MINUTES OF THE ASSEMBLY COMMITTEE ON COMMERCE Sixty-eighth Session May 1, 1995 The Committee on Commerce was called to order at 3:30 p.m., on Monday, May 1, 1995, Chairman Larry Spitler presiding in Room 332 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Larry L. Spitler, Chairman Ms. Sandra Tiffany, Chairman Mrs. Maureen E. Brower, Vice Chairman Mr. Richard Perkins, Vice Chairman Mr. Morse Arberry, Jr. Mr. Thomas A. Fettic Ms. Chris Giunchigliani Mr. Lynn Hettrick Mr. David E. Humke Mr. Michael A. (Mike) Schneider COMMITTEE MEMBERS EXCUSED: Ms. Barbara E. Buckley GUEST LEGISLATORS PRESENT: None STAFF MEMBERS PRESENT: Mr. Paul Mouritsen, Senior Research Analyst Mrs. Barbara Moss, Committee Secretary OTHERS PRESENT: Patsy Redmond, Nevada Association Joan Buchanan, Real Estate Division John Gibbons, Real Estate Division Pat Coward, Nevada Association of Realtors Darrell L. Clark, Nevada Association of Realtors Donald Morse, B & I Manufactured Housing Division Marolyn Mann, Nevada Mobile Home Park Owners Irene Porter, Nevada Home Builders Association Rene Ashelman, Sierra Nevada Home Builders Association Mrs. Collier Barbara McKenzie, City of Reno Following roll call, Chairman Spitler asked the Committee to take action to introduce Bill Draft Request 54-696 requested by the city of Las Vegas, which was an act relating to private patrolmen revising provisions governing the employment of such persons of unarmed security guards and providing other matters properly relating thereto. ASSEMBLYMAN HETTRICK MOVED TO INTRODUCE BDR 54-696. ASSEMBLYMAN PERKINS SECONDED THE MOTION THE MOTION CARRIED. (ASSEMBLYMAN ALLARD WAS NOT PRESENT FOR THE VOTE.) The Chair also asked the Committee to introduce a Bill Draft Request, requested by Stephanie Tyler for the Dispensing Opticians Board, for the justification or purpose that the present statutes have certain deficiencies that require supplemental legislation in areas concerning prescriptions, advertising apprentices, business permits, unlicensed activity and other matters. ASSEMBLYMAN HETTRICK MOVED FOR INTRODUCTION. ASSEMBLYWOMAN GIUNCHIGLIANI SECONDED THE MOTION. THE MOTION CARRIED. (ASSEMBLYMAN ALLARD WAS NOT PRESENT FOR THE VOTE.) Chairman Spitler announced Ms. Giunchigliani was distributing to the Committee an amendment (Exhibit C) to A.B. 329 with the intention of voting on the bill Wednesday, May 3, 1995. Chairman Spitler recommended those committee members who had bills in subcommittees to move toward resolution. If they were unable to find resolution, inform the Chairs and the bill would be brought back for work in full committee. Chairman Spitler opened the hearing on A.B. 476. ASSEMBLY BILL 476 - Requires seller of certain residential property to disclose condition of property. Assemblyman Mike Schneider, Assembly District 42, indicated there were a group of bills to be presented on real estate disclosure from an interim study that he attended. The study was on listing defects of a property, history of rent increases in mobile home parks, and disclosure of death on a property, such as a suicide, which did not pertain to the property. He stated there were several individuals who would speak on the various bills. He returned to his seat on the Committee but was available for reference if needed. Pat Coward, representing the Nevada Association of Realtors, introduced Patsy Redmond, Executive Vice President of the Association of Realtors. Mr. Coward would give an overview of what had occurred up to the drafting of the bill. Ms. Redmond would also give an overview, and they would go through the bill line-by-line and introduce three proposed amendments that would strengthen the bill. Mr. Coward said A.B. 476 came from the 1993 legislative session when both houses passed A.C.R. 75 interim study on property condition disclosure. They supported it at that time and had been actively involved with the Committee working on a package of bills, primarily the three bills to be addressed on this date. The Committee was very active and chaired by Assemblyman Petrak, who took a great interest in the outcome of the recommendations of the Committee. He added Mr. Petrak had called him twice reiterating his support for the three bills. Mr. Coward indicated an article (Exhibit D) from the Reno Gazette, dated April 30, 1995, endorsing the bills. Mr. Coward stated one of the endeavors within the Association, unique and never done before, was the creation of a state-wide task force that worked in conjunction with the interim study committee. The task force attempted to involve people in the industry, and from all parts of the state, to participate in creating workable property condition disclosure legislation beneficial to the consumer. He felt they had accomplished it. It was something new and different. They had numerous meetings throughout the year, as did the interim committee, in dealing with the subject matter. He deferred to Ms. Redmond who would give an overview of A.B. 476. Ms. Patsy Redmond indicated they had been working on the concept for a number of years. The Nevada Association of Realtors believed the bill protected all parties in an open and fair manner. It had eight sections: section 2 was definitions, section 4 told how the form would be serviced and included exclusions, section 5 included seller's protections, section 6 included buyer's remedies, section 7 outlined when the conveyance occurred, and section 8 required an effective date of October 1, 1995. Ms. Redmond indicated there were proposed amendments (Exhibit E) which she would explain later in her testimony. She explained the bill section-by-section. Section 2: The first definition had to do with a defect, which meant a defect that materially effected the value or use of the residence. In other words, a leaky roof or plumbing that was not working. Disclosure form was the second definition and would be adopted by the Real Estate Division through regulation. Dwelling unit was a residence occupied by one person or by two or more persons maintaining a common household. Residential property meant no more than four dwelling units. Seller meant a person who sold or intended to sell any residential property. Mr. Arberry indicated number 4, "residential property meant any land in the state to which was affixed not less than one and not more than four dwelling units". He asked how it applied to a condominium complex having more than four dwelling units. Ms. Redmond answered it was strictly for real property, not common interest. Mr. Arberry asked what happened when there were more than four town houses? Ms. Redmond reiterated it was not covered under that law. Mr. Coward said they tried to keep the focus initially very narrow within the residential community and