House Insurance and Commerce Committee

The Vice Chair has a motion, without objection. I'd like to make a motion for a special order of business for Wednesday of next week. That would be date, what was the date of that? 23rd. 23rd, yeah. Okay. For an act concerning the transportation and underground storage of carbon dioxide and for other purposes. What's the pleasure of the committee? Okay. Okay. All in favor? All in favor? Let it be known by saying aye. Aye. Opposed? Motion carries. What's the bill number? We don't have a bill number yet. That's what I was looking for. The next item on the agenda is House Bill 1354, Representative Dines, you recognize to come to the end of the table and present your bill. I believe the bill has an amendment. Thank you, Mr. Chair. I do have an amendment. After some discussion last night, we have the bill amended and I would offer that amendment to the bill they're about to have a a copy of the amendment. Okay. We do have a motion. Okay. All in favor? Aye. Okay. Motion carries. Thank you, Mr. Chair. If I could proceed with the bill. Proceed. Okay. This is a bill that kind of came about and was needed after a court opinion in 2009 dealing with restrictive covenants in subdivisions. As you'll see from the original, let me discuss the amendment first, and then we'll get to the crust of what we're talking about. This is part of the Arkansas Realtors Association package. It was a broad bill that we had some heartburn on and worked down and got it where it was tolerable. A lot of the time restrictions, there was some heartburn over that, so we took those out. But this is in response to a decision in 2009, a case handed out to the Court of Appeals, Roush Coleman Holmes versus Gene Breck. And that case caused some confusion when it came to restrictive covenants and subdivisions and different plots of land. And what this bill does is it cleans that up or attempts to clean that up. With the amendment that we just had, it takes out the copy that you have. It takes out the first, on page two, it takes out the first 13 lines and also the last 32 through 36 lines. So basically what the amendment does now and is acceptable to those that present the bill, including the realtors, is that it defines restrictive covenant and also clarifies in provision C what happens when there's conflicting language. That's where the Court of Appeals kind of stumbled in the Roush-Coleman case and mixed apples and grapes, if you will. So what we try to do is clarify the language when there's conflicting paragraphs either with and stepping back into that case. The conflict was between there was a term and then there was amendment language. There were two clauses, and the court interpreted them in a different fashion, if you will, and we're just attempting to clarify that going forward. We'll have no effect on anything that is already recorded. This is simply a cleanup bill going forward so that we don't have this situation as we move forward in the future. I'd be happy to entertain any questions. Representative Burnett, do you recognize for a question? Good morning. Thank you, Mr. Chairman, Representative Vines. Good morning. Could you describe briefly the Arkansas Court of Appeals, the case having to do with Coleman Holmes? Could you brief us on that, on what was the outcome, and what actually happened there? Well, it was a subdivision in the Cabot area, and in the Bill of Assurance, there were conflicting paragraphs that said, it talked about the term of the covenants. It was basically a 20-year covenant, and then there was another paragraph in the Bill of Assurance that talked about amending those bills of assurance. The trial court found that you couldn't have been those for the 20-year period of the Bill of Assurance. And when it went up to the Court of Appeals, they affirmed that. And the reasoning may have been sufficient, but it simply paralyzes the ability of any developer or any group of homeowners or any change of circumstance in that subdivision. And what we want to do going forward is to clarify and make sure that case is more the exception than the rule and make sure this distinction is allowed. And I have a copy of the case, too, if you'd like to peruse it. Thank you. I would like to read that when you get a chance. Thank you, Mr. Chairman. Any further questions? No questions. Is there anyone? Oh, sorry. Representative? Motion at proper time. Thank you. Is there anybody in the audience who want to speak for or against the bill? Mr. Lever? I move. Do pass as amended. Okay. Any discussion? All in favor, let it be known by saying aye. Aye. Congratulations. Rep. Vines, you passed your bill. Thank you. Would you like to stay at the end of the table and present your next bill to you? Sure. If you don't mind, I appreciate it. Without objection? Is that okay? All right. You're recognized to present House bill 1388, Rep. Vines. Recognize to present House bill 1388, Representative Vines. Yes, thank you. Let me get my hands on 1388. This is another bill that is part