The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 7:00 a.m., on Thursday, April 8, 1999, in Room 2135 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Randolph J. Townsend, Chairman

Senator Ann O’Connell, Vice Chairman

Senator Mark Amodei

Senator Dean A. Rhoads

Senator Raymond C. Shaffer

Senator Michael A. (Mike) Schneider

Senator Maggie Carlton

STAFF MEMBERS PRESENT:

Scott Young, Committee Policy Analyst

John Meder, Committee Policy Analyst

Beverly Willis, Committee Secretary

OTHERS PRESENT:

John M. Vergiels, Lobbyist, Nevada Physical Therapy Association

Bryan Gresh, Lobbyist, Summit Engineering

Pamela Scott, Senior Property Manager, Summerlin-Howard Hughes Corporation

Jim Flippen, CMCA, Project Manager, Associated Management Inc.

Darrell Lincoln Clark, Attorney, Justice for Condominium Owners

Robert Canter, Concerned Citizen

Donna Erwin, District Manager, Eugene Burger Management Corporation

Judy Farrah, CMCA, PCAM and CAI, General Manager, Desert Shores

Michael Trudell, Manager, Caughlin Ranch Homeowners Association

Karen Brigg, Eugene Berger Management Corporation

Margi A. Grein, Lobbyist, Executive Director, State Contractors’ Board

Dennis R. Haney, Attorney, State Contractors’ Board

M. A. "Frank" Gross, Concerned Citizen

John B. Hester, Acting Assistant City Manager, City of Reno

Irene E. Porter, Lobbyist, Nevada Home Builders Association

Chairman Townsend explained the meeting would be concerned with construction-related issues. The chairman called for a motion on Senate Bill (S.B.) 128.

SENATOR O’CONNELL MOVED TO AMEND S.B. 128.

SENATOR SCHNEIDER SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

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Chairman Townsend opened the hearing on S.B. 131.

Harvey Whittemore, Lobbyist, representing various paging companies, testified the industry and law enforcement interests wish to introduce a proposal to mandate counties with over 400,000 population adopt an ordinance consistent with S.B. 131 and the remaining counties to report to the committee in 2 years, if there are significant problems.

SENATOR O’CONNELL MOVED TO AMEND S.B. 131.

SENATOR SCHNEIDER SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

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Chairman Townsend opened the hearing on S.B. 423.

Senator Schneider reported the origin of S.B. 423 was at the request of constituents in southern Nevada.

Peter D. Krueger, Lobbyist, Roofing Contractors Association of Nevada, summarized an amendment offered by the association (Exhibit C). Senator Schneider said the committee has worked with the State Contractors’ Board to develop a form to spell out warranty information, sponsor some public service announcements, and inform consumers of their rights

Robert R. Barengo, Lobbyist, Nevada State Contractors’ Board, testified the board supports the amendment described in Exhibit C.

Cheryl C. Blomstrom, Lobbyist, Nevada Chapter of Associated General Contractors; Ken P. Dillon, President D&D Roofing and Sheet Metal Inc.; Mike Chapman, President, Horizon Roofing Inc., and Vice President, Roofing Contractors Association of Nevada; and Robb G. Smith, President, Advanced Roof Technology Inc., testified in support of the amendment as presented in Exhibit C, and of the industry commitment to assist in educating consumers of their rights.

SENATOR SCHNEIDER SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

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Chairman Townsend opened the work session on S.B. 357.

Harvey Whittemore, Lobbyist, Nevada Athletic Trainers Association, testified S.B. 357 includes significant consensus refinements; including the removal of all references to interns and temporary licenses, redefining of athletic injury, additional training requirements, and assurance the course of study for a trainer is effective.

John M. Vergiels, Lobbyist, Nevada Physical Therapy Association, perceives weakness in the present bill. Pamela C. Hogan, President, Nevada Physical Therapy Association, expressed her appreciation for the changes, but stated there are some remaining problems. Ms. Hogan read Exhibit D, which recaps her concerns. Exhibit E and Exhibit F, correspondence forwarded by physical therapists summarizing their unease about S.B. 357, were entered into the record.

Ms. Hogan entered for the record Exhibit G, which addresses the financial consequences and the educational standards in the bill. Chairman Townsend said the bill does not set a cap on fees because when a board or committee is created, the costs are unknown. He reiterated the hesitancy of the committee to appoint another advisory group, and requested ideas from Ms. Hogan. Ms. Hogan asserted she could not speak for the State Board of Physical Therapy Examiners, and no representative was present. Chairman Townsend said both sides have made a legitimate case, and if the issues of representation and fees were resolved, dealing with the "scope of practice" would be the remaining issue.

