The Committee on Commerce and Labor was called to order at 1:15 p.m., on Friday, May 7, 1999. Chairman Barbara Buckley presided in Room 4100 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All Exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Ms. Barbara Buckley, Chairman

Mr. Richard Perkins, Vice Chairman

Mr. Morse Arberry Jr.

Mr. Bob Beers

Ms. Merle Berman

Mr. Joe Dini, Jr.

Ms. Chris Giunchigliani

Mr. David Goldwater

Mr. Lynn Hettrick

Mr. David Humke

Mr. Dennis Nolan

Mr. David Parks

Mrs. Gene Segerblom

COMMITTEE MEMBERS ABSENT:

Mrs. Jan Evans

STAFF MEMBERS PRESENT:

GUEST LEGISLATORS PRESENT:

OTHERS PRESENT:

John Vergiels, Representing physical therapists

Steve McCauley, Representing Nevada Athletic Trainers Associations

Alfredo Alonso, Lobbyist, Lionel Sawyer & Collins, representing Nevada

Mary Foley, Representing Marriage and Family Therapists

Marsha Burgess, President, Greater Nevada Credit Union, Chairman of the Board for the Nevada Credit Union League, Chairman of Nevada State Advisory Council

Pamela Scott, Property Manager, Community Association Management,

The Howard Hughes Corporation

Joan Buchanan, Administrator, Nevada Real Estate Division

Mary Lynn Ashworth, Ombudsman, Common Interest Communities, Department of Business and Industry, State of Nevada

Michael Trudell, Manager, Caughlin Ranch Homeowners Association

Robert C. Maddox, Representing Nevada Trial Lawyers Association

Pat Coward, Representing Michelin Tire of North America

Terry Riedy, Trial Lawyer, located in Las Vegas

Ray E. Bacon, Representing Nevada Manufacturers Association

Pat Coward, Representing Nevada Association of Realtors

Melody Luetkehans, Legal Counsel, Nevada Association of Realtors

Dewey Struble, Commercial Real Estate Agent, Trident Real Estate

Margi Grein, Executive Officer, Nevada State Contractors Board

Fred L. Hillerby, Legislative Advocate, Nevada State Contractors Board,

American Institute of Architecture (AIA)

James L. Wadhams, Attorney at Law, Wadhams & Akridge, Representing

Southern Nevada Home Builders

Robert C. Maddox, Nevada Trial Lawyers Association

Bob Canter, Private Citizen

Following roll call, Chairman Buckley directed Assemblywoman Evans should be marked excused, several members of the committee would be leaving to testify on bills in the senate, and some members were called to a leadership meeting to resolve a problem. She announced the order in which the bills would be heard in the committee. Chairman Buckley opened the hearing on S.B. 357.

Senator Valerie Wiener, Senate District 3, declared she was seeking support for S.B. 357, which involved athletic trainers. Steve McCauley, Manager, Athletic Healthcare Program of Sunrise Health Strategies, and a certified athletic trainer contacted Senator Wiener for legislative assistance. Mr. McCauley informed her of the need for athletic trainers to be licensed. Senator Wiener disclosed she trained for athletic competition. In October 1998, she participated in the Senior Olympics in fitness and weight lifting and won two gold medals in the competition. With the belief that a strong body resulted in a strong mind she continued to work out for an hour each morning before going to work. Senator Wiener appreciated the goal of the professionals to set standards of performance and find the most appropriate ways to insure that the public was being served safely. She respected their desires to provide the public with a high level of competency from the certified athletic trainer.

Senator Wiener said the bill under consideration created an advisory committee under the State Board of Physical Therapy Examiners. The advisory committee would recommend legislation to the Nevada Legislature regarding regulation of athletic trainers considered necessary. The version of the bill that had been presented was an amendment to the original bill and, in fact, was a substitute for the original bill. S.B. 357 was offered to the athletic trainers by the physical therapists and was a collaborative approach to create a study committee. The bill had not been introduced to create a conflict between professions. She disclosed she was not qualified to answer detailed questions regarding athletic training; therefore, she asked Steve McCauley to answer any questions. She concluded her testimony by asking the committee’s support of S.B. 357 (Exhibit C).

John Vergiels, on behalf of physical therapists, and Steve McCauley, Representing the Nevada Athletic Trainers Association, introduced themselves and offered Exhibit D. Both men were supportive of the bill.

Assemblyman Nolan disclosed he had been a student athletic trainer and questioned the need for an additional advisory committee. Mr. Vergiels replied that was a way to resolve problems within time limitations for both professions.

Mr. McCauley believed the amendment would force the two entities to settle a few disputes that continued to arise. In the past 5 or 6 years certain conflicts could never be resolved.

Alfredo Alonso, Representing, Lionel Sawyer & Collins, Representing Nevada Athletic Trainers, directed his answer to Assemblyman Nolan. Mr. Alonso stated matters existed that required conclusion and were issues of public health. With the approval of the bill the opportunity was created for both sides to cooperate and agree on a bill.

Chairman Buckley closed the hearing on S.B. 357 and opened the hearing on S.B. 97.

Senator Wiener presented testimony on S.B. 97 amended chapter 232 of Nevada Revised Statutes (NRS) by increasing the number of members of the Commission on Mental Health and Mental Retardation from 7 to 8. The appointments made by the governor included a psychiatrist, a psychologist, a physician experienced in dealing with mental retardation, a social worker, a registered nurse, and two members of the general public. S.B. 97 included a marriage and family therapist to the commission on page 2, line 4.

The National Institute of Mental Health recognized marriage and family therapists as one of the five core mental health professionals. Within the context of marriage and family issues, it was almost impossible to resolve issues with children unless working in conjunction with parents and siblings to find solutions to problems.