of the Realtors Association package. It deals with transfer fee covenants. These are, I don't know that I want to say new, but they're new to probably the area in the state. And what these are are transfer fee covenants and bill of assurances and restrictive covenants that require a fee to be paid back to the developer on sale of property. So if you have a lot in a development, every time you sold or it sold, a fee would stream back to the original developer, almost like an annuity for a developer. They are an outlaw. They're not favored. Four states, including or specifically Florida, Missouri, Kansas, and Oregon, have already nullified and voided this practice. It just creates a burden on the property. It restricts the alienation of the property. and at a time when we're having trouble transacting real property as it is, this is a direct hindrance. Another issue that's been brought to my attention from the Realtor Association is certain and most mortgage companies now are restricting their mortgage practice. They won't write a mortgage on a property that has these. They're really, for lack of a better term, bad news as far as sale and transaction of real property is. And what this bill does is just prohibits them on the front end before the practice becomes rampant in the state. I'd be happy to entertain any questions. Representative Burnett, you're recognized for question. Is this a practice that really has been going on for quite some time? I mean, this is not a widespread practice that I'm aware of. It's not widespread, to my knowledge, but it is increasing in popularity, it seems, and it's a concern to, like I say, the realtors and not necessarily the developers, but the realtors out there. Could you give us a kind of a real-life case example of maybe what's happening? Well, subdivision is platted. The bill of assurance contains one of these provisions, and every time, let's say, you own a 20,000-square-foot home up in northwest Arkansas like you do and you go to transact it in that sold division, when you go to sell it, there would be a fee, a transfer fee associated with that that wouldn't trickle back to the developer. And it doesn't end with that transaction. The purchaser from you, if they sold it in the future, there would be a fee back and it's an unending alienation on the property. Is this like that real estate fee that they charged on the front side or the back side? Is it any similar? I'm kidding. Not familiar with that. What about a developer that was developing a subdivision? Let's just say that he had to bring a sewer line or a water line two miles to that subdivision and he had a lot of costs associated with that. And he was trying to recoup some of his investment. And let's just say that there were some parties in between his subdivision and where he made his original tap for the water sewer, and there were people along the way that wanted to tie into the system, either now or later. Would it prohibit him from recouping some of his investment for those who want to tap on? I don't believe so. The ones I've seen and been involved with, if that's the case, where you're having, let's say, a suburban or what I'd call a rural subdivision, if you would, another provision would be within that document that accounts for that. That's been my experience with it, and I think that would be, again, an apples to grape comparison. Okay, thank you. Representative Viviano, you recognize the question? Thank you, Mr. Chairman. My question was similar to Representative Barnett. I've never seen this enforced, and I've done a lot of development, and I'm wondering if I'm due some transfer fees that I haven't collected. Are you asking in my day job role? I'm asking is it really being enforced in the state of Arkansas because I've never seen it before. Not yet. It's something that I think this is a precautionary bill to try to stem because, like I said, these surrounding states are having issues with it, and we're trying to stop nip it in the bud, if you will. Vice Chair Cary, you recognize the question. Thank you, Mr. Chairman. Representative Vines, can you give us an idea of what a dollar amount or a percentage of one of these transfer fees might be? You know, that's a good question, and I don't know that we do have a good answer to that, but I'd be happy to get you one on that. Well, in my opinion, anything would be wrong, but I thought maybe you had a dollar figure. I don't have a dollar fee. I can go back and look at, like, say, I've got those four states, and I don't know if there's an average fee or if there's any sort of money. But I agree with you wholeheartedly on this. Any fee is too much. Right. So what you're basically saying is the way this is set up is whatever fee they decide to do, there's not really a standard. I don't know if it's $10 or $200, but it's too much, and it's too much to burden that transaction, And it's not fair to the successor parties to that property to be restricted with that, you know, what could be a 10- or 15-, 20-year development, past