2004 Legislative Report
In 2004, the Tennessee Association of REALTORS® lived up to its reputation as one of our state’s strongest and most effective lobbying organizations, winning several significant legislative and regulatory victories. These accomplishments could not have been achieved without the thousands of REALTORS® who exercised their right to participate in the political process.
The grassroots power of TAR has become a substantial force on Capitol Hill. Tennessee REALTORS® utilized TAR VoterVOICE® to generate thousands of e-mails to legislators this year. Moreover, these contacts were targeted; state lawmakers praised TAR’s ability to ensure that e-mails they received came from constituents only. For the first time, TAR was also able to certify whether or not the REALTOR® sending the e-mail is a registered voter.
Over 200 REALTORS® from all corners of the state participated in “REALTORS® Day on the Hill” in March, meeting face-to-face with Senators and Representatives to outline our public policy goals.
The launch of the TAR Political Coordinator Program was another milestone in our grassroots program. Dozens of REALTORS® volunteered to make use of their personal and professional relationships with members of the General Assembly to maximize TAR’s political clout. Serving as key contacts to elected officials and their staffs, these REALTORS® did an excellent job of communicating the TAR agenda.
Just as essential to our success was the strength of the REALTORS® Political Action Committee (RPAC). In 2003, Tennessee REALTORS® invested $283,017.65 in RPAC, of which $63,100 was contributed directly to state legislative candidates. RPAC-supported legislators helped make the difference on several critical issues, underscoring the importance of a REALTOR®-friendly General Assembly.
REALTORS® championed legislation that improves our industry, protects the rights of property owners and consumers, and promotes a strong economy. Our victories include:
- Predatory Lending
- Limiting the Use of Credit Scores for Homeowner's Insurance
- Changes to the Tennessee Do Not Call Program
- Workers' Compensation Insurance Reform
- Keeping Real Estate Taxes Low
- Property Used to Manufacture Methamphetamine
- Building Construction Safety Standards
- Mandatory Mold Inspections
- Restrictions on Selling Title Insurance
- Home Inspector Licensing
One of TAR’s top legislative priorities for 2004 was passage of a bill that would define and prohibit “predatory” lending practices in Tennessee. This goal was usurped in January, when the U.S. Office of the Comptroller of the Currency issued new rules giving itself increased authority to govern nationally chartered lenders. This action limited the power of states to regulate banks, particularly in regard to predatory lending practices.
Disappointed but not defeated, TAR resolved to assist the Tennessee Department of Financial Institutions (TDFI) in enacting SB 3455/HB 3539. The bill authorizes the TDFI to register all mortgage loan originators under the Mortgage Act. This registration requirement will help the TDFI more effectively regulate the mortgage industry and curb predatory practices by enabling the department to better track and monitor the activities of loan originators.
This new law will also afford consumers greater protections through enhanced regulatory oversight and tougher penalties for violations, including civil money penalties of up to $10,000, and authority to order refunds to a borrower for interest or fees collected in violation of the TILT or Mortgage Acts.
REALTORS® used TAR VoterVOICE® to send over 1,100 e-mails to House and Senate members on this issue alone.
In a direct response to the move by the OCC, the General Assembly adopted SJR 699. This resolution urges the U.S. Congress to study the growing scope of federal preemption of the banking industry by the OCC and to enact legislation, if necessary, to prevent the unilateral expansion of jurisdiction of financial institutions by unelected regulators.
TAR also successfully lobbied for SB 3358/HB 3377, a proposal that extends the life of the pecial Joint Study Committee on Predatory Lending until May 1, 2005.
Limiting the Use of Credit Scores for Homeowner's Insurance
TAR supported SB 2259/HB 2339, which was signed into law by Governor Phil Bredesen in April. The new law specifically prohibits insurance companies from using credit information as the sole determinant for insurance underwriting and rate-setting purposes. The credit scoring language in the bill is in line with recommendations from the National Association of REALTORS® Insurance Task Force, which was formed in 2002 to explore issues surrounding availability and affordability of property casualty insurance.
This measure, sponsored by Sen. Roscoe Dixon (D-Memphis) and Rep. Kathryn Bowers (D-Memphis), also enumerates several additional protections for consumers regarding how credit scores are used, including a prohibition on the use of an insurance score that is calculated using income, gender, address, ethnic group, religion, marital status, nationality, education, or occupation of the consumer as a factor. Insurers that use insurance scores to underwrite or rate risks must file their scoring models or other scoring processes with the Department of Commerce and Insurance.