Helen Foley, Representing Marriage and Family Therapists, announced they concurred with the testimony of Senator Wiener. There would be no problem with changing the number of individuals on the committee because it was advisory only and would not be setting policy. Everyone had been supportive in including the marriage and family therapist.

With no further testimony, Chairman Buckley closed hearing on S.B. 97.

Senator Mark Amodei, Representing Senate Capital District, explained S.B. 39

authorized the credit union to receive deposits from the State of Nevada or an agency or political subdivision including cities, counties, and school districts. The measure increased from $10,000 to $30,000 the amount credit union members or directors may guarantee or endorse on loans to other members. The bill required the Commissioner of Financial Institutions to adopt a regulation specifying the records a credit union must keep and the period of time the records must be retained. Under the present statutory system a credit union must be specifically named in a statute dealing with state funds or political subdivision funds or funds are prohibited from being deposited in a credit union. Every time new funds were deposited in a credit union a new section was required. The bill would remove the statutory prohibition through omission of the ability of political subdivisions to deposit funds in a credit union. He had received no opposition on the bill, and it had been coordinated with the State Treasurer, Division of Financial Institutions, League of Cities, Association of Counties, and Public Employees Retirement System (PERS).

Marsha Burgess, President, Greater Nevada Credit Union, Chairman of the Board for the Nevada Credit Union League and Chairman of Nevada State Advisory Council, expressed her appreciation to the committee for hearing S.B. 39. She read her testimony from Exhibit E, which elaborated on the importance of the bill.

Chairman Buckley asked if the concept of credit unions, as unions or associations, and organizations that assembled together to achieve better banking services, was changing and she wondered how the legislation conformed to that concept.

Senator Amodei replied the bill did not change any of the traditional operational aspects of credit unions as they operated in the state. They were still membership driven organizations. The bill allowed the credit unions to compete for deposits of political subdivisions and to diversify funds between financial institutions.

Chairman Buckley closed the hearing on S.B. 39 and opened the public hearing on S.B. 451.

Senator Michael A. Schneider, Senate District 8, stated S.B. 451 was a continuation of the homeowners’ association bill known as S. B. 314 of the 1997 Session. The current bill was designed to "tighten things up" and make it "user friendly for home owners, managers, and ombudsman." Managers, brokers, homeowners, and others, formed a cooperative coalition on the bill. Senator Schneider deferred to Renny Ashleman, Nevada Government Relations, Representing the Southern Nevada Home Builders Association (SNHBA) and Clark County, for additional information.

Mr. Ashleman declared consensus with amendments had been reached after lengthy negotiations, and he presented Exhibit F, which was a proposed amendment to S.B. 451, and discussed the bill line by line. He stated that section 4 was extremely important and that reserves of an organization prevented later financial trouble. He believed some of the individuals attending the hearing could be presenting amendments. Several of those individuals did not participate in the earlier negotiations to work out the agreements and he requested the committee look with intense scrutiny at any amendments.

Chairman Buckley asked Mr. Ashleman to define major components of common elements. If there was no definition in the bill Ms. Buckley wanted to know the intent for inclusion. Mr. Ashleman replied the intent was to identify expensive things like roofing and exterior walls. General agreement existed as to those components, but the real meaning of the language was that each association must identify for themselves what they thought they were.

Chairman Buckley observed the association could define what was a major component of a common element. Mr. Ashleman replied that was correct but the basic idea was to direct their attention to those issues. The intent was to identify possible problems. He moved on to a discussion of time given for notices to be given, method of notification, and requirements of the notice. He remarked that some associations were larger than many cities in the state, and balance was sought between the right of people to be informed and the cost and difficulties for the association. An emergency was defined as something that could not have been reasonably foreseen, affected the health, welfare, and safety of the owners, requiring immediate attention of, and action, the board which made it impracticable to comply with the subdivision notice.

Chairman Buckley inquired about section 6, which was modified and was completely new rather than amended. She wondered why it had been done in that manner. Pamela Scott, Property Manager, Community Association Management, The Howard Hughes Corporation, replied in 1997 the language became confused between a meeting of the unit owners and a meeting of the executive board. By separating the two types of meetings, it was clear what was considered at each meeting and requirements of notice for each type of meeting.

Chairman Buckley wanted to know if the new section 6 merely governed the executive board meeting, to which Ms. Scott replied that was correct.

Chairman Buckley followed that exchange with the question of whether the executive board references were deleted in NRS 116.3108. Ms. Scott contended 116.3108 addressed the meeting of the homeowners as opposed to the board meetings.

Chairman Buckley referred to page 14 for clarity.

Mr. Ashleman continued reading on through the sections of the bill. Page 11, line 8, modified the fine provisions for failure to comply with rules and regulations that did not threaten the health and welfare of the community, were limited to $100 or a total amount of $500. There was considerable debate over the costs and an effort had been made in order to strike a balance.

Chairman Buckley asked if there was still a prohibition against foreclosure, to which Mr. Ashleman responded affirmatively.

Senator Schneider communicated the association could fine any minimum amount, but the maximum was limited to $100. If the failure to comply continued without correction it would be capped at $500.

Chairman Buckley observed an additional fine could be imposed for each of the 7 days the infraction was not corrected, and imposed without notice and without an opportunity to be heard according to lines 17 through 19.

Senator Schneider disclosed the total was capped at $500. In many associations that were composed of expensive homes, the homeowner elected to pay the former fine of $50 rather than correct the situation.

Assemblyman Goldwater disclosed he was an executive board member of the Quadro Homeowners Association.

Pamela Scott exclaimed part 2 addressed a continuing violation. The person who refused to correct the situation did not have to be re-notified and brought into a hearing for a remaining violation. The fine could never exceed the cap of $500 and would force associations to go to arbitration more often.

Mr. Ashleman continued commenting on the bill item by item. The clearance control was identified in the statute, and addressed the ability of the original owner or subdivider and developer of the units to maintain control of the board as long as he was under certain financial responsibility. It varied by the percentage of the units that were still owned and how many were sold to the residents. After a certain time, he was forced to turn over control to the residents, and at various percentages more residents were added to the board.