development. Thank you, Representative Vines. Representative Westerlin, you recognize the question? Thank you, Mr. Chairman. I just wanted to make a motion at the proper time. Representative Wren, you recognize the question? MR. Mr. Westerman took my motion. MR. Okay. All right. Representative Carnine, you're recognized for questioning. MR. Thank you, Mr. Chairman. I just have a brief question that I wanted to be sure I understood, and I think I'm okay with this, but is this at all going to constrain potentially developers? MR. No. MR. What way, shape, or form, if you're denying them, for example, to recoup their cost? Well, I don't think it's a widespread practice right now. What we're trying to prohibit is, again, to nip it in the bud before it starts. It's occurring in other portions of the country, and what we're trying to do is stop it. So it's not affecting, to our knowledge, anyone, and if it is anyone right now, it's a small pool, and we're trying to restrict the practice before it gets widespread and rampant. Is it restricting any monies to them? Sure. But normally, historically in the state of Arkansas, we haven't incurred or had these fees. So. Okay. Thank you. Yeah. Any further questions from the committee? Okay. Is there anyone in the audience want to speak for or against the bill? So what's the pleasure of the committee? Question. Mr. Wessel, I'm sorry. Thank you, Mr. Chairman. I move do pass on House Bill 1388. Okay. Thank you. All right. All in favor, let it be known by saying aye. Aye. Opposed? Congratulations. You passed the bill. Thank you, Mr. Chairman. Thank you, committee. I appreciate it. Thank you. Fred Allen to present his bill HB 1384. Thank you, Mr. Vice Chair. Thank you. I have with me Valerie Boyd, and she is with the Storage Association, and without objection, I would like for her to explain this bill to you all. Yes, Ms. Boyd, you're recognized. Thank you, MS. House Bill 1384 was put together to improve the process of the notice of sale to the self-sorage customer. What it does is right now they're getting a certified return receipt letter with 14 days prior to the sale of their belongings. What we'd like to do is make it a first-class certificate of mailing due to the fact that a lot of people don't get it in a timely matter when it's certified mail, address change or whatever, and it's going to save the customer $5 plus. It'll save them because it'll be dropped right into their mailbox versus why they're at work. They get a slip in the mail if they've got certified mail. That's interesting. And let me echo a couple of things. I think also they will be able to forward this on to a forwarding address, and in the pass the way it's delivered, the way the notice is sent out, they don't forward to a forwarder and address. MR. Brilliant. Okay. So any questions from the committee? Representative Carnar. MR. Thank you, Mr. Chair. I guess I have one question about it in terms of protection for military personnel, which Particularly, do we have anything that allows a variance regarding this when we have individuals that are deployed and families that leave the area but are expecting to return? It does protect them. In what way? Because it continues to forward the mail, whereas if it was certified return receipt, it would just come back to us and say, you know, undeliverable as addressed. And when you put it as first-class certificate of mailing, they have a forwarding order in play. It just continues to forward on to them. My question, obviously, is in a case where a young person is, in fact, deployed and we're trying to forward mail to areas in Afghanistan and Iraq. My understanding is sometimes the mail doesn't always reach them all that efficiently. I guess my only concern is that one with the bill, and I just hope that in some way, shape, or form, if it needs amending, that we protect servicemen and women regarding having their possessions sold when they have been unable to get forwarded mail. That's my only comment from that standpoint. That's my biggest concern with the bill. Thank you. And that's a good point, Representative Carnahan. When I first talked to the association, that was a concern of theirs because what happens is that most people that go out to the military, they do leave a forwarded address in the state or some other parts of the United States. So what this will do, this will allow them to forward the letter on to the forwarded address. Under the current law, all they have to do is provide proof of delivery or proof of mailing to answer your question, Representative Cairn. I understand, but again, I understand the forwarding process. I don't take exception with that, but I do understand where you have a large concentration of military personnel. That sometimes can be extremely difficult. I do understand sometimes young people do have addresses that they give, but circumstances change, and I was a little, again, a little leery of the fact that we're – I know it's an improvement over what you have today. In fact, I appreciate