Mr. Whittemore held he was unsure of the definition of "scope of practice." Chairman Townsend explained if someone is performing physical therapy, the State Board of Physical Therapy Examiners has the responsibility. S.B. 357 would mean if athletic trainers were infringing on physical therapists, the board would have the right to bring them forth. He continued, the board could define "scope of practice." Mr. Whittemore said he sees no problem having the State Board of Physical Therapy Examiners govern athletic trainers and develop a certification process. Chairman Townsend requested the parties convene in order to discuss the following: defining the practice of athletic training; educational requirements; and combining athletic trainers with physical therapists for regulation purposes. Mr. Whittemore requested Mr. Vergiels contact D. Keith Kleve, L.P.T., State Board of Physical Therapy Examiners, in order to include a board member in the discussion. Chairman Townsend opined the assessment of fees for athletic trainers would not conflict with the Governor’s "no additional taxes" mandate.

Chairman Townsend opened the work session on S.B. 103.

Senator Margaret (Maggie) A. Carlton, Clark County Senatorial District No. 2, explained a proposed amendment to the bill is not finalized. Chairman Townsend informed those appearing on behalf of S.B. 103 may testify today, and a copy of the amendment would be transmitted upon completion.

Senator Carlton described the basic concept of the amendment is to add language that there will be an engineer of discipline located in the State of Nevada, to review plans and zoning. Bruce Robb, Attorney, State Board of Professional Engineers and Land Surveyors agreed the proposal would insert a provision that a firm offering engineering services in a certain discipline shall employ a professional engineer licensed in such discipline within the State of Nevada.

Bryan Gresh, Lobbyist, Summit Engineering, introduced Thomas H. Gallagher, President and Chief Executive Officer, Summit Engineering Corporation; and Gregory Walch, Lobbyist, Summit Engineering. Mr. Gresh read prepared testimony (Exhibit H).

Answering questions put forth by Senator O’Connell, Mr. Walch explained there have been a rash of cases filed in the past 3 to 4 years citing shoddy workmanship following new construction in the Las Vegas area. Mr. Walch averred studies indicate attorneys from southern California have located in Nevada in order to litigate cases, and many of the developments are 6 to 10 years old, nearing the expiration of the statute of limitations. Mr. Walch speculated 90 percent of the cases settle. He continued, the argument that a screening-panel process would present an additional burden on the homeowner has no merit, because it is more often the developer or the contractor who brings action against the engineer or surveyor. Proposed language sets a maximum 130-day deadline for a panel decision, and the decision of the screening panel would be nonbinding.

Mr. Robb commented the State Board of Professional Engineers and Land Surveyors prefers to not attach legislation concerning a screening panel to S.B. 103. He asserted the board views its role as extending policy to address public health, welfare, and safety, through licensing and regulation of licensees. The issue of the screening panel has merit and should be separately discussed, argued and debated.

Mr. Gallagher cited an example of a claim filed on July 23, 1988, naming 36 contractors and subcontractors, which is yet to be resolved. He asserted a screening panel would have made decisions within 130 days, and those not satisfied could pursue the matter further.

Chairman Townsend closed the work session on S.B. 103, and opened the work session on S.B. 451.

Senator Michael (Mike) A. Schneider, Clark County Senatorial District No. 8, introduced proposed amendments to S.B. 451 (Exhibit I).

Ivan R. Ashleman II, Lobbyist, Southern Nevada Home Builders Association, explained the definition of "administrator" means the administrator of the Real Estate Division of the Department of Business and Industry. Mr. Ashleman said the study of a reserve account would be required at least once every 5 years, and added a unit owner may participate in the study. The wording "unforeseen circumstances" has been changed to "circumstances that could not have been reasonably foreseen," and the deadline for notifying owners of an executive board meeting has been shortened from 10 days to 7 days.

Michael Buckley, Attorney, Community Association Institute, interjected some of the deadlines concerning agendas, and the posting requirements of agendas requires additional defining. Pamela Scott, Senior Property Manager, Summerlin-Howard Hughes Corporation, agreed with Mr. Buckley, and Chairman Townsend requested they meet with the bill drafter at the close of the committee meeting to address the points.

Chairman Townsend expressed concern about what constitutes an emergency, wherein an executive board may act on an item not listed on the agenda. Mr. Ashleman said the definition of emergency means any occurrence that could not have been reasonably foreseen, which requires the immediate attention of and possible action by, the executive board, and which makes it impracticable to comply with agenda requirements.

Senator O’Connell declared she has a major problem with the definition of emergency, as it does not qualify any financial situation. Chairman Townsend recommended emergency be defined as health and life-safety issues only, and Mr. Ashleman agreed.