Assemblyman Perkins clarified the termination of the control of the community occurred as portions were sold and more of the property was under the control of the others. Mr. Ashleman agreed. He stated two problems needed to be addressed. Frequently, associations were turned over under reserves and without adequate studies. Declarants advertised low monthly dues, and upon purchasing a property and taking control of the association, the owners discovered that the developer had subsidized the development and dues had to be increased drastically in order to cover the costs. The potential homeowner should be informed the developer was subsidizing the development.

Continuing, Mr. Ashleman stated the intent was to allow payout of deficiencies for people in a prior position, not for the future. It applied to the future a declarant could turn something over and still have 3 years to payout. He stressed the committee might want to consider dropping the concept in the drafting process.

Chairman Buckley questioned the deletion of lines 14 and 15 in section 22, regarding uniform enforcement. Mr. Ashleman related the deletion was undertaken before the committee revisions, and he was unsure about the rationale. Senator Schneider added sometimes the rules of the association were not evenly enforced against everyone.

Chairman Buckley remarked the section gave someone unfairly singled out, an opportunity to articulate the rule could not be enforced if they could prove it was not enforced against everyone, and she queried why it would be desirable to remove the section. Senator Schneider mused it might have been moved somewhere else and he would have to research the issue.

Chairman Buckley agreed it should be double-checked and should be maintained because it was a protection against arbitrary action.

Mr. Ashleman opined other than the issue of redundancy, no one had a particular purpose for removal of that section. Referring to page 16, section 24, lines 2 and 3, an executive session was discussed regarding failure to pay an assessment. The exception to subsection 3 allowed the unit owner to request the executive board meeting be held at an open meeting. It also allowed the exclusion of the member from any other portion of the meeting. The language was intended to clarify and cut down on the number of physical fights that occurred during deliberations.

Mr. Ashleman said page 17 covered the rules for proxies. Strangers had found it entertaining to obtain proxies. There needed to be a reasonable relationship to the community to hold a proxy.

Assemblyman Perkins suggested the last sentence opened the possibilities of proxy to a member of the immediate family and tenant of the unit’s owner. Any other person who resided in the community was not eligible. There were no other forms of government that used proxies. Municipal elections had low voter turnout on occasion.

Senator Schneider replied that for the election of board members there were secret ballots; therefore, 100 percent participation was possible using the mail system. Disclosure was the issue, and the homeowners need to vote on when the association increased dues or assessments. They were required to be notified and then a vote took place.

Continuing, Senator Schneider said many people could not attend because of work schedules; however, the vote was still required, and that was the reason for the proxy. Proxies enabled more participation in the association, but could not be used to vote for the board of directors.

Ms. Scott suggested it was the quorum requirements that were being questioned. The language in the bill recommended moving to a designated proxy, which would not allow just anyone holding a proxy to vote. The designated proxy would indicate exactly how the proxy vote must be cast, whether or not the proxy could be used for any other purpose, and that it was limited to the meeting for which it was dated.

Mr. Ashleman said if one member of the association held 60 proxies and no one else desired to participate in the vote, the result would be someone running the organization the way they desired.

Ms. Scott explained the problem most associations experienced was meeting the quorum requirements. The proxy also allowed an individual to designate that a person could not vote and it was a quorum-only proxy. The use of a designated proxy would cut down on the abuses. Mr. Ashleman added that was a compromise. There were people opposed to the proxy but most professional managers believed the association would be paralyzed without them. The proxy was invalid if the vote was not designated. The person who gave the proxy had to decide how the vote would be cast. At the beginning of the meeting the person holding the proxy was required to disclose that he had the proxy and voting instructions. The proxy terminated immediately after the conclusion of the meeting for which it was executed. The process was not valid for the election of the executive board of an association, and the intent was that meetings could be adjourned without sine die and then reconvened.

Assemblywoman Berman stated she agreed that a proxy was needed; however, from her personal experience, she expressed concern about limiting the proxies provided to one individual.

Senator Schneider responded that could not be done anymore because a secret ballot was required to vote for board members. Line 23 on page 17, clarified the requirement.

Mr. Ashleman revealed that the proxies would be used on action items.

Assemblyman Goldwater commented Senator Schneider had clarified the issue. Should the bill pass, one would no longer be able to vote for a board of directors based on proxy.

With regard to section 17, lines 22 and 23, Assemblyman Hettrick requested clarification and stated it did not say an absentee ballot could be used. He expressed concern the language might need to be changed in order to clarify it was an absentee ballot, and asked if it was clarified somewhere in the bill. He understood it would be a secret ballot of the people present with an absentee ballot as well.

Ms. Scott informed him section 19, subsection 5, indicated a secret ballot must be mailed to each member of the association. The material to which Assemblyman Hettrick referred were limitations on a proxy that terminated. He reiterated the proxy could not be used to vote for a board member.

Assemblyman Goldwater pondered if it would be a majority of the secret votes cast, or would it be a majority of the homeowners in the associations. Ms. Scott replied the associations were corporations, which had quorum requirements. If the documents did not identify quorum requirements, then NRS 116 required a 20 percent quorum. Twenty percent of the ballots needed to be returned to have an official election.

Assemblyman Goldwater requested the staff present review of this issue as an action item.

Mr. Ashleman suggested a reading of page 12, lines 18 through 23, and of page 17, lines 23, 25, 40, and 41, which governed the handling of the secret ballot, made clear that the quorum requirements were satisfied. If the staff had any doubt, the issue would be addressed.

