John P. Sande III, Lobbyist, A O N Risk Services, and the Nevada Bankers Association

Scott M. Craigie, Lobbyist, Liberty Mutual Insurance Group

Daryl E. Capurro, Lobbyist, Nevada Motor Transport Association, and Nevada Transportation Network Self-Insured Group

Robert A. Ostrovsky, Lobbyist, Nevada Resort Association

David T. Pursiano, Lobbyist, Nevada Trial Lawyers Association

James L. Wadhams, Lobbyist, Southern Nevada Home Builders Association

Cindy Stephans, Sierra Nevada Association of Professional Mortgage Women, and MCS Mortgage Company

L. Scott Walshaw, Commissioner, Division of Financial Institutions, Department of Business and Industry

Marty LeVasseur, State President, Nevada Association of Mortgage Brokers

James Jeppson, Chief Insurance Assistant, Division of Insurance, Department of Business and Industry

Pat Coward, Lobbyist, Nevada Land Title Association

Russell Best, Lobbyist, Home Financial Mortgage

Ivan R. Ashleman II, Lobbyist, Southern Nevada Home Builders Association

Robert E. Lyle, Lobbyist, Nevada Trial Lawyers Association

Chairman Townsend opened a work session with Senate Bill (S.B.) 38.

SENATE BILL 38: Makes various changes concerning industrial insurance. (BDR 53-379)

SENATOR O’CONNELL MOVED TO CONCUR WITH AMENDMENT NO. 980 TO S.B. 38.

SENATOR SCHNEIDER SECONDED THE MOTION.

THE MOTION CARRIED. (SENATOR AMODEI, SENATOR RHOADS, AND SENATOR CARLTON WERE ABSENT FOR THE VOTE.)

SENATE BILL 74: Revises provisions governing insurance guaranty associations. (BDR 57-814)

SENATOR O’CONNELL MOVED TO CONCUR WITH AMENDMENT NO. 740 TO S.B. 74.

SENATOR SCHNEIDER SECONDED THE MOTION.

THE MOTION CARRIED. (SENATOR AMODEI, SENATOR RHOADS, AND SENATOR CARLTON WERE ABSENT FOR THE VOTE.)

*****

Chairman Townsend addressed S.B. 103.

SENATE BILL 103: Revises provisions relating to professional engineers and land surveyors. (BDR 54-408)

SENATOR O’CONNELL MOVED TO CONCUR WITH AMENDMENT NO. 985 TO S.B. 103.

SENATOR SCHNEIDER SECONDED THE MOTION.

THE MOTION CARRIED. (SENATOR AMODEI, SENATOR RHOADS, AND SENATOR CARLTON WERE ABSENT FOR THE VOTE.)

*****

The next bill addressed by Chairman Townsend was S.B. 128.

SENATE BILL 128: Authorizes state contractors’ board to request that telephone number be disconnected and to request beeper number be switched or disconnected if telephone or beeper number is included in certain unlawful advertisements. (BDR 54-607)

SENATOR O’CONNELL MOVED TO NOT CONCUR WITH AMENDMENT NO. 984 TO S.B. 128.

SENATOR SHAFFER SECONDED THE MOTION.

THE MOTION CARRIED. (SENATOR AMODEI AND SENATOR RHOADS WERE ABSENT FOR THE VOTE.)

SENATE BILL 132: Revises provisions governing benefits for industrial insurance for certain police officers and firemen. (BDR 53-925)

SENATOR O’CONNELL MOVED TO CONCUR WITH AMENDMENT NO. 936 TO S.B. 132.

SENATOR CARLTON SECONDED THE MOTION.

THE MOTION CARRIED. (SENATOR AMODEI AND SENATOR RHOADS WERE ABSENT FOR THE VOTE.)

SENATE BILL 133: Establishes provisions governing consolidated insurance programs. (BDR 53-384)

SENATE BILL 210: Provides for regulation of persons who counsel alcohol and drug abusers. (BDR 54-163)

SENATOR O’CONNELL MOVED TO CONCUR WITH AMENDMENT NO. 1039 TO S.B. 210.

SENATOR SCHNEIDER SECONDED THE MOTION.

THE MOTION CARRIED. (SENATOR RHOADS WAS ABSENT FOR THE VOTE.)

*****

SENATE BILL 375: Makes various changes to provisions governing trade secrets. (BDR 52-900)

SENATOR O’CONNELL MOVED TO CONCUR WITH AMENDMENT NO. 982 TO S.B. 375.

SENATOR SCHNEIDER SECONDED THE MOTION.

THE MOTION CARRIED. (SENATOR RHOADS WAS ABSENT FOR THE VOTE.)

*****

Chairman Townsend next addressed S.B. 417.

SENATE BILL 417: Creates appeals panel for industrial insurance to hear certain grievances of employers. (BDR 53-1080)

Chairman Townsend recommended nonconcurrence.

SENATOR O’CONNELL MOVED TO NOT CONCUR WITH AMENDMENT NO. 979 TO S.B. 417.

SENATOR SCHNEIDER SECONDED THE MOTION.

THE MOTION CARRIED. (SENATOR RHOADS WAS ABSENT FOR THE VOTE.)

*****

SENATE BILL 423: Makes various changes to provisions concerning contractors. (BDR 54-1479)

SENATOR O’CONNELL MOVED TO NOT CONCUR WITH AMENDMENT NO. 1007 TO S.B. 423.

SENATOR AMODEI SECONDED THE MOTION.

THE MOTION CARRIED. (SENATOR RHOADS WAS ABSENT FOR THE VOTE.)

*****

Chairman Townsend addressed S.B. 451.

SENATE BILL 451: Makes various changes to provisions governing common-interest communities. (BDR 10-924

Let’s [Let us] bring everybody to the table with regard to S.B. 451. The reason I’ve [I have] asked everyone to come in on this is when this bill was processed out of this house, we had about 17 parties at the table for 17 hours. There were three, 5-hour sessions, plus a couple of extra hours. And when it left here, we thought we had it correct. Now I see there is a change, a substantive change to section 27, pages 20 and 21, by deleting lines 28 through 43 on page 20, and lines 1 through 7 on page 21, and then restating how an association would handle a lawsuit and what the responsibilities of the homeowners would be to either ratify or not ratify. This shifts the burden of proof. How did this happen and why are we doing this? Anybody want to . . .

I’ll [I will] take the first step. At the time that S.B. 32 was passed out of this committee, we had, at that hearing, indicated that there were a number of other provisions in several other bills that related to the package that had been put together. This is one of those components. This was dealt with by all of the parties that dealt with S.B. 32, and carefully put together and carefully considered.

SENATE BILL 32: Revises provisions concerning constructional defects and insurance for home protection. (BDR 3-22)

At the time that we passed [S.B.] 32 out of this committee, [S.B.] 451 I don’t [do not] think had come back up, or had already been passed over to the other side, and as part of passing [S.B.] 32, the parties agreed to this language. So this is language that is integral to the whole construction defect litigation legislation that was passed and made part of S.B. 32.

Well you may have considered it that way, I didn’t [did not]. And I’m [I am] not happy about this, just so that you know. That’s [that is] my own feeling, but as far as I was concerned, [S.B.] 32 was a deal you guys cut. This is what we did. You’ve [you have] got to have the burden of proof of why we should accept this, because this changes the entire essence of associations going forward with these lawsuits. And I can tell you, I live in an association, two of them, and if I have a problem, and I’m [I am] just your basic, everyday homeowner, I want to know how I can deal with it. This puts the burden on me. Why should that be?

Essentially what this provision does is mimics or mirrors how the governing documents operate. For instance, the governing documents in most associations in this state, if you want to remove a member of the board, it takes affirmative action by the citizenry, if you will, to remove that board member. One of the problems that we have, and have had, in southern Nevada, particularly, because we are a 24-hour town, it’s [it is] very difficult to get a majority of people together whether it be at a meeting, or whether you are knocking on doors getting their agreement. Rather than penalize the association, which has already moved forward with the litigation, because under [S.B.] 32 now, homeowners association cases go right into litigation, and as part of S.B. 32, the association, when it serves the lawsuit on the builder, has to have a very detailed defect list which costs a lot of money to put together, which is an expense. What this is intending to do is to say, "We recognize that it’s [it is] difficult to get a majority of people together at a meeting or get them to agree." Because the association, through its board of directors, is the one that acts to protect the association property, rather than penalize them for going forward, we’re [we are] merely going to mimic what is already in the governing documents. If the majority do not want to go forward, then a majority steps up and votes the litigation to an end. So that’s [that is] really what it’s [it is] intending to do, is to be consistent with what’s [what is] already in the governing documents.

Well, Senator Schneider and this committee made serious effort to focus on homeowners and what their needs are. And you’re [you are] now saying the association’s responsibility is more important and should supercede the homeowners’ desires. That’s [That is] the way I view it. And I’ve [I have] got to tell you, I am not a happy camper over this. Now if these guys cut a deal, then the members of this committee from southern Nevada will have to decide, because that is where most of this is coming from. But it’s [it is] not making me happy to find out somebody was in agreement, and then all of a sudden we have a new deal here.

So, why don’t [do not] I let Mr. Wadhams give his perception of why we’re [we are] doing this. Because litigation’s [litigation is] a little different than other things, Mr. Pursiano. For a homeowner to wake up one day and find out he or she is in litigation, and he’s [he has] got to make an affirmative effort to stop it, concerns me, that’s [that is] all. There are more and more of these associations every day. People just want to get up and go to work every day. Not have to worry about whether they’re [they are] in litigation, because you’ve [you have] got somebody in southern Nevada who has nothing better to do with their life but sit on these associations. You know, that’s [that is] the reality. I know you deal with the reality of the construction issue. We deal with the reality of the people who live in these places.

I had to exert some, I don’t [do not] exactly know how to put it, but in one of the associations in which my wife and I are involved, the president broke the rule every day. He parked a "Dually" on the street. That ain’t [is not] allowed. I sent him a little note, was nice the first time. The second time, I wasn’t [was not] so nice. It’s [it is] amazing what the tow truck looked like when it was leaving, and he decided to move rather than deal with me, which was fine, because he doesn’t [does not] live there anymore. But, that’s [that is] what I’m [I am] concerned about. Now this committee will make this as a group decision as we always do, but to be honest with you, I don’t [do not] like it, but I’ll [I will] live with it if that’s [that is] the deal you cut, and this committee is willing to support it. I may not vote with it, but I’ll [I will] live with it.

I’m [I am] at a little bit of a disadvantage since I was not part of the group that actually discussed this language, but we do support it and think it is consistent with what we’ve [we have] tried to achieve. Let me back up just a little bit. One of the problems that we saw coming into this legislative session, is that the "51 percent rule," that is getting the majority rule from homeowners associations before lawsuits were filed, was not being recognized in southern Nevada, in particular, and particularly by some of the judges. So, we think, and quite frankly thought, that the effort of this committee was excellent. What we have achieved by this legislation is that it is now clear that the Legislature absolutely intends that there be a majority vote before litigation is commenced.

The problematic language here, Senator, is that it is a little softer on the ratification if for some reason the litigation is commenced without the prior vote. But we think that the distinction that’s [that is] made will give direction and comfort to the judges that this body does expect that a majority of the homeowners will participate in that decision. Unfortunately, in our process of government, oftentimes compromises have to be made. We think we have advanced the cause of homeowner notification. Is this version the perfect answer? No, but we do think it’s [it is] an improvement. We are satisfied that it is at least as sufficient improvement that if it doesn’t [does not] work, that if we find abuse, homeowners associations, home builders, any number of people feel free to have access to this body next session. I think we’ve [we have] made an improvement. The home builders associations supports this language. No, sir, it is not perfect, but we think it’s [it is] an improvement and think it’s [it is] worth giving it a try for the next 2 years.

Very briefly, this is a part of the packages that was worked out, and one of the overriding philosophies driving the negotiations on all of the bills that were bundled together here, construction defects, etcetera, was whatever the standard is, let’s [let us] make sure it’s [it is] clear. Because in a lot of cases the language that was in the statutes before, and in a lot of cases where the procedures were operating under statutes that were here, there were a lot issues that were uncertain. When could you do data requests? Whom did you have to notify? What kind of discipline or lack of discipline is there in that process? This is part of the language that was developed as we were going through trying to make a clear delineation, as Mr. Wadhams said, so that the judges, and more importantly, so that all the parties that are in these lawsuits who are average citizens, like me. I’m [I am] not an attorney, and it’s [it is] non-attorneys that have to deal with all this stuff, consequences out on the construction site or on the homeowners’ side, or the association board.

So what we did, and I think a pretty good job of, is to try and make it clearly laid out [as to] when, and why, and who has the right to start, or stop, or participate in these processes. And that’s [that is] why really, I think it’s [it is] important. It wasn’t [was not] a trade like we got something, and they got something. That was the philosophy that drove this, and I do think that this fits into that package.

Senator O’Connell remarked:

Mr. Chairman, if the committee does decide to concur with this amendment, I think the record should reflect in bold, large type, that it is the intent of this legislative body to assure that the majority of the homeowners, so there be no mistake, has a voice in the decision to litigate, and perhaps that would also help so that we don’t [do not] have anybody trying to interpret what our intent was.

Mr. Wadhams responded by saying:

We recommend that this committee develop floor statements. Our supreme court recognizes floor statements as being guidance on legislative intent more so than committee debate. So that would be the vehicle to satisfy that desire.

Senator Schneider addressed Mr. Wadhams, saying:

I had a question. I was wondering, well, first of all, on this majority. These homeowners associations were out of control, and they were suing members of an association. This is how all of this started to begin with. Board members were suing other members of an association. There’s [there is] one right up here, Glenbrook, where they spent hundreds of thousands of dollars suing one member. You go down the road, and all the homeowners are upset. But, tell me, could you walk me through the process here of what’s [what is] going to happen? Because, you guys are upset and throwing stones backwards now, because of a few attorneys that do construction defects in these things. Could you walk me through, step by step, what happens in these lawsuits?

Mr. Wadhams stated:

Senator Schneider, I appreciate you asking me that question. I guess I would defer that to one of the lawyers that actually handles that process. The notion that we supported in 1995, 1997, and again today, is that these are governing units and should be controlled by the informed consent of a majority of its members. In that respect, we completely agree. I think I would defer the question to one of the lawyers that walks these associations through that process, if you don’t [do not] mind, Senator.

I’ll [I will] try to do that. Within 90 days after the action is commenced, the association must either hold a meeting or put out by ballot, to all members of the association, basically a consent or do not consent with proceeding with litigation. At the same time, the association, under section 10, must provide information about the costs, and the risks and benefits of the litigation. I’ll [I will] term it that way. If the association is unable, the board is unable to get a majority, the lawsuit will be dismissed. But it will only be dismissed if a majority of the owners say they want it dismissed. That’s [That is] the way it is written.

So it’s [it is] a two-step process. You’ve [You have] got to get one vote to say, "No, we don’t [do not] want to proceed," and then you have to get another vote to say, "Dismiss it."

I think it’s [it is] contemplated that it would be a one-step process. As you see in the flush language under [section 27, subsection] 9, [paragraph] (e) [of S.B. 451] at the very end, it talks about "obtained at the time the approval to commence or ratify the action was sought." So, you do it within the same vote.

There is a form that goes out, a ballot, where you have a meeting where you’ve [you have] got everybody there either by proxy or however the board decides to conduct the meeting. And they have a ballot that says either to proceed or not to proceed. If they get a majority to proceed, then they’re [they are] fine. If they get a majority that say "do not proceed," then the litigation is dismissed. It’s [It is] all done in one ballot, at one time. So, it’s [it is] not a two-step process, it’s a one-step process. It’s [it is] contemplated to be that way.

Correct, the language, the magic words are "members of the association allocated to vote." So it’s [it is] all members, the voting power of the association, as written. So it’s [it is] not a majority of members that are present at a meeting. Does that clarify your question?

The way this is written, litigation may have already been commenced, and the reason why we’ve [we have] done that is because if there’s [there is] a statute-of-limitations issue and what not, at least preserve the rights of the association to proceed. At the front end of these cases there is typically enough information, there is information generated as to what the problems are such that you can prepare a budget of projected expert expenses. We do that almost on a routine basis.

Well, my concern is where you do that, you go though the process, you draft the complaint, you file it, you serve the complaint, then you get a vote not to proceed, and then you’ve [you have] got a homeowners association that says we have $X,000 into this thing that we decided not to do. Why are we paying for this?

In putting together all of these various parts, S.B. 32 and this particular section, that’s [that is] one of the difficulties. That’s [That is] why a majority, before it is dismissed, a majority of people must affirmatively say that it must be dismissed.

In the event that that happens, is there anything in here that allows like an open extension to answer until that vote is held? Because then if the other side has to answer and go to the expense of drafting and filing an answer and starting to prepare for the "16-1" process, and it’s [it is] ultimately dismissed, then it wouldn’t [would not] be beyond the realm of possibility that they’re [they are] going to want their expense for doing that from the homeowners association, which ultimately said, "I don’t [do not] want to do this."

ASSEMBLY BILL 109: Revises provisions relating to trade practices. (BDR 52-292)

SENATOR O’CONNELL MOVED TO NOT RECEDE FROM AMENDMENT NO. 1021 TO A.B. 109.

SENATOR SHAFFER SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

SENATOR SHAFFER MOVED TO NOT CONCUR WITH AMENDMENT NO. 978 TO S.B. 133.

SENATOR SCHNEIDER SECONDED THE MOTION.

THE MOTION CARRIED. (SENATOR CARLTON, SENATOR AMODEI, AND SENATOR O’CONNELL VOTED NO.)

ASSEMBLY BILL 64: Revises provisions relating to mortgage companies and loans secured by liens on real property. (BDR 54-1204)

ASSEMBLY BILL 72: Subjects certain transactions involving mortgage companies and notes secured by liens on real property to laws regulating securities. (BDR 7-1203)

SENATOR SHAFFER MOVED TO INCLUDE AMENDMENT 2 OF EXHIBIT C IN A.B. 64.

SENATOR SCHNEIDER SECONDED THE MOTION.

THE MOTION CARRIED. (SENATOR AMODEI, SENATOR RHOADS, AND SENATOR O’CONNELL WERE ABSENT FOR THE VOTE.)

SENATOR SHAFFER MOVED TO INCLUDE AMENDMENT 6 OF EXHIBIT C IN A.B. 64.

SENATOR SCHNEIDER SECONDED THE MOTION.

THE MOTION CARRIED. (SENATOR O’CONNELL AND SENATOR AMODEI WERE ABSENT FOR THE VOTE.)

SENATOR SCHNEIDER MOVED TO INCLUDE AMENDMENT 7 OF EXHIBIT C IN A.B. 64.

SENATOR RHOADS SECONDED THE MOTION.

THE MOTION CARRIED. (SENATOR O’CONNELL WAS ABSENT FOR THE VOTE.)

We are here to deal with the section starting on page 20 of the first reprint of S.B. 451 that was this committee’s language, and then we have an amendment which the Assembly put in that is different. I’ll [I will] try to be fair. I guess what I’m [I am] trying to get our arms around is a very simple issue, and that is one of homeowners associations are more of a problem than homeowners. And they seem to have been given greater latitude, or the homeowners seem to be put in a second position with regard to the association and the ability to stop litigation that was believed to be important to the association. So, that’s [that is] my concern, and apparently the parties who are involved in this have struck some kind of deal.

Unfortunately for both parties, the Senate was not part of that deal. So that’s [that is] why we’re [we are] back here. Does anybody want to come up and chat about this a little bit, and if you don’t [do not], you’re [you are] welcome not to. But I think the changing of this where you have to have an affirmative action to stop it is the antithesis of an affirmative action to pursue it. Where did we come up with that and why? What benefit to the consumer, the average homeowner, is that to do that? Can somebody give us any background, or do they care to give us any background on why that change in burden should occur?

SENATE BILL 32: Revises provisions concerning constructional defects and insurance for home protection. (BDR 3-22)

I can tell you this particular clause was basically reached by a compromise by the parties over issues in S.B. 32 and in this bill as it existed in the first reprint. That was the principal reason behind it. I would note that the association is not prohibited from dismissing its lawsuit. It is only limited by the action of the members moving to dismiss for the sole reason that ratification was not reached, to doing it the same evening that the issue was in front of the body.

The purpose behind that was to try to avoid the risk of going forward with litigation to some considerable extent only to be hit later with a dismissal for that purpose. But the board can still dismiss for any reason, and the members can, by a written statement to the board, dismiss for any reason, for instance, if they don’t [do not] think that the litigation is well founded. Since it takes a majority to begin by agreeing with it, it would take a majority to get rid of it, and we thought that was a reasonable balance of the parties’ interest. I must say that I was principally motivated by the fact that I personally put more weight on the value of the various disclosures in items in section 10, [subsection 1, paragraphs] (a), (b), and (c), than I am so concerned about this voting procedure. Because very seldom have we had any litigation ever dismissed by a vote of the members anyway; that’s [that is] not something that occurs very often. But making sure that the parties had a good idea as to what was being involved struck me as an extremely important piece of public policy and that was the tradeoff. You just don’t [do not] always get what you want. But, that’s [that is] how we got there.

When we heard this before, Mike [Senator Schneider], you were going to get in touch with some of your associations and people who had raised some concerns. Did you talk this over, and did they have a voice on the other side [Assembly Committee on Commerce and Labor] when the bill was heard? Did they have somebody representing them?

No. And they, I think the discussion went on, but there wasn’t [was not] a lot of involvement. And the couple of people I talked to aren’t [are not] real happy with this. They thought it just was going down the track, and they kind of let it go, you know?

Renny [Mr. Ashleman], how "married" are you to this language, and do you think that the language that we had into the bill prior to that is not acceptable at all?

I think the problem is I’m [I am] afraid of losing the bill because the other [Assembly] side wouldn’t [would not] agree. The problem’s [problem is] not really reaching an agreement with me; I’m [I am] happy to limit the trial lawyers as far as I can.

I wasn’t [was not] involved in the specific wording of this provision in S.B. 451, but was intimately involved in overall development and participation in the package that resulted in both S.B. 32 and S.B. 451. Perhaps I can answer your question by going back and giving an overall picture. That is, as the law currently exists, essentially homeowners’ protection is provided in the bylaws that they have. It’s [it is] the contractual agreement essentially that says, "When you buy into this . . . ." [An inaudible comment by Senator O’Connell] Right, and so you’re [you are] familiar with what I’m [I am] talking about. As it exists, however, the governing board of the homeowner association typically is elected by the membership. Sometimes there are very few people that participate in that, and this language actually that is now put in S.B. 451 is to protect those homeowners who say, "Wait a minute. Something is going on here with this piece of litigation. We don’t [do not] want that governing board to go forward with it any longer."

This really ends up as a safety valve so that those homeowners can get together, and in fact, the board is required, now, if the action is filed within 90 days, to basically go forward with this ballot process and the disclosures that Mr. Ashleman talked about. So, as opposed to the board just running with litigation, as it could under existing law, the homeowners now have to be informed, and they have a right to come back and challenge it, and say, "We don’t [do not] want you to go forward. And as it works in conjunction with S.B. 32, this now will all happen at a very early stage. Anytime now somebody files litigation on behalf of a homeowners association, it would be considered complex litigation. So the lawsuit is filed, all of the parties come forward, the association’s board and their lawyer are required now to give these notices to the members of the homeowners association, the entire membership. And the entire membership, then, within 90 days, if they don’t [do not] feel the lawsuit is justified, can end it at that point in time. That’s [That is] at a stage literally at the very beginning. There have been no interrogatories, no depositions, no substantial expenses.

Just to add to that historical background, typically the board is responsible to protect the assets of the association. For instance, if a statute was to run on a roof, they might be inclined to file the action because they’re [they are] concerned about the roofs. They may decide, the notice then goes out to the homeowners association, and the homeowners association may say, "You know, this is a small problem; we would much rather fix it ourselves as opposed to getting tied up in litigation for years. Or there is an insurance policy that covers it. We would just as soon go that route." It really is a safety valve now for homeowners; it does not exist in the current law.

I would feel more comfortable not concurring with this, going to a conference committee, and seeing what we could come up with during the conference committee. Because, with all the work that we did before with this, this was never, ever brought up. Everybody was perfectly happy with what we had put in the law. So, I’d [I would] like to ask counsel, and I’d [I would] like to go to a conference committee and talk to the other side about why they think this is different. I realize the thing has been flip-flopped. But why they think this is so much better than the other language.

It’s [It has] always been my understanding working on this, that the work on these litigation [cases] should be done ahead of time. In other words, you don’t [do not] go to litigation until you get the approval of the association. And now all of a sudden you’re [you are] in litigation, you’re [you are] saying "Well give us 90 days to convince everybody we should do this." It seems like we’ve [we have] put something in here that makes us go backwards. It was my understanding going through all this, the homeowners I’ve [I have] talked to, they want to be notified up front, go through everything first before they step off the end of that board, you know, that gangplank and go into litigation. That’s [That is] my thought process on the whole thing. Did I miss something, Ann [Senator O’Connell]?

Well, we might very well end up with this language. But it can’t [cannot] hurt to talk to them and to then have our counsel also look at the two languages and tell us. I appreciate what you said, sir, [Mr. Lyle] and I appreciate your testimony. It’s [It is] just that we’ve [we have] spent an awful lot of time getting an agreement on this initially, and everybody was at the table then. And evidently on the other side, not everybody was at the table. So, it would just give me a level of comfort to step back a minute, and another day isn’t [is not] going to matter that much, and just talk to the people.

The two issues with which the amendment differs from the language we sent the Assembly are as follows: In line 28 of the bill, we spoke to "protect the health, safety, welfare of the members of the association"; current language, we said "from an eminent risk of loss of life or serious and permanent damage to the property." So we narrowed it, so the homeowners association can’t [cannot] just "willy-nilly" go out and start an action. These are the qualifications. Then it says if a civil action is commenced, it must ratify within 30 days after the commencement of the action upon a vote of the owners, etcetera. If the action is not so ratified, the association has to have a special motion to dismiss. The rest of it looks like it’s [it is] fairly common, and I haven’t [have not] been able to compare them. That the 10 days, the reasonable estimate, explanation, potential benefits, I think most of those are in here. This, however, has taken out that qualifier. You can file a civil action, period. And now we’re [we are] back to that, where you can just do it, and then all of a sudden it must be ratified within 90 days, majority is allocated. If they made a good-faith effort and they cannot obtain the required vote or agreement to commence, the association may thereafter seek to dismiss. Tell me why our language wasn’t [was not] good.

Mr. Chairman, I don’t [do not] have a specific answer for you because I didn’t [did not] participate in the negotiations at that stage. But I can tell you that, at least my understanding of the concerns are, . . . contractually the homeowners association has a legal obligation to go forward and protect the interests of the association in terms of their assets. There was concern about the language that I think you just referred to, and again, I didn’t [did not] participate in the negotiations or what took place as to that change, but this has been the acceptable language on all sides.

I’m [I am] sorry, it’s [it is] in the existing law, and I guess, I’m [I am] trying to bring the amendment back into the context of [a copy of the third reprint was located in the bill book], I’m [I am] just suggesting that it’s [it is] important sometimes to take our amendments and put them back in the context of not just, well, in this case the existing law. The existing law has not been changed that requires that a commencement of a civil action may occur only upon a vote of the majority of the owners. So, it is not correct to say that "You can just go file a lawsuit." They must have a vote before they commence the action. Then going across to new section 10, there is disclosure that must be provided to those owners prior to that election on whether to commence the lawsuit. The complication, Senator, in the amendment, which was as I said this morning and I think last week, it is admittedly a watering down of what this committee adopted.

It is on the ratification under those circumstances when you don’t [do not] have the prior vote and the prior vote is listed, and typically would occur if a statute of limitations was going to run and there wasn’t [was not] time for the prior vote or perhaps if it is a life-safety issue. And Senator Townsend identified the language in the Senate version that said "eminent threat" which is really an interpretation issue that had been a problem. And the other problem I want to make sure this committee understands with all apologies, my recollection is S.B. 451 moved out of this committee before S.B. 32. And so we really didn’t [did not] have an opportunity to discuss the overlap or the application or implication of the [S.B.] 32 passage on [S.B.] 451. It had already left the jurisdiction of this committee. That doesn’t [does not] necessarily eliminate the confusion, but the timing was not one that we had control of. But I think it’s [it is] important to note that the commencement of the lawsuit must be preceded by a majority vote, and only in those circumstances where it does not occur, on health, safety, welfare typically, or perhaps a statute of limitations. Then is the subsequent ratifying vote.

I appreciate your explanation; however, this committee, after listening to 17 hours of testimony, decided that the exemption that is provided for on line 22, the provisions of this subsection of current law, do not apply to a civil action that is commenced, and then it lists [paragraphs] (a), (b), (c), (d). When we got to [paragraph] (e), we heard testimony that every single lawsuit is getting exempted by these associations using (e). That everything is determined to be a health, safety, and welfare of the members, and that was not the goal of this. The goal of this was to get things fixed, get them done, and that’s [that is] why we put the language in that said, ". . . association from an eminent risk of loss of life, serious and permanent damage to property." That’s [That is] why that is in there. It’s [It is] so that you stop these groups who are using this exemption to just go out and start these lawsuits. I mean I remember that quite clearly, and I think this committee does too. The goal is to get things fixed.

What if we said "immediate risk?" That certainly would narrow the interpretation down. For instance, if you had a flood of some kind and you had a situation where you immediately needed to fix the street because it had caused a breakup in the asphalt or something. Or you had a situation where somebody’s home had really been damaged and perhaps there was a health situation of mold or something in the carpet. That would be something that happened right away before they could get any kind of an agreement perhaps from the association or the members. Would that take care of the concern as far as leaving to interpretation the word "eminent?"

Senator, you’re [you are] looking at me, so I guess maybe I should answer, although I certainly want to defer to others. We have no problem with the language that you have suggested. We have no problem with the reprint you have suggested. The process that we were engaged in, which is not the public policy setting that this body and its counterpart is responsible for, we have worked through these words and have agreed with the words on the page. So, let me be clear. We wouldn’t [would not] object to what you are saying, but at this juncture, we’re [we are] committed to the parties that we had an agreement with.

Let me point out, because the proponents, people who work with me, aren’t [are not] here, and I don’t [do not] want to be unfair to them because it was our belief when we talked jointly that the disclosure would completely alter the picture. That is that the lack of participation by the members would turn around if they actually had that kind of a disclosure so that they were more active in making the decisions and that, therefore, this other part would not be as much of a problem. Now, we don’t [do not] know if that’s [that is] true or not. That’s [That is] what we think will be true, because that is a pretty dramatic set of disclosures. And that is where we were coming from with this. And the other thing is that with those disclosures is my opinion that any kind of a prudent attorney would not be very likely to proceed without an agreement of the majority, which is really how everybody envisioned these being done in the first place.

We really didn’t [did not] think in general they were going to vote, they were going to be like other lawsuits, where you go out and sign people up for them. I understand that’s [that is] how most of them, in fact, are brought. Although we did have testimony that people are using this loophole rather excessively, but I understand that the majority of them are brought by the written agreement. That was the thinking. And I only say that to be fair to this body on the policy considerations that we had. It wasn’t [was not] just a deal cutting; we did try to talk about what we thought the issues were, and it’s [it is] true that that did not take place here. And it’s [it is] also true that not everybody, we had 30 or 40 people at a couple of those little things that Mr. [John] Meder and I helped preside over after you guys had been beat on for awhile. We probably only had 10 or 15, but we did, in fact, disclose this to the people we had available in the other house. So the representatives that cared to come, we did talk to.

SENATOR O’CONNELL MOVED TO NOT CONCUR WITH AMENDMENT NO. 908 TO S.B. 451.

SENATOR SCHNEIDER SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.