you doing this. At the same time, I still think there potentially needs to be a variance for military personnel, period, that they not – they'd be given a grace period of time beyond that time, and And if, in fact, they are military, that you contact the base to find out what the status is before their items are sold. And, again, that's my only concern is the fact that with that particular segment, I think there needs to be a variance. I'm sorry. Thank you. Representative Barnett, you're recognized for a question. Thank you, Mr. Chairman. Did you know that there is a reality TV show now on this particular subject line? Have you all seen it? Representative Valdeman, have you been on that show yet? Not yet. Not yet? I was watching that the other day, and it was very interesting. I'm sure it was all real. There was nothing made up in that. But anyhow, that was a very interesting show. And if you have any connections, some of us would like to be on that show. If you could work that out, we want to buy. Okay. against that guy that's always buying all the stuff and getting all the good deals. We want to compete against him. Would you – what's wrong with doing both? What's wrong with just sending a certified letter and a first-class – why don't you just do both? Money. I guess the reason for not doing both is because we're trying to save the customer money in the end, And we're trying to make sure that it's easier for them to receive the notice, which is certificate of mailing first class is going to get right in their post office, right in their box, and the other one takes longer for them to receive to respond back. And plus you can't forward it. So if they forward their mail, it's just going to come back to me, and I'm going to have to send it back out. Yeah, but don't – okay, a first class mail, the certificate of mailing, they don't have to sign for that do they exactly so it goes right into their box when it's delivered right but but the reason why I asked why wouldn't you want both is because that goes right in their box but from a legal standpoint it wouldn't it be better if they actually had to sign a document saying that by gosh I gosh we know they're coming after us we're not having paid our fees and we We better, we better, and they have to sign for it. There's something about, you know, every time I get a letter that I have to sign for, I always think, first thought goes through my mind, somebody's suing me, you know. And so when I get past that fear, I think, no, it's just a, you know, notification. I've been sued a lot in my lifetime on the highway department, by the way. But I'm just, sometimes that signature is meaningful. I mean, it puts the fear of God in somebody, and they think, boy, I better take care of this. The problem with that is that 35% to 40% of my customers don't sign for it, and so they still don't get notified that their items are being sold. And the law just requires me to just give notice. So I'm trying to give notice in a way that they're going to actually receive the notice. What percent, what's an average percentage, and this may be more difficult to answer, What's an average percent of people in your business that lease to customers that default and you all have to end up having a sale? What percent? On average, probably about 20%. That much, huh? Yeah. 20%. And the thing is, is that, you know, you've got to remember who I'm reading to. It's just everyday people. and if they get behind on their bills, you know, that extra they're paying out to storage is something they're going to get behind on first because rent and food come first always. Okay. That's, wow, that's higher than what I thought. Yeah, yeah, it really is kind of amazing. Did you know I've never rented a facility ever in my life? That's a question, by the way. Okay, I think I may have some more questions, but that's it for right now. Thank you. Thank you, Mr. Vice Chairman. Point of clarification, with the mail notice and everything, is it really required to put an advertisement in the newspaper in addition to that? Yes, seven days before the sale. Okay. Thank you. Representative Rice, you had a question? Thank you, Mr. Chairman. This does not change any of your notification process that you're doing now. It just changes the form it's done in. Is that correct? Absolutely. Yes, sir. You don't have to prove that they saw and refused to sign the certified letter or anything now. You just have to send it. Exactly. This was new to me when I heard about it was the certificate of mailing, but it is, you described, it's forwarded. So if there's other things that people want to do in the rental storage industry business that wants to exempt military, and it's a good thought, I don't know if there's a problem with that, that could be done in another bill, could it not? Yes, sir. Okay, but this bill, all it does is changes the way the mailing and the contact is and actually increases the chance that they'll get the mailing. Yes, sir. Did I hear a figure somewhere in industry that about