Ms. Scott revealed the intent was to tighten requirements and not have many people exempted from the qualifications for property management. Under subsection 4A, a full-time employee of an association who managed only one association with up to 30,000 units, could be exempted; however, that was not desirable. He remarked a widow who had managed a 10 or 20 unit condominium successfully for many years should be excluded. The intent was to allow the real estate division to establish criteria that could exclude the small manager from the requirements. In failing to remove "A" and not excluding single associations’ employees, the language was broadened and not tightened; therefore, Ms. Scott suggested that "H" replace "A" in the bill. Mr. Ashleman referred to the proposed amendment to whi8ch the trial lawyers and homebuilders had agreed. The changes restored the ability to bring suit by agreement, as well as by voting. Disclosures were simplified, and an explanation of the potential benefits and potential adverse consequences were included.

Ms. Scott interjected by referring everyone to section 28, which needed clarification. The bill applied to fee simple residential lots or homes and not apartments, commercial, retail, or mixed use associations. She suggested that line 16 should read for "every fee simple residential unit" as opposed to every unit.

Mr. Ashleman opined the definition offered might not be the appropriate one but it was correct that they were not trying to reach the apartments. He felt it should be left to the legal drafters as to how we describe it because not all of the other units are always fee simple.

Mr. Ashleman said the second amendment, Exhibit G, had been proposed by Clark County and stated: "This amendment would include commercial subdivisions which are created out of air rights in the exception to the chapter created for commercial subdivisions." The condominiums would not be excluded from the act, in the opinion of Clark County Planning Department, unless the amendment of air rights was added. The amendment intended to do that.

Chairman Buckley requested clarification on what had just been said, to which Mr. Ashleman explained there were commercial buildings built in air rights as opposed to being constructed on the ground. Buildings were constructed above existing structures and then made commercial condominiums. If the amendment was not added, the residential rules would apply. A general exemption existed for commercial establishments.

Chairman Buckley asked why they did not fall under the commercial exemption. Mr. Ashleman replied the commercial definition did not address condominiums built within air rights. He alerted the committee representatives from Caughlin Ranch had proposed an amendment that had not been addressed to their satisfaction.

Senator Schneider expressed his appreciation and thanked everyone that had worked on the bill for 2 years. Chairman Buckley stated it could be difficult to meet all the concerns of the various groups and commended him on the work.

Joan Buchanan, Administrator for the Nevada Real Estate Division, introduced Mary Lynn Ashworth, Ombudsman, Common Interest Communities, Department of Business and Industry, Real Estate Division, State of Nevada. Proposed amendments had been submitted to the committee (Exhibit H).

Ms. Buchanan began with section 6, number 2, and suggested the number of days in which to provide notice of an impending meeting should be returned to 10. It had been changed to 7 days, however seven days would not allow enough notice time for members to attend the meetings. Number 2 was considered of utmost importance in order to assure notices were sent by prepaid United States Mail to the mailing address of each unit’s owner. The current verbiage read "unit" and would be amended to "unit’s owner." In order to comply with section 14, which required a database, the Real Estate Division needed a lot of time to prepare, as well as needing large equipment. They requested several years in which to achieve that. She said the amendments had been discussed with Senator Schneider and a fiscal note would be added when the bill was completed together with an operational plan.

Chairman Buckley stated that it was very late in the session to add a fiscal note and suggested that they should have one in place immediately. She inquired of Ms. Buchanan when they could have a note prepared.

Ms. Buchanan replied that perhaps they could have one drafted by Wednesday, May 10.

Chairman Buckley asked for what was the fiscal note. Ms. Buchanan responded that the money was from the nongeneral fund, and there were exemptions within the act of those that did not apply to the ombudsman’s office and the fee. Landscape associations and homeowners’ associations needed to be defined by regulation.

Senator Schneider related the 1997 session bill exempted out of the homeowners association everyone who paid $500 or less per year. It had been assumed it would apply to landscape associations. They discovered associations all over the state paid less than $500; therefore, that criterion had been removed and landscaping associations were specifically exempted. Associations established before 1992 were exempted and those associations were added to the requirements.

Chairman Buckley asked how many new associations were anticipated to be added with the proposed changes. Ms. Ashworth testified she had done a quick calculation and it appeared it would be increased by 40 percent at the very minimum.

Chairman Buckley clarified an additional 40 percent of homeowners associations would now be included under the act and the bill. Ms. Ashworth replied affirmatively.

Assemblyman Parks declared he resided in an association that had been created in 1963 or 1964, and had approximately 160 units, and paid $35 per year. He wanted to know if that homeowners association would not be included in the change. Ms. Ashworth replied it would be included.

Chairman Buckley announced the reason it caused such concern in the committee was because it was a concurrent referral to the Assembly Committee on Judiciary and would have to go to the Assembly Committee on Ways and Means, which was closing budgets.

Senator Schneider revealed the bill generated its own money. Chairman Buckley said it still had to go to Ways and Means Committee in order to reconcile the account. She deferred to Assemblyman Arberry, the Chairman of Ways and Means Committee.

Assemblyman Arberry said Chairman Buckley was correct that the Ways and Means Committee would review the bill to see if any adjustments needed to be made to their budget.

Chairman Buckley elaborated it was still a state agency even though it did not affect the state general funds.

Assemblywoman Giunchigliani wanted to know what the 40 percent translated into numerically. Ms. Ashworth guessed approximately half-of-a-million people. Currently there were 300,000 people who participated in the program. Out of approximately 900 homeowners associations in the state, 50 to 60 percent of them currently fell under NRS 116.

Assemblywoman Giunchigliani asked if neighborhood associations were included, to which Ms. Ashworth replied no. Neighborhoods were not common interest communities.

Chairman Buckley asked how much that would change from existing law. She could understand the argument the smaller homeowners associations possessed just as many problems and needed the intervention of the ombudsman such that the fee should apply. She inquired about the rest of the bill, such as the mailings and additional requirements and asked how were the burdensome requirements handled with regard to a "mom and pop" operation.

