End of Year General Session Report

By Sam LICKLIDER posted 06-14-2018 03:19 PM

Missouri REALTORS®,

The following is a reasonably complete description of actions taken in the most recent, completed session, that have direct impact on the real estate profession. I’ve also included a list of all bills we were following as well, including a much shorter list of bills that contain issues described within this report.

As was reported earlier, HB 1796, strictly speaking (Senate Substitute No 2 For House Committee Substitute for House Bill No. 1796), was Truly Agreed and Finally passed on May 18, 2018 - the final day of the session. Much work went into the final vote, but the two most significant factors in our success was our House Sponsor, Rep. Becky Ruth, and our Senate Handler, Sen. Caleb Rowden.

Representative Ruth’s discussions with House leadership ensured the bill was assigned to the House Committee on Banking, chaired by Rep. Lyndall Fraker; a long-time supporter of Missouri REALTORS® issues. That meant when the bill was reported out of committee, it was assigned to the House Rules-Legislative Oversight Committee, chaired by Rep. Shawn Rhoads, avoiding the problem we had the last session when the first bill went to House Rules-Administrative Oversight. The House perfected the bill on February 14th and, because of the fiscal note, it was sent to House Fiscal Review.

A fiscal note is an estimate of the cost to the State, and it exceeded two million dollars. My colleague, Adam Davis, took up the challenge of drafting a much more reasonable estimate of the cost based on data from other states. His estimate came in at a low of $48,000, based on 2% participation, to a high of $120,000, based on 5% participation. The data from the Department of Revenue assumed every person who could open a First Time Homebuyers Savings Account would. Understandably, that is not real-world experience. At the same time, using data from the National Association of Homebuilders, Adam developed a model showing it was likely, based on homebuyer spending in the first year of purchase and the accompanying sales tax receipts Missouri might make on the accounts.

The bill was reported out of Fiscal Review, by unanimous vote, on February 19 and third read by a vote of 133 to 13, the same day.

On March 1, it was assigned to the Senate Committee on Insurance and Banking, chaired by Sen. Paul Wieland, and heard on March 13. It was reported to the Senate Calendar on April 17 and assigned to the Senate Committee on Fiscal Oversight, again the fiscal note was the reason for that assignment. Fiscal Oversight reported the bill out favorably on April 19 and it was taken up for debate in the Senate on May 2. That’s when the wheels fell off.

Sen. Rowden offered a Senate Substitute which contained several, relatively uncontroversial benevolent tax credits, including a diaper bank tax credit; champion for children tax credit; a public safety officers surviving spouse tax credit and several others. The plan was to make it more difficult for some of the budget hawks to oppose. It was not successful... Sen. Rob Schaff and Sen. Maria Chappelle-Nadal spent a great deal of time discussing problems with homes contaminated with radioactive waste. Sen. Chappelle-Nadal’s district encompasses an area that has been reported to be contaminated because of decisions made many years ago.

The discussion went on for a time, followed by Sen. Rowden laying the bill over on the informal calendar.

The remaining time was spent looking for a compromise that would allow the bill to move. It took some time, but thanks to a combination of Sen. Rowden’s office, Sen. Wieland’s staff and Rep. Ruth’s determination, we came up with a plan. Sen. Chappelle-Nadal had a provision in her legislation dealing with radioactive contamination that required an owner, seller, landlord, or other transferor to disclose in writing to the prospective lessee, purchaser or other transferee if they have knowledge the property is, or was previously, contaminated with radioactive material. Later amendments added hazardous material and defined “knowledge” as the receipt by the owner, seller or other transferor of a report, stating affirmatively the premises was contaminated. If the person required to make the disclosure knew and did not disclose, they would be guilty of a Class A misdemeanor.

Once the amendment was agreed to and placed in the second Senate substitute, it took about two more hours of debate to pass the bill. The final vote was 29 to 4.
Because of the changes in the bill, it had to go back to the House, go through Fiscal Review one more time, followed by a final vote in the House of 132 ‘yes’ and eight ‘no’.
We were not as successful with SB 920 which provided immunity for real estate licensees who are given information about the size or area of a property, or improvements on the property from another - and who disclose the source of information. It was taken up for discussion on April 9, and after nearly four hours, Sen. Jeanie Riddle laid the bill on the informal calendar. It was not taken up again. We will look at some modifications and try next session.

Several years ago, Missouri REALTORS® strongly supported removing trial de novo in rent and possession cases. Trial de novo gave a party to the litigation, generally held in Associate Circuit Court, the ability to ask for a new trial in Circuit Court. It was not an appeal but a new trial. The action was the last vestige of the magistrate system where individuals who were not trained attorneys held a trial on a limited class of cases. The magistrate system was repealed in the 1970’s and replaced with the Associate Circuit Court system; these judges are as qualified as Circuit Judges. To get the one issue passed, we were forced to accept an amendment that required landlords to place security deposits in a trust account.

The Missouri Supreme Court, in the case of Brainchild Holdings, LLC v. Stephanie Cameron, opinion issued December 5, 2017, found that parties in a rent and possession case had a right to a jury trial in the associate circuit division. If every rent and possession case demanded a jury trial in the associate circuit division it would create a significant burden on the division and make recovery of property take even longer than it already does. The solution, based on a nuanced reading of the decision, appeared to be put back trial de novo because at some point the parties would have a right to a jury trial.