the definition was one to four dwellings. He felt it could be expanded but it got quite complex. Mr. Arberry did not wish to expand it, he just wanted it clarified. Section 3: The Real Estate Division would develop the form and adopt regulations describing the format and contents of the form. Subsection 1 included systems that must be in the disclosure form. Subsection 2 - The disclosures were to be made by the seller, not the agent. That was included because the seller was the one living in the home and was knowledgeable about it. Section 4: Referred to when the form must be provided to the buyer and stated: "When the residential property was conveyed to the purchaser the seller shall complete a disclosure form regarding the residential property." They were recommending, and it had been brought up to the Committee, that under section 4, 1 (a), sub 1, it would read: "The seller shall complete a disclosure form no later than ten days prior to conveyance of the property." Ms. Giunchigliani asked if "seller" could include a bank in the event of repossession. Ms. Redmond answered no, that was an exclusion and would be discussed further along in her presentation. Mr. Coward added one of the reasons they incorporated the ten day period was to give adequate time for the buyer to react to the property condition disclosure and assimilate what information had to be provided and take action. They also incorporated a waiver process in the event of a cash transaction which would close escrow quicker than ten days. Ms. Giunchigliani asked where escrow came in? Ms. Redmond responded at the end of conveyance. Ms. Giunchigliani clarified they would not be penalized or risk losing their money if that occurred. Ms. Redmond stated it would be more protection for them because if a defect was revealed that was not in the purchase agreement they would have remedy to not purchase the property. Ms. Redmond continued with Section 4. (2) (b) stated if after the service of the completed disclosure form but before conveyance of the property, the purchaser, a seller or his agent discovered a defect in the residential property that was not identified prior or a defect had become worse, then the buyer did have some remedy. It allowed the buyer to have inspections should they so desire. 2. started the beginning of exclusions including: (a) government or governmental foreclosure, (b) co-owners of properties which were spouses or persons related, (c) first sale of a residence that was constructed by a licensed contractor and never before occupied, (d) by bank, thrift company, credit union, trust company, etc., (e) if it had been acquired for development or for convenient transaction of its businesses, or as a result of foreclosure, (f) by a person who takes temporary po ss es si on . Th is happened in a case when a company transferred a person out- of-town and the company took over the residence moving it into a third party relocation firm. It was excluded because the relocation firm would not know the property condition. Ms. Tiffany asked if one was doing a contract sale and not using a real estate firm would one still be responsible for that portion of the law? Ms. Redmond said it was not truly conveyed at that point. Ms. Tiffany asked the definition of "convey". Ms. Redmond explained it meant the property was turned over from one party to the other. Ms. Tiffany indicated she could see the shift for responsibility of disclosure was leaning more heavily toward the seller and away from the real estate agent/broker and asked if it were possible to buy any type of insurance to indemnify oneself for the future. Ms. Redmond said the agent was still required to disclose any material defect of which he/she was aware. In answer to the insurance question she stated there were home warranty policies in effect in Nevada. One of the large home warranty companies, however, just recently went bankrupt. Ms. Tiffany was not thinking of home warranty but the type of insurance which an agent/broker had to carry for liability. Ms. Redmond said they all carried Errors and Omissions (E&O) coverage. Ms. Tiffany asked if there was E&O type insurance for the seller. Ms. Redmond did not have an answer for that. Ms. Tiffany felt this could warrant it. Mr. Arberry understood the public administrator sometimes confiscated property upon death and asked how that would be effected in the bill. Ms. Redmond explained that would be a government entity and cited 2 (a) which said it was excluded by government or governmental agency and would not be required to disclose. Mr. Fettic disclosed he was a real estate broker. In scanning through the bill he did not see it would effect him any differently than anyone else, therefore, he would take part in the discussions and eventual vote. Ms. Brower asked if there was a similar form that real estate agents were required to use at the present time? Ms. Redmond said no, but for a number of years the industry had encouraged voluntary use of property condition disclosure forms and 90 percent of them did so. Ms. Brower clarified it was not required. Ms. Redmond asserted it was voluntary. Ms. Brower observed the disclosures were based upon awareness, therefore, would the seller be freed from liability? Ms. Redmond said they must be aware of problems. Ms. Tiffany asked, in the case of a sale by owner, how would the seller know the disclosure form was required? Ms. Redmond hoped anyone involved in so extensive a legal transaction would investigate the requirements needed. Ms. Tiffany declared it once again went back to the seller and the buyer would have to request it. Therefore, if the buyer and the seller were not informed about the disclosure statement, the seller would still be responsible. Ms. Redmond said that was correct. Ms. Tiffany asked if the closing agent missed it at closing, the seller would still be responsible. Ms. Redmond agreed but said later in the bill there were some buyer's remedies in which awareness and nonawareness was addressed. Ms. Tiffany stated when a bill was passed there were some people who fell through the cracks. She expressed concern about liability without knowledge and inquired how the general public would be made aware. Ms. Redmond pointed out there was always a contract of some sort between a buyer and a seller. A contract would be purchased, at a stationery store or wherever such things were sold, and a package of documents required for sale of property would be readily available. Mr. Coward indicated if an individual did not use a licensed real estate agent, the escrow officer or closing agent would walk them through the procedure explaining the documents required before transfer of property could take place. Over time education would be extended, not