Senator Schneider related the notice of the meeting could be hand delivered directly to the doors of the residents and could be published in the quarterly newsletters thereby easing the burden of notification.

Ms. Buchanan stated she had initially submitted a fiscal note with the bill, and as it was amended, it was difficult to ascertain what the final totals would be. Currently they had one employee and the money that was collected was not expended because they wanted ensure the program expenditures and collections matched.

Chairman Buckley replied the other choice would be to not collect so much and keep it small.

Senator Schneider informed the committee that the ombudsman had received 500 telephone calls a month from homeowners around the state and it was an important program. The ombudsman had only one person assisting her on a half-time basis and she needed more assistance. The $3.00 fee spread across the state generated a lot of money.

Chairman Buckley exclaimed the committee might want to provide additional assistance for solving real problems, as opposed to paying for more staff to collect a database of bylaws, which might not be needed. She would rather have the homeowners association receive help than create a database when funds were limited. Ms. Ashworth agreed that was a valid point. She attempted to update the committee on her accomplishments so far. She testified a proactive basis was used in empowering and educating the homeowners. Three workshops had been held. In June a conflict resolution workshop for board members would be given. Another workshop and general meeting for homeowners was scheduled.

Michael Trudell, Manager, Caughlin Ranch Homeowners Association, submitted a letter of correspondence addressed to Senator Townsend (Exhibit I). Mr. Trudell disclosed that Caughlin Ranch Homeowners Association was not previously subject to NRS Chapter 116. Caughlin Ranch was approved in 1983, and developed and implemented under NRS Chapter 278A for planned unit developments. Section 35 of the bill proposed to eliminate previous exemptions for planned unit developments and deleted NRS 116.1204. Caughlin Ranch previously requested that NRS Chapter 116.3115 be amended, and that amendment appeared in Section 16. They sought to have vacant lots owned by declarant exempted from the assessment. He stated there were 11 developers in Caughlin Ranch with which the homeowners association dealt. The developers recorded their real estate based on the fact Caughlin Ranch did not charge declarants homeowners dues against their recorded vacant lots. It would be in the best interest of the homeowners association to continue to allow developers to advance under the original arrangements. He requested an amendment for clarification in section 27, page 19, line 22, after number 6, inserting a new section, and read the information from Exhibit I.

Chairman Buckley invited those who wished to testify against S.B. 451 to approach the witness table.

Robert C. Maddox, Representing Nevada Trial Lawyers Association, stated they were not really opposed to S.B. 451 but wanted to bring to the attention of the committee some of their concerns. Section 27, subsections 8 and 9, on page 20, beginning at line 12, had the wording of the first reprint to which they were opposed. The section applied to seeking a vote of the membership to commence a civil action. They supported amendment proposed by Mr. Ashleman and urged the committee to adopt it.

With regard to section 5, page 3, lines 23 to 32, Mr. Maddox stated the provision indicated that should a governing board borrow money from a reserve account it must be repaid within 1 year. They would like to have the time period extended or providing exceptions for the duty to repay within 1 year under certain circumstances. The situation suitable for such an exemption would be an association, which dealt with serious construction defect matters. An action was commenced against the developer in order to cause that developer to pay for repairs. He said those situations did not get resolved in just 1 year and it could require a substantial special assessment, which would be difficult to achieve. The proposed amendments were not in writing.

Chairman Buckley requested that the amendments be given to the committee as soon as possible but no later than Monday, May 10.

Mr. Maddox continued to identify another concern about section 19, page 11, lines 27 to 32, regarding the residence requirement for board members. They thought it might be unconstitutional and it would not work well in resort associations. Full-time residents were required to be able to serve on the board. Although there was a provision that stated if there were not enough residents to serve, then nonresidents could serve. There could be a situation whereby someone who was the least popular and most obnoxious person within an association could maintain his position on a governing board. The United States Supreme Court generally struck residency requirements.

Chairman Buckley requested that any specific case law where the Supreme Court had struck such a requirement be provided to the committee. Mr. Maddox remarked the issue was applicable to occupations, but not necessarily to a governing board of an association. He did not know of any situations that applied to a governing board of an association.

Joan Wright, Attorney, Allison, MacKenzie, Hartman, Soumbeniotis & Russell, testified on behalf of Stephen D. Hartman and presented a letter signed by Mr. Hartman Exhibit J. Both Ms. Wright and Mr. Hartman were engaged in the practice of real estate and had standard homeowner associations and timeshares as clients. They had been requested to testify by their timeshare clients. NRS Chapter 116 was adopted as a uniform act, and they were beginning to micromanage a uniform act resulting in the loss of benefits from uniformity. She stated when Nevada’s act was different, the benefit of case law and experience from other states that adopted the same uniform act, was lost. As a general rule, no changes should be made to uniform acts. The best solution in a resort industry was to remove all time share projects from NRS 116.

Ms. Wright said their problems were very different and NRS 119A governed them. It was unclear which provisions would govern NRS 119A from reading the draft of the current bill. She suggested a blanket exemption of 119A projects out of NRS 116. Ms. Wright referred to Mr. Hartman’s letter and addressed the specific objections to the bill.

Senator Schneider articulated in the 1997 legislative session, timeshare associations were exempted from the bill.

Ms. Wright testified that the provision in S.B. 314 had exempted timeshares, and stated if NRS 119 specifically mentioned the subject then one looked to NRS 119. If NRS 119 did not specifically mention the subject then NRS 116 prevailed. That verbiage had resulted in 12 provisions.

Senator Schneider asserted if it was easy and quick to do, and the staff desired, he would be agreeable to removing the provision. He understood it could be impractical for 20,000 to 30,000 owners in a timeshare development them to be governed by that.