half the people that receive their mailing come in and pay their bill? Yes. Okay. Thank you. Motion to proper time, Mr. Chairman. Representative Catlett, you're recognized for a question. Thank you, Mr. Vice Chair. And since I've... Since I've... The light's on, but it's not working. No light's on. Nobody's home. The light's on. I think you broke them all. Can you hear me? I don't need it. What this looks like, if you're taking away the return mail, you're able to do this without a return. Okay, now it's working. Exactly. Okay, and because of that, the reason why you don't want to do it is people aren't answering it. Exactly. that forwarding this first class mail and adding being able to forward it by first class and adding the ability to get the return what's the difference in It's like $0.91 versus $5.64. Really? Yes. Go for it. Thank you. Representative Hyde, you're recognized for a question. Thank you for being here. And really, everything you're doing makes sense. But since you're opening this up, I wonder if you wouldn't consider, you know, hanging on to this just for a day and see if we can work out an amendment. I'm the chairman of the community council for Camp Robinson, Camp Pike. And we have numerous people, thousands of people, actually, over the course of a year who are being activated and deactivated and returned. And the community as a whole, and I'm sure I'd find the same to be true in the western part of the state, in Fort Smith and certainly in Jacksonville, the community as a whole, and I'd like to say the state as a whole is really bending over backwards, trying to help these folks that are putting themselves in harm's way for our benefit in any which way we can. So I'm not asking you to forgive any debts or any of that, but I just wish that you would consider or offer some effort to see if we can't find something that would accommodate those military active people who go active duty military on us. Representative Hyde, your point is well made. What I'm willing to do with the help of this committee, I'm willing to sponsor another bill that will take care of that. All right. Thank you, Chairman. Thank you, Representative Hyde. Representative Lovell, you're recognized for a question. Thank you, Mr. Chair. Representative Allen, would it not be easier to just get an amendment that you could put on this bill at the next meeting rather than drafting a whole new bill just to address what one line would probably take care of in this bill? One second. I don't know. pause for a consultation. Bear with us, ladies and gentlemen. I promise you I'll support it if you'll bring it back amended. The military is covered under another section of our law. It's under the Sailor and Silver's Act and it's a separate way of what we do when we go to sell someone in the military there's a whole other thing that we have to go through. We research it and, you know, get a hold of them if we don't have an address and that kind of thing. It's not just got rid of like you're thinking. Representative Lowell, will you yield to Representative Hyde unless you have any other questions? I guess I'm through. I don't know that we've got legal people here that would substantiate what you just said. I mean, all we're asking for is a simple amendment that if the people are overseas and there's a possibility that they will not get the notice, all we're asking for is just give them an exemption to allow time before their property is sold. I don't see a problem with that. She says she doesn't see a problem with that. Well, she doesn't have a problem with amending it and bringing it back Friday? Sure. Okay. No problem. Okay. Thank you very much. Thank you, Mr. Chair. Thank you. Representative Ward, you're next on the list for a question. Thank you, Mr. Chairman. My question more or less has been asked with concern of the military, but also since we're We're talking about default, on the average, about how many payment must a person miss is this before they are normally held in default? Well, they're late when their rent's not paid on the second day of the month, and then they're in default when they're 30 days late, and at 45 days we're sending them notices. I mean, five days out they get a letter, 20 days out they get a letter, 30 days out they're getting the lien letter, and by the 45th day we can go to sale. So, I mean, there are several notices, phone calls that are made to a customer when they go in default. So, actually, if they are five days late on the fifth day of the month, then the first notice goes out? Yes, sir. Thank you very much for the visit word. Representative Wright, you recognized for a question? It's been answered. Okay. Any more questions from the committee? any questions from the audience either for or against the bill no one looking as a process server to find representative Barnett ok alright does I understand it representative Allen you're going to pull your bill down and add an amendment that is ok well then we will So stand on this bill and wait for the amendment.