only to the members of the association, but to the general public as well. This was not unique to Nevada but was happening across the country. Disclosure had become a critical issue in the transfer of property and the best person to know the condition of the property was the seller. Ms. Tiffany said there were circumstances in which it was difficult to sell a house and more people were choosing to sell by owner, or contract seller, outside of an agent because of the six percent fee. With the California market falling apart, more people in Nevada were doing that. She asked if a clause could be added allowing a grace period for the law to be put into effect and the education to reach the public. Ms. Redmond said she could see no problem with it indicating there was a method in place to train the licensee which could be extended to training the public as well. Mr. Coward concurred and stated they could do it in the language of the bill or move the effective date forward. Ms. Giunchigliani indicated page 3, line 9, " . . through the disclosure form or otherwise . .", she asked what did "or otherwise" mean? Ms. Redmond said it could be verbal and deferred to their staff attorney, Darrell L. Clark. Mr. Clark said "or otherwise" was added because the previous line referred to seller or agent and the agent did not fill out the disclosure form. Ms. Giunchigliani asked, under current statute, what did the agent fill out? Ms. Redmond replied currently the agent was not required to fill out a form, only a verbal disclosure. Mr. Clark stated the agent, under law in the state of Nevada, both in Chapter 645 and case law, was required to inform all parties to a real estate transaction of any material matters effecting the property that he/she was aware of, whether it be the seller or the buyer. Ms. Giunchigliani asked if there was documentation required under Chapter 645? Mr. Clark said it was not stated in writing. Ms. Giunchigliani questioned how the real estate agents protected themselves. Ms. Redmond said that was the reason many of their agents were using disclosure forms and having them signed by the seller. It was voluntary and the seller could refuse to disclose if they so desired. In most instances, however, they did fill out the form at the request of the real estate agent. Ms. Giunchigliani asserted she did not want to penalize agents but, for their protection, they should be required to document the seller had been informed. Ms. Giunchigliani asked the definition of "defects". Mr. Clark indicated it was defined in section 2 (1): "Defect means a condition that materially affects the value or use of residential property in an adverse manner." Ms. Giunchigliani stated in section 6, sub-section 5, (b), "A contractor, engineer, land surveyor or pesticide applicator, who was authorized to practice that profession in this state at the time the information was provided." She asked if it would be permissible to say "who was licensed or authorized" because some were required to practice in the state and others were only authorized. Perhaps that could be clearer. Mr. Fettic stated section 6, subsection 2, spoke to the rights of the purchaser, and asked if it came out of section 4, subsection 2 (b)? Ms. Redmond answered they were two different instances. Section 4 talked about the disclosure form, serving the disclosure form, and if a defect was discovered after service of the disclosure form but before conveyance. Subsection 6 covered failure to serve a completed disclosure form. Mr. Hettrick felt the intent was correct but when he looked at subsection 6, line 8, it said, ". . through the disclosure form . . ", and he felt the language needed to be tightened up. There could not be a disclosure form that would apply if it were not completed. It appeared to him it was in subsection 6 as well. It said a defect not identified in the agreement, therefore, section 4 was a defect identified prior to sale; section 6 was one identified after sale because it said "rescind the agreement or recover". Mr. Spitler stated amendments had been mentioned by the testifiers and asked Ms. Redmond if additional amendments would be added based upon discussions taking place in the hearing. She answered there probably would be additional amendments, but she wished to address the two existing amendments. Ms. Redmond addressed the proposed amendments to A.B. 476 (Exhibit E). Mr. Hettrick called attention to section 6.4 where it said, "or his agent", and on page 2, line 40, where it talked about somebody having temporary control and it appeared to be somebody's agent, not necessarily a real estate agent. His point was if they were talking about his agent in line 21, meaning the real estate agent, he agreed; but if they were talking about his agent in terms of subsection (f) on page 2, it would still be his agent. It needed clarification. Ms. Redmond indicated on page 2 they were exclusions. Mr. Hettrick stated if the seller turned it over to an agent for sale, and in subsection 6 they were talking about someone who had filled out a disclosure form, it was unclear. Ms. Redmond stated it was not turned over to the agent to convey, the seller conveyed it. Mr. Coward interjected if a person was moved by his employer, it was customary for a real estate company to work on his behalf to transfer the title of the property from the seller to a relocation company. After the seller had departed, the property was listed and sold by them. Ms. Redmond said the second amendment dealt with deliberately not revealing a defect. In Section 6.4 they proposed: "Except as otherwise provided in subsection 5 if a seller conveys residential property to a purchaser without complying with the requirements of section 4 of this act or provides a notice that does not reveal a defect . . ." Mr. Hettrick pointed out page 1, lines 23 and 24, where it said, ". . . and of the condition of any other aspects of the property which the real estate divisions deems appropriate . . .", it was very broad language and he was concerned with it. He felt it should say "pertinent aspects of the property", not "any other". Ms. Redmond said they had concerns regarding evolving issues that happened in real estate, such as lead-based paint, radon, and types of things that developed. Those things could not be put in statute and the form had to evolve to fit those particular disclosure items. Ms. Giunchigliani stated much was being placed upon the seller insofar as knowing whether or not there were radon levels in the neighborhood or in their home. She asked if the disclosure form would be in layman's terminology and easily understood by the man in the street. Ms. Redmond said it would be modified to be readily understandable. There would