Ms. Wright continued by discussing the objection to section 6, which mandated that associations had quarterly meetings. There were homeowners associations that did not need quarterly meetings, and to micromanage associations was impractical, and it created a hardship for the associations. They believed the residency requirement to be unconstitutional under the commerce clause and could be challenged. It was preferable to have a resident serve on the board that was not a resident of the state rather than having a resident serve who had no desire or interest in doing so simply because that person resided in the state. The 2-year restriction to serving on the board was not practical and was micromanagement.

Chairman Buckley inquired about the term limit issue and directed attention to the next sentence, which stated "a member may be elected to succeed themselves." It appeared that the term was restricted, but the ability to continue to run was not. Ms. Wright replied it could have been misread since they had acquired their client yesterday and did not have enough time to become familiar with the bill. If the bill actually meant the term of office was 2 years, and a person could continue to be reelected, then there would be no objection.

Ms. Wright was not certain any purpose was served to mandate an association have a quarterly meeting, and she said the costs involved could be significant. Homeowners associations were nonprofit corporations and a full body of laws governed those associations. She did not understand why the corporate law governed the corporations rather than introducing conflicting legislation.

Continuing, Ms. Wright said corporate law, which regulated proxies, served a good purpose, were a known device, and one should have the right to use a proxy. Boards became involved in civil action necessary for the operation of business such as collecting bills, claims, etc. and the bill made that a very cumbersome process for the board. She suggested her clients should be exempted from this bill.

Senator Schneider declared a lot of work had gone into the bill over the past 2 years. Timeshares were out of the bill as far as he was concerned. Last month the Texas Senate approved a bill similar to S.B. 451, which was used as model legislation. Many states were moving in that direction. He stated some of the proposed amendments were good and he wanted to progress further.

With no further testimony, Chairman Buckley closed hearing on S.B. 451 and opened the hearing on S.B. 375.

Pat Coward, Representing Michelin Tire of North America, claimed that additional companies moving to Nevada had expressed concern with trade secrets when involved with research and development. The bill would enhance and strengthen those trade secret laws.

Terry Riedy, Trial Lawyer of Las Vegas, stated he appeared today because he represented many product manufacturers. Trade secret protection existed to protect the most valuable pieces of personal property developed in the information age. In the past, one thought of automobiles or other items as property. In the current age of information, intellectual property and ideas were valuable commodities and businesses wanted them protected. Tire companies had processes for making tires that were trade secrets and the companies wanted to protect those secrets. When considering a state in which to do business, companies wanted to be assured the state would protect trade interests. Nevada was the second state to consider legislation whereby trade secret protections would be extended.

Mr. Riedy explained it was time to move to the forefront in order to protect business that wanted to invest their ideas in Nevada. S.B. 375 would accomplish that goal in two simple ways. First, Nevada would become one of the first states to make stealing ideas such as those indicated in section 1, intellectual ideas and trade secrets, a criminal offense. The second section of the act extended the same sort of protection to civil actions. The intent was to stop people from stealing trade secret ideas in civil cases when that could not be considered under corporate espionage.

With regard to the corporate business world, Mr. Reidy said when information from another business was wanted by someone, they filed a lawsuit and attempted to extract it in that manner. In section 5, page 4, the bill provided guidance to the district court judges in handling requests for trade secret information that were made by competitors and others. In addition, instructions were given to judges who prosecuted the criminal offenses in preserving trade secrets and decided whether the secrets had been stolen. The bill gave the judge some guidance on protection of the information in a criminal or civil proceeding.

Continuing, Mr. Reidy said Nevada used to have the model trade secret act to protect the rights using an outdated law. Senator Schneider, the Bar Association, and the Nevada Trial Lawyers Association, had approved the idea and compromised to advance Nevada’s idea of how to protect information, and communicate to businesses that when developed in the State of Nevada, those valuable assets were protected.

Chairman Buckley expressed concern they made a civil action a crime without an intentional act or intent. Mr. Coward provided the committee with an example of trying to protect a trade secret. The legislation would require a person to have had knowingly and/or willfully violated a protective order and communicated information to others, in order for them to have committed a felony offense. It was not simply breach of a court order, but a knowing and willing breach.

Chairman Buckley inquired where that verbiage appeared in the bill. Mr. Coward replied all definitions referred back to section 1. Section 1 established the parameters of intent and attempted to reach criminal intent.

Chairman Buckley inquired about the fine of $100,000, which was higher than the fine for murder in the state. Mr. Coward stated it was not consistent with criminal law’s understanding of a category "C" felony. The principle deterrent was the criminal offense. He believed the fine should not be $100,000, but rather $10,000 and 1 to 5 years. He desired to be consistent with the category "C" felony.

Assemblyman Hettrick sought confirmation the language of "trade secret" on page 3, lines 4-7, applied literally to computer programs. The word "program" might be used as a marketing program, and the word "code" might not necessarily refer to a computer code. Mr. Riedy declared Mr. Hettrick’s understanding was correct. Some of the largest businesses protected themselves by not revealing their code or their style. A person’s code was almost like their signature and very unique. Those were the kinds of protections they wanted to extend under the trade secret definitions.

In order to clarify the issue, Assemblyman Hettrick suggested the language read "computer program code." Mr. Riedy replied that would meet their intent.

Chairman Buckley explained that could be included in the floor statement as a statement of intent the language be included. She wanted to clarify the issue of civil versus criminal negligence and suggested the committee work with the Legislative Counsel Bureau’s (LCBs) Legal Department in order to clarify that criminal intent was desired.

Ray E. Bacon, Representing Nevada Manufacturers Association, revealed 25 percent of the members believed they had something in their facilities currently that gave them a distinct competitive advantage and were very much in favor of the bill.

Chairman Buckley closed the public hearing on S.B. 375 and opened the hearing on S.B. 452.

