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Joint Sunset Committee

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					                                 Joint Sunset Committee
                           Thursday, February 17, 2011, 6:00 pm
                  Cannon Building, 861 Silver Lake Blvd., Dover, Delaware
                    Public Hearings - Inactive Boards/Commissions and
                                 Real Estate Commission
________________________________________________________________________________
JSC and Staff: Sen. George H. Bunting, Jr., Chair; Rep. John A. Kowalko, Jr., Vice Chair; Rep. John C. Atkins;
Rep. E. Bradford Bennett; Sen. Colin R.M.J. Bonini; Sen. Michael S. Katz; Rep. Michael Ramone; Rep. Daniel
B. Short; Sen. F. Gary Simpson; Debbie Puzzo, JSC Executive Director, Judi Abbott, Legislative Council staff,
and Lorena J. Hartnett, Registered Professional Reporter.

Absent: Sen. Robert I. Marshall

In attendance: Vincent White, Chairperson, DREC; Rick Allamong, DREC; Chris Whitefield, DREC; Glenn
Watson, DE Auctioneers Assoc.; Bill Lucks, DE Assoc. of Realtor, CMA; Kevin Wolfgang, DAA President;
Frank Szczuka, member of the public; Bruce Harvey, Newark Landlord Assoc., DREC; Michael J. Harrington,
R.E. Comm; Charlotte Herbert, DAR; Bruce Walls, DAA; Michele Twilley, DAA; Ben Twilley, DAA; Chuck
Muzholland; Doug Nubel, DE Assoc. of Appraisers; Eileen Heeney, DAG; Kip Heeney; Denise Tatman, DAR;
Michelle Hunt; Anne Menaquale; Tracy Greenwood; Kay Warren, DPR; Andrew Taylor, DAR; Corrie Robinson,
NCC Brd. Of Realtors member; J. David Villabona, DAA; Alexander Mathews; James Kelly; William Diveley,
Council on RE Appraisers
________________________________________________________________________________

Agenda:
I.     Overview of the Sunset Process
II.    Inactive Boards including Public Comments
         Advisory Council to the Office of Retail Gasoline Sales, Title 6, §2911
         Board of Athletic Agent Examiners, Title 24, §5403, Title 29, Chapter 101
         Corps of Oral Hygienists, Title 16, §171
         Delaware Center for Educational Technology, Title 14, Chapter 42
         Seed Certification Advisory Committee, Title 3, §1507 8(c)
         Worker's Compensation Advisory Council, Title 19, §2301(d)
       Advisory Council on Children, Youth and their Families, Title 29, Chapter 90
       Delaware Development Corporation, Title 29, §5063
       Authority on Radiation Protection, Title 16, §7404
III. Public Hearing – Real Estate Commission
      a. Opening Comments by Agency/Board/Commission (15 minutes)
      b. Points for Consideration/Question and Answer with JSC
      c. Public Comments (3 minutes per person)
IV. Concluding Remarks (JSC)
V. Adjournment

Sen. Bunting called the meeting to order at 6:02 p.m.

Senator Bunting thanked everyone for coming to the meeting. The JSC members introduced themselves.

III.     Inactive Boards including Public Comments
SENATOR BUNTING: We have a quorum, and I would like to get started. We are going to first go
through our agenda here. We have a number of inactive boards. And at this time I would like to turn to

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our Executive Director, Debbie Puzzo, who is going to walk through those so we can move quickly,
hopefully, and into the immediate evening with the Real Estate Commission and the dialogue there.

MS. PUZZO: Hi. We got a list of inactive boards and commissions from the Governor's Office. Each
of you has a packet in front of you. Two of the entities have been removed from the list. That would be
the first one, the Advisory Council to the Office of Retail Gasoline Sales. That was sunset through -- or
deleted from statute by a Senate bill and also the Delaware Center for Educational Technology, that
remains active. However, there was a Board of Directors that was disbanded.

The remaining entities are:
       The Board of Athletic Agent Examiners, we have a letter from Director Collins stating that --
              and this is all listed in your packet -- that it is inactive.

       The Corps of Oral Hygienists, inactive, per Secretary Landgraf.

       Seed Certification, inactive.

       Worker's Compensation Advisory Council, inactive.

       Advisory Council on Children, Young and their Families, inactive.

       The Delaware Development Corp. has not been active for ten years. We have a letter from Alan
             Levin; and

       The Authority on Radiation Protection. There is a statement letter from the Department of Health
             and Social Services sent that explains there are only three nationally [correction 2], and
             that they [DHSS] are going to absorb the Authority itself. It actually has been up and
             running but the Department is going to pick up the work.

So you can take a vote, if you would like to sunset them as of June 30, unless there is any comment.

REPRESENTATIVE KOWALKO: I make that motion.

REPRESENTATIVE BENNETT: Second.

SENATOR BUNTING: All in favor signify by saying aye. (All present (7) Bunting, Kowalko, Atkins,
Bennett, Ramone, Short, Simpson). Motion passed.

IV. Public Hearing – Real Estate Commission and Overview of the Sunset Process

SENATOR BUNTING: We are going to get started. I would like to welcome you here from the Real
Estate Commission and others. Tonight we are looking at the Real Estate Commission. The Sunset
process is an involved process. We do periodic review of an agency, or a board, or a commission within
our state government. It's a part of our government that needs to be very open, and it needs to involve
the public, and it needs to involve the legislature, as well as the board, the commission, or agency that's
being reviewed.




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As background to this process leading to this evening, each May the Joint Sunset Committee decides
who we are going to review the next legislative year, which usually includes five to seven agencies,
boards, or commissions.
We then contact the entity under review, sending them a questionnaire to be filled out and returned.
There is a communication line of correspondence back and forth, and that is presented to the Committee
in draft report form prepared by our Executive Director, Debbie Puzzo.

As we start to collect the data, the agency, board, or commission preparing the responses to that
questionnaire starts to realize this is a healthy process. You see all the paper around this evening. It is
not supposed to be an inquisition or being called before the principal or anything like that.

Upon the completion of the draft report by the staff, a public hearing is held for the agency -- as we are
doing this evening -- board, or commission, at which time that entity prepares a 15-minute presentation
for the JSC.

Tonight's following presentation is by the Real Estate Commission to the Joint Sunset Committee. We
will go through the Sunset report. You will have an opportunity to comment on how well this entity is
serving the interests of the public's health, safety, and welfare of our state.

There is a three-minute limit for each person from the public to address the Committee this evening, or a
five-minute limit if you represent an entity. We don't stand up here with an egg timer or a gong. When
you get to three minutes, we would hope to finish.

If that amount of time is not sufficient for the comments, we do allow written correspondence to be
submitted to the Committee. And any comment offered this evening is a part of our public record. If
you don't have a prepared written statement tonight, you are welcome to submit your statement at a later
date to our staff.

The public comment period remains open until we set a recommendation meeting for each entity. We
will come back to consider suggestions of the entity as well as suggestions of the public.

As a reminder also, or what I would like to clarify, as well -- and as a legislator we have got, on this
committee, almost 80 years of legislative experience. But I would like to apologize for the fact that
from '01 to the present time when these were reviewed, there was no action taken by the Legislature at
that time, and that's why we are here where we are this evening.

Now, outside, as you all know, coming into Legislature, if you do elementary math, 11 Senators in the
Senate passes something, 21 in the House of Representatives, and the Governor can or cannot sign it, or
then he can veto it.

So whatever we do this evening or comes out of this or is recommended, you still have certainly the
option to go to any legislator to prepare legislation. I want to make that extremely clear. We'll take the
Real Estate Commission at this time.

     a. Opening Comments by Agency/Board/Commission

MR. WHITE: Good evening, Senator Bunting, Representative Kowalko, members of the Joint Sunset
Committee. Thank you for the opportunity to appear before you to discuss the review of the Delaware
Real Estate Commission. My name is Vincent White. I'm the Commission's chairperson. Joining me is
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Commissioner Chris Whitfield, Secretary and Chair of the Legislative Committee; Rick Allamong,
Commission Member; Mike Harrington, who is sitting behind me; Eileen Heeney, the Board's Deputy
AG; Mr. Collins, Director of the Division of Professional Regulations; and Kay Warren, Deputy
Director of the Division of Professional Regulations.

The Commission and the Division welcomes the Joint Sunset Review process because we believe that
there are opportunities to increase public protection in the real estate profession. It is our hope that such
opportunities will result from this process.

I am pleased to provide an overview of the Commission's activities, address major challenges, identify
in this Committee's draft report, and introduce the Commission's suggestions.

First, overview and accomplishments: The Commission currently licenses 735 resident brokers, 329
non-resident brokers, 3,924 resident salespersons, 663 non-resident salespersons, 200 main offices, and
60 branch offices.

From 2008 to 2010, there were 154 -- I'm sorry -- 144 complaints investigated: Seventy were forwarded
to the Attorney General's Office for prosecution. 39 were dismissed; 12 received a decision and order of
discipline by the Commission; three accepted consent agreements; and 16 are pending.

As it was previously stated, the Commission was previously reviewed by this Committee in 2001. The
Commission is in compliance with a number of the Committee's prior recommendations. The
Commission has been working over the last three years to comply with the remaining recommendations
and other regulatory issues that were raised in the draft report.

One of the 2001 Committee recommendations was accomplished by the enactment of House Bill 122
during the 143rd General Assembly. The law implemented agency and dual agency disclosure to clarify
the licensee's business relationships with a consumer in conducting real estate transactions. In response,
the Commission developed consumer information sheets and disclosure forms.

In June 2004, Senate Bill 229 was enacted, which created a uniform approach throughout Title 24
requiring that the refusal, revocation, and suspension of a license for professions and occupations
regulated under Title 24 be based upon conviction of crimes that are "substantially related" to the
profession or occupation at issue and not for crimes that are unrelated to the profession or occupation.

The bill required boards and commissions of affected professions and occupations to promulgate law --
I'm sorry -- to promulgate regulations that specifically identify the crimes that are "substantially related"
to the profession or occupation within 180 days of the enactment of the bill.

The Commission promulgated final rules and regulations to implement SB 229 to identify crimes
substantially related to the practice of real estate in March of 2005.

In July of 2005, Senate Bill 206 was enacted to give protection to active duty military, activated
reservists, or members of the National Guard from having their professional licenses expire during
active military deployments.

During the 143rd General Assembly, Senate Bill 403 was enacted in July 2006 to allow Title 24 boards
and commissions to waive convictions substantially related to the professions under certain conditions.
If the Commission, after a hearing, found that the following conditions were met, a waiver was granted.
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More than five years have elapsed since the applicant fully discharged all imposed sentences (all periods
of modification of sentence, probation, or suspension); applicant is capable of practicing real estate
brokering or real estate sales in a competent and professional manner; and granting of a waiver will not
endanger the public health, safety, or welfare.

During the 144th General Assembly, House Bill 36 passed. The legislation provided all boards and
commissions within the Division of Professional Regulation cease and desist authority to address
unlicensed practice and to impose fines for those who violate cease and desist orders subject to hearing
procedures. Prior to the passage of this bill, unlicensed activity was under the jurisdiction of Superior
Court.

In 2009 the Commission delegated authority to the Division of Professional Regulation to issue licenses
to applicants in those cases where the licensing requirements are straightforward and where there is no
question, issues, or concerns on an application. The commission would ratify the licensing list at their
next regularly-scheduled meeting.

The Commission streamlined the renewal process by offering online renewal with the use of payment by
credit card and attesting to continuing education subject to post-renewal audit. In 2008 real estate
applicants for licensure began to receive the electronic notification when their application was received
and informed of the ability to tractor their progress of their application online.

During the 145th General Assembly, Senate Bill 164 allowed all boards and commissions under Title 24
to waive criminal convictions substantially related to the profession by either holding a hearing (which
was previously practiced) or a review of the documentation to determine applicants -- whether the
applicants met the specific criteria for a waiver.

During the 145th General Assembly, Senate Bill 232 gave Title 24 boards and commissions the
authority to suspend or revoke a license effective immediately at a hearing with a written order to be
served 30 days after the hearing.

During the 145th General Assembly, House Bill 459 was enacted to permit hearing officers to conduct
hearings for boards and commissions under the Division of Professional Regulation.

Over the last several years, the Commission and the Division began to notify individuals who had filed
complaints about the Guaranty Fund. As a result, the Commission has paid two claims and four claims
are pending.

In 2008 the Commission formed a subcommittee to address the 2001 Joint Sunset Committee
recommendations and other needed statutory revisions. The Subcommittee has met monthly since that
time. Proposed changes were presented by the Commission members throughout the licensee's
community in public meetings, seminars, newsletters, and workshops to obtain feedback from the many
stakeholders.

The challenges, as we move forward, are these: The Commission is working with a statute that
inadequately addresses changes in the real estate profession. There are also regulatory provisions used
by Title 24 professional boards and commissions that have not been reflected in the Commission's
statute that would provide clarity for practitioners and the public. These challenges make the monitoring
of Delaware licensees' real estate activities difficult.

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The Commission is aware of other professionals who are transacting real estate activities that are
currently unregulated or exempted by the Commission. The Commission believes that a solution may
be to regulate in some form, in some fashion, auctioneers, property managers, and home builders' sales
representatives who are transacting real estate activities to ensure the highest level of protection.

To improve public protection, the Commission is seeking authority to regulate real estate Internet
activities, which involve listing, selling, renting of properties, and marketing.

As is evidenced by this summary, the draft report prepared by this Committee comprehensively
identifies the concerns and needs related to this Commission. The Real Estate Commission and Division
of Professional Regulation welcome the opportunity to work with this Committee to address these
issues. Thank you.

SENATOR BUNTING: Thank you, Mr. White. Members of the Committee, do any of you have
questions or comments?

REPRESENTATIVE KOWALKO: Thank you, Mr. White. Under your challenges, "The Commission
is seeking authority to regulate real estate Internet activities." This is an area that there has been much
discussion -- and I'm talking about Internet activities, themselves.

MR. WHITE: Yes.

REPRESENTATIVE KOWALKO: This has been raising some very unique constitutional challenges
and answers that haven't been given yet to questions that have been asked in other areas, but all related
to the Internet. And it's a right to an autonomy, and it's a right to cross state lines, from gambling issues
to almost anything.

I don't appreciate the fact that there should be some kind of a regulation of that, but I think that might be
a huge chunk of meat you're biting off there that we may not be able to swallow. I don't know how that
would come out. But I just thought that, if you have any further thoughts on that, how are you going to
do that?

MR. WHITE: Well, I think that's an important statement. Given the fact that, as you well know, the
Commission's job is to protect the public, and given the fact that we know the Internet is a wonderful
thing. But we feel, although there is discussion, mind you, that when a licensee is interacting with the
public on the Internet, certain things should be made known to that member of the public: Perhaps
license, the state where that person is licensed, the name of the broker, contact information. All that is
substantiated in Title 24 statute.

Right now there are situations where a public member could hit on a website and not know that that
person was licensed or where that person was licensed, conduct business -- there has been business, as
you know, conducted over the Internet, people purchasing a home, closing on a home, and they haven't
seen it. That seems to be a part of the wonderful world, wide world of the web.

We feel as though -- and this is not only from the professional members but also from the public
members of the Commission -- that the public is entitled to know at all times, and in the first
substantiated contact, that someone has a license. And we think that's important.


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So when we talk about regulating, we're talking about only in the terms of a disclosure, only in the terms
that would heighten a public member's knowledge that that professional or that entity is a brokerage.
Otherwise, if there is an issue, there is a complaint, the member of the public will have no way of
knowing.

REPRESENTATIVE KOWALKO: Well, the Internet knows no state borders. How would you
possibly regulate or insist on a licensing process for someone on the Internet that lists a home wherever
it is for sale? How would you possibly have that regulatory authority. I mean, I don't understand how
you would even be able to do that.

MR. WHITE: It's not a licensing that we are seeking to do on the Internet. It's just in conducting
business in the state. The statute always says you need to disclose who you are.

So, for example, I serve on a number of national boards and associations. There are situations where
people are conducting business in a state in terms of selling and listing of property, and they are not
regulated by that entity because they are in California. And that public member, if they had an issue or
complaint, they would not know who to contact or how to go about contacting.

And we think that there is ways that the profession can regulate in terms of disclosure. And, to some
extent, some of that is being done. On the national level, some organizations have required that if you
have a website, you disclose your license, the state your license is in, the number of your license, your
broker's number and address. That's the requirement.

Right now, if you go out and search or surf the web, you could come to some sites, some real estate-
related sites and not know who you are dealing with. And, again, it's not a licensing issue; it's a
disclosure issue.

REPRESENTATIVE KOWALKO: And let me give you an example.

MR. WHITE: Sure.

REPRESENTATIVE KOWALKO: I'm a broker licensed up in New York, and I'm listing properties
here on a website. How would you enforce me disclosing anything? That's my question.

MR. WHITFIELD: I think it's more about if that broker from New York was taking a local broker in
Delaware's information and posting it on the web as his own and he is not licensed in the State of
Delaware to do business.

MR. WHITE: Right.

MR. WHITFIELD: That's the scenario we are talking about.

REPRESENTATIVE KOWALKO: And I can appreciate your concern. I'm just sitting here trying to
get in my mind about how would you possibly enforce that. I think the big problem with Internet
enforcement or Internet regulation certainly is not just limited to jurisdiction. It's really, you know, can
you do it. If you can't do it, it's almost like an empty egg that you are doing, like, you know, composing
some type of regulatory capacity. If it's not enforceable, it's -- I don't want to say a waste of time, but it
may end up being that.

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MR. WHITE: And this goes both ways, too, so it's not just, as Commissioner Whitfield talked about,
brokers acting in unlicensed activity in the State of Delaware. This is also licensees spreading out.

Now, what some boards, some commissions have done on a national basis, they have put on their
website that this type of activity is illegal, that you need to be licensed in the state in which you are
conducting business. And that has served as notice to someone looking to do business or surfing the
web. So you give notice, you give construction that you need to be licensed if you are going to
promulgate or you are going to offer for sale of property.

And, again, I think it comes down to if the public member has a complaint against that person right now,
if they're not licensed in Delaware, there is nothing we can do. And we are just saying that if you are
going to do business -- we understand that the web is a powerful tool -- if you are going to do business
in Delaware or if you are going to export your services, you need to disclose that you are a licensee,
your brokerage firm, your contact information, so if there is an issue, that that member of the public has
a way of coming back and perhaps filing a complaint with the Delaware Real Estate Commission.

REPRESENTATIVE KOWALKO: Are you aware of any kind of legislation like this in other states?
We could look at it as a template.

MR. WHITE: Right.

REPRESENTATIVE KOWALKO: In other words, starting from scratch, you just can't say hey, here is
a bill or a law that's going to allow you to regulate Internet activity. But there is no way for us to ensure
that you have that capability or that it's being done. Do you know what I'm saying?

MR. WHITE: I understand what you are saying.

REPRESENTATIVE KOWALKO: So maybe that issue, if you could reflect some kind of existing
policy along the lines of what you would like to see happen, we could follow that up.

MR. WHITE: If you need additional information, I would be more than happy to provide it.

SENATOR BUNTING: To follow-up with that, the question and your answer, I thought the concept of
a template, you know, if we have other states -- and most of us that have professions belong to national
associations or something, generally speaking, that we get at least the basics of it so we can craft
legislation.

MR. WHITE: Right. And it's a good segue to this comment. All of the Commission members are a
member of the ARELLO, the Association of Real Estate Law Licensed Officials. This conversation, as
the representative pointed out, is one froth with a lot of challenges.

I recently attended a meeting in a mid-year meeting last year where this matter seems to be at the top in
terms of not only enforcement but disclosure. It doesn't seem to go away. I know, when you ask for
best practices, in the State of Texas, the Texas Real Estate Commission has come up with some
guidelines; Kentucky; Chicago; and California. So there is -- we can provide some best practices.

And that's one of the things that we are working on, and also to develop a statute or rules and regs that
would somewhat regulate the licensee's interaction, not all activities on the Internet, but those that we
think that the public has a possibility of interacting.
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REPRESENTATIVE SHORT: …I guess I'm a little confused after hearing your testimony in written
form and then your explanation. You're after disclosure. You don't want all aspects. But what you
wrote in your letter says everything: Listing, selling, renting, and marketing.

So I'm a little confused what are you really after here in that, because you kind of backed up in your
verbal testimony to say it was purely disclosure, unless I heard wrong. But in the written testimony it's
everything everybody does in the real estate business that I'm aware of.

MR. WHITE: Yes. Disclosure, if you're conducting those types of practices, disclosure; if you are
marketing, if you are selling, if you are renting, if you are listing.

REPRESENTATIVE SHORT: I understand that, but it says up here, "To improve public protection, the
Commission is seeking the authority to regulate real estate Internet activity."

MR. WHITE: I can understand why that would be confusing, yes.

REPRESENTATIVE SHORT: It's a little bit different than saying I want someone to disclose
something versus regulate real estate. And I think that's where my colleague was coming from.
I mean, I just bought something over EBay, and the person contacted me off of the site. And EBay
comes back and says beware. I mean, I think that's the mode you are going to have to get into. I don't
think you are going to be able to control them like you have got a real estate EBay world that says
beware, you just got contacted illegally by someone. And I don't think that's a state function. I think
that's a function of the business world.

REPRESENTATIVE BENNETT: Yes. I was just curious. I know currently, you know, it's not
regulated, the auctioneers, the property managers, and the homebuilders' sales representatives. What
types of problems have you encountered or do you hear about, being on the Real Estate Commission,
involving those entities?

MR. WHITE: I'm going to defer to Commissioner Allamong.

MR. ALLAMONG: Asking your question again, problems relating to homebuilders, auctioneers?

REPRESENTATIVE BENNETT: Just in general, I'm just curious what you guys hear are problems out
there.

MR. ALLAMONG: Well, we hear a variety of issues from our public members, from the public as well
as our professional members with respect to those industries as it relates to real property. And I have a
statement that I would like to read about homebuilders, if we can address that first, and then Chris will
be addressing auctioneers.

SENATOR BUNTING: What I would like to do -- and we will go to you on that, Representative
Bennett. We would like to go to Points for Consideration, and then we will move into that. I will take
these in alphabetical order.

REPRESENTATIVE KOWALKO: If I may, Mr. Chairman. Also, when we get into a discussion of the
-- what I think was three issues, the auctioneers, property managers and the homebuilders, I would -- I
don't know if we probably -- certainly we can go through our list and Points for Consideration. But I
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would like to have the individuals who are testifying on behalf of those entities make their statement and
then reserve the right to call members of the Commission to answer questions we may have on that.

Because I think if we just skip, take statements, ask you questions, and then there are more questions
that have arisen from that, in the interest of a smooth transition, if that would be okay with you, sir.

SENATOR BUNTING: Ok. Let's start with Points for Consideration.

       A. "Delete the provision for a credit report from its regulations."

MR. WHITE: Yes. We are offering that. The Commission had been requesting credit reports from new
applicants for broker license. We have been doing that for about a year. The problem is that there was
no baseline in terms of someone came in with a 580 or a 660, what did that basically mean? How was
that ensuring that that person was competent in terms of interacting with the public? It became arbitrary,
a little bit capricious. Was there a difference between a 680 score and a 679 score?

We felt as though that tool wasn't the appropriate tool to guarantee -- or not guarantee, but in all
likelihood ensure that that person would be responsible. We just think there are some other things on
that application in terms of prior conduct, substantially related crimes, and other things we could glean
off of that that would be a little more appropriate.

       B: "Amend 24 Del. C. 2905 to include those powers and duties common to all licensing
       agencies regulated by Title 24 and all such powers and duties would be stated as mandates."
       Do you want to comment?

MS. HEENEY: Good evening. I'm Eileen Heeney. I'm the Commission's Deputy Attorney General.
…This is really a matter of bringing the statute up to date, making it consistent with other Title 24
boards.

       C: "Amend 24 Del. C. 2905 to include the standard language for the objectives of the
       Commission common to all licensing boards/commissions regulated by Title 24."

MS. HEENEY: That's a similar issue. There is a standard paragraph that's in all Title 24 boards'
objectives. It's not in the Real Estate Commission statute but needs to be added.

       D: "Amend the statute to give the Commission the authority to perform a random audit of
       continuing education credits submitted by licensees for license renewal."

MR. WHITE: Currently, that rule is promulgated in our rules and regulations. We want that to be a part
of the statute.

       E: "Amend 24 Del. C. 2905 to provide the Commission with the power to order compensation
       when the Commission finds in favor of an aggrieved party after a hearing and an order has
       been issued. Subsequently amend 2922 governing the Real Estate Guaranty Fund to reflect
       the change."

MS. HEENEY: The Guaranty Fund gives the Commission the authority to make awards, but it's not
specifically listed in the powers and duties of the Commission, so it's just putting that item in there to be
explicit.
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SENATOR BONINI: Explain the Guaranty Fund for me real quick. That money -- where does that
money come from? And it sits there specifically?

MR. WHITE: Right. The money comes from licensees, a part of their payment. It is set up to serve as a
guaranty funding in case there is a claim, a loss.

       F: "Rewrite and organize 24 Del. C. Subchapter 1 to be consistent with other boards and
       commissions regulated by Title 24."

MS. HEENEY: Again, this is another reorganization bringing the statute up to date. For example, the
provision relating to the grounds for discipline is not worded properly. It doesn't have all the items in
there that should be in there and across other boards.

       G: "Amend the 'Qualifications for Certificate' 2907 to include objective criteria for obtaining
       a license as real estate salesperson and real estate broker."

MS. HEENEY: Currently, the list of qualifications for licensee is fairly brief, and that needs to be
expanded to be more explicit. Some of the more substantive requirements for licensure are in the rules
and regs, and that needs to be in the statute.

SENATOR BONINI: Mr. Chairman, I apologize. I'm always the one to sit and wait too long to ask the
questions. But these standards are already out there. You guys already apply these standards.

MS. HEENEY: Oh, yes.

SENATOR BONINI: So you simply want to codify the standards that you currently use.

MR. WHITE: Right.

SENATOR SIMPSON: Is that a new standard?

SENATOR BONINI: There would be no new standards or anything like that.

MS. HEENEY: Well, they are searching -- there is going to be more specific requirements for the three
licensure categories.

MR. WHITE: Which are?

MS. HEENEY: Which will be broker, associate broker, and salesperson.

SENATOR BONINI: Okay. And those are criteria you have already established?

MS. HEENEY: Yes.

MR. WHITFIELD: They are referred to in a different manner. There is a broker of record out there that
is a term that's developed over time, because people generally got licensed as brokers to own an office
and over time people just got a broker's license, so you have a lot of people out there who are acting as
brokers, but there is one broker of record. So we are going to create a broker and have a --
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SENATOR BONINI: So that also means, if I am not mistaken, that the next time you want to change
these things, you have to go change the code?

MS. HEENEY: Well, some of the items will be pre-licensing education, as set forth in the rules and
regulations. So say, for example, if a person has a certain number of hours of education and it's deemed
to be appropriate to increase or decrease that, it can be done in the rules.

       H: "In 2001, the Joint Sunset Committee recommended that the Commission revise its rules
       and regulations to insure that the rules and regulations do not exceed the Commission's
       statutory authority. However, perhaps the statute should also be amended to provide the
       Commission with the authority to provide specific requirements for licensure in rules and
       regulation."

MR. WHITE: Again, this is promulgated in our rules and regs. So the recommendation to revise those
rules and regs -- and that's what we have been trying to work on since that period of time, but also not --
trying to be a little bit more specific but not overstep our boundaries.

       I: "Amend the statute to require that current licensees, when renewing their licenses, attest to
       the fact that they have not been convicted of a felony."

MR. WHITE: This is an issue right now. I mentioned earlier that there is online renewal. And that
person can attest that they have their CE, but at the same time they are going to attest in terms of their
criminal background.

SENATOR BONINI: And if someone has received a pardon, how does that work?

MR. WHITE: It's a pardon.

MS. HEENEY: If someone is pardoned, it's treated as if it didn't happen.

       J: "Amend the statute (24 Del. C 2905(a)(1)) to provide that the approval process goes
       through the Education Committee of the Commission and a list of approved instructors is
       maintained.

MR. WHITE: Currently, Mr. Chairman, this item is dealt with in our rules and regs. Again, we want to
mention in the statute that there is an establishment of an education -- that the Commission has the
authority to establish an Education Committee.

       K: "The Commission is proposing to amend the statute to regulate auctioneers transacting
       real estate activities."

MR. WHITFIELD: I will try to be very brief with this. When we were going through the process of the
Joint Sunset review from 2001, we came across the exemption. We were trying to figure out why it was
there. The only reason we could come up with is that auctioneers were practicing before real estate
practitioners came to be.




                                                     12
And it was either by that reason or by the fact that the sale of real estate by auction didn't really occur
that much. It was more, you know, regularly it was more associated with a last resort, financial
hardship, or maybe, you know, just as a last resort.

In today's market, it's becoming more commonplace and many of the licensees, people that have licenses
to auction property, also have real estate licenses. It has actually become a form of marketing. And
when we step back and we looked at how does that impact the public, we determined that auctioneers
are out there. They are advertising property for sale. They are representing a party. They are generally
representing the seller. They are negotiating directly with the public. They are also negotiating by way
of the auction, and they are also negotiating with the public prior to the sale. You can buy the property a
lot of times prior to the actual auction, so those auctioneers are actually conducting negotiations. They
are accepting deposit money. There is no statutory requirement that those escrow monies be placed into
an account. They can go into the general operating fund. They could be used for -- they could be
misappropriated for any reason. They prepare the agreements of the sale. These are all the duties that
real estate practitioners do and we just feel that there should be some regulation over auctioneers when
they are practicing real property.

Now, that can be in two ways. We understand that the auctioneers would like to have their own board or
commission. And I think, generally, we are okay with that. We just feel that the public needs to be
protected in some way.

If they were awarded their own board or commission, we would ask that it be mandated that at least one
or two of the members of that Board also held real estate licenses. We would do the same. If they were
not successful in getting their Board, we would make the recommendation that we remove the
auctioneer exemption. And then we, in turn, would add an auctioneer to our Commission to kind of level
the playing field and make sure that real property and the transaction of real property, that escrow
deposits were being held properly.

In addition to that, we are not looking to restrain their trade in any way. We had discussions with the
auctioneers, and those discussions revolved around either gifting them licenses -- we talked about gifting
them broker's licenses so they would not have to wait five years to become a brokerage company,
having some type of grandfathering clause that would allow them to practice, and eventually over a
period of time there would be a sunset that they would eventually have to have a license. So this isn't an
issue about us stepping into their business; it's we would like to see the public protected in some way
during those transactions.

SENATOR BUNTING: Thank you. We are going to have more discussion on this, and I would ask
that the members -- you can go ahead, but we want to move through some of these points and come back
for discussion.

REPRESENTATIVE KOWALKO: I just want to know, how many members are on the Real Estate
Commission now?

MR. WHITFIELD: We have nine.

REPRESENTATIVE KOWALKO: And they are all licensed realtors?




                                                      13
MR. WHITFIELD: No. We have five (licensed realtors) and four public members. We don't
necessarily have to change the number, so to speak. We just have to make sure that one of them is a
licensed auctioneer on the existing.

       L: "Amend the statute to regulate unlicensed property managers renting and leasing property
       on behalf of the third parties."

MR. WHITFIELD: And that's a bit confusing. …Currently under our statute, property managers aren't
licensed, but the activities of sales and leasing are licensed. You do require a license for that. Right
now, as a matter of fact, we have DPR investigators investigating cases of people practicing property
management...

Through the course of doing the Sunset revision for 2001, we had talked about creating a definition of
property management, and including that you had to have a license to do property management. There
was some opposition. And at this point really all we are looking to do is clarify the definition of
"property manager" and state and make it explicit in the statute that, if you are practicing real estate by
sales and leasing, that portion of your business model has to be regulated and licensed. That's it. The
only thing they are really looking to do is clarify it.

Now, that could potentially cause problems for certain property managers. And we would then go back
and say that we are willing to listen and talk about having a separate section of property management if
they would want that.

But at this juncture, we are not proposing any change to the statute other than giving our investigators a
clear and precise line as to where somebody is stepping over the line. And that's at the sales and leasing
portion.

REPRESENTATIVE RAMONE: Can I just ask -- you stated that so clearly that that would create
problems for the property manager, as if you already know. Can you just give us a little bit of what kind
of problem?

MR. WHITFIELD: Well, the one probably most impacted was the Delaware -- it's DAA, Delaware
Apartment Association. A lot of residential property managers, they have people in apartments. And
there will be a third-party company, and their rental contacts, the people that deal with the public, they
are signing leases with the new tenants coming in.

If that person is an employee of the owner, they are exempted. But, if they are a third-party company,
then they are actually transacting real estate by signing those leases. And that's where the confusion
comes in and everybody says, "Well, you need a license to do property management," when, in fact, you
don't. You need a license to conduct sales and leasing.

       M: "Amend the statute to regulate homebuilders' sales representatives transacting real estate
       activities."

MR. ALLAMONG: I'm Rick Allamong. I will walk through that one … But I'm sure that you are all
aware, as many of you voted on House Bill 122 in the 143rd General Assembly, which did two
important things for the real estate industry. It created confidentiality, which defined what is
confidential between the public and the licensee in transacting real estate; and it implemented disclosure,
they are required to disclose statutory agency.
                                                     14
Currently in this area, new home sellers' employees are not licensed. They are not subject to the
confidentiality provision, the disclosure provision, nor is there in place a way to make complaints and
have complaints heard.

The disclosure statement is accomplished through a consumer information statement which ascribes
statutory agency. Title 24, Chapter 29, again Section 2901(d)(1) currently excludes the seller and
sellers' employees of new home sales and excludes them from any complaint filing process.

The concern is really not about the seller that sells their own property, but is about a seller who hires
employees to sell, on behalf of the employer, their new homes.

In recent years, there has been a substantial increase in the amount of real property sales that have
occurred by these employees of the builders, of developers. And, as indicated, these individuals are
exempt from a license requirement.

The public may not understand that their ability to negotiate could be negatively impacted by what they
might say regarding their willingness or ability to pay more or agree to terms being offered by the seller
employees.

If buyer motivations are discovered that could be potentially detrimental to the negotiation position of
the buyer, the employee under the employment agreement is most likely accountable to share those
motivations with the seller, and this occurs without the buyer's knowledge.

The public is not made aware through disclosure that they did not have a confidential relationship with
the employee of the seller. To make things worse, some new home sellers have partnered with licensed
brokers to have their listings entered into the realtor multiple listing service.

It is possible that a licensee may respond to a public inquiry and provide listings that are being sold by
agents who are subject to the statute and also provide listings being sold by employees of the builders
who are not subject to the statute.

The public could call on one of these listings and be provided with the disclosure, the consumer
information statement from a licensee subject to our statute, and they might drive to the next location
that is exempt from the consumer information statement and disclosure and the applicable laws.

So how would the public know that there is a difference in confidentiality and the complaint process
between these two salespeople? In the example I just gave you, it's extremely misleading to the public.

We began the process of determining what the legislation might look like, and that has been included in
your draft report. I believe it's labeled as Subsection 3, new home sales. And we attempted to work
with the Delaware Homebuilders Association to build consensus on the need for the initiative.

Initially, it was indicated that there might be a willingness on their part to implement some type of a
disclosure requirement, but the problem in there lies is that not all builders are a member of the
Delaware Homebuilders Association, so it would not totally resolve the issue.

Additionally, the Delaware Homebuilders Association, which I assume you will hear later on, are not in
agreement to the proposed legislation. From what I brought back from that, the main reason is a lack of
                                                     15
complaints. And, regarding complaints, they are correct. We are unable to provide evidence of
complaints. Complaints are scattered throughout the state as far as where they are made, where they go,
and they are not categorized once they are received.

However, it is very likely that the public, by not being educated on the buying process, would not know
that they may have harmed themselves during the home buying process. The public does not know what
the rules are, so how can they judge if the rules are broken? They do not have guidance on how to file a
concern.

As you read the Subsection 3, you are going to note that we have recommended a registration process.
This is not a complicated licensure process, but a simple registration process that would allow authority
to create a confidentiality provision, require a disclosure statement, the ability to define how escrow
deposits are handled, and also implement the ability in the process for the public to file and have
complaints heard.

REPRESENTATIVE KOWALKO: Let me ask you a question. So what you are telling me is the
Commission does not want to license these home building agents; they want a registration process?

MR. ALLAMONG: A registration process. The licensure process would be much too restrictive, I
think, for their industry, as far as the qualifications to get one and to maintain it.

The Homebuilders' Association and the industry in general has probably superior training to other types
of training. So there are a lot of things that we really want/ need to impose upon them, but more simply
a registration process so that we have the ability to impose the significant items regarding disclosure and
confidentiality, escrows, and complaints.

       N: "In 2009, the Commission delegated license authority to the Division of Professional
       Regulation to issue licenses to applicants under specific circumstances. The Legislature has
       not given the Division of Professional Regulation the authority to issue licenses. As such, in
       the 2010 JSC reviews of the Board of Massage and Bodywork and the Boards of Dentistry and
       Dental Hygiene, the JSC made the following recommendation: Amend the statute to give the
       Division of Professional Regulation the authority to issue licenses/permits/certificates for all
       Title 24 boards in cases where the licensing requirements are straightforward and when there
       are no questions, issues, or concerns on the application. This provision will be done as a
       separate bill and will address all boards/ commissions in Title 24. This bill was not introduced
       in the past session."

SENATOR BUNTING: That speaks for itself.

       O: "Create new language terms and sections in the statute to coincide with the modern
       practices and provide clarity for practitioners and the public. New or revised terms include:
       Associate Broker (new), Conviction (legal), Division (legal), Dual Agent (clarity), Person
       (legal, Property Management Services (clarity), Psychologically Impacted (clarity), Real Estate
       Services (new). Rules and Regulations (clarity)."

MR. WHITFIELD: Through the course of reviewing the statute, -- there was references to certificates,
references to licensees, references to practitioners. The statute was all over the place. What we tried to
do was get to just terminology that made sense and could be reused throughout the statute. And that's
what most of this is, is just to clarify and make the statute much easier to read. So, when we refer to a
                                                    16
licensee, it's a licensee, not a practitioner, not this, you know -- there are three or four different
references. We throw things in there. Any of them -- we spoke briefly about the Associate Broker.
Again, "property management services" was about clarifying. It was about a clarification issue, just to
define "property management." And that's probably about it, but mostly to clarify the statute.

REPRESENTATIVE KOWALKO: The Associates Broker, is that a licensed realtor, the Associate
Broker?

MR. WHITFIELD: Yes. We have a reference or two to "broker of record," and this was kind of
modeled after -- Maryland refers to a broker as that broker every record, and then if your a broker as that
broker of record. And then, if you are a broker and you are not the owner/operator, responsible party in
the company, you are a broker associate. It does a couple of different things. It let's the public person
know that the broker associate is not the owner; they are not talking to the owner. It's a little misleading
when you have a business card that says "broker." Some members of the public could think they are
talking to the owner of the company when, in fact, they are not.

REPRESENTATIVE KOWALKO: It doesn't relieve the owner or the company of any kind of
responsibility?

MR. WHITFIELD: No. It's just a difference between licenses and how they are being used.

       P: "Change the public reprimand sanction to a letter of reprimand since all penalties are of
       public record."

MS. HEENEY: Currently, the statute suggests that there is two different kinds of sections, that there is a
public reprimand and then a letter of public reprimand, and in Delaware no penalty or no sanction is
private. So it would necessarily be public, and there is just a letter of reprimand. There is no reprimand
that's given verbally at a hearing or anything like that. So that just needs to be tweaked.

       Q: "Allow for requiring continuing education and raise the maximum penalty to $5,000."

MR. WHITE: Yes, Mr. Chair. That goes back to really J, again to give the -- put in the statute that the
Commission has a right to regulate the education activities.

       R: "Expand the rules and regulations pertaining to Internet advertising."

MR. WHITE: We have had a conversation about this already, and I appreciate the concerns that the
legislators have regarding that.

SENATOR SIMPSON: What is the current penalty?

MR. WHITE: $1,000.

SENATOR SIMPSON: And what's this a penalty for?

MR. WHITFIELD: For any violation of the statute, on the licensee we can impose up to $5,000 per
violation. It's been $1,000 since it was written. I don't know how long it's been $1,000, but ...

SENATOR SIMPSON: That's a very substantial increase.
                                                    17
MR. ALLAMONG: I believe, however, it does agree with other boards. That's why we chose the
5,000.

MS. HEENEY: In our discussions with the subcommittee and the Commission, that was felt to be
appropriate, given the nature of the kinds of cases the Commission had been seeing. So it's per
violation. If the hearing happens and the Commission finds more than one violation, there is an option
of fining up to $5,000 per violation. It's only been $1,000 forever.

REPRESENTATIVE RAMONE: Just a point of clarity, because I think what I'm reading sounds like
different from what you are saying. This says, "Allow for requiring continuing education and raise the
maximum penalty." So that's like two different statements. Allow for requirement of continuing
education is thought process one; raising all penalties to $5,000 is thought process two.

MR. WHITFIELD: They are two different items.

REPRESENTATIVE KOWALKO: I just wanted to ask, if you didn't do your required continuing
education, is that a violation you can be fined $5,000 for?

MR. WHITE: The answer is you could.

REPRESENTATIVE KOWALKO: There would be a hearing though; right?

MR. WHITE: Oh, we do what are called show-cause hearings. So, yes, they have show-cause hearings.

SENATOR KATZ: What is the term requirement for continuing education? What is the cost per cycle?

MR. ALLAMONG: 15 hours, and typically it runs $35, roughly, a class for three hours.

MR. WHITE: Many large firms and associations offer continuing education for free. So it comes out to
less than one CE hour per month for 24 months.
SENATOR BONINI: So it's not a burdensome requirement?

MR. WHITE: No.

MR. WHITE: I would mention to say that when $1,000 was set, that was a very high number, as well.

SENATOR BUNTING: I think we pointed out that really what it does is give them the authority.
MR. WHITE: Correct.

       S. "Grant the Commission authority to issue cease and desist orders and to impose fines for
       unlicensed practice in accordance with the Administrative Procedures Act."

MS. HEENEY: That is in the Administrative Procedures Act, an amendment that happened not last year
but the year before that, giving all of Title 24 boards -- and I think maybe other professions, as well --
the authority to issue cease and desist orders to tell people to stop licensing if they are not licensed.

      T: "Coordinate with the Human Relations Commission on complaints concerning fair
housing."
                                                   18
MR. WHITE: Again, Mr. Chair, I think that speaks for itself. Currently, right now, if there is a fair
housing complaint, the Commission may not know about that licensee's activities. It's clearly a matter
that's regulated under Title 24, and we think that it's an opportunity that can be developed to further
educate the licensee and the public that there are problems for people who don't comply with grounds.

       U: "Revise the language regarding 'psychologically impacted' for clarity."

MR. ALLAMONG: That is actually a housekeeping issue. "Psychologically impacted" property was an
add-on to the statute at a much later date, and it needs to be brought into the standard definitions. We are
not recommending to change the law on how the law handles impacted properties. And, also, we need
to change the medical term for HIV to make it accurate. I think it's misspelled in the current statute.

SENATOR BONINI: What does that mean, psychologically impacted?

MR. ALLAMONG: "Psychologically impacted" is if a homicide, felony, or arson occurred on the
property. The way the law reads right now is that a salesperson is not obligated to disclose that unless a
buyer were to request that answer in writing, and then the seller must answer that. But with something
like AIDS, that's protected. If the buyer wanted to know if the person living in the house has AIDS,
even if they put it in writing, the seller could not answer that question.

SENATOR BUNTING: I think at this point we are going to go back to Points “K, L and M”. And then
part of this discussion will be public participation.

       K. "The Commission is proposing to amend the statute to regulate auctioneers transacting
       real estate activities."

     c. Public Comments (3 minutes per person)

MR. WATSON: Good evening. I'm Glenn Watson, President of the Delaware Auctioneer's
Association. I think most of you probably received a letter that our association or our board members
have sent to you prior to this, so I will just read that again.

It says our membership and board of directors have been very busy this past year in drafting legislation
for an auctioneer's law for the State of Delaware. At the present time, there is no legislation or laws of
any kind for auctioneers to follow. We feel that this is something that needs to be addressed, and we
feel, as a profession, it should be addressed by auctioneers.

It has been brought to our attention that the Delaware Real Estate Commission is seeking to bring
auctioneers, new home sales representatives, and property managers under their control.

We do feel that, as a profession, if we need to be under anyone's control or guidance, it should be by our
own peers and not by a group that does not know or understand our business. This is why we have
created and organized the Delaware Auctioneer's Association so we can help draft regulation to both
protect the consumer and auctioneer.

If you have not seen a copy of the draft, I think Mr. Kidner has circulated some of that here. If it has not
been entered yet, we will gladly get those to you.

                                                    19
I do agree with some things that have been said here. We are trying to bring the auctioneers' profession
up into the 21st century here. That's why we are attempting to, you know, have some legislation passed.

I don't think there is a lot of groups that come forward that look to regulate their self, you know, in this
day and time, but we are looking to do that. So if, you know, with your indulgence here in this
legislation, I think the Real Estate Commission also will see that we are trying to address the real estate
questions that they do have.

I have spoken with one of the DAR board members. I do understand what some of the issues that they
are coming up with, you know, here and how some practices have been done. So, you know, this is our
stance here. We do feel that we should be regulated, you know, by ourselves and by our peers here.

SENATOR BUNTING: I commend you for stepping up with that and looking into it. I know it's all
very difficult when you try to come up with rules and regulations to govern yourself.

MR. WATSON: Yes, sir. We have modeled our licensing law after the National Auctioneer's
Association. They have come up with what they have termed a uniform licensing law basically for
auctioneers across the country that they are trying to promote and things like that. So we did have a lot
of help through them, you know, to help us with some things. Of course, we have tailored it to our state
here also.

REPRESENTATIVE KOWALKO: When you auction a real property -- - is it the case sometimes that
it's an as-is?

MR. WATSON: Most of the time, yes.

REPRESENTATIVE KOWALKO: Most of the time?

MR. WATSON: Yes.

REPRESENTATIVE KOWALKO: So the conditions of some of the regulations that are part of the real
estate realtor's business could just affect your businesses?

MR. WATSON: Correct. I think you will find at the moment pretty much all auctioneers' companies
are a little different in how they handle transactions real-estate wise.

We do encourage our sellers, from our company's standpoint, to deal with disclosure and things like that,
you know, to help protect, you know, the public. We do encourage our sellers to try to have a property
inspection done prior to that we can, you know, hand out to prospective buyers, things like that. But
these are things that need to be addressed with this legislation that we are coming with.

REPRESENTATIVE KOWALKO: And if you were permitted to have your own commission -
regulatory authority, then that would probably be one of your first choices, to have a predisposed report
on a property?

MR. WATSON: Correct.

REPRESENTATIVE KOWALKO: In the cases it's allowed --

                                                     20
MR. WATSON: Correct. Uniform contracts and everything like that, yes.

REPRESENTATIVE KOWALKO: And have you had a lot of -- Have there been accusations to the
Attorney General's Office or anything before?

MR. WATSON: To my knowledge, no.

SENATOR SIMPSON: If the public has some problems that today with an auctioneer holding escrow
or whatever --

MR. WATSON: Correct.

SENATOR SIMPSON: What's the recourse?

MR. WATSON: Other than a civil suit, there is none. I mean, there is basically no law, legislation at all
for auctioneers. You basically now can go out and buy a business license, and technically you are an
auctioneer. And we don't agree with that, you know, the way it's been -- I guess it's an old way of doing
business that's never been changed. And, you know, we like to see ourselves as professionals, and this
is the only way we are going to accomplish this, is to have some sort of legislation enacted.

SENATOR SIMPSON: Are you aware of any lawsuits currently brought before the auctioneer
profession?

MR. WATSON: No, sir.

SENATOR SIMPSON: Are you aware of any in the last year?

MR. WATSON: Not to my knowledge.

SENATOR BONINI: To be honest, when I was listening to the Commission's testimony and I heard
what you said, it sounds like there is quite a bit of overlay.

MR. WATSON: Right.

SENATOR BONINI: And I'm sort of loathe to create more boards and commissions. And, trust me,
your members, after a year or two, may be more loathed.

MR. WATSON: That's true.

SENATOR BONINI: But is there -- and this is just sort of a -- because, you know, when I was just
sitting here, I said, gees, it sounds like there is so much common ground. Is there a way to say, whether
it's a recommendation of the board, whether it's a subcommittee? Because it sounds like there is some
overlap. I mean, do you think that -- I mean, would you lose the identity of your individual profession?

MR. WATSON: Well, personally, I think -- tonight we're just looking at this from a real estate
profession. But our licensing entails handling estates, you know, automobile sales, equipment sales. We
are looking at a profession here where we should be licensed or governed by our own profession, I
mean.

                                                   21
REPRESENTATIVE RAMONE: Can I just clarify? It sounds like there's three moving parts. There are
realtors that are realtors. There are auctioneers that are auctioneers. Clearly, they should be able to
maybe make their own, police their own worlds. Then there is, because of the marketing and maybe the
dynamics of our current economy, there is the "betweeners" who maybe do both.

MR. WATSON: Correct.

REPRESENTATIVE RAMONE: I'm going to go to competition in my world of swimming and fitness.
In a place where there are overlapping rules, the more stringent rule rules. Is that something that could
be worked out?

MR. WATSON: Possibly. I'm a "betweener" myself. I'm a licensed realtor. Okay, so --

REPRESENTATIVE RAMONE: I'm just asking out of curiosity.

MR. WATSON: Facing, you know, the fact what you are talking here, you know, what hats you wear at
what point and when does the auctioneer part stop and, you know, they are talking negotiating contracts,
you know, after the fact and things like this. And this is what we are trying to have worked out here
with this legislation. Okay? Because there is no way that you can be both. You know.

REPRESENTATIVE RAMONE: At one point you are putting one hat away and you are putting the
other hat on.

MR. WATSON: Yes, sir.

SENATOR BONINI: Mr. Chairman, tell me if it's inappropriate, but I would like to hear what the
commission or board, what they think about this. Have you guys looked at this or thought about
creating a new commission?

MR. COLLINS: Good evening. You know, I think that I have been to some of the committee meetings
where the Commission and the representatives from the auctioneer's industry have had discussions. And
at the point that it was decided that there was going to be a Joint Sunset review, those discussions
stopped. And I know that there is some disagreement.

You know, I'm sitting back here listening like you. I'm thinking I was asking the question of how many
auctioneers are there. Now, the number I was provided, it was around 100 or less.

MR. WATSON: Correct.

MR. COLLINS: Around 100 or less.

MR. WATSON: I'm sorry, but there are out-of-state auctioneers that are licensed that, you know, aren't
--

MR. COLLINS: Gotcha. So I was sitting back here thinking, you know, create a whole another entity
for, you know, around 90 people. My original thought was, if they are transacting real estate, then the
Real Estate Commission is the appropriate place. What I haven't figured out how to handle is the other
functions that the auctioneers take care of.

                                                   22
SENATOR BONINI: If it's a new board or commission, obviously you just absorb that, just with your
massive resources. (Laughter)

MR. COLLINS: No, no. There would be no "just absorb that."

SENATOR BONINI: With your massive resources.

MR. COLLINS: We have absorbed a lot of things in recent years. And we are -- I think the scientific
term is "saturated" where we can't absorb no more, and so we are going to have to have some resources
if we are going to create another entity within the Division of Professional Regulation.

REPRESENTATIVE KOWALKO: Mr. Collins, I do appreciate your plight. But I also appreciate, as
much as you might think of it as let's just regulate everything, it's a far cry from reality.

…But I do think that it's pertinent and germane to the discussion that, regardless of whether we
approach it by creating a new commission or not, that the autonomy of the auctioneers has to be in some
ways preserved too. It is a different business in a lot of parts.

So the Board doesn't have to be -- or a new commission doesn't have to be as involved and convoluted
as some of the existing boards that you have responsibility for. I know that's very little solace to you.

MR. COLLINS: The reality of it is, it's still meetings, it's still hearings, it's still investigations, it's still
applications, I mean, there are still rules. Whether or not the requirements are, you know, ten things or
seven things, it's still, for us, you know, it's still the same amount of work. If they are going to meet,
you know, ten times a year, the board member payments. All of those things -- all of those
administrative things still occur when you set up a separate entity.

REPRESENTATIVE KOWALKO: No, I understand that. What I'm saying, though, is that where do
we stop blending the two different autonomous groups under one commission? Because then we are
getting precariously close to over regulating private industry without having the intention or not
fulfilling the intention to protect --

MR. WHITFIELD: Might I be permitted one more comment?

SENATOR BUNTING: Yes.

MR. WHITFIELD: I have two quick comments in that I just wanted to state for the record that this isn't
about there being a problem with the auctioneers and that there is a problem that they are out there
misrepresenting the public.

And that the only thing I want to offer is that, if someone was to do something wrong, there is no -- they
have the recourse of the court system, but that auctioneer could continue to operate. There is no way to
shut them down. There is no loss of license, and there is no way to shut that business down. They could
reincorporate under another corporation a week later.

And then the other item that I would like to mention, because it was touched upon, is that exemption
status. We do have licensees that are auctioneers. And if they go out and auction a property, they do
something wrong, we don't know if they are doing that under their exemption. Can we bring them
before the commission, as your point stated, which puts the stricter of the two? We don't know if we
                                                        23
have that jurisdiction. We could bring them in because they did something wrong during an auction.
But say that we would find them -- we could suspend their real estate license and they will take it to the
court of appeals. And because they did it under an auction, they are exempted.

So we need some clarification there as far as the exemption statuses, as well. Where does the hat come
off if you have an exemption, even as a homeowner?

REPRESENTATIVE KOWALKO: Senator Simpson and I just mumbled between each other. And the
General Assembly could draft legislation to have an enforcement technique for violation, such as the
escrow, where the auctioneer would not be able to practice. I mean, that's a doable. You understand?
I'm not interested in overkill. I know you are not. And I'm also not interested in restricting, and I know
that the auctioneers don't want that either. So I appreciate the dialogue because I think we have come to
a lot of new awareness on the subject matter…

MR. LUCKS: Good evening. My name is Bill Lucks, and I'm the president of the Delaware
Association of Realtors. On behalf of our 3,400 realtor members, I want to thank you for the
opportunity to speak with you this evening to address issues important to the Delaware Real Estate
Commission's mission of protecting the public.

DAR is a strong supporter of the role of the commission and supports their core recommendations as
submitted to the Joint Sunset Committee.

One of the issues I wanted to address this evening deals with licensing of auctioneers. DAR supports,
directs initial efforts to require auctioneers be licensed to sell real property. In this changing market
when so much property is selling by auction, the simple auction process has changed dramatically. It's
no longer post a sign for an auction and sell as-is that day. Now auctioneers are negotiating transactions
prior to and after the sale. Often, large property auctions occur where a few units sell that day and the
rest are negotiated afterwards.

The auctioning of real property, as the Real Estate Commission has pointed out, is now not much more
than a marketing technique with auctioneers acting in the same way as a real estate licensee but not
being subject to public disclosure and all the other public protection provisions those involved in the real
estate transaction are assured of when using a licensee.

If you have any questions, I would be happy to answer them.

SENATOR BUNTING: Thank you. Just a comment. I was recently reading that the Real Estate
Commission, I believe, was created in 1927. Auctioneers were here at the beginning of our nation.
There is a unique history with that.

MR. WATSON: This isn't my first trip around. Just to put things together, with our draft legislation
that we are bringing up here, there are fines and penalties involved, you know, with our legislation
against auctioneers for wronging the public, whether it be with real property, personal property, things
too. So I don't want you to think that we are trying to bring any kind of legislation through without
some penalties, for us or for the consumer, you know, to actually go before our commission, hopefully,
to suggest things. So that is part of the package, of the draft we are doing.

SENATOR BUNTING: Thank you. We will go to the other issue which seemed to be a topic, and
that's back to L. "Amend the statute to regulate unlicensed property managers renting and leasing
                                                    24
property on behalf of third parties." And I believe in that testimony -- they were talking about some
type of restricted license.

SENATOR BONINI: Well, and I would like some clarification of that, now that we have heard the
other side of that. If I go to rent an apartment or a house or something, -- I get a pretty lengthy
landlord/tenant code that I have to abide by. And I have been involved in legislation to create that a few
times. People feel pretty strongly about that. It depends on who you are talking to.

So I guess my question is, I'm unclear where the real estate transaction happens that's not regulated by
that. And just forgive me, because I just don't understand.

MR. WHITFIELD: If you read our current statute, it clearly regulates sales and leasing. So any third-
party individual -- If I'm not an owner of the property, I'm the third-party property manager. If they are
signing a lease, they are doing sales and leasing. Our statute clearly regulates any sales or leasing by a
third party. It's there today.

SENATOR BONINI: Okay. So like, for instance, in most, when you go to these big apartment
complexes, a college or whatever, apartment complexes, I went to the sales office or the rental office
there, and we signed the lease and all that. Should she be a licensed realtor?

MR. WHITFIELD: What's been happening, the way I understand it -- and I don't know if anybody from
the Delaware Apartment Association is here and plans to speak - in a lot of those situations they are
employees of the owner. Alot of apartment complexes have their own employees there. In the cases
where it's a third party, they create an employment contract or some type of ownership into the property
in a way that clears them of having to have a real estate license. And, technically, the only reason they
would be doing that is because they know they are supposed to have a license.

SENATOR BONINI: I don't know this, but my guess is there are probably a lot of property
management companies out there that are -- I think the history is consolidated. There are lots of these.
But I guess it just struck me as odd because this is a pretty highly regulated transaction already.

MR. WHITFIELD: Well, it's really just to clear up for the Real Estate Commission and the
investigative unit and the Division of Professional Regulation where the line is drawn. That's it. That
property management is not regulated by the Delaware Real Estate Commission, but the sales and
leasing portion of it are regulated and that it draws the line.

SENATOR BONINI: You are just trying to get a clarification.

MR. WHITFIELD: Just clearing and cleaning it up so we know.

SENATOR BONINI: Because I just, I mean, you would hate to -- when you start getting into that game
and every single sales office establishes something --

MR. WHITFIELD: And I understand the concerns of the property managers.

SENATOR BONINI: You're going to start regulating how many apartments?

MR. WHITFIELD: We don't necessarily want to do it, and it would require a new section of the statute.

                                                    25
SENATOR SIMPSON: Where does manufactured housing fall into this, the leasing of manufactured
housing? Do they fall under property management, or are they already in it?

MR. WHITFIELD: Manufactured housing? No, we don't regulate manufactured housing. Maybe you
can help me with that. They're not real property, but the land lease is generally leased by the owner, but
technically, if it was a third-party management company, then yes, they would have to be licensed in
order to handle the leasing. That's what the statute says today. To lease the land, the real property
portion of it.

SENATOR SIMPSON: Yes. If he is leasing that and he has got an individual secretary there leasing
out those properties, currently you are saying --

MR. WHITFIELD: As an employee, she has an exemption. The owner and its employees have an
exemption under the statute today.

SENATOR BONINI: Because she is a third-party.

MR. WHITFIELD: If she is a third-party company that's handling the leasing for the owner of the
property, then they should be licensed per today's statute.

SENATOR BUNTING: Senator Simpson and I both have probably the most manufactured housing in
the state, and we do have management companies that run off particular parts.

MR. WOLFGANG: My name is Kevin Wolfgang. I'm the president of the Delaware Apartment
Association. We also have affiliate associations under our umbrella, such as the Newark Landlord
Association, the Greater Wilmington Housing Providers, and others.

I wrote a letter that was sent to the Committee. I just want to address a couple issues first, and then I
will read from the letter. But I think there is an important clarification that needs to be made with regard
to a third-party company or a third-party relationship. And we have repeatedly tried to communicate the
complexity of the, you know, ownership structures that exist in the multifamily industry today.

The days of you going out and buying a 300-unit property or a 50-unit property and putting it in your
own name personally are over because of liability issues. You are going to make it a corporation or an
LLC.

So, for example, I may own an apartment complex. It's one company. I have a management company.
It's a separate company, I own another apartment complex managed by the same property management
company, but it's yet a third company. The next thing we know, some of us have a lot of companies.
So we needed to have specific language to address that reality that where is the third-party relationship
and where is it -- you know, where does the arm's length sort of relationship exist or not exist.

And it clearly wasn't addressed in the draft [legislation], and we tried to make it -- we even provided
specific language for that.

The opening comments were that this was an opportunity to provide increased public protection. And,
you know, much like the homebuilders, we are, you know, asking a simple question: Where is the
outcry from the public that they need protecting? Where is there evidence that, you know, there is a
problem in our industry? And there is tens of thousands, probably hundreds of thousands of real estate
                                                    26
lease rental agreement transactions every year. And we are a very highly regulated industry. And there
is a very, very small percentage of those transactions where there is any type of serious issue.

One of the things that I wrote in my draft was that one of the key elements to their draft is that there
needs to be disclosure, transparency, an ability for information dissemination, and that the best way to
do that is to make sure that everyone involved in property management becomes a licensed realtor.
Does that make a lot of sense to you? It doesn't make a lot of sense to me.

We had a situation in the JP Court system where we had employees of management companies
representing the property in landlord/tenant actions in the JP Court system.

The JP Court system said we need to figure out a way to make sure that this person is authorized by the
owner of the company to be here in court representing them and that the person in court, who is the
defendant, knows who owns the property, and how we get information out to everybody involved.

What they didn't say is everyone should become an attorney, everyone that does property management
services must become an attorney. What they said is why don't we create a very simple registration
system.

And so I don't really understand why, on the one hand the committee is saying, well, that would work
for the homebuilders to just do a simple registration system for them, but property management folks,
they need to have an additional burden of regulation placed upon them.

I think it has real serious consequences, maybe unintended, but there will be serious consequences of
that to the public and to the state and to the economy that wouldn't be in the best interests of anybody.

Let me just read from this. I will try to be brief. Some of it may be repetitive. "We strongly oppose any
legislation that would require individuals who engage in property management services to be required to
become licensed real estate agents. Although the Delaware Real Estate Commission argues that such a
legislation is already in existence, we believe that, to make such an argument, requires a very broad
interpretation of the existing language and is contrary to public interest. However, the reality is that in
the last 18 years Delaware Real Estate Commission has not regulated the multifamily industry, has
received hardly any complaints, and has essentially offered no educational offerings for our industry."

Let's pause there for a moment. If I ask people in the Delaware Association of Realtors who are on the
Committee what is the most popular or the few most popular property management software systems for
the multi-housing industry, or what is the new technology that's being used by the industry, or what is
the cutting-edge education that's being offered by our industry, my guess is they would probably not
know the answer to any of them. And the reason is that they are very different skill sets, very different
educational focuses, and very different businesses. And to lump them all together fundamentally doesn't
make sense.

Quite simply, the multifamily industry is not broken. We are one of the few real estate sectors and one
of the few industries in the general economy that's maintained consistency and stability during this
current economic recession. Our industry has mortgage default rates of less than 1 percent, and we
actually produce net revenue profits for the Delaware State government. We are already a highly
regulated industry under the jurisdiction of the Delaware Landlord Tenant Code, the Attorney General's
Office, the Delaware Public Service Commission, the Environmental Protection Agency, county and

                                                    27
local departments of licenses and inspections. Many local jurisdictions have their own rental guides that
we must hand out on top, above and beyond the landlord tenant code. I could go on and on and on.

We are regulated. We have to hand out lead paint disclosures. EPA will fine us if we don't do that. I
mean, the list of our regulations is enough to make our leases about this big. (Indicating)

Yet, according to the draft report, I noticed two instances in the last three years of complaints regarding
property managers. And, you know, we don't have a lot of reports from the Attorney General's Office
that they are getting a ton of complaints regarding rental leases. It's not an overwhelming mandate on
behalf of the public.

Nobody understands the importance of our industry more than us. We are responsible for the state's
rental housing stock which provides the majority of workforce housing for the state.

One of the things both locally, on a state level, and nationally that there is a lot of discussion is a lack of
affordable housing, a lack of workforce housing for people that need that in the state. And we believe
this regulation is only going to cause harm to our ability to be able to provide that housing to the public.

To seek an engaged and intensified regulation of performing industry that is already heavily regulated
doesn't make a lot of sense, and we would urge policy makers to be very cautious and not cause
unintended consequences by trying to solve a problem that, in our opinion, doesn't exist in the
multifamily industry.

Ultimately, multifamily owners will have to recoup this burden through increased rental rates, payroll
cutbacks, deferred capital improvements or limited new development. Our industry will have an
unnecessary burden that will inhibit our ability to create jobs, keep housing costs low, and promote the
growth of our economy.

I don't think anyone can really make an argument right now that doing anything that is going to not
promote the growth of our economy is a good idea.

I'm probably approaching my five minutes, and I don't want to overstay my welcome. So just one last
thing: With regard to education, nationally there are certain designations in the property management
industry which are recognized as being the best education and the best designations for our industry.

Currently, those educational offerings are only available through the Delaware Apartment Association
under the umbrella and guidance of the National Apartment Association and in combination with other
associations such as the Institute of Real Estate Management.

So even with regards to education, it's unclear to us how the Commission would provide the kind of
education that's already being provided and do it nearly as well.

Thank you for giving me the opportunity to speak. I would be happy to answer any questions.

SENATOR BUNTING: Thank you. A few years ago I asked Legislative Council what's the most
requested legislation in Delaware, and it is the Landlord/Tenant Code. I don't know how many hits now
-- because you go on the Internet. I don't know how many hits we get, but that's one thing I think
apartment dwellers and others, they want to know what their rights are. And you hand that out, but also
they have the ability to follow up with that.
                                                      28
MR. WOLFGANG: And with the Internet and, you know, just the general sophistication and available
information to renters, we certainly see a trend over the last decade of renters exercising their rights.

REPRESENTATIVE KOWALKO: Yeah. I read your letter. I'm very impressed by the regulation
already in place on your industry, very impressed, especially when I get to the lead-based paint current
rule changes, because I know how adequately that's enforced. I just bought a home. And actually it's
the discretion of the home seller. And the question was, "Do you know of a lead-based paint problem?"
"No, I'm sure." And that suffices. I know that you are held to a higher standard than that.

MR. WOLFGANG: There are several things we need to do, and I will be happy to explain what they
are. There is an initial disclosure that must be given to renters when --

REPRESENTATIVE KOWALKO: Right. You can demand, I understand, when you buy something.
But you have to do that up front, don't you?

MR. WOLFGANG: Absolutely have to do it up front. We can be fined if they find any lease that
doesn't have that in there. In addition, if we do any renovations after they move in that go beyond a
certain threshold, there is a whole criteria of requirements, including certifications, that our employees
must have disclosure, continuing information, a specific procedure we must go through.

And those are the types of things that, as an association, we bring in companies that will give that class
to our employees so they meet the EPA standards to get the certifications they need.

REPRESENTATIVE KOWALKO: What regulatory authority does the Delaware Public Service
Commission have over you, in what regards, if you can give me?

MR. WOLFGANG: Sure. It goes back to some very -- I don't know why PECO handled it this way.
But certain properties had master meters where one meter would serve the gas line for the entire
property. And then it becomes the landlord's responsibility to maintain that gas line under ground with
cathodic protection systems, sacrifacial anodes, all those type of things. And so annually they come and
they do an inspection to make sure you are in compliance, make sure that you had an outside third-party
company do the inspection that's required, that you are following all the rules and regulations. And
often we have to follow the same rules and regulations that a gas stations follow.

REPRESENTATIVE RAMONE: Just very quickly. For the sake of us getting a better grasp, could you
provide us with a traditional, typical lease that a person would sign? I know they are not all the same,
but just so we have something to actually get a visual insight into what you are actually saying.

MR. WOLFGANG: Sure.

REPRESENTATIVE RAMONE: What would I do if I went to one of your apartment buildings to rent
an apartment? Who would I have to see? Could we be provided with that at some point?

MR. WOLFGANG: Absolutely. And the Apartment Association has a standardized lease that our
members are not obligated to use. Many companies have their own general counsel, and they want their
own general counsel generating the lease.


                                                     29
But a lease typically would be anywhere from three to six pages of the legal body of the lease. And
then, unfortunately, in today's day and age it's accompanied by about 16 to 25 addendums which cover
everything from mold, to lead paint, to fair housing, to, you know, on and on and on, and each
addendum would cover sort of specific areas that are realities in today's industry.

MR. WOLFGANG: By the way, we also give the landlord/tenant code, as well. And in certain
jurisdictions like New Castle County, they require their own renters' rights guide be given above and
beyond the landlord/tenant code you give.

MR. WHITFIELD: The only thing I want to reiterate is that we are not looking to regulate the multi-
family industry at all. I just want to clarify some things that have been said more than once, just for the
Committee's overview.

The Real Estate Commission does not advocate, does not encourage any affiliation of a national basis
for licensing. We are only interested in the licensee.

There are a couple times there has been comments from guests indicating that somehow the Commission
wants the licensee to become a realtor. That is not the case. There are licensees who are not part of a
professional organization, whether they be the National Association of Realtors, whether it be the
National Association of Real Estate Brokers, whether they be a member of the Asian Association of
Real Estate Brokers or the Hispanic Association of Real Estate Brokers. We do not advocate, recruit, or
encourage. We are only concerned with licensees. And not all licensees in Delaware are a member of a
professional organization. I just want to go on record with that. Thank you, Mr. Chairman.

MR. SZCZUKA: Okay. Thanks. Good evening, Committee members. My name is Frank Szczuka.
I'm a civic member of a couple organizations in southern New Castle County, and I'm also the land chair
for those civics.

I have documentation here on everything I am going to talk about. And I'm sorry I didn't have copies to
you, but I couldn't send it through e-mails, and the associates here said that they could turn it in
afterwards -- and make copies. Well, anyway, I got involved with trying to help change the law. And
my first document was April 9, 2009. I appeared before the Real Estate Commission wanting to help
create a law for homebuilders so that they are not exempt. They referenced me to go to a subcommittee.
So I went to the next subcommittee meeting, which was in September. I turned in documentation as
exhibits, and I spoke about how many complaints there were on just one development. And, basically,
they hadn't heard anything. They tried to get information from different parties, and they couldn't get
this information.

So the Governor's Office had his representative there, and he also stated that he represented Senator
Ennis's office and there is a problem.

Well, at the next hearing, which was October 12, 2009, I had a problem in that everything I turned in at
the meeting prior was lost. All the documentation, they couldn't find it. They don't remember. I
insisted they look through their records. They did find them. The chairperson had them in his file. They
would not talk about it to me because it wasn't on the minutes. So they said, "Well, we will have to put
it on the agenda for next month." Okay? So everything I complained about was never brought up at that
meeting from the prior meeting.


                                                     30
Well, the next meeting I was unavailable for medical reasons. However, what I found out was the
meeting was scheduled for 11/30 in 2009. However, I couldn't find any documents where that meeting
was ever held. However, they told me the next meeting was going to be on 12/3. Well, there was no
meeting on 12/3. The scheduling said it was 12/7. So I'm really not sure when it was. And I got
disgusted in trying to figure out when I could appear to the subcommittee.

So, anyway, I wrote a letter to Debbie Puzzo on 12/3/2009 explaining all the problems I have gone
through.

Now, what happened in all of this: At the Real Estate Subcommittee meeting, I was told, and as they
later proved, that there were no complaints from the AG's Office. The documentation says, from the
director of the Fraud Division, that there was two for 2009 and there was three in 2008. They are the
only complaints they had.

However, there is newspaper articles. The front page of the newspaper from 2007 to 2011 state about
fraud that homebuilders were doing in a development in my community. No one heard of it. Well,
anyway, I have that document.

In 2011 -- I believe it was this year. No, it was last year. Last year was 2010. I received a confidential
report from the AG's Office that states there were 10,259 complaints to the Fraud Division. Of that,
there were 157 just for new home construction alone. However, in writing, I was told, there was only
two. However, I know in 2008 there were over 60, because that's how many residents from our
community filed complaints with the AG's Office. There has been a total of almost 200 complaints just
from one development.

We had to change the laws from -- I think it was HB-122, 123, for the fraud. Delaware represented --
the AG's Office represented Delaware for over 100 years in the Fraud Division, and this is the first
instance that came up where they couldn't get consumer fraud on real estate. They had to change the
law. So I'm not sure what happened there, but this last 22 and 23, when they changed that law, it was
for consumer protection for real estate.

Our trouble is, everything is supposed to be for the protection of the public with the boards. Other
boards, whether you are an electrician or a plumber, any type of service to the public, you have to have a
license. You have to be accountable.

Homebuilders, they are not all bad. It's probably just a handful that do things that may not be by the
book. The trouble is, the public is at a disadvantage. The public, in general, I believe, 95 percent of the
general public does not know, when you buy a house from a developer/builder, they are not covered
under rules of law, under real estate law. They are held under fraud law.

And what happens -- and this is in our community -- after so many calls go to the Attorney General's
Office, the Attorney General said, "We are not taking anymore calls on this issue. We have so many
people now, we are having lawsuits batched for each little community in that development."

They are still going on, and it's not going to stop, because there is no one accountable. Only on certain
builders. I'm not going to tell you it's all of them. It's just certain ones know how to do this, and it's
mostly about amenities. They are promising amenities that they say will or won't be there.


                                                    31
And I'm just asking for the Committee to look into changing the rules so that there is accountability so
the public is protected by those that want to do business scrupulously.

SENATOR BUNTING: Thank you for your testimony. I think you have a champion coming over here.
Senator Ennis stopped me, and I think it's about the same issue you have.

REPRESENTATIVE KOWALKO: I will just be very brief. Congratulations to the Commission. I
think you found a soft spot for me here. I agree very much with what the witness has -- what the witness
said and the concerns he has. And I don't know -- Jim Kelly is not here, I expect? Jim Kelly, are you
here?

MR. KELLY: Yeah, I would rather lay low, if you don't mind.

REPRESENTATIVE KOWALKO: I will try to make it quick.

SENATOR BUNTING: Mr. Kelly, can you step forward, please?

REPRESENTATIVE KOWALKO: I have your letter here, and I think that you are of the same mindset,
that there has to be kind of a regulation on builder developers.

MR. KELLY: Absolutely, I mean.

REPRESENTATIVE KOWALKO: To protect the public?

MR. KELLY: Yeah.

REPRESENTATIVE KOWALKO: Let's get explicitly into that. That, after all, is the purpose of the
laws here. You put it very eloquently. The other Committee members have a copy of this.

REPRESENTATIVE KOWALKO: Do you have anything to add to that?

MR. KELLY: I really don't. But as I'm sitting in the back of the room and listening to some stuff being
said, I have a couple points I have written down here as I have been listening to the deliberation.

I think one of the bigger things is that I'm not really sure that -- and I could have missed it. About a year
ago I started coming to the DREC meetings because I heard the Joint Sunset was going to be reviewing
this stuff.

And I was kind of watching for the subcommittee meetings, but I really don't think they were
announced. So I think there were a lot of meetings that maybe happened and I didn't know about. I'm
not sure if they were on a calendar or what. I think realtors could have been provided a lot more
information. And, you know, we do get an e-mail from DAR, and we get some updates here and there.
But I think there were a lot of meetings that we maybe could have attended but missed. That's the first
thing.

When you asked the Commission what kinds of things have you heard, they don't have a -- The
commissioners don't even have an e-mail. I'm not even sure their names are all listed on the website.
Their names may be listed on the website. I will have to double check. But I know they don't have e-
mails. So you can't even e-mail them directly. I guess there is probably one e-mail where you can e-
                                                     32
mail one person, but I don't believe all the commissioners have e-mails. So it's a little hard for the
public to reach.

MR. ALLAMONG: If I can clarify, all the subcommittee meetings are posted on the Division's website,
as well as every board meeting, usually 30 days in advance. And there are the names of the
commissioners posted in this website for ours and other commissions, as well as an e-mail to make
contact.

MR. KELLY: One e-mail, I think.

MR. ALLAMONG: No, but we did make them aware that this subcommittee was talking about --

MR. KELLY: I was at the one meeting where all the builders were there, and that was about eight
months or so. I might have been the only realtor in the room. And, since then, I just don't know where
the subcommittee meetings are.

MR. ALLAMONG: One clarifying point I want to make, and this might be confused with the current
legislation, the DUA, the Delaware Uniform Condominium -- It's one of those. A lot that you heard
here, this testimony, was about fraud, which has to do with things in that act, and we are not looking to
regulate that act.

MR. ALLAMONG: There is a distinction here of what we are talking about versus things covered
already understand the DUA.

SENATOR BUNTING: Thank you. At this point we have other speakers. I would like to get a little
more handle around this thing. It sounds like Representative Kowalko would too, as to who is, I guess,
or who is with the AG's Office in that whole area. I'm not sure. There are some areas there I'm not sure,
because I know I have had some issues with some complaint situations where they have this thing called
patterns of practice.

MR. SZCZUKA: Mr. Chairman. Ian McConnell is the director of the Fraud Division, and he is the one
who told -- I have it in writing. He told the Real Estate Commission they only had two problems in
2009, three in 2008. It's in writing. Now, that completely is irrelevant when you see the report from the
AG's Office that says there is all these other complaints.

SENATOR BUNTING: Mr. Szczuka, could you get some of that to us?

MR. SZCZUKA: Yes. This is all yours. I have already made arrangements with Judy.

REPRESENTATIVE SHORT: In the terminology that you are using, homebuilder, are you talking
about the person in the development that's contracting to do all the homes in that development and the
build-out of that development?

MR. SZCZUKA: It's very confusing, because what happens is the developer is also a builder, so he
contracts out to seven different builders. And those builders may not know all the language that he has
created in maintenance agreements.

REPRESENTATIVE SHORT: Where I'm going with this is, on a separate issue, for members of the
Committee, we were actually working on something else with a couple other associations that the
                                                     33
terminology right now is "Contractor Fraud Act," which is, may overlap somewhat. So I would be
interested in knowing whether that report that he has is purely homebuilders or that small proprietor
LLC that's building homes or coming in on individual contracts.

MR. SZCZUKA: This is more on amenities than it is on --

REPRESENTATIVE SHORT: On the buildings?

MR. SZCZUKA: Yes.

MS. ROBINSON: I'm Cori Robinson. I have been an associate broker for over 25 years in
Pennsylvania, Delaware, and Maryland. I've sold new homes for over 15 years. When I approach
somebody, I have to give them this (holding up document) -- I entered it in -- which is a consumer
information statement that basically tells the consumer who I represent and what duties I can and cannot
perform. That is not necessary for builders' agents to do if they are not licensed. And I don't quite
understand why that distinction is made. My people don't. They call them site agents as if they are
licensed.

When things happened with the development and my customers called me, I had to tell them, "They
weren't licensed. You can't blame me or realtors for what happened there." They were totally confused.
They had no disclosures made. And I think it's proper that they should be protected, everybody,
anybody that sells real estate through a third party -- I don't care whether it's builders or elephants --
should have to be licensed and have to disclose what they are doing and who they represent. I think
that's only fair.

REPRESENTATIVE BENNETT: Maybe the Commission or anybody. I was just curious. These site
agents, as you referred to them, there are no educational requirements?

MS. ROBINSON: There is no nothing. When Pennsylvania went from not being required to being
required, what they did is they introduced a builder's license so that the -- not all the site agents that
weren't licensed had to have everything right away. They had an interim. You know, in other words,
they had a few hours, and they built it up to where they were licensed like regular.

I also have a CSP 1 and 2, which is the certified new home salesperson given by the National
Association of Homebuilders. They are wonderful courses, and I really value them, but they have
nothing to do with state law or who represents their agency. So they do good in education but not
toward consumers.

SENATOR SIMPSON: This could be answered by the Commission, as well. When a builder has a
development and half of those houses are sold and half are unsold, and you get a resale, can that person
that works for the builder also sell the resale in there, or does it have to come through you?

MR. ALLAMONG: Typically, that would be listed by a licensed broker, and the licensed broker would
only be paying compensation to another licensed broker.

SENATOR SIMPSON: So it's against the law for a builder to resell a second time?

MR. ALLAMONG: We cannot pay them a commission for that. Correct.

                                                     34
MR. HARVEY: Good evening. My name is Bruce Harvey. I'm president of the Newark Landlord
Association. I'm also an affiliate member of the Delaware Apartment Association. We represent about
850 landlords who own properties in Newark. Most are small. About half the properties in Newark are
owned by people who only own one property.

It would be awfully nice -- well, one of the things we do at the Association is offer mentoring and help
for each other, landlords helping landlords, because we all thought the book How to Make a Zillion
Dollars in Real Estate was all you needed to know until the day you went looking for the first tenant.

What puzzles us is it seems the disciplines, the skill sets, the actual work between buying and selling
real estate and managing rental properties, it's like they are different worlds. I almost feel like
somebody is asking baseball players to be members of the Professional Golfers' Association. I mean,
there is an argument that they both hit balls.

So maybe we just don't understand. So maybe I should tell -- it would help if I said what we do want in
property managers. Most of us are do-it-yourself property managers, and a lot of us would use a
professional if we could find one that was so skilled that the work and the money were better using a
professional than doing it ourselves.

And what we are looking for in that, we are looking for good property managers, seasoned, experienced,
and committed to excellence who are going to look after our properties and not get confused with some
sales they have on the other side of the office.

Track record is a lot more important than a good -- than a license. Newark is a small town. If somebody
is not doing a good job, we find out about it very quickly.

As has been mentioned, we are required to give a copy of the Delaware Residential Landlord/Tenant
Code to people we lease to. And that does include the name, address, and phone number of the
Consumer Protection Unit of the Attorney General's Office.

People can and do call that number. And a landlord who is in the wrong will have a call from an
attorney employed by the State who will read them chapter and verse and tell them where they are
wrong in no uncertain terms. And, you know, that's regulation. We have it.

And, to finish off, anybody out here who is a property manager and wants to be on our list, Newark
landlords are potential customers of property management services. We do maintain a database of
people who are available for a number of jobs. If property managers here want to be on that list, give
me a call. It helps if you have a reference from a Newark landlord.

That's about all I have. I don't think further regulation in this area is necessary.

MS. MENAQUALE: My name is Ann Menaquale. I have been a licensed realtor for 26 years in
Delaware and Maryland. I have also been a property manager for 26 years. I have owned my own
company now for going on 14 years, Menaquale Property Management.

Lucky for me, I am a licensed realtor, because the regulations saying that now they want us to be
licensed realtors. I don't see how that would serve the property management business. They are two
completely different animals. I have people in my office that have been realtors for 20, 30 years, and
they come to me with their landlord/tenant problems for their sons or daughters or cousins or whoever.
                                                      35
Knowing the landlord tenant code and protecting the tenants and the property owners has nothing to do
with me selling houses. It's a different set of laws. It's a different set of regulations. In my property
management business, I have management insurance. I carry all my licenses for state and county, you
know, different towns that require it. I take Continuing Ed to keep my real estate license. That doesn't
help me with property management. Lucky for me, I have been doing it for 26 years, and I take pride in
what I do. So when I do find a property management class to take, I take it. I have had two complaints
from families come to me within the last year. They went to a real estate company that had a property
management division to have their properties managed. Well, those realtors that are working in the
property management division don't know the landlord/tenant code. They don't know how to interpret it,
and they don't know how to protect the people that they are trying to protect, which are the landlords or
the owners and the tenants. So they came to me to try to help them. I just don't understand. You know,
if you want to license a property manager, that's fine, but it should be separate from real estate licenses.
If you want me to get a property management license, I will.

SENATOR BUNTING: I think they clarified that earlier.

MS. MENAQUALE: Well, right now the Code said they want us to be licensed realtors and they want
us to be working under a broker. And I don't think that's --

SENATOR BUNTING: That's not the intent. But I'm not here to debate you at this point.

MS. MENAQUALE: Right.

MR. MULHOLLAND: Good evening, members of the Committee. My name is Chuck Mulholland.
I'm president of the Civic League for New Castle County.

I stand here before you this evening and hope for further transparency for real estate transactions in the
State of Delaware. There are sales techniques and brochures that have painted the rosiest of pictures for
potential clients, with some past buyers having walked into a spider's web.

To Representative Bennett's question about issues: These are real estate ads. There is ten of them. Not
one of them give a description of what the county calls are in the SAD. These are all for workforce and
affordable housing community. Not one ad mentions affordable housing, fixed units, fixed price units,
or anything even remotely close to what market rate buyers may be looking for or affordable rate buyers
may be looking for. There is no distinction whatsoever.

What we are pushing for is what was adopted by the Delaware Real Estate Commission in September
2008, and in an additional form for new construction effective January 1 of 2011, regarding workforce
and affordable housing to be disclosed to all buyers of all houses.

We believe the shortest and most effective way to make that happen is to license all real estate agents for
both new homes, which is not done, and existing homes, which is done.

The New Castle County Department of Land Use approved the construction of 1,095 lots, dwelling
units, in two separate plans in southern New Castle County. One was done on April of 2010 for 951
units, and one was done in October 2010 for another 144 units. That's a potential 1,095 clients walking
into the sales offices and not being told the potential parts of various parts of this code. We have had
people go into the sales office depicted in all these ads, and they weren't told half of the questions that I
gave the guy to ask. "We don't know. You would have to ask the county."
                                                      36
In January of this year, the board of directors of the Civic League for New Castle County voted
unanimously to support the licensing of all real estate sales agents in the State of Delaware. We are
hopeful that, if the Delaware Real Estate Commission continues, that the work and wording that they set
forth in the two sellers' disclosure forms that I have mentioned here and I forwarded to Senator Bunting
and Representative Kowalko yesterday, that there will be a path of enforcement to make sure that there
is no more innocent victims when they come to Delaware to buy a home.

As for what Mr. Szczuka was talking about, I was in the rooms during those meetings. There was
hundreds of screaming people. And you may ask where are they tonight? They didn't get such a good
deal from hoping that the public entity would come through for them. There has been various laws in
the State Legislature. There has been civil suits, and there has been a lot of for sale signs. If you want
me to tell you the name of the development, I will. It's Odessa National.

SENATOR BONINI: I had just a quick question -- I'm sorry. Thanks. Excuse me, Mr. Chairman.
When you first talked about the ads and the workforce housing -- and I apologize we don't have that in
my county. So when you talk about disclosure that wasn't happening, I'm confused on what exactly you
wanted people to be informed about when they walked in.

MR. MULHOLLAND: When the two people I asked to go to the sales office for these ads went there,
they weren't told that there are fixed-price units in there, which is prescribed under Section 4007-342.
They weren't told that all the houses were supposed to look the same, whether they were market rate or
40 percent less in cost, which is prescribed under 4007-344.

SENATOR BONINI: So you are saying they weren't given a total picture of the neighborhood they are
talking about?

MR. MULHOLLAND: I'm saying, Senator, that neither the affordable people know what's in these ads
nor the market rate people know what's in these ads. It's sort of a secret. And unless you know before
you walk in there, you may get a surprise like some of the people in the other series of circumstances.
And, believe me, there were so many people in the one community that I just mentioned, that a number
of for sales signs are people just trying to get out, disappointed buyers, when they came to buy a home in
Delaware. They don't need to walk into another spider's nest.

SENATOR BONINI: And let me ask you. And this may not be fair for you. Maybe somebody else can
answer it. If I am selling my home, I hire a real estate agent to sell my house, they negotiate with the
buyers or seller's real estate, each usually split the commission. Right? And, hopefully, I get my house
sold. But I also pay the extra percentage that's, you know, I don't get to take that home. The realtor
takes it home for the services that they provide.

When I walk in -- and I just don't know the answer to this -- when I walk into Joe's Brand New
Development and there is a salesperson in the model home, and I walk in and I talk to that person, does
that person get a percentage? How is that person compensated versus what a realtor is compensated.

Because, Chuck, what I'm concerned about is, if there is some savings by, you know -- I don't know
what the pertinent terminology would be -- I just don't know how that person is compensated and
whether the fact the consumer is perhaps getting a better deal through that process versus a regular --


                                                     37
MR. MULHOLLAND: I won't answer for the Real Estate Commission, but I will tell you my
experience is that when all the innocent victims, many of whom came from out of state, were drawn into
the web down on Fieldsboro Road, they were told anything that they had to be told to get them to buy
that house.

SENATOR BONINI: To get them to sign. Okay.

MR. MULHOLLAND: And as Frank did, as another gentleman in the back did, I sat there and watched
these people cry their hearts out on the things that they weren't told that they now have to pay for.

And, as time would have it, it's coming back again. You will see these articles probably in the next
couple weeks, because it ain't over with yet.

SENATOR BONINI: And these things were not in the final real estate settlements?

MR. MULHOLLAND: The testimony that I heard before investigators from the AG's Office in the
basement of the corporate library on High Street in Odessa was that they were given only two or three
pages of a 57-page document.

SENATOR BONINI: Wow.

MR. MULHOLLAND: And that was just one example that was repeated many times over. But we are
asking for transparency and enforcement. We don't need any more innocent victims. Thank you.

REPRESENTATIVE KOWALKO: You said the '08 and the 2011.

MR. MULHOLLAND: Yes, sir.

REPRESENTATIVE KOWALKO: The 2011, I'm assuming, are strengthened?

MR. MULHOLLAND: The 2011 applies to new homes. The 2008 applies to existing homes. Now
they have come to full circle to make sure that all buyers of all real estate are made aware if there is
fixed price housing that may affect their eventual comparable sales.

REPRESENTATIVE KOWALKO: So the gist of it is, though, that there is no enforcement by the Real
Estate Commission, no allowable enforcement by the Real Estate Commission for the violators of this.
Is that --

MR. ALLAMONG: We are responsible for making the forms, but we don't have enforcement authority.

REPRESENTATIVE KOWALKO: But you can't enforce that the forms -- are followed through by the
salesperson and/or whatever broker they have for those developers?

MR. ALLAMONG: For our licensees, we can, but that's the extent.

REPRESENTATIVE KOWALKO: Right. And that's what I said. You found a soft spot in this area
because of the experience -- Cecelia Chair (?) was a very good friend of mine who experienced that, for
lack of a better word, tragedy, debacle.

                                                     38
MR. MULHOLLAND: What we are saying -- we are not saying that we have got all the answers, but
we believe that when the salesperson is sitting behind the desk, they are responsible for telling the
potential buyer anything that may affect the value of that home.

And in December of 2008, Rose Hollands, the sponsor of the ordinance that precipitated all this stuff,
was told by Steve Larrimore, a licensed realtor, on WDEL, he said you gotta consider regression, that if
the house -- you know, if you buy a house for a hundred grand and the house next to it sells for 50, and
even though they look the same, when it comes around to comparable sales, it's going to negatively
affect your assessment, or your asking price. And, unfortunately, when the County amended their first
code, they forgot to put that in the second code.

SENATOR BONINI: Mr. Chairman, I would ask if someone from the agencies -- my questions about
how the sales agents are compensated, if somebody knows that.

MR. ALLAMONG: Yes. Compensation, of course isn't a part of our initiative with respect to
registration. And if there is a homebuilders association represented, I am sure there are all different
business models.

SENATOR BONINI: But it is not a standard?

MR. ALLAMONG: That's not standardized.

MR. MAKITKA: My name is Alexander Makitka. I'm a licensed engineer in Delaware plus multiple
other states. Yes, I live in Odessa National. And when we went to buy there, the builder said, "Hey, if
you want to belong to the golf course, fine. If you don't, that's fine too. It's not mandatory."

We saw the nice development. It didn't look too bad. We saw a nice clubhouse. I said, "When is it
going to open?" "Oh, Soon."

"What else is coming?"

"Pool and tennis courts." This is February. "Well, when do you expect the tennis court and pool to be
in?"

"You will be swimming in it in September to 2007." Here we are, no swimming pool. We are not even
in the clubhouse. And, yes, the representative, the builder basically told you what he had to, to make
you buy the house.

As far as affordable housing goes, affordable housing popped up recently on Fieldsboro real close to
where we are. What's that going to do to our property values? Okay? It's really going to affect us big
time. And affordable housing, why in the world would you put affordable housing in an old farm when
there is no public transportation, no place to buy food, and no jobs? Does that make sense? I didn't
move to Delaware to live next to a ghetto. I'm sorry. That wasn't my real intent. No, I'm not a real
happy camper.

SENATOR BONINI: Where do you come from?

MR. MAKITKA: Pennsylvania, up in the Poconos, originally from Pittsburgh.

                                                    39
SENATOR BONINI: And when did you buy the house?

MR. MAKITKA: 2007. Signed up in February 2007. We moved in in June of 2007.

A couple other issues: Yes, we complained to the Attorney General's Office, and a bunch of us settled.
The people that represented the builder were mysteriously transferred, even though they lied and,
frankly, I thought it was fraud. We don't have to pay for the golf course until -- if we sell the house, the
new owner has to start paying the golf course fees.

We had people in the neighborhood who are avid golfers. But think about it. Would you pay to belong
to a golf course, $800 a year, where you get, wow, two rounds of free golf, plus a 10 percent discount?...
But it's really -- it's really tough. When we went in and talked to the developer, we actually had been
looking in Delaware now for about 10 years. And we thought, gee, 55-plus community. And, frankly,
what makes a community is not the developer but the people in the community. And the people in the
community are super, super people.

REPRESENTATIVE KOWALKO: Yes. By way of a comment, not a question, necessarily. I do
appreciate the situation you found yourself in and your neighbors found yourself in. But I just want to
iterate that this Committee will not be able to interfere in workforce housing laws, stipulations,
ordinances from the County.

We will -- or we are able -- I will not say we will, because then I will be speaking for everybody. We are
able, though, to put a disclosure type of scenario under the Real Estate Commission, which could be our
small offering of solace and future prevention of these kinds of things coming into play. Do you
understand what I am saying?

MR. MAKITKA: Yes. And, actually, when you look at the big picture, we are the people that basically
were beat up so bad, we are helping to prevent the same thing from happening to future buyers in
Delaware.

A good example is, a lot of people are paying for amenities that they don't have, never seen, may never
see. But the new folks joining the great State of Delaware aren't doing that.

So we were the whipping boys, for lack of a better term. And even though we got picked on, I hope we
are making the State of Delaware a better state. And I think the real estate folks should have
representatives in all the model homes.

MR. LUCKS: I was remiss earlier. I did not introduce Andy Taylor, who is counsel for the Delaware
Association of Realtors. He is sitting to my left.

We had one other issue of clarification to DREC's most recent language with regard to the use of
competitive market analysis, or CMA, by real estate professionals. The CMA is a service provided by
licensee for the purpose of providing either a potential listing price or a potential offering price in a real
estate service transaction.

Unfortunately, in today's real estate climate, with a multiple of short sales, multitude of short sales and
foreclosures, we are seeing realtors being asked to provide CMA's by banks where a contract already
exists on the property.

                                                      40
We understand that DREC had come to an agreement on their proposed language for the Council of
Real Estate Appraisers to ensure that the law is being followed and the public being protected.
After careful consideration, DAR believes we can strengthen DREC's language to protect all parties by
inserting a sentence that clearly states, "A licensee shall not perform a CMA for a mortgagee on a
property that is the subject of a signed agreement of sale." We presented this additional language to the
Appraiser's Council, who also supports it.

SENATOR SIMPSON: Bill, I wasn't quite sure what you were saying. Put that in layman's language.

MR. LUCKS: Okay. You are a listing agent on a property. It may be a short sale, a property short sale.
You have a contract -- Do you understand what a short sale is? Does everyone understand that, where
it's being sold for less than what the mortgage may be? A lender may approach another realtor and ask
them to perform a CMA on the same property.

SENATOR SIMPSON: And a CMA is a?

MR. LUCKS: A comparable market analysis. An opinion of value, if you will. Not an appraisal, but an
opinion of value to that creates -- it's a marketing thing - it creates a lot of problems. Other agent may
come up with a higher number to not make that sale happen, if you will, and may work as a marketing
technique to get the listing on that property when that first sale falls apart. It's just an ugly world out
there right now.

MR. WHITFIELD: If I may. What they are pointing to is the active performing a competitive
marketing analysis, or a BPO, whatever acronym you provide to it, it's providing a comparable value of
a piece of real estate in the form of setting the market price to go out to market with the property.

Under the current statute, there is no definition, there is no provision for a real estate licensee to perform
a CMA. However, under the Delaware Appraisal Council, they have a limiting condition that says you
can only do a CMA for the purpose of listing a property.

In today's environment, that doesn't happen anymore. You do it for the listing, but you also do it for the
sales -- for the buyer of the property. So, in essence, every time we do a CMA for a buyer, we are
violating state law.

The Appraisal Council has said to the Real Estate Commission that, "We are not looking to limit your
business and disallow you from doing anything you should be doing and performing for your
customers."

Our Sunset Committee drafted a definition of a CMA, and we added it to a section of this revised draft
that we have. It's been shopped. It's been out to the public. It's been out to all the realtors. It's been to
the DAR. It's been in workshops. This, about a week prior to this meeting, is the first time we heard
DAR wanted to add a sentence to it.

At this point I think that we are still -- we have -- there hasn't been a definition decided, and it's not
going to come out of this hearing. So to say this is the definition, that's really not taking place tonight. I
think we are talking about that there is a definition that's going to be proposed, that we were proposing,
and that could continue to be work-shopped. It doesn't need to be decided at this moment.


                                                      41
SENATOR SIMPSON: So what you are saying is, if I buy a house from Company B, the bank can't go
to Company C to ask for a competitive market analysis of that property?

MR. WHITFIELD: Technically, in the State of Delaware -- the State of Delaware is -- what's the term,
a mandatory state for appraisal. If you are putting a value on a piece of property for any legal purpose,
you need to be a licensed appraiser in the State of Delaware to do so.

There is an exception in the statute that allows real estate licensees to perform a competitive market
analysis or a comparable market analysis. It contradicts our statute in some way. We are just looking to
clean that up so that we have a definition in our statute that's acceptable to the Appraisal Council. They
have agreed to the Delaware Real Estate's definition. Subsequent to them agreeing to that, DAR went to
them and asked them to add a sentence. And all I'm stating for this evening is that we will continue to
workshop that definition and come up with something everybody is happy with.

REPRESENTATIVE SHORT: Mr. Chairman, I noted there is a reference to Mr. Houston, who I
believe represents the Appraisal Council. I mean, is it fair to ask him now, or do you want to wait on
that?

SENATOR BUNTING: No, go ahead.

REPRESENTATIVE SHORT: Would you like to -- I think it's always fair to have both sides of the
story. When you say someone agrees to something, I would like to hear them say they agree to it. I didn't
mean to put you on the spot.

MR. HOUSTON: Sure. Steve Houston, professional member of the Appraisal Council, regulatory
board for the State.

REPRESENTATIVE SHORT: I guess the question would be, is this the first time you have seen the
new language that was proposed within the last week, or do you have any comment on it?
MR. HOUSTON: We have received the additional sentence from DAR about a week ago, and we did
review it. We had our meeting on Tuesday, and we didn't have any opposition to its insertion.
However, Mr. Whitfield says that there is some opposition to it.

MR. WHITFIELD: The DREC hadn't approved the language. It hadn't been brought to us, so it was the
first time we had seen it. It hadn't been through our subcommittee, and we hadn't had a chance to
discuss it. I think the misconception was that the language was going to be approved tonight and that
they wanted to insert their sentence. And that's all I'm stating, is there is time to still workshop this.

MR. WHITFIELD: This will continue to have discussion and dialogue.

MR. WHITE: Through our subcommittee.

REPRESENTATIVE SHORT: I just wanted to make sure that was the case and get it on the record.
Thank you. Appreciate it.

SENATOR BUNTING: I would like to ask the members here, it's 8:30. We have got a lot of ground to
cover here. Do you want another meeting? How are we going to run that?


                                                    42
MS. PUZZO: May I? Many of these issues are going to be -- they are going to be just housekeeping.
So if we -- my suggestion would be, if we just go through and do the housekeeping, if there is anything
with more discussion, we might be able to get through this in 10, 15 minutes.

MR. ALLAMONG: We will be very brief, Mr. Chair, if possible.

SENATOR BUNTING: I apologize. We try to infuse as many people we can to speak and convey, and
also the fellow members here. And this is a very important issue. So I'm going to start on

       W: "Remove the separate license for non-applicants and include reciprocity provisions."

MR. ALLAMONG: Housekeeping to make the record clear with respect to how we term a licensed
individual.

       X: "Remove the separate license for non-resident applicants and include reciprocity
       provisions."

MR. ALLAMONG: Reciprocity is -- that's a change to the statute to make it easier for licensees of
other states to enter our state and begin doing business.

       Y: "The Commission is proposing to remove the separate license for non-resident applicants
       and include reciprocity provisions." I just went through that. Excuse me.

MR. ALLAMONG: I think that's a repeat.

       Z: "Revise the licensure categories to create three license types: Broker, associate broker and
       salesperson, which is the structure currently used in the states of Maryland and Pennsylvania,
       and amend the Commission composition accordingly."

MR. ALLAMONG: that is housekeeping to better inform the public who is the broker in charge by
referring to them now as broker, and any other people that have obtained that status and education as
associate brokers.

SENATOR BONINI: Any heartburn from your members about this change?

MR. ALLAMONG: No. We took it out to our three counties and discussed it with licensees. Some
feelings hurt, but people understood the need for it.

       AA: "Amend the powers and duties section to provide the Commission with the authority to
       require licensees to complete continuing education. As such, this authority should be made
       explicit in the statute, as is the case with other licensing boards."

MR. WHITE: Mr. Chair, again this is housekeeping. We referenced it before.

       BB: "Improve the investigative process by increasing resources in the Division's investigative
       unit and the Attorney General's Office.



                                                   43
MR. COLLINS: I will be brief. We addressed this last week in our meeting with the Gaming Control
Board. We have increased the resources in the investigative unit as well as at the Attorney General's
level, and we believe that the boards and commissions will begin to feel that.

SENATOR BONINI: You pay for everything through ASF funding?

MR. COLLINS: That's correct.

SENATOR BONINI: So, in a sense, if you just got authorization to do this, it would be funded through
increased licensure fees, increased –

MR. COLLINS: Everything I have just mentioned is paid for through licensure fees.

SENATOR BONINI: And what is the dollar figure behind what you think you need?

MR. COLLINS: Well, these recommendations were drafted prior to us putting these new resources in
place. I think we are okay. I think we need to feel the impact of the new resources before we can think
about anything else.

       CC: "Expand the grounds for discipline and disciplinary sanction provisions."

MS. HEENEY: This is really just to make the Commission in the statute under Title 24 boards. The
only thing I want to note is that the Commission is looking for the authority to permanently revoke a
license, which is not in all Title 24 statutes. It's in some. But they certainly would like that option to do
that permanently.

       DD: "There are four public members with one from each county. As such, one county would
       be represented twice. If the number of public members remains at four, perhaps the statute
       should mandate that the fourth public member be from the City of Wilmington."

MR. WHITE: Correct, Mr. Chair. That's just asking for the Sunset Committee's guidance on that, if
that's a good idea. We think it is, but we look for your guidance regarding that matter.

       EE: "Statute should be amended to include removal of members language that also conforms
       to the language used regarding other boards and commissions regulated by Title 24."

MS. HEENEY: This is just inclusion of standard language pertaining to removal of a commissioner.

       FF: "Statutory mandated training was not provided in 2009 and 2010 due to budget
       restrictions. Prior to 2009, the Division provided annual board member regulatory training."

SENATOR BONINI: Chairman, we dealt with that in our last meeting.

       GG. "The Commission is proposing to clarify the statute regarding main offices obtaining a
       permit and providing for biannual renewal and provide an experience requirement for the
       designated on-site supervisor."



                                                     44
MR. WHITFIELD: Currently we charge -- the DPR charges permit fees for the branch offices, but the
main offices don't pay that fee. And we feel that going out to those main offices should pay the same
fee that the branch offices pay.

And the experience requirement for an on-site supervisor: You can have -- if you have a broker's
license, you could open up an office and you can get a duplicate copy of your broker's license to open up
a second office, but you can't technically manage both offices full time. So you can designate an on-site
supervisor, but that on-site supervisor currently could be licensed yesterday. So they are an on-site
supervisor that has no experience. So we would like to put some minimal requirement on the on-site
supervisor to know that someone has experience that's actually managing the office.

       HH: "In 2001, the JSC recommended that this language be rewritten and refer to the
       certificate holder or licensee's place of business. In addition, if he or she works for more than
       one office, that office must have a copy of the license."

MR. WHITE: That's housekeeping, Mr. Chair.

       II: "In 2001, the JSC recommended 2918 entitled 'Form and Display of certificate" be
       incorporated into 24 Del. C. 2906 which refers to the certificate requirement. The
       Commission has indicated that it will address this recommendation in its proposed
       legislation."

MR. WHITFIELD: That's housekeeping.

       JJ: "In 2001, the JSC recommended that 24 Del. C. 2907 be rewritten to eliminate any
       ambiguities in the repetition of the words 'nor have been professionally penalized' for the
       various crimes listed. The Commission has indicated that it will address this recommendation
       in its proposed legislation."

MS. HEENEY: The language enclosed is duplicative in that an applicant -- the Commission looks at the
person's disciplinary history in other jurisdictions and their criminal history, so that language is just
repetitive.
        KK: "Should be rewritten to eliminate contradicting language, Del 2921."

MR. ALLAMONG: That is partially housekeeping, and we need to specify that a licensee who transfers
from with one broker to another can begin business at the new broker once the application is complete
and before the administrative processing with the State occurs so that they continue business, and also to
prevent brokers from holding a license by giving them five days in order to finalize a transfer
application.

       LL: "The commission is proposing to clarify and establish additional criteria for deposits and
       escrow accounts for better protection of the public."

MR. ALLAMONG: Part of this is housekeeping to further define the statute to we believe the intent
that the broker is the person that opens the escrow and that the broker's name needs to be on the -- as a
signatory on the broker's account. Some business models have taken that away from the broker and
placed that in an accounting department. We feel that's incorrect.


                                                    45
Also, we want to define the terminology as far as better define what an escrow account is and what type
of transactions it covers.

SENATOR BONINI: In this case the broker who is in charge of it is responsible for the escrow. And is
there a bonding requirement?

MR. ALLAMONG: There is not. There is a minimum deposit of $100 and no bonding required. It
must be in a Delaware bank, a bank that has depository offices in Delaware.

SENATOR BONINI: No fiduciary bond held by the broker?

MR. ALLAMONG: No.

       MM: "Statute mandates that the Department of Finance shall not grant a business license to
       a broker until he or she presents a certificate from the Commission showing that he or she has
       complied with statute. Other boards do not impose requirements on the Department of
       Finance, and the Commission proposes elimination of this statutory provision. 24 Del. C.
       2924"

MS. HEENEY: The Commission is asking for deletion of this, in that it's a unique provision and the
Commission would not have the authority to direct the activities of the Department of Finance.

       NN: "Currently, 24 Del. C. 2912 is entitled 'Revocation of Certificate.' In 2001, the JSC
       recommended that 2912 be retitled as 'Grounds for Discipline' and rewritten and updated to
       include the customary grounds for discipline common to all other regulatory agencies under
       the Division of Professional Regulation."

MS. HEENEY: This is just reorganization and rewriting to make the statute consistent with other Title
24 boards.

REPRESENTATIVE SHORT: Are we saying that a real estate agent also has to have a business
license?

MR. ALLAMONG: The broker.

REPRESENTATIVE SHORT: So he has to have a broker's license and a business license?

MR. ALLAMONG: Correct. Local jurisdictions will require a business license for both the broker and
the salesperson.

REPRESENTATIVE SHORT: When you say local jurisdiction --

MR. ALLAMONG: The State.

REPRESENTATIVE SHORT: -- you are talking about the state?

MR. ALLAMONG: The state.


                                                  46
MR. WHITE: Yes. And the City of Wilmington requires a state business license as well as a city
license.

       OO: "Rewrite 24 Del. C. 2912 in a specific, unambiguous way to insure that the Commission
       has the legal authority to act."

MS. HEENEY: We're proposing adding protection to 2905, which explicitly gives us the authority to
sanction licensees, which is not currently in there, and also to rewrite Section 2912 to be more consistent
with other licensing boards.

       PP: "The Commission has been granted a special privilege granted to no other licensing
       board or commission, that is, to request a waiver from the Secretary of State to permit the
       Commission to investigate a particular complaint. Delete Del. 24 Del. C. 2912 regarding the
       Commission's authority to investigate a complaint."

MS. HEENEY: This is a unique authority that was granted to the Real Estate Commission that other
boards don't have. This is something that doesn't happen in practice at any rate.

       QQ: "The words 'guilty knowledge' in 24 Del. C. are not defined by statute or Rules or
       Regulation."

MS. HEENEY: This language is pertaining to the responsibility of a broker for the activities of his or
her employees and their statutory provision that they can be sanctioned for having guilty knowledge of
what transpired. And the Commission agrees that that needs to be clarified in either being defined in the
definition section of the statute or using a different terminology, because that's a confusing term, "guilty
knowledge."

REPRESENTATIVE KOWALKO: The Commission is going to come up with a recommendation?

MS. HEENEY: Yes.

       RR: "The current statutory language regarding hearings in 24 Del. C. should be rewritten to
       include reference to the Administrative Procedures Act and conform to the language of other
       regulatory boards."

MS. HEENEY: And currently there is this section in here that crosses the whole list of procedures
which other Title 24 boards don't have. It should really only be referencing the Administrative
Procedures Act and the statutory provision pertaining to the Division of Professional Regulation.

       SS: "24 Del. C. provides the Commission with the authority to subpoena any person in the
       state or take testimony of any such person by deposition in the same manner as prescribed by
       law in judicial procedures in civil cases in Delaware courts. This authority is not provided to
       any other board or commission regulated under Title 24."

MS. HEENEY: This is the same response that I just gave for RR in that there needs to be references to
the APA, the Administrative Procedures Act.

SENATOR SIMPSON: Are you saying you want to do away with that privilege?

                                                    47
MS. HEENEY: No. In that this is not consistent with other Title 24 boards. They have this list of items
pertaining to hearings, and the other boards just reference that hearings are covered by the
Administrative Procedures Acts as opposed to setting forth specific procedures. It's not consistent. It's
not going to take away those procedures.

MR. WHITE: It's just going to clarify.

       TT: Del. 24 provides that any party to any hearing before the Commission shall have the right
       to the attendance of witnesses in the party's behalf at such hearing, upon making request
       therefore to the Commission and designating the person or persons sought to be subpoenaed.
       This authority is not provided to any other board or commission regulated under Title 24."

MS. HEENEY: I think, for clarity, what the response is that that authority doesn't come from Title 24
boards; it comes from the APA and from 29 Delaware Code Section 8735 which pertains to the Division
of Professional Regulation.

       UU: "Recently, the Legislature passed specific provisions regarding the temporary suspension
       of a license by the Board of Medical Licensure and Discipline. Should the new provisions and
       process also apply to the Commission?"

MR. COLLINS: Mr. Chairman, the new law, what it does, it allows, in emergency situations where
there was an imminent danger to the public, it allowed the president of the Board of Medical Licensure
and Discipline and the Secretary of State to make a decision to temporarily suspend a license.
…
MR. COLLINS: … what's happened in the past, when there is an emergency -- and there have been
some real estate cases where we had to -- where we took emergency action. There were tens of
thousands of dollars unaccounted for.

REPRESENTATIVE KOWALKO: Wouldn't that type of -- because, very specifically, the Medical
Licensing provision was put in place because of the Dr. Bradley incident. There is no denying that's
why. But, because after the door was shut, the horse was already out there, and no one paid attention to
it, so we had to force the Medical Commission to sort of look at this. Do you think this is necessary?

MR. COLLINS: I do. That was one of my recommendations.

MR. WHITE: Yes.

MR. COLLINS: What happens now -- and I think it should be across all of the boards. What happens
now, when there is a -- when we are investigating a complaint and there is imminent danger to the
public, we have to pull a quorum of the board together in order for the board to take an action. And no
action can be taken against that license until a quorum of the board gets together and votes to take that
action, which is sometimes difficult to arrange and could take days or a week.

REPRESENTATIVE KOWALKO: But now you used the terminology, "imminent danger to the
public." See, that's what separates the law that we just passed recently, "imminent danger to the public."
I don't know how you get that in real estate. I honestly -- I'm not trying to dilute any of the authority to
move quickly in matters. But sometimes, you know, the old haste makes waste. Haste can also cause
damage that cannot be rectified as easily.
                                                    48
MR. COLLINS: I think danger is I think danger is a pretty high standard to achieve, so that would
happen after an expedited investigation. It would go to the Attorney General's Office. And if the
prosecutor determined that they agreed that it substantiated that there is imminent danger, then they
would file a formal request to the board to take emergency action, and only after that.

So it has to go through our investigators, to the Attorney General's Office, and then to that process. It's
not just, you know, instantly to that particular process.

REPRESENTATIVE RAMONE: The imminent danger is to a human being?

MR. COLLINS: Imminent danger to the public, their health, safety and welfare. Well, we have had a
recent case with the Real Estate Commission where we had to take such an action against a broker for
how they were handling funds in escrow account.

REPRESENTATIVE RAMONE: And how would funds in an escrow account jeopardize somebody's
imminent danger?

MR. COLLINS: It was a lack thereof. A lack of funds in an escrow account. So what we did is we went
down --

REPRESENTATIVE RAMONE: So you are classifying somebody losing their wealth or losing their
money as "imminent danger," not them dying?

MR. COLLINS: It's the other people who haven't lost their money yet that we are trying to keep them
from losing their money.

       VV: "The Commission has proposed;
            1. Expanding the grounds for discipline and disciplinary sanction provisions.
            2. Changing the public reprimand sanction to a letter of reprimand since all penalties
                   Are of public record.
            3. Raising the maximum penalty -- we discussed this -- to 5,000.
            4. Increasing monetary penalties for persons guilty of practicing real estate without a
                   license.
            5. Expanding the provisions for reinstatement of a license due to suspension,
                   revocation, or probation.

MR. WHITE: Yes, Mr. Chair, it's a little bit more than housekeeping, but it is an effort to clarify the
grounds if someone could be taken discipline on and those sanctions thereof.

SENATOR BUNTING: Thank you. I think Senator Simpson raised a question, and I'm sure we will
hear it raised when it comes to legislation. Raising from 1,000 to 5,000 always raises an eyebrow in
penalties.

SENATOR BONINI: What is the fees to get -- the fees for the licensures now, to be a broker, to be an
agent, to be -- I'm sorry, I guess --

MR. ALLAMONG: Actually, I think we have them. It's 25 for the guarantee fee pay. I don't know
what page this is on.
                                                     49
SENATOR BONINI: That's okay.

MR. ALLAMONG: They are referenced in this Sunset document.

SENATOR BONINI: Okay. That's fine.

MR. ALLAMONG: And it breaks it out for all licensees.

SENATOR BONINI: But it's not -- I mean, it's not a thousand dollar a year?

MR. WHITFIELD: A branch office is $40.

SENATOR BONINI: So they are not -- okay. Thank you.

MR. COLLINS: It's on Page 45.

SENATOR BUNTING: WW: "The appeals provision in 24 Del. C. 2915 should be rewritten to refer to
the Administrative Procedures Act and conform to provisions in other regulatory statutes."

MS. HEENEY: And this again is just making the statute consistent with what other licensing board
statutes look like.

SENATOR BUNTING: Yes.

MR. ALLAMONG: Sorry, Mr. Chair, but you skipped V.

       V: "The Commission is proposing to clarify common law agency and statutory agency
       provisions."

MR. ALLAMONG: I had a reply that I just needed to make on that one. Actually, that's little bit of
housekeeping to pull common law together in the statute, when the statute is rewritten, so that it's clear,
but also to introduce to the State a presumed buyer agency.

And what that is, is currently statutory agency defines that licensees automatically represent the seller
and not the buyer/consumer until such time as a consumer elects to become a statutory buyer agent.
And close to 100 percent of our buyers elect buyer's agent representation.

It is felt that the average consumer assumes that you are representing them when they walk into a
brokerage office for assistance and/or go with a licensee to view a property.

So our recommendation is that we put presumed buyer agency is what the consumers actually are
already expecting. So it is a change to our statutory agency representation.

SENATOR SIMPSON: So what you are saying is that it has always been that the agent represents the
seller, and now we are changing to where the agency represents the buyer?

MR. ALLAMONG: Correct.

                                                     50
SENATOR SIMPSON: Even though the seller is giving them the money?

MR. ALLAMONG: Well, the seller may have a listing and, by definition, the seller and the agent have
entered into an agreement where they represent the seller.

When a customer walks in a brokerage office, it's assumed that, internally in the law, that we represent
the seller; but most buyers, when they walk in, they assume that you are representing them.

So it's not until that we have the earlier of our first scheduled appointment or showing of a property do
we actually sit with that consumer and go over the consumer information statement to explain to them
that we represent the seller. We can represent you. How would you like to proceed. And that's when
they make that election.

With confidentiality being injected by House bill 122, how it stands, everything is confidential from the
moment I meet you, whether you are the seller or the buyer, presumed buyer agency makes sense,
because the buyers are now, as well as the sellers, are protected to the maximum extent of the law.

SENATOR SIMPSON: Going back to M, "Amend the statute to regulate homebuilders' sales
representatives." You said that you don't want to license them; you just want to register them. Is that
correct?

MR. ALLAMONG: Using the terminology of registration, making it different than the licensure process
so there is not confusion.

SENATOR SIMPSON: It sounds like, from what complaints we have heard tonight from the public,
that they would like a greater degree of regulation rather than just registration.

MR. WHITE: We hear that too.

MR. ALLAMONG: Part of our discussion was to try to find some middle ground that would make this
less controversial with the homebuilders.

SENATOR SIMPSON: Are any homebuilders here? I guess they must have known we were letting
them off the hook.

Let me ask a question to homebuyers, because I had a question from an individual. Some builders are
using mortgage brokers as sort of their in-house mortgage brokerage, and some are also using in-house
lawyers to handle the complete transaction from initial walk in the door to walk out the door, you know,
till you are done.

Do you think there is sufficient separation between those three entities, mortgage broker, builder, and
lawyer?

MR. WHITE: No. I think there is business models that work, and you are describing a business model.
And I said no for as much sincerity as for a fact.

I think if disclosure is done at all levels, at all portions -- and I'm not talking about lip service. If that
would-be purchaser understands at every point that that person may not be representing them and that

                                                       51
they have the option and the choice and it is recommended that they seek counsel or mortgage financing
in other areas, then yes, I mean, they could move forward.

If that's not being done, there is no doubt in my humble mind -- I'm only speaking for me, not for the
rest of the Commission -- that there is harm that could be done of a major portion.

So you know -- you have bought homes before, or you know people who have -- that is the largest single
purchase you will ever make, and we hope you make it more than once. But, with that said, disclosure,
disclosure, disclosure; and I mean disclosure that adds teeth. And if you don't disclose, there is
consequences for that disclosure.

And so I say yes. In some ways that business model is out there. If it's done professionally, ethically,
and legal, that's a business choice. But, as a whole, do I think it's something that I want my child, your
child, or anybody else's relative to go through without disclosure? No.

MR. ALLAMONG: As another broker, can I give you an opinion? There are broker models that that is
a part of their full-service model. And there are RESPA, Real Estate Settlement Procedures Act,
disclosures which are required by law, that we disclose our relationship with those ancillary type
services in the brokerage organization.

So it is a big part of some brokerage models to have those services, to provide full service, full-service
shop, and they are important to the broker's business.

SENATOR BUNTING: Senator Simpson raised, and what you have came back with this wisdom,
because when you see -- if it's all done professionally -- but having seen a lot of transactions over the
years, it just seems like when you see these in-house all locked-in type sales, you question them a little
bit because of who the players are and how they are all connected together. It may be perfectly legit. It
may be perfectly professional. But, personally, I wouldn't count on it.

REPRESENTATIVE KOWALKO: Yeah, just a clarification on V. You have to forgive my ignorance
of the subject. Suppose you can clarify. Can someone walk in now to buy a home, and that seller where
it's listed, that can be their agent, that same agent can represent the buyer, the seller and the buyer?

MR. WHITE: Yeah. Do you want to -- Yes. The Delaware statute provides for limited dual agency.
Limited meaning that I could represent you as the purchaser, and I could represent the seller. Limited
means that, one, you have to have knowledge of that, and that knowledge has to be in writing. All
parties have to agree to that in writing prior to moving forward. So that's the only type of dual agency
that we are allowed to practice in the State of Delaware. It's called limited dual agency.

REPRESENTATIVE KOWALKO: But it is a guarantee that's not going to change? It has to be in
writing by the seller, the buyer.

MR. WHITE: That's not going to be changed, at least not from this commissioner's standpoint.

REPRESENTATIVE SHORT: Just a comment on that, just taking it as it is. I mean, in my business we
have to give full disclosure. The problem is that after a period of time, I think they get confused because
of the lack of clarity of the disclosure, meaning the obvious of it.


                                                     52
So, as you move forward, I would suggest innovation in this. I have actually gone to colored paper for
the disclosure. You used to be able to sell life insurance with four pages. The two policies I wrote
today, there was 68 pages sent to the company. And they get tired of signing and at a particular point
wonder what they're signing and get confused.

So I suggested to the companies in the insurance business -- and it's like falling on deaf ears because
they don't want to be innovative in this, and that's why we have things like National Health Care
Reform, because they don't want to be.

As you think through that, innovation, I think, is great for your industry. And I'm just throwing that out
there.

MR. WHITE: We appreciate that.

VI. Concluding Remarks
SENATOR BUNTING: Thank you. I would like to thank all the public attending this evening. We try
to cut it off in three hours. I would certainly like to thank the loyal members that are participating this
evening.

MS. PUZZO: I wanted to make a few comments. First of all, thanks to the Commission and the
Division of Professional Regulation for your efforts and your cooperation.

And where do we go from here? These minutes will be transcribed, and from there we go to committee
meetings. Committee meetings will be scheduled at a later date. They are held during the day, usually
in the Legislative Hall area. They are held one day during the week. Your attendance is absolutely
welcome.

It is a cooperative process, as you can see, back and forth. We will talk about the discussions, and you
will watch the Committee members discuss the information that was talked about tonight. And, from
there, we move on to recommendations, and you are involved throughout the process.

And what happens through this process, we draft legislation that comes out of this Committee and goes
into the regular Committee process. If you already have legislation, you are ahead of the game; so we
will work with you to fine tune what you have in regards to what the Committee recommends. So that's
where we are.

SENATOR BUNTING: Again, I apologize. A lot of this work should have been done a long time ago
and been on the books; and it's certainly not the fault of the Real Estate Commission.

VII. Adjournment
The meeting was adjourned at 9:07 pm.




March 2, 21011/dap




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