Mr. Ashleman explained a change, from "before a commission" to "submitted to arbitration or mediation" appears throughout Exhibit I, since it was the consensus of the group doing the study the commission concept would be postponed for further study. Mr. Ashleman continued the amendment allows the Real Estate Commission to issue subpoenas for the resolution of disputes.

Mr. Buckley said the section in the proposed amendment referring to the availability of books and records of the association to an owner, is already addressed in current law. Senator O’Connell said if that is true, it needs to be emphasized, because there have been many complaints concerning the issue. Mr. Ashleman said the Legislative Counsel Bureau would deal with the section to ensure there is no duplication.

Senator O’Connell agreed with Ms. Scott that records dealing with personnel, delinquencies, and personal records of the homeowner should be exempt. Mr. Ashleman stated the ombudsman would be able to act on behalf of a homeowner, if access to records is denied.

Mr. Ashleman stated proposed changes in Exhibit I would accomplish the following: increase the time an association has to inform homeowners of changes made to governing documents from 14 days to 30 days; define planned communities in which the units are restricted to nonresidential use; and identify rural agricultural residential common-interest communities.

Mr. Buckley perceived problems in suggested language stating documents created before January 1, 1992, are not required to be revised to conform to provisions of S.B. 451. Senator Schneider agreed with Mr. Buckley, and he referred to numerous constituent calls from members of older associations requesting the provision of the bill apply to them. Ms. Scott proposed to not delete existing law that delineates applicability to preexisting common-interest communities. Mr. Ashleman said it would be possible to retain the enforcement provisions, and except the impractical changes.

Mr. Buckley expressed concern about requiring each member of the executive board of a common-interest community be a resident of Nevada and a resident of the community. Often employees of the developer serve on the board, and may not meet those conditions. Jim Flippen, Association Manager, Associated Management Inc., argued a minority of resident owners could manage the board indefinitely, and nonresident owners would not have the opportunity to volunteer. Mr. Whittemore said Mr. Buckley’s point could be addressed by applying the requirement when the developer has transferred control of the community to the association, and term limits could address Mr. Flippen’s argument. Mr. Buckley expressed these issues should be governed by a vote of the people. Ms. Scott mentioned nothing addresses custom communities under construction when perhaps there are four homes completed; therefore, these four owners would control the board. Mr. Flippen said if residents are in the minority and they perpetuate their position on the board, it would be prejudicial against out-of-state owners, and the law should not exclude them.

Ms. Scott said the provisions on page 7 of Exhibit I, relating to term of office, and secret ballot are acceptable, as long as it is the intent of the committee the representative form of government remain unchanged for those boards created prior to January 1, 1992.

Chairman Townsend assured Darrell Lincoln Clark, Attorney, Justice for Condominium Owners, Exhibit I deletes a reference to ombudsman on page 7, and retains the requirement of a two-thirds majority vote.

Ms. Scott opined reference to the requirement of meeting notification calls for redefining, since the reference should be to the meeting of the board of directors, not to meetings of the unit owners. Mr. Ashleman concurred with Ms. Scott.

Referring to page 8 of Exhibit I, Senator Schneider said he was under the impression a designated proxy did not apply to the election of a member of the executive board. Mr. Clark pointed out a designated proxy and a secret ballot are separate issues, and a secret ballot submitted by U.S. mail means no proxy is required to vote for board members.

Robert Canter, Concerned Citizen, testified that without the tool of a proxy vote, there would be no way to cast a ballot for a candidate nominated from the floor. Chairman Townsend said someone nominated from the floor has the right for those present to vote for them, and if it is their intention to run, they should prepare their candidacy in advance. Mr. Ashleman suggested a provision describing how to get on a slate to answer the problem.

Shari O’Donnell, Director of Community Relations, Signature Homes, and Community Association Institute, Legislative Action Committee, related two instances whereby the board or election committee set the slate and homeowners were successful, by using the proxy process, in reversing the slate. Senator Schneider added boards can be overthrown calling a special meeting, and he would like to stay with a secret ballot.

Mr. Clark testified in favor of a secret ballot. Mr. Ashleman suggested a solution to a concern expressed by Chairman Townsend; each board would allow each homeowner a chance to be on the ballot up to 30 days prior to a board election.

Donna Erwin, District Manager, Eugene Burger Management Corporation, requested proxy votes be issued only to members of the association. Judy Farrah, General Manager, Desert Shores, explained current law allows an owner to give his or her proxy to any person. Mr. Ashleman suggested limiting a proxy to a member, a resident, or a relative of the homeowner. Mr. Buckley added a lender might require such a right.