also be ability to mark "unknown" which would give the buyer an opportunity to have testing done if they so wished. Ms. Joan Buchanan, Administrator of the Nevada Real Estate Division, stated she was present to support A.B. 476 as a regulatory agency for the state. She distributed a booklet entitled "Disclosure of Information in Real Estate Transactions" (Exhibit F). The Real Estate Commission supported the legislation as well. There were probably 30 states at the present time who had some form of real estate sale of property disclosure. She had reports from the other jurisdictions that complaints had gone down considerably. If people were informed up front about problems they could accept it. If they found out after the fact, they did not like it. Controversies would be mellowed out and people would be more satisfied. Obviously the law required the division to adopt regulations prescribing the format and contents of the form. It did not necessarily mean they would work the regulations through the real estate commission, therefore, it would require public hearings. She referred to the form (Exhibit G) entitled "Seller's Property Disclosure Statement" and explained the local board used it. It was developed out of California but there were many different forms from other jurisdictions. She was interested in receiving the Committee's input regarding the form. She said it was quite an inclusive type of form. She stated radon and lead paint had to be disclosed because they were covered under federal law. In response to Ms. Tiffany's concern about the general public becoming aware, she pointed out a fiscal note (Exhibit H) which included costs for public hearings and printing of public service announcements. She felt this was the beginning of a public educational program. She did not wish to use education funds and felt it should be financed through the general fund. She indicated it was a minor fiscal amounting to $3,692.00. She referred again to Ms. Tiffany's questions regarding guarantees, warranties and home inspection. There were many individuals who would not know if there had been a legal building permit to an add-on or a garage conversion into a family room. Ms. Buchanan felt it was legislative responsibility to inform the public of such things and how to proceed to find out. She surmised books would be published on the subjects, the realtor's association would be educating their people, and her organization would do their best as well. Ms. Tiffany expressed appreciation that the bill was attempting to solve problems at inception and asked how a disclosure problem would be solved. Ms. Buchanan indicated if it was a sale-by-owner there was no jurisdiction by the Real Estate Division and any problem would be a civil matter. If the transaction was handled by a licensed real estate agent, the Real Estate Division investigated complaints. If problems were discovered they would be reported to the Real Estate Commission for disciplinary action. Ms. Giunchigliani stated eight years ago, in her neighborhood, three people were killed while refinishing floors in a home. She asked if disclosure of that type of matter would be required? Ms. Buchanan indicated disclosure of death in a home was not required. Ms. Giunchigliani, in referring to (Exhibit F), 645.630, asked who was licensee A versus licensee B? Ms. Buchanan answered they were grades of disciplinary action. Ms. Giunchigliani said in 645.633, number 6, the "B" person could be disciplined for failure to disclose with whom they were deeming any material facts, and it was missing in "A". Therefore, what it told her was there was one class of individuals (Class "A") who would be not disciplined for not disclosing. Ms. Buchanan indicated it had to do with fines. Ms. Giunchigliani asserted the importance of consistency in the legislation. Ms. Buchanan stated the seller would be more knowledgeable about their house than the real estate agent. Ms. Giunchigliani suggested an individual might have inherited the house and never lived in it, therefore, would not be able to disclose all problems. Mr. Fettic indicated page 2, line 8, said the seller and his agent, and the agent of the purchaser, may reveal the completed form and its contents to any purchaser. Then in section 4 it said the seller shall complete a disclosure form and serve the purchaser or his agents with the completed disclosure form. One said "shall", one said "may". Mr. Clark, attorney for the Nevada Association of Realtors, said the "may" section allowed for allowance of the agent to pass on the information to the buyer; the "shall" was the requirement that the seller fill out the form. Mr. Fettic pointed out it said "the seller and his agent may". Mr. Clark said it was for the purpose of passing the information on. Mr. Fettic understood what they were trying to say, but it said "to any purchaser", which was different than a potential purchaser. Mr. Clark responded it said "to any contents to any purchaser or potential purchaser of the residential property". Mr. Fettic asserted his point was that down below it said "you must" serve it to a "purchaser". It seemed evident to him they were saying in line 9 "they may" reveal to any purchaser; then down below it said "they shall". Mr. Clark answered the seller "shall" pass the information on before the transaction was completed to the purchaser -- which was one concept. Mr. Fettic asserted if he was satisfied with the language and he could defend it, he guessed it was all right! Chairman Spitler asked if there were any more testifiers on A.B. 476. Mr. I. R. Ashleman, representing the Southern Nevada Home Builders Association, stated they did not have a position on the bill itself, but on page 2, section 4, subsection 1 (d), line 33, they suggested a change to strike the words "and never before occupied". This was an exemption for first sale by a licensed contractor. In actual practice many licensed contractors would, under a number of circumstances, allow someone to occupy a new home before transferring title. An example would be individuals who did not qualify for financing but would be able to do so in the near future. Oftentimes they were allowed to come in on a lease, lease option or various forms of occupancy prior to the purchase, but it was still the first sale of a new home. A second example would be people who needed a home desperately. For one reason or another, they may have sold their prior home and had to move in before the paper work and financing could be completed. Those were prime examples of when a builder would want to sell a home without completion of the sales transaction. Therefore, if the bill was to be processed they respectfully requested an amendment be made. He had spoken to