Sen. Doug Libla introduced SB 581, removing the requirement that a landlord is required to keep security deposits in a trust account. The decision was made to use the bill as a vehicle to put back trial de novo.

Many in the General Assembly, and the Greitens’ administration, have opposed the use of Low Income Housing and Historic tax credits. In 2017, the Missouri Housing Development Commission refused to issue any state Low-Income Housing tax credits. This year, as in the past several years, there were bills introduced to either significantly limit historic tax credits, making them subject to appropriation, or repeal them altogether. One bill, SB 590, introduced by Sen. Dan Hageman, initially severely limited the credits. After a great deal of discussion, debate, and maneuvering on all sides, we reached a reasonable compromise. The cap on the tax credits went from $140 million to $90 million. The Department of Economic Development shall issue up to an additional $30 million in credits. Where those credits are to be used in census tracts with a 20% or higher poverty rate, as determined by a map issued by DED. The combination of the $90 million in regular credits and the $30 million in additional credits brought the total available credits to $120 million. There is some additional problematic language in the bill giving DED the ability to consider other factors in awarding the credits. Sen. Hageman has promised he will monitor the issue and take action if it is needed.

The issues surrounding short-term or vacation rentals were as significant this session as they were in the preceding one. The issue at controversy was a little different. The broader legislation, HB 2457, was never placed on the calendar. Instead, a portion of the bill, dealing with taxation - both sales and the hotel/motel tax - was offered as an amendment on several occasions. The confusing thing was, according to the Department of Revenue, vacation rentals are subject to the same sales tax as other lodging establishments and, according to conversations with those who are involved in vacation rentals, they believe they are required to pay the hotel/motel tax. There has been at least one circuit court decision in Miller County that found vacation rentals to be liable for the tax. In other words, Expedia and other proponents of the amendment were looking to pass legislation that was existing law; there had to be something that was beneficial to the companies involved. We opposed those attempts and were successful, thanks in no small part to Representatives Rocky Miller, Diane Franklin, Keith Frederick and David Wood; just to name a few.

Licensing issues played a significant role in this session. One of the most popular changes was a provision allowing a person who met specific income qualifications, or who are in a military family, to request a waiver of occupational license fees for two years. The income qualifications include a household adjusted gross income below 130% of the federal poverty level, or individuals who are enrolled in a state or federal public assistance program. According to online research, 133 percent of poverty for a family of one, in 2017, was $16,040.

Another licensing issue in HB 1719 was the passage of the Sunrise Act. I’m not sure where the name came from or why it’s is called that because it imposes specific requirements on those who would seek to license a trade, occupation or profession not licensed as of January 1, 2019. The bill, as initially introduced about six years ago, covered all licenses - both current and potential. Our consistent opposition to imposing that on currently licensed occupations led to the current limitation. At any rate, the bill passed. It means if you want to license, for example, people who walk dogs for a fee, you must show that the public needs to be protected from the depredations of unlicensed dog walkers and describe what other states, if any, have done to protect the public and show that the only way to protect the public is to license the occupation and that certification or registration will not suffice. Those two words, certification and registration, caused a bit of a furor after the session adjourned.

In late May we received a copy of an email from the American Society of Association Executives asserting the passage of the bill would mean the end of private certification and registration. They included a link that allowed the recipient to send an email to, then, Governor Eric Greitens, asking him to veto the bill - in this case, HB 1719. It ignored the fact that similar language, in HB 1500, passed on May 1. I’m not sure the problem is as grave as they seem to think it is. The bill recognizes and refers to “private certification” on page 41 of HB 1719 and indeed would appear to encourage it as an alternative to state licensing. Governor Grietens signed HB 1719 on June 1, 2018; the same day he resigned from office. We’ve already had conversations with some members of the General Assembly and, if necessary, I suspect language can be crafted to remove even the semblance of a problem.

Hearings in both the House and the Senate discussed ways to make remote notarization possible and practical, additionally, Secretary of State, Jay Ashcroft, held a meeting in his office and invited all interested parties to attend. To make remote notarization work, you must have agreement from all the parties involved in the transaction. There were sufficient concerns expressed by several of the stakeholders that there needed to be additional modifications to the legislation to provide adequate security within the transaction. Because of the concerns expressed, the decision was made to work on the issue over the interim and reintroduce it next session.

And finally, HB 2562, introduced by Rep. Kevin Austin, that began as a bill making changes to treatment courts, expanded a bit. Two provisions that directly concern us are 82.462 and 82.1025 - 82.1030.

The first gives a person permission, not the owner of the property, to go on the property, but not enter any structures, to secure the property, remove trash and debris, mow the grounds and remove or paint over graffiti on the real property. The owner of the property is immune from civil liability for an injury suffered by the person so entering unless an act or omission constitutes gross negligence or willful, wanton or intentional misconduct.

The second reference deals with what is known as the “Neighborhood Restoration Act” and adds the City of Springfield to the act. Among other provisions, the act gives a property owner who owns property within “one thousand two hundred feet of a parcel of property which is alleged to be a nuisance to bring a nuisance action against the offending property owner for the amount of damage created by such nuisance to the value of the petitioner’s property…”. It also gives certain neighborhood organizations the ability to bring similar actions regarding code violations. The Senate Committee Substitute had a provision to award attorney’s fees to the property owner or neighborhood organization. Sen. Dixon agreed to remove that provision.