Mr. Ashleman referred to a section in Exhibit I that states any person granted an exemption to the requirement they hold property management certification must demonstrate he or she is qualified and competent to engage in property management. Shirley Petro, Deputy Administrator, Real Estate Division, Department of Business & Industry, was assured the division would be the entity to determine qualification. Ms. Petro said the division would establish the grounds for initiating disciplinary action, and set a standard of practice in order to regulate. Chairman Townsend instructed Ms. Petro to provide Scott Young, Committee Policy Analyst, Research Division, Legislative Counsel Bureau, a draft of the standards.

Michael Trudell, Manager, Caughlin Ranch Homeowners Association, requested clarification between managers of units, and managers of homeowner associations. Ms. Scott said current law includes such a definition.

Mr. Ashleman explained the section of page 9 in Exhibit I, which relates to assessments, requires revision because it does not address certain communities created before January 1, 1992, who have been paying their assessments. Ms. Scott added the requirement would be difficult for the Summerlin-Howard Hughes Corporation to meet, since completion is estimated to be in the year 2025.

Mr. Ashleman said item 10 on page 10 of Exhibit I will insert language to inform unit owners of the possible costs and ramifications of commencing a civil action. Senator Schneider asked how the managers feel about this. Karen Brigg, Eugene Berger Management Corporation, emphasized the importance of each member knowing the possible result and consequence of a civil action. Chairman Townsend repeated a suggestion made by Mr. Young to include, with the notice of the meeting, an explanation of the possible consequences if the decision rendered in the civil action is not favorable to the association, including potential liability.

Mr. Buckley said language suggested on page 10 of the exhibit "set forth in the declaration in" be deleted; thus assuring every unit in the association is included when calculating the ombudsman’s fee.

Ms. Petro said the Real Estate Division recommends a cap of $3 per unit be placed in the section of Exhibit I, page 11, describing the ombudsman’s fee.

Mr. Ashleman reviewed page 12 of the exhibit, which allows payment to a mediator or arbitrator be made from the ombudsman’s account. He suggested the time an award must be made be shortened from 90 days to 30 days.

Mr. Buckley recommended a technical change to S.B. 451 on page 15, line 26. The reference should be to the executive board, not the unit-owners association. He requested clarification to references on page 2 of S.B. 451, "to repair, replace, restore and maintain the major components of the common elements." Chairman Townsend asked if the language was unclear. Mr. Flippen interpreted it to mean a roof could be patched as well as replaced, and the reserve fund is normally just for replacement. Ms. Farrah said the problem of defining an item as a repair, a major replacement, or a maintenance item occurs frequently in the classes she teaches. It was agreed to remove the word maintain in references to the reserve account.

Mr. Ashleman informed Ms. Farrah the ombudsman’s fee would be paid at a time set by the real estate administrator.

Mr. Flippen noted S.B. 451 retains a maximum fine of $50 for violations of the governing documents. Chairman Townsend said the committee has a policy to apply fines commensurate with the infraction, and the committee must advise a cap. Ms. Farrah said in other legislation there was language the executive board of an association could revisit a failure to comply, and impose a fine of $50 per week. Senator O’Connell claimed she did not know how a fine of $50 per week would correct an ongoing problem. Ms. Farrah mentioned mediation should be used to address ongoing problems. Mr. Clark suggested a cap not to exceed $500 over a cumulative period. Senator O’Connell concurred with the suggestion.

Senator Carlton requested Mr. Ashleman review the items included in S.B. 451 to assure they do not include small independent neighborhood organizations.

SENATOR SCHNEIDER MOVED TO AMEND AND DO PASS S.B. 451.

SENATOR O’CONNELL SECONDED THE MOTION.

THE MOTION PASSED UNANIMOUSLY.

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Chairman Townsend opened the hearing on S.B. 32.

Mr. Young asserted the proposed changes to S.B. 32 (Exhibit J) will be discussed today. He summarized ideas omitted in the proposal because of time constraints. The State Contractors’ Board had suggested responsibility for inspection of those projects under construction should be with the regulatory body having jurisdiction over the codes. Also, the board shall require an applicant or licensee to show such a degree of knowledge as the board deems necessary for the safety and protection of the public. Financial responsibility may be determined by the history of the applicant, and the financial responsibility of a corporation shall be determined independent of the assets of the officers, directors and stockholders. Chairman Townsend had requested a preamble stating the purpose of occupational and professional boards is for the protection of the public and not of the licensee; and a board member who violates that purpose is subject to removal by the Governor. The chairman also requested a warranty be purchased by the contractor, and the price be included in the sales price of the property. Mr. Young said these concepts would be drafted for future consideration by the committee.