Pat Coward and did not believe the proponents of the measure had any objections to those amendments, nor would they affect the intent of the bill. Ms. Irene Porter, Southern Nevada Home Builders Association, recalled when she and her husband purchased their first house. They had been renting a house and the owners wanted it back and gave them ten days in which to move. They bought a Pardee College Park Home on a VA loan and it was 60 to 90 days before escrow could close. They were allowed to move in on a lease for the period of time until the paperwork was completed and they could close escrow. It was a fairly common occurrence. She was concerned the language of the bill might not address circumstances of that type which could cause a problem. Mrs. Collier, representing herself as a private home owner, stated she was against A.B. 476. From her perspective, if Mr. and Mrs. Homeowner decided to hit the road in their RV, could they do it with piece of mind or might there be a lawsuit hanging over their head for two years. It seemed to her everything was put on the shoulders of the sellers with nobody else taking any responsibility. She felt there were already enough laws protecting buyers and sellers and this was just more regulation against private ownership and what a person could do with their property. Mr. Schneider addressed her concerns and explained the bill was attempting to make it easier for people to get into their motor homes and head down the road worry free. Everything was addressed up front. The buyer would go over all the structural problems that might possibly be wrong with the home to the best of his awareness. Everything would be checked off so the buyer and the seller could agree -- plus there would be a walk-through for the new buyer. The intent was to make it easier for a home to be sold and make it more difficult for a lawsuit to be filed at a later date. Therefore, when a house was sold the seller was assured the buyer had signed off on it and was aware of the problems. Ms. Brower indicated to Ms. Redmond, in response to Mrs. Collier's question, the form showed no indication of an "unknown" category. Would it be added to the form? Ms. Redmond said she had not seen the form but understood the Real Estate Division would be developing a form and would address it through public hearing. Mrs. Collier was given a copy of the Seller's Property Disclosure Form for her information. Ms. Giunchigliani stated she did not want it to get over- regulatory and when regulations were set there would be a place on the form stating "not applicable", and in other cases, "unknown". She felt Mrs. Collier's concern was time related. An action could commence anytime within two years and could be hanging over somebody's head. It was a legitimate concern and perhaps the time periods could be studied. Ms. Redmond indicated the two year period had to do with not disclosing and had nothing to do with completion of the transaction. Ms. Buchanan wished to clear up section 645.630 regarding disciplinary action and the categorizations, "A", "B", "C", "D", pursuant to Ms. Giunchigliani's query. She indicated Mr. John Gibbons, who had been with the Division for 20 years, informed her as the statutes were amended the Legislative Counsel Bureau (LCB) set them up in that particular manner. There being no more questions or testimony, the hearing was closed on A.B. 476 and opened on A.B. 472. ASSEMBLY BILL 472 - Requires instruction for original real estate salesman's license to include subject of disclosure to information in real estate transactions. Ms. Patsy Redmond stated the bill was a portion of the interim study committee and requested training to be conducted on the disclosure forms and how it would be presented to the real estate licensees. She indicated support of the bill. Mr. Spitler clarified A.B. 476 would have to pass before A.B. 472 could pass. Ms. Redmond agreed. Mr. Hettrick read part of the bill that stated, ". . including instruction on the methods of obtaining the required information . .", and felt if the seller had to fill out the form he should be told the method of obtaining the information. It appeared to him the subject of disclosure should be included in the required information in real estate transactions. Ms. Redmond stated the information could be obtained from inspections and a number of other ways. It was training for licensees. Mr. Hettrick stated it appeared the seller could get other information, but this was instruction for the real estate agent. Ms. Redmond said that was correct. He felt it would be up to the seller to put what other information they might get from another method on the disclosure form. The burden was being placed on the seller. He questioned if the instruction included the method of obtaining information. Ms. Redmond responded the methods were for the real estate licensee to be able to share. It was training for the licensee, not the seller. In other words, a real estate licensee, who worked with the seller and the buyer, would train them on other methods to obtain information, whether it was testing for radon or lead-based paint. Ms. Joan Buchanan indicated the Real Estate Division supported the bill wholeheartedly. It added to the outline of prelicensing education for those wishing to apply for a real estate salesman's license. She pointed out it did not provide for anyone applying for a broker salesman, or broker's license. Therefore, she submitted an amendment (Exhibit I) requesting consideration of the Committee because the division felt it important for broker salesman and brokers to have that information. A person could come in from another state with the proper education and qualifications, take the 15 hours of Nevada law, and not have had the information disclosure education. Therefore, they requested it be added to the requirements under section 1 of the bill. She explained section 2 (a) and indicated the division would be doing it through their education department, working with the prelicensing schools to ensure their syllabus and outline had the information. They also would be working with a testing service to change some of the questions. Mr. Arberry pointed out on page 2 where it mentioned three semester units. He asked if it could be accomplished in one semester or were individuals required to do it in three? Ms. Buchanan deferred to Dorothy Zimmerman, the licensing supervisor for the Real Estate Division. Ms. Zimmerman explained, in the statute semester units were counted as 15 hours per unit, therefore, 45 hours was the equivalent of three semester units, each unit being 15 hours in length. Mr. Arberry was curious if an individual could accomplish three units in one semester, and would that accomplish