Changes to the Tennessee Do Not Call Program
When the federal government created its own Do Not Call program in 2003, the Tennessee Regulatory Authority (TRA) decided not to share the state list with the federal list, thereby requiring REALTORS® in Tennessee to operate under two different Do Not Call programs.
Persons wanting to engage in telephone solicitations may purchase the state’s Do Not Call list by paying a $500.00 registration fee. Under its rulemaking authority, the TRA can charge real estate firms $1,000.00 plus $50.00 per affiliate broker for access to this same list. The federal government does not charge a registration fee for access to its list.
In response to this inequity between the state and federal law, TAR filed SB 2370/HB 2400, sponsored by Sen. Ward Crutchfield (D-Chattanooga) and Rep. Jere Hargrove (D-Cookeville). The intent of the bill was to provide an exemption for real estate licensees from the Tennessee Do Not Call law. The bill was later re-written to exempt real estate licensees from the registration fees.
The amended version of HB 2400 passed unanimously in the House Commerce and Finance Committees, but was met with some skepticism from ranking members of the Senate Commerce Committee. Throughout the legislative session, TAR lobbyists were meeting with TRA officials to discuss a regulatory solution to our problem. These negotiations proved to be successful, and TAR suspended its efforts to pass the bill.
The TRA has begun the process of amending the rules regarding the state's Do Not Call Register. A rule change has been proposed that will remove calls made to For-Sale-By-Owner and expired listings from the definition of "telephone solicitation," thereby creating a limited exemption from the Do Not Call law for real estate licensees.
For those real estate firms that wish to engage in pure cold-calling, the proposal will also include a provision to lower the fee to access the state's Do Not Call Register. Under current regulations, a real estate firm must pay a registration fee of $1,000, plus $50 per agent, for access to the Register. The proposal will lower this fee to a flat $500, with no additional fee for agents.
TAR expects the regulatory action to be finalized in late summer 2004. It is important to note that even with a state exemption for calls made to FSBOs and expired listings, Tennessee REALTORS® will still be subject to the provisions of the National Do Not Call list. NAR is pursuing a similar exemption at the federal level.
Workers' Compensation Insurance Reform
Governor Phil Bredesen scored a major political victory this year by winning legislative support for SB 3424/HB 3531, his plan to reform the state's workers' compensation insurance law.
The TAR Board of Directors voted unanimously at the Spring Conference to support the governor’s proposal, which he said was designed to create more jobs in Tennessee. The administration has cited several examples of businesses that have not expanded in or relocated to Tennessee at least partly due to workers' compensation costs. Naturally, more jobs should mean increased commercial and residential real estate activity in Tennessee.
Two proposals that would have significantly increased the cost of homeownership in two suburban counties were killed on the House floor during the final week of the legislative session. HB 3582 would have authorized the Rutherford County Commission to levy a tax of $2,500 per lot on residential development. HB 3614 would have authorized a $1.00 per square foot tax on residential and commercial development in Fayette County.
The failure of these bills is significant because it is virtually impossible to kill legislation that applies only to a specific city or county, also known as a "local bill." The tradition of "legislative courtesy" holds that lawmakers don't vote against another member's local bill. Local bills are routinely placed on the consent calendar, which consists of non-controversial bills and resolutions, and are generally passed unanimously by the House and Senate.
Under the House rules, however, HB 3582 could not be placed on the consent calendar because one of the delegation members, Rep. Donna Rowland (R-Murfreesboro) refused to sign on as a cosponsor of the bill. The proposal failed on the House floor when it fell shy of passage by eight votes. The sponsors brought it back to the floor one week later, but the bill failed again and received ten less votes than before.
At the urging of TAR, Rep. Kathryn Bowers (D-Memphis) and Rep. Ulysses Jones (D-Memphis) filed objections that same day to HB 3614 and had it moved from the consent calendar to the next regular calendar. TAR and the Home Builders Association of Tennessee, with grassroots assistance from REALTORS® and home builders in Shelby and Fayette Counties, worked against the bill until the next morning. When HB 3614 came up for consideration, it received fifteen votes, thirty-five short of the fifty needed for passage.