Margi A. Grein, Lobbyist, Executive Director, State Contractors’ Board, introduced Dennis R. Haney, Attorney, State Contractors’ Board. Mr. Haney pointed out verbiage referring to a "governing board" should be "permitting authority." He also suggested inserting the word "residential" before "contractor" on page 2, section 4 of Exhibit J. Ms. Grein would like subsection 5, on page 2, to be retained, and replace "5 consecutive years" with "not less than 10 years." She requested the reinstatement period on line 13, page 3 of the bill, be 90 days.

Mr. Canter testified a contractor could not do any business while he has an inactive license, and he does not understand why 45 days is not ample time. Mr. Haney explained this is an administrative suggestion, and of the approximately 1175 late licenses issued last year, there were just 52 that required further board action. Mr. Canter said contractors are businesspeople and they should be prompt with their renewal. The extended time could be a problem to the consumer, who would be told the contractor is on inactive status. Ms. Grein informed Chairman Townsend the late fee is one half of the renewal fee of $220, and notification is mailed 60 days prior to renewal. Ms. Grein said the penalty could be changed by regulation, along with a dominant notice that the license is automatically suspended, and there are substantial penalties if any project is continued during the suspension period.

M. A. "Frank" Gross, Concerned Citizen, referred to provisions on lines 28 through lines 33, on page 2 of S.B. 32. Mr. Gross requested the same provisions be applied to contractors who have had three substantiated code violations.

Ms. Grein pointed to page 3, lines 30 through 33, and said the penalties conflict with legislation before the Assembly. Mr. Canter testified the penalties were studied when the legislative analysis was done for S.B. 32. Chairman Townsend said upon completion of the amendments, when they read in context, areas concerning penalties and the unlicensed contractor would be clear.

Chairman Townsend affirmed with Ms. Grein that the part of Exhibit J relating to an owner/builder provides the State Contractors’ Board with regulatory authority to enforce sanctions.

John B. Hester, Acting Assistant City Manager, City of Reno, suggested inserting "for a period of 12 years" on page 8 of Exhibit J, after "Records concerning the construction of this building are on file with the building department."

Mr. Canter read Exhibit K, which addresses the home warranty section of S.B. 32. The exhibit describes warranties and the coverage they would offer.

Mr. Canter, in answer to a question by Senator Shaffer, explained Exhibit K clearly spells out exclusions, and he was sure insurance companies would be interested in underwriting this type of coverage.

Mr. Krueger said the Roofing Contractors Association of Nevada wants to be clear that roofing defects are defined as blatant and obvious defects; and not be included in the structural component classification, which means the foundation, floors, walls, roof trusses or rafters of a residence.

Senator O’Connell expressed her opinion a warranty is only as good as whoever issues it. Mr. Canter said Exhibit K addresses her concern.

The meeting recessed at 11:25 a.m.

The meeting reconvened at 2:00 p.m.

Chairman Townsend asked the committee if they had considered the issue of mandated warranties.

Senator Amodei suggested a method similar to car warranties. He said if the homeowner wants a warranty, then he should pay for it. Mr. Canter replied a car warranty is included in the purchase price, and the consumer has the choice of purchasing an extended warranty. Senator Amodei suggested if a warranty were mandated, it would raise the cost of the home. If the homeowner purchased the warranty, there would be more consumer participation. Mr. Canter said the contractor is the best party to stand behind his product.

Mr. Gross said the homeowner must now go through his insurance company, the warrantor, and then the contractor. The contractor should be in first position for litigation. Chairman Townsend instructed staff to review deceptive trade practice law, when drafting suggested legislation. He stated the State Contractors’ Board must have the authority to use that section of the law to pursue poor construction.

The committee agreed to change from "shall" to "may" in section 4, page 3, line 40 of S.B. 32.

Irene E. Porter, Lobbyist, Nevada Home Builders Association, concurred with the change. She said there are very few warranty companies remaining, and they are quite expensive and limited.

Mr. Gross repeated his request of requiring a contractor to put up an additional bond if substantiated complaints have been recorded against him. Ms. Grein said such action is achievable, and she will work with Mr. Gross to help draft additional language.

SENATOR O’CONNELL MOVED TO AMEND AND DO PASS S.B. 32.

SENATOR SCHNEIDER SECONDED THE MOTION.

THE MOTION PASSED UNANIMOUSLY.

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The meeting was adjourned at 2:45 p.m.

RESPECTFULLY SUBMITTED:

Cynthia Cook,

Committee Secretary

APPROVED BY:

Senator Randolph J. Townsend, Chairman

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