the goal? Ms. Zimmerman stated they had to complete three semester units because the total sales requirement was 90 hours of instruction, which was broken down into 45 hours of principles and 45 hours of law, or three units of each. Mr. Arberry reiterated, could it be accomplished in one semester if one so desired? Ms. Buchanan stated an individual could accomplish three semester units in one semester because that was one course. However, for a broker's license, if a person had no equivalent experience in the business they were required to take 64 semester units. Mr. Spitler asked for clarification that they were asking for an amendment to include brokers and broker salesmen should A.B. 472 be passed which was dependent upon A.B. 476 being passed. Ms. Redmond said that was correct. Mr. Spitler asked if she had worked with the proponents of the bill and discussed the amendment with them? She stated she had done so. Ms. Giunchigliani asked if the amendment would apply to original licensees as well as renewals, or just original? Ms. Redmond responded, just original. Ms. Giunchigliani inquired if the effective date of October 1, 1995 would be enough time to get the course work accomplished and suggested it be moved up to January 1, 1996 or later. Ms. Redmond said they would like it to be before October 1, 1995 in order to get people coming on- line. Ms. Giunchigliani remarked they needed to be realistic to ensure the courses would be offered and people notified of the new requirement. Ms. Redmond said January 1, 1996 would be fine. Mr. Spitler said they would have to dovetail the implementation date with the other bill. Chairman Spitler asked if there were any more testimony or questions on A.B. 472. There being none the hearing was closed on A.B. 472 and opened on A.B. 479. ASSEMBLY BILL 479 - Revises provisions governing liability for failure in sale of real property to disclose certain facts concerning property. Ms. Patsy Redmond and Mr. Pat Coward were present to support A.B. 479. Ms. Redmond indicated the current law required a homicide, suicide or any crime punishable as a felony need not be disclosed in a real estate transaction. It also included the seller or any agent of the seller need not disclose those particular issues. It addressed the issue of AIDS and not being able to disclose those as material to the property as well. The bill came about because of civil rights action by the federal government that victims of AIDS were a protected class. A couple of amendments were being proposed because this time homicide, suicide, or a death in the commission of a crime did not have to be disclosed. However, a death of natural causes, such as a heart attack, had to be disclosed. It did not seem to be quite even in the application of the law. In section 2 the proposed amendment was to add "or buyer" because at the present time the only agent involved was the seller's agent. With the proliferation of buyer's agents it was felt important and fair the buyer's agent be included as a person not required to disclose those particular issues. The determination was it was not material to the structure of the house. Mrs. Collier, private home owner, agreed with Ms. Buchanan it was a good thing to be able to disclose what kind of death had occurred because she would want to know in order to protect her children from disease. Maybe one would want to fumigate the house. One should know what kind of disease had caused the death, therefore, she felt the bill was good and should be passed. Mr. Spitler told Mrs. Collier she misunderstood the bill. He explained the bill said those things would not be disclosed. Part of the bill had come about as a result of federal protection for people with AIDS. There had been, at one point, almost hysteria regarding the purchase of houses from individuals with that disease. He made it clear to Mrs. Collier that those things did not have to be disclosed. The bill was expanding a section of the law. Therefore, he informed her she was in opposition of the bill as opposed to supporting it. Upon understanding, Mrs. Collier indicated she opposed the bill because she would want to know what disease had been in the house in order to protect her family. Mr. Hettrick further explained to Mrs. Collier the proponent's intent, by adding the words "or death by any other cause", was a fairness issue. A homicide or suicide did not have to be disclosed, yet a home seller could in effect be penalized because of a death due to a heart attack which had to be disclosed. The HIV issue, which she had raised, was a valid concern and had been addressed by federal law and was part of existing law. Chairman Spitler asked if there was any more testimony, for or against, A.B. 479. There being none the hearing was closed on A.B. 479 and opened on A.B. 478. ASSEMBLY BILL 478 - Requires seller of certain residential property to disclose information regarding master plan and private services, utilities, road and improvements affecting property. Ms. Barbara McKenzie, representing the city of Reno, indicated A.B. 478 was the result of a bill proposed in the 1993 legislative session. When it became clear the interim study was going to be completed she suggested to Mr. Coward, and others, since her bills had not been introduced it was all right to include them in the disclosure interim study. It was more complicated than originally planned and she would explain the more difficult areas. Line 5 was the first change and they wanted to include, in addition to the zoning designations, the master plan designations. Not necessarily all contents of the master plan, just the designations of the master plan as was done for zoning designations. The reason was when a subdivision or development was being proposed on the outskirts of town, or on open land, the zoning of the adjoining property might be zoned large lot subdivision or zoning designation A-1, which were one acre parcels or medium density 15,000 square foot properties. Whereas the master plan could, at some time in the future because of area growth, show it as being a commercial area designated for commercial development, but at the present time the property was not rezoned. The intent of it was to inform the new buyer that while the property next to his backyard was presently zoned for one house per acre, it could in the future be rezoned to a commercial development as designated in the master plan. Mr. Fettic asked, when referring to initial purchaser, were they talking about contractors? Ms. McKenzie said they were talking about the developer -- the person who owned the land, had master-planned it and was selling lots and condominiums. Mr. Fettic indicated the bill read "seller". Ms. McKenzie responded that was the intent and if it needed to be amended for clarification she was amenable. Ms. Giunchigliani clarified what was being meant on line 5 (a) and suggested it should read: "The zoning and master plan designations, adopted pursuant . . ", which would then allow for apartments, condominiums or a shopping mall to come in and it would be contained within the master plan, versus actual zoning. Ms. McKenzie concurred. Mr. Schneider explained portions of the bill were what had created A.C.R. 75 involving Myrna Williams, the beltway around Las Vegas, and disclosure of the types of things discussed. Mr. Spitler asserted the interim study had come about as a result of his bill wherein he had met with the real estate people, the home builders and everyone involved. They had decided it was a much bigger issue than Mr. Spitler's isolated issue on his bill and he was happy to see everyone working together on it. Ms. McKenzie stated the next requested change dealt with private subdivisions and developments where the streets and utilities were private and would never be dedicated to the local government. However, in speaking with Mrs. Porter regarding subsection 1 (b), lines 14, 15 and 16, she did not believe it was necessary in that section of the law because it was covered in the Uniform Common Interest Act, which had been considered at great length by the legislature over the last several years. Therefore, she wanted lines 14, 15 and 16 deleted from the bill. In subsection 2, beginning on lines 20, 21 and 22, which brought in the Real Estate Division to adopt regulations specifying information regarding the contents of the master plan, Ms. McKenzie did not believe it necessary to say in section 1 (a) that the zoning and land use designations be noticed. She did not think there was any reason to involve a state agency in local zoning and master planning issues. She thought the law was clear without changing any of that language and could remain, "The zoning and master planning information contained in the document must . . .", and then on page 2, return to the existing language, which would be updated every six months. She did not think it necessary to complicate and make it more bureaucratic by including the state agency since the law would be straightforward on what was to be included. Ms. Giunchigliani asked how and when it would be noticed? Ms. McKenzie said it would be done in conjunction with requirement 113, as she understood it. It was part of the documentation provided to the buyer when purchasing a piece of property and she thought it would be in the escrow papers. Ms. Giunchigliani asked who it was provided by? Ms. McKenzie answered, by the seller. Ms. Giunchigliani asked from whom did the seller obtain it? Ms. McKenzie responded, from the local government, as shown on page 2. Ms. Giunchigliani clarified: She was the seller, she had to disclose, then she had to obtain through the local government any zoning or master plan designations and provide them to the buyer. She wanted to ensure people would know, as the seller, they had to obtain those things. Ms. Irene Porter, Southern Nevada Home Builders Association, came forward to be of assistance on how it would be handled. She stated the original legislation was drafted by Mr. Callister in the 1989 session and they worked with him to put it all together. They had developed a form which was supplied to their members, or the builders had their attorneys supply them. At the time the purchaser signed the sales agreement he/she was given a drawing which showed the subdivision, the lot they were buying, and what the zoning was on the surrounding parcels to that subdivision. Many of the builders voluntarily put in the master plan land use designations and the bill would require that as well. Therefore, when signing the sales agreement they would be provided the drawing showing where the property was, the zoning all around the subdivision which were the master plan designations all around it. At the bottom of the sales agreement it stated the information had been obtained from the local planning department, with the name and number of that department, in order for them to secure additional information. The purchaser and the sales agent at the builder's office both signed and acknowledged the form. Ms. Giunchigliani clarified the seller's responsibility was to get the attachment to the buyer. She noted Clark County was dealing with roads and was that part of a master plan, as a general rule, and would it be something potentially to be disclosed? Ms. Porter responded that was a very complex issue. There had been a bill several sessions ago relative to showing roads and easements. They found in talking to the various local governments in committee that it was almost impossible for a builder to be able to disclose all of that because things constantly changed. They did get the zoning and master plan information, which was the land use designation, as Ms. McKenzie had described. Perhaps it was RE at the present time, but the master plan showed it would be medium density residential, which could be apartment or other type zoning. Most of the builders were documenting what it meant on the plan so the public would understand it was single family, condominium, apartment, or commercial. In fact, it had become of assistance in public hearing situations wherein there was a subdivision, and adjacent to it was medium density zoning shown for apartments. Everybody who purchased houses there had acknowledged the form. Six months later when someone came in to build that medium density, there were 500 people protesting. The builders walked in with the signed forms and said it had been disclosed. The home owners remembered signing the form but stated they had hoped it would go away! She stated concern because the law applied if there were only ten or more parcels or lots in the development. Their organization had felt for some time, and had testified to it at the initiation of the study, that it should be provided for all initial purchases of homes. An example being: there might be a parcel map with four lots carved out and a builder would build four houses there. The individuals who bought the houses would not be provided that disclosure because it was not covered under the law. Those people would end up thinking the area was going to remain RE or half-acre lots when, in fact, it was already zoned something different, or the master plan called for it to be medium, low density, single family. Ms. Porter believed the law should be extended to the initial purchase of all homes because it had proven to work for both sides over the last six years. Ms. Giunchigliani reiterated her concern that gravel pits, beltways, etc., be part of master plans to protect people. Ms. Porter stated the Las Vegas beltway was originally on the Clark County and city master plans in the late 1960's. There was a master plan of streets and highways but not all communities had developed them, however, the law applied state-wide. Ms. Tiffany stated she resided in Green Valley and had she known how much air craft noise there would be she would not have bought in that area. She asked if there was anything included in the bill for disclosure of airport noise? Ms. Porter said there was nothing in A.B. 478 regarding such, but she had dealt with the issue over the years. Runways were built and changed, take-offs and landings due to wind conditions were altered, and the airport was in a continual state of flux. Many studies had been done but with the constant change in airport function she was skeptical there would ever be disclosures concerning it. A discussion ensued centering on airport noise emanating from Nellis Air Force Base, McCarren, Sky Harbor, and North Las Vegas airports. Ms. McKenzie, in answer to the question on master plans, stated that major arterials and roadways in Reno and Washoe County were designated on the map. Therefore, a prospective buyer of a home would be able to ascertain information in regard to the community they were considering. Regarding airports, Washoe County required an avigation easement, also required by the FAA, and the houses in those areas were built with more noise abatement. However, constantly changing nature of airports was a problem to be dealt with in growing urban areas. Mr. Schneider, in response to Ms. Tiffany's comments, indicated there was a zone map which dealt with noise abatement for airports. He stated it was available at Nellis Air Force Base. It recommended areas/zones suitable for no building, only industrial building, housing, and how much noise abatement insulation was required. Housing in areas of aircraft traffic had to be built sturdier and with more insulation to eliminate vibration. Ms. Porter withdrew her objections to the bill consistent with the recommendations for change made by Ms. McKenzie. The Nevada Home Builders Association wanted property owners to be informed and concurred the bill should say land use designations from the master plan. She had talked with Ms. McKenzie regarding the issue of privately maintained streets. Almost all of it was under home owner's associations which placed it under a voluminous act called the Uniform Common Interest Ownership Act. The act provided for extensive disclosure for a purchaser, including CC&R's, by-laws, and all manner of things. They also concurred the information should be coming from the zoning department which maintained the master plan and zoning regulations in adherence to the way the act was initially instituted in 1989. Her only other comment was to suggest the Committee take into consideration expansion of the act into all initial sales of homes, not just those in subdivisions of ten lots or more. Chairman Spitler requested Ms. McKenzie to interface with Paul Mouritsen, Research Analyst, to prepare the amendment. Ms. Giunchigliani, in response to Ms. Porter's testimony, asked if language could be provided for subsection 4. Ms. Porter said she would be happy to work with Ms. McKenzie and her staff. Chairman Spitler asked if there was any more testimony or questions on A.B. 478. There being none he closed the hearing on A.B. 478. The hearing was opened on A.B. 480. ASSEMBLY BILL 480 - Requires landlord of mobile home park to disclose history of rental charges for lot to be rented. Mr. Pat Coward, representing the Nevada Realtors Association, explained this piece of the interim study was proposed by Assemblyman Bill Petrak. Mr. Petrak was not reelected, therefore, no proponent was present to speak on behalf of the bill. Mr. Schneider came forward to give the background on the bill. A.B. 480 addressed the subject of rent control in mobile home parks. When a tenant moved into a mobile home park, he/she would be given a five year history of rent costs. The tenant could then make a decision whether or not he/she wished to live there. It was a disclosure in order for prospective tenants to know ahead of time there could be rent increases. Mr. Hettrick expressed concern about the bill. If a five year history was given it might show no increases. The tenant would move in and within a year there might be a rent increase. Maybe the landlord had to raise rents during that five years in order to cover costs. He now had costs covered and did not intend to have any more increases for awhile. If he was required to disclose that five year history it could discourage tenants. Mr. Hettrick felt this was not fair or meaningful to either party. Ms. Giunchigliani remarked she was not aware of problems of mobile homes, there being very few in her district. She suggested the wording say "upon request" rather than making it an automatic disclosure, which might take care of Mr. Hettrick's concern. Ms. Marolyn Mann, Executive Director for the Nevada Mobilehome Park Owners Association, gave more insight into the bill. She stated that mobile home parks were already providing rental history. In 1989 the legislature passed the landlord tenant law 118B which required demographic data to be provided to the state annually. There were penalty provisions if it was not done. They were required to give the name of the owner, the manager, how many spaces, whether or not they were occupied, if they were master-metered, how many people lived in the park, how many were over 55 years of age -- it went on and on! Last, but not least, they were required to provide rental information broken down by single wides, double wides, triple wides, and other. The state then compiled all the information and it became public information. Her association felt they were already providing enough information and she felt, upon request, park owners were providing the particular information being asked for by A.B. 480. Chairman Spitler queried if she would still oppose the bill if "upon request" was included. Ms. Mann felt from the interim study it went a little bit further because it broke it down for the lot instead of the park. She felt it would be just one more thing park owners would be required to do. Chairman Spitler indicated there were five mobile home parks in his district. He felt fortunate there had never been any complaints regarding rent. There being no more testimony, Chairman Spitler closed the hearing on A.B. 480. The hearing was adjourned at 5:45 p.m. RESPECTFULLY SUBMITTED: Barbara Moss, Committee Secretary APPROVED BY: Assemblyman Larry L. Spitler, Chairman Assemblyman Sandra Tiffany, Chairman Assembly Committee on Commerce May 1, 1995 Page