During the debate on the Fayette County proposal, Rep. Tommy Head (D-Clarksville) gave a thought-provoking floor speech on how county commissions should proceed in the future if they want to request new development taxes. Rep. Head encouraged local governments to work with their REALTORS® and home builders on reasonable proposals before submitting a request to the legislature for new taxes.
Rep. Head cited as an example SB 3462/HB 3555, which authorized an adequate facilities tax for Montgomery County. This tax — crafted as a compromise between the county commission, local REALTORS®, and home builders — sets an initial rate of $250 per lot and $250 per dwelling unit. The tax rate is increased by six percent annually through the year 2016, when it will reach a combined maximum of $1,000.
Property Used to Manufacture Methamphetamine
Methamphetamine, or "meth," is the fastest growing drug problem in Tennessee. Properties where meth is manufactured are often found to be unfit for human use, as they have been contaminated by the toxic by-products of the cooking process. The production of one pound of meth can create five to seven pounds of toxic waste.
TAR worked with the sponsors of SB 2979/HB 2385, Sen. Charlotte Burks (D-Monterey) and Rep. Charles Curtiss (D-Sparta), to craft a bill that protects private property rights as well as the public health.
As adopted by the General Assembly, this new law allows local law enforcement agencies to quarantine property where meth has been manufactured. Persons with an ownership interest in the property, including any lienholders, may contact a state-certified industrial hygienist or other persons qualified by the state in order to perform testing and cleanup of the property. Costs associated with the inspection, testing, and quarantine will be required to be considered when the court calculates restitution for offenders. In the event that the local law enforcement agency will not lift the quarantine, property owners may petition the court to have the quarantine lifted once the property has been cleaned and declared fit for human use, or if they can show that the property was wrongfully quarantined.
Building Construction Safety Standards
TAR won passage of SB 2684/HB 2347, which was filed in response to overly burdensome seismic standards in the new International Code Council’s model building codes. Had this bill failed, many groups were predicting a virtual shutdown of new commercial, industrial, and multi-family residential construction in West Tennessee.
This new law gives certain local jurisdictions an additional year to adopt the prevailing state building code and clarifies the right of local governments to amend the standard building code. It is anticipated that the next version of the model building codes will contain more flexibility regarding seismic standards.
SB 3130/HB 3129 would have required owners of residential, commercial or industrial buildings or structures to obtain a mold inspection prior to the sale, exchange or transfer of such properties. TAR convinced the bill sponsor, Sen. Tim Burchett (R-Knoxville), not to move forward with this bill.
Restrictions on Selling Title Insurance
TAR successfully fought SB 2706/HB 3145, which would have placed onerous restrictions on who may sell title insurance in Tennessee. The bill was proposed by the Tennessee Land Title Association and would have required any contract for title insurance to be counter-signed by a Tennessee resident licensed to issue title insurance. TAR and other groups worked together to oppose what was obviously a protectionist bill that would provide no benefit to Tennessee homebuyers.
The flagship item on TAR’s 2004 legislative agenda was passage of SB 2323/HB 2434, the Home Inspector License Act, which would create education, training, testing, ethical, and experience standards for home inspectors. This legislation was designed to allow open access to licensure while ensuring a reasonable level of competency among practitioners.
At the urging of Governor Bredesen, TAR decided to shelve the measure until next year. The administration plans to conduct a thorough review of all boards, commissions, and related licensing entities during the summer and fall. It is anticipated that this review could result in legislation to streamline the operations of state government.
Anna Windrow, Governor Bredesen’s Senior Policy Advisor, assured TAR lobbyists that the Association will have opportunities to share its thoughts concerning the proposal to license home inspectors during this process, as well as any thoughts on the Real Estate Commission and the Real Estate Appraisal Commission.
Additionally, the leadership of the American Society of Home Inspectors and the Home Inspectors of Tennessee Association decided to oppose an agreement reached between TAR and state officials regarding administrative supervision of home inspector licensing. An agreement in principle had been reached with the Division of Regulatory Boards to amend the bill and place the licensing authority of home inspectors with the Board for Licensing Contractors. This amendment was expected to eliminate the negative fiscal impact of the bill.
With the coalition of support for the bill threatening to crumble, and in light of the governor's request, the Legislative Affairs Subcommittee of the TAR Governmental Affairs Committee voted to pull the bill this year, work with the Administration, and if necessary, re-file the proposal in 2005.