Pat Coward, Lobbyist, Nevada Association of Realtors, stated that S.B. 452 was a modification of a bill that had been introduced in the 1997 session. In an attempt to develop a bill that would be fair and equitable, they had worked for 18 months to craft a balanced bill. He introduced Melody Luetkehans who would review the bill with the committee and introduce a change, and Dewey Struble, Commercial Real Estate Agent, who would relate experiences regarding the issues to be resolved.

Melody Luetkehans, Legal Counsel, Nevada Association of Realtors, asserted the heart of the bill was in section 17. The bill affected only those commercial real estate brokers who worked for sellers, and included a statutory requirement that the brokerage agreement or contract for personal services must be in writing. Once a commercial broker had performed according to the terms of the brokerage agreement, they notified the seller that they had a claim against the seller’s proceeds on the transaction. The seller then had the ability to acknowledge or reject that claim. If the seller did not acknowledge or reject the claim then the broker had the right to record that claim. Once the claim was recorded, the escrow company which held the funds for the seller, would then reserve the amount of the claim of those funds. That was not a claim upon the real estate, but was strictly a claim upon funds and it did not affect the title to the real estate in any way.

Ms. Luetkehans stated there would be no effect on the seller’s ability to close the transaction because the broker was owed money. Specifically, the bill required that the seller had no right to stop a transaction from closing because they owed the broker money agreed to in the brokerage agreement. If there was a dispute once the claim was recorded then the seller had the right to file a complaint in court and have a hearing. The broker had to go to court and explain why their claim was valid and then the court determined the validity of that claim. The seller had the right, if the claim was held not to be valid, to proceed with a frivolous claim suit against the broker.

The original draft sections 15, 16, and 21 of NRS 645A had been submitted to the Legislative Counsel Bureau (LCB). NRS 645A was the section that dealt with escrow agents and escrow companies. LCB elected to insert everything under NRS 645. Ms. Luetkehans proposed that sections 15, 16, and 21 be placed under NRS 645A.

Chairman Buckley indicated Mr. Coward should discuss the issue with the legal advisors in order to confirm that it was acceptable and it would be considered at the work session.

With no further testimony, Chairman Buckley closed hearing on S.B. 452.

Senator Schneider related the bill set forth continuing education for contractors in the first part. The financial responsibility of the contractors was addressed. The contractors board would review the stability of the contractor, and he said bonds were required when reinstating a contractors license after it had expired. The Certificate of Residential Occupancy identified what had been inspected. There were conflicts with the contractors board bill and a work session had been scheduled in order to resolve that conflict.

Chairman Buckley called attention to page 9, lines 19 through 21, "an owner that requests an exemption must apply to the board" and wanted to know the genesis for that new language. Margi Grein, Executive Officer, Nevada State Contractors Board, revealed the verbiage came from testimony discussed in the Senate Committee on Commerce and Labor. The owner/builder problem was addressed, and an amendment had been submitted to the committee clarifying the owner/builder exemption in more detail. The proof was on the person who applied for the permit to pay the taxes and meet all requirements of an employer. The intent was to tighten the owner/builder laws currently in existence.

Chairman Buckley wondered if any suggestions were made to fix the ambiguity. It was not clear where the exemption section was located, and she remarked the intent of that section was unclear. Margi Grein believed the way it was drafted in the bill stated the owner/builder came to the contractors board in order to obtain an exemption form to take to the building department. She expressed her desire for a delayed start time on that requirement in order to allow time in which to develop the regulations and requirements for monitoring.

Senator Schneider announced that if an individual was an owner, that individual did not need to be licensed as a contractor to build his or her own building. NRS Chapter 624 addressed those provisions of a general contractors license stating they were not required; however, the attempt was to keep track of the number of people building in that manner.

Chairman Buckley inquired did someone have to apply for an exemption in order to build their own home. Senator Schneider replied under the bill, they would have to apply for the exemption from the board.

Chairman Buckley interjected it was not spelled out in the bill that a person who wanted an exemption had to apply for one.

Fred L. Hillerby, Legislative Advocate, Nevada State Contractors Board, indicated that the issue brought to them by the building department and others was there were people who claimed to be an owner/builder and did not require a license to build. While building the home, there were "For Sale" signs on the property. There was an increasing pattern of building all over town using different family names in which to apply for the building permit. There was no coordination between the building department and the contractors board.

Mr. Hillerby said the language was admittedly awkward because it did not state that one had to apply for the exemption but rather, if one did apply for the exemption it had to be done through the board. The point was to gather information on the person abusing the owner/builder exemption but in fact, was acting as a contractor. The expectation was that the owner/builder would live in the home for 1 year before selling it.

Chairman Buckley observed the existing law stated the exemption was intended for property not for sale or lease. With a "For Sale" sign, it would be evident the individual was not an owner/builder.

Assemblywoman Giunchigliani commented she believed the county had a restriction on the number of homes an owner/builder could build within a time period. Ms. Grein admitted there was, but testimony revealed it was difficult to monitor because different names were used. If line 19 was changed to state that a propertyowner claiming an exemption pursuant to that subsection must apply to the board for exemption, thereby addressing the requirement for application.

Assemblywoman Giunchigliani inquired what would happen if the board did not want to approve the application and it was a legitimate owner/builder. Margi Grein replied currently there were no controls over the owner/builders. Whether or not the bill would correct the situation was uncertain and that was why she sought more time in which to develop the regulations.

Assemblywoman Giunchigliani claimed she appreciated trying to capture those who abused the system and acted as a contractor. She sought assurances that the language did not prohibit or negatively impact those who were legitimately building their own homes so the board did not arbitrarily deny the exemption request. She Giunchigliani asked what impact it would have on the permit application process and if it would be necessary to wait until the board had approved the exemption. Ms. Grein opined that was the way it read.

Assemblywoman Giunchigliani queried how often the board met, if there would be accommodations, and how much would the owner be charged. Ms. Grein noted that had not been considered, but the board met twice a month and she admitted the bill needed some work.

