberg  is attempting to abrogate                                                               
common law.   Thirteen states  have attempted this  [approach] in                                                               
their licensing laws,  and none of them have  been successful [in                                                               
court].   He said that there's  got to be a  [standard] rulebook,                                                               
and when  people get  in trouble  in all  of these  other states,                                                               
they go back to common law to decide how to deal with the issue.                                                                
Number 0219                                                                                                                     
DAVID GARRISON, Associate Broker,  AAR #1 Buyers' Agency; member,                                                               
Anchorage Board  of Realtors;  Buyer Agent,  National Association                                                               
of Exclusive  Buyer Agents, explained  that he works only  on the                                                               
buyer's side  of the transaction  and that his firm  handles both                                                               
commercial and  residential properties.   He  warned that  if the                                                               
[the   legislature]  stops   requiring  agency   disclosure,  the                                                               
consumer will  be hurt.   He  explained that he  is doing  a real                                                               
estate  transaction with  an agent  in Chicago,  and that  person                                                               
discloses whom  he is representing.   He  said that the  issue is                                                               
not about the different disclosure  practices between realtors in                                                               
big  towns  and  small  towns.    Mr.  Garrison  said  he  favors                                                               
retaining the disclosure requirement [in  state law].  He opposes                                                               
the "get out of jail free"  provision in [Section 7 of] the bill.                                                               
He said  an agent should have  a fiduciary duty to  represent the                                                               
buyer  or  the  seller.    If   that  is  changed,  he  said  the                                                               
[legislature] should  sunset the  Real Estate Commission  and let                                                               
the [real estate] marketplace go [unregulated].                                                                                 
Number 0392                                                                                                                     
REPRESENTATIVE LYNN  confirmed that  the Chicago  transaction Mr.                                                               
Garrison mentioned was of a commercial nature.                                                                                  
Number 0439                                                                                                                     
LINDA GARRISON,  AAR #1  Buyers' Agency,  questioned why  the big                                                               
hurry  to  pass HB  257.    She noted  the  work  of the  [Alaska                                                               
Association of Realtors'] legislative  committee, the Agency Task                                                               
Force committee,  and its subcommittee,  and urged  the committee                                                               
to wait  until these groups had  finished their work, even  if it                                                               
means waiting until next session.   Ms. Garrison said she opposes                                                               
any retroactive provisions  in state law because  they remove the                                                               
checks  and   balances  between  the  legislature   and  judicial                                                               
systems.   She testified that  [HB 257] protects the  real estate                                                               
agent,  not the  public or  the consumer.   She  said that  buyer                                                               
agency and  seller agency  are very  simple relationships  with a                                                               
fiduciary  duty.   Ms.  Garrison  stated  that dual  agency  only                                                               
benefits one  person; but  buyers and sellers  have the  right to                                                               
decide   whether  they   want   a  dual   agent   or  their   own                                                               
representation.   She  said she  does not  support abrogation  of                                                               
common law.                                                                                                                     
Number 0635                                                                                                                     
CHAIR ANDERSON closed public testimony on HB 257.                                                                               
Number 0649                                                                                                                     
REPRESENTATIVE DAHLSTROM moved to report  HB 257 out of committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
note.   There  being no  objection, HB  257 was  passed from  the                                                               
House Labor and Commerce Standing Committee.                                                                                    

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