2008 Legislative Summary

By Tom Farley, CEO  

State Budget Update – Closing a $2 Billion Deficit

We started off this year with an Arizona REALTOR® magazine article titled “2008 Legislative Session – Can Ya Spare a Billion $$?” As of June 26, the deficit has grown to approximately $2 billion. The legislature has passed a budget that is designed to close the deficit with some accounting maneuvers such as delaying a payment to K-12 education, agency cuts of approximately $360 million and a lot of bonding – approximately $400 million for school construction. It is very likely that this latest effort to fix the budget deficit was not enough, as most reports I have seen claim that the deficit is closer to $2.2 billion, which will require the legislature to return to session at some point and make some more fixes. 

The 2008 Legislative session began on January 14 and is officially known as the 48th Legislature Second Regular Session. As I write this legislative summary article, it is the 166th day of the session, going down in the state history book as the fourth longest session since statehood. This is a troubling trend, since the 2007 Legislative session tied for the fifth longest session. The regular effective date for the new laws passed this session will be September 25, 2008, unless the legislation includes an appropriation, fee increase, tax change or emergency clause.

The legislative session dealt with some important issues such as real estate signs, disclosures, real estate licensees’ email addresses, employer sanctions, construction defects, and requiring municipalities to provide water status in rural or non-Active Management Areas of our state. Below are some of the legislative issues that the Arizona Association of REALTORS® (AAR) successfully advanced or defeated.

Had this bill passed, a condominium or planned community would have had the authority to regulate for sale signs by adopting a specific provision regarding for sale signs in the HOA documents. This legislation follows a bill that AAR passed last year (SB 1062), prohibiting HOAs from regulating for sale signs except for size and number of signs on the property. Yes, some HOAs are ignoring the law hoping that the seller will just comply with the HOAs demands. Some HOAs argue the different colored for sale signs are not aesthetically pleasing to the eye even though different colored for sale signs sold the development when it was brand new. When HOAs make it harder to sell a property, they are likely negatively impacting the sales price to be received by the current homeowner.  In addition to negatively impacting home sellers, they are likely exacerbating the number of foreclosure signs HOA communities will see as a result of their unnecessary intrusion into the sign regulation. HB 2611 was successfully opposed and the 2007 for sale sign legislation stands without the weakening language this bill would have brought to struggling home sellers.

Establishes a loan originator licensing program within the Arizona Department of Financial Institutions and requires that as of January 1, 2010, all loan originators be licensed unless they are exempted by statute. The legislation requires applicants for licensure to complete a loan originator course during the year preceding the time of application or have at least three years of loan origination experience immediately preceding the time of application. Applicants must pass an exam, submit information as prescribed by the department, and pay a nonrefundable fee as determined by the Superintendent.  SB 1028 passed the legislature and will become effective on the general effective date of September 25, 2008.

Both of these bills as initially drafted sought to require water supply status to be disclosed.  HB 2141 would have required the water supply status for residential property to be disclosed by the agent or broker before any contract or advertisement had occurred for both Active Management Areas (urban) and Non-Active Management Areas (rural) of our state. If and when the agent or broker could discover this information, the legislation required the water supply status to be placed on the first page of any contract and disclosure document and on all advertisements, including for sale signs and websites.  AAR vigorously opposed the initial draft of HB 2141. After a couple of hearings and a lot of discussion with the bill’s sponsor, the legislation was rewritten to require a separate recorded document to state the subdivision’s water supply status without all the problems listed above. HB 2141 still did not pass the legislature because the rural Arizona legislators did not like urban Arizona legislators telling them what to do with their water. 

HB 2270 was a bill drafted by AAR in response to many years of legislative attempts by the environmental and municipal lobbies to place real estate licensees in the litigious crosshairs of discovery and water supply disclosure. The environmental lobby supports lots of regulation aimed at making real estate transactions and growth more difficult. The municipal lobby supported some of the same water disclosure legislation because it placed the duty to investigate and disclose the water supply status on someone else – real estate agents. Even though municipalities are in charge of their legally defined water supply status, they wanted someone else to be on the litigation hook for the status of their income earning commodity. HB 2270 requires municipalities to provide the water supply status in Non-Active Management Areas of the state to any person in an electronic form. The written statement shall be delivered by fax, email or U.S. mail, as designated by the person requesting the information, within three days of receipt of the request. AAR was successful in advocating for this legislation; it was signed by the Governor and is effective on January 1, 2009.

SB 1232; Business Broker Designation and Real Estate Licensees’ Email Addresses - SUPPORT

As introduced, SB 1232 addressed two important issues: 

1. Removing a confusing provision relating to business broker designations from the real estate statutes, and
2. Prohibiting the ADRE from releasing or allowing the inspection of a licensee’s email address. 

AAR successfully sought an amendment to SB 1232 to prohibit the Arizona Department of Real Estate from providing licensees’ email addresses after it was learned that a vendor made a request to the department. AAR’s concern was for its members and the fact that everyone already has enough spam in their respective email inboxes.  The provision of SB 1232 as it relates to licensees’ information is provided below:   

• Removes, retroactive to January 1, 2008, the requirement that a licensee file an original signed statement to request ADRE not to release the licensee’s home address and home telephone number to any person other than a court, a process server or a governmental agency that will use the information for a legitimate governmental purpose, and removes the ADRE’s ability to charge a fee for each request.
• Prohibits, retroactive to January 1, 2008, a licensee’s or applicant’s residential address or residential telephone number that is maintained by ADRE from being made available to the public, unless the commissioner of ADRE determines that disclosure of either serves the interests of justice and is in the public interest.
• Prohibits, retroactive to January 1, 2008, a licensee’s or applicant’s e-mail address from being released or made available for inspection to any person other than a court or a governmental agency that will use the e-mail address for a legitimate court or governmental purpose.
• Stipulates, retroactive to January 1, 2008, that the residential address, email address and residential telephone number of a licensee whose license is on inactive status are confidential unless the commissioner determines that disclosure of the addresses and telephone number serves the interests of justice and is in the public interest.

SB 1232 was signed by the governor and becomes effective on September 25, 2008, with retroactive provisions as noted.

This legislation was proposed as a result of a citizen’s ballot measure currently being circulated for signatures for the November 2008 ballot. In reading the proposed ballot measure, the contents provide for several things, including an increase in the number of years a seller has to provide a warranty against defects for workmanship. This ballot measure’s language caused concern for lack of clarity by the drafters.

What alarmed AAR was a provision that required “sellers” to provide a 10-year warranty for a residential dwelling when it is sold. Currently, depending on the circumstances, a residential dwelling according to Arizona statute has either an eight- or nine-year warranty against defects from the date of substantial completion by the builder. The ballot measure caused AAR enough concern that it successfully amended the definition of “seller” in state law to remove real estate licensees and their non-builder “sellers” from a mandate to provide a 10-year warranty for workmanship when selling a residential dwelling. 10-year warranties for workmanship are not available for purchase, and it is doubtful one could ever find such a product for a home older than 10 years.

SB 1176 was signed by the governor and will go into effect September 25, 2008. 

These are just a few of the legislative efforts in which AAR was involved during the 2008 legislative session. While the legislative session may have had its share of ups and downs, AAR volunteer members and staff worked very hard on your behalf. Your 2008 leadership team of AAR President John Gall, Government Affairs Committee Chairman Sue Flucke and Legislative Committee Chairman Duane Fouts and their respective committees deserve your thanks for the many hours they volunteered on your behalf at the Arizona Legislature. 

As we close out this legislative session, we are already engaging in efforts for the 2008 elections and the 2009 Legislative Session, which begins with the REALTOR® Caucus held in September. More details on this event will be published soon and we hope you will consider attending this important event. For more details on other real estate legislation or election year efforts, please logon to www.rallinow.com.