Assemblywoman Giunchigliani contended the language did that. She questioned the intent of the drafters. Senator Schneider related the testimony to him was that the bill was a tracking device.

Assemblywoman Giunchigliani inquired if the building department could simply transmit the permit they had approved for an owner/builder.

Chairman Buckley commented when someone abused the exemption it could be brought to the attention of the contractors board and that individual could be prosecuted for contracting without a license. Ms. Grein said the building department did not believe it would be feasible to supply all the building permits; however, if problem areas were identified, they would be reported to the contractors board.

Assemblywoman Giunchigliani reiterated the contractors board only needed to know who had applied to be an owner/builder and did not need the permits. That would begin the tracking process.

Margi Grein shared one idea was to attach the exemption form to the deed so when the house was sold, if it had not met the 1-year requirement, it would be noticed; however, that idea had not been accepted.

Assemblywoman Giunchigliani stated her problem was with the word "exemption" because the contractors board only had jurisdiction over contractors and an owner/builder was not a contractor until they abused the exemptions. She remarked those individuals needed to be identified, and the language of the bill needed to be changed.

James L. Wadhams, Attorney at Law, Wadhams & Akridge, on behalf of the Southern Nevada Home Builders, presented a list of recommended amendments Exhibit K to S.B. 423. The staff could compare S.B. 32 and S.B. 634 because there were duplications and overlaps. He stated section 14 dealt with warranty issues.

Chairman Buckley expressed concern since it was late in the session. She was happy to include the sections in Senator Schneider’s bill if he wanted them to be added; however, the language needed to be reviewed in order to ensure the final language was clearly identified.

Mr. Wadhams expressed his major interest in S.B. 32 and the amendment regarding section 14 and 11, which eliminated duplication regarding that bill. The committee could process S.B. 634 according to their direction.

Robert C. Maddox, Representing Nevada Trial Lawyers Association, testified the association agreed with Mr. Wadhams’ position with regard to sections 11 and 14 of the bill. Additionally, and with regard to the Certificate of Occupancy, Mr. Wadhams and Mr. Maddox agreed on the following language, which was reviewed with Senator Schneider who concurred. The Certificate of Occupancy form would be changed and a new subsection 5 to section 16, on page 12, would read: "A Certificate of Occupancy may not be used as evidence in a civil action that any construction is in actual compliance with applicable building codes." The basis for the language was to prevent the use of the Certificate of Occupancy as evidence that the building was in compliance when actually it was not.

Assemblyman Arberry informed the committee the city building department would issue a Certificate of Occupancy, even if the home was not completed, so long as one bathroom and the kitchen was finished. The home could be occupied under those conditions. That was done to accommodate the homeowner who had nowhere else to live.

Peter D. Krueger, Representing Roofing Contractors Association of Nevada, stated he had not seen the amendments in sections 11 and 14, which were crucial sections for the association. He hoped to see them at the conclusion of his testimony. He wanted the record to reflect only residential construction was affected and that it did not apply to commercial construction. With regard to line 41, he proposed amending "shall" to "may."

Margi Grein announced they wanted to add an amendment concerning the Certificate of Occupancy to read: "A Certificate of Occupancy may not be used in a proceeding pursuant to NRS 64 as proof that the construction is in actual compliance with the applicable building codes or that the construction meets the minimum standards of the industry." The problem in prior experiences was that people believed the construction was all right.

In order to develop a mandatory continuing education program, which required additional time, Ms. Grein requested the provisions of section 3 not become effective until July 1, 2000. The provisions of section 12 relating to owner/ builder would also require added time. Ms. Grein asked that those sections, the sections in A.B. 634, included in S.B. 423 (sections 4, 5, 6, 10, and 13) be left in A.B. 634.

Chairman Buckley invited Senator Schneider to choose whether or not he wanted those sections in his bill. Senator Schneider said he would work with Ms. Grein and the bill drafters to achieve the best fit.

Chairman Buckley remarked the committee would wait until Monday to be informed of Senator Schneider preferences.

Senator Schneider commented he wanted the record to reflect the contractors board would draft language on warranties and an outline for roofers.

Chairman Buckley reviewed proposed amendments with Vance Hughey and others present for accuracy. She announced the bill would be considered in the work session.

Bob Canter, Private Individual, submitted Exhibit L to the committee, and presented a proposed amendment to section 14. He did not want the language to defuse what was happening with A.B. 636, which was broader, protected a great number of people, and he felt it would be more effective.

According to Mr. Canter, that section began as a part of S.B. 32 and when S.B. 32 and S.B. 286 were combined, the result was the new S.B. 32 and S.B. 423. He believed one of the contractors problems regarded warranties. He was of the opinion S.B. 423 was somewhat deficient due to lack of discussion in the Senate. Some common ground regarding home warranties was needed so that new residential construction was warranted.

Mr. Canter said a better definition of the home warranty was needed because section 14 was confusing. If the warranty was optional, the concern was that no warranty would be provided at all. A Certificate of Occupancy could be issued for a home that was not purchased by a homeowner for 9 months to 1 year after the residence had been built. Based upon the wording in the bill, the warranty became worthless for the first year. He suggested the warranty date should mean the date whereby the initial owner takes legal title. The state contractors board should enforce the warranty to be effective because it would be too costly to have the courts enforce the warranty. Home warranties were generally sold to builders and not all builders qualified to purchase home warranties. The cost of those warranties was not excessive according to research.

Assemblywoman Giunchigliani asked if the structural warranty included insulation. Mr. Canter replied no. The structural integrity of the building was covered. Builders purchased many of the warranties in order to limit future liability.

There being no further business, Chairman Buckley adjourned the meeting adjourned at 4:40 p.m.

RESPECTFULLY SUBMITTED:

Cleone Bujalski,

Committee Secretary

APPROVED BY:

Assemblywoman Barbara Buckley, Chairman

DATE: