Chairperson Gale convened a meeting of the Nebraska Real Estate Commission at 9:03 a.m. on April 1, 2004, in the Staybridge Room of the Staybridge Suites, located at 2701 Fletcher Avenue in Lincoln, Nebraska. All of the members of the Real Estate Commission were present, with the exception of Commissioner Johnson, who was absent and excused. Also present were Director Les Tyrrell, Deputy Director for Education Teresa Hoffman, Deputy Director for Enforcement Terry Mayrose, and Administrative Assistant Heidi Burklund. Abbie Widger, Special Assistant Attorney General and Counsel to the Commission, was present for the Klein stipulation and consent order, the request for proposals for the errors and omissions insurance contract, and the rule change discussion.

Director Tyrrell presented a public notice and proofs of publication thereof relating to this meeting, all of which are attached to and made a part of these minutes. Chairperson Gale reported that all Commissioners had been notified of the meeting simultaneously, in writing, and that a proposed tentative agenda accompanied the notification.

Chairperson Gale pointed out to those in attendance that a public copy of the materials being used during the meeting was available to the public on the counsel table in the meeting room, and that the procedures followed were in accordance with the Open Meetings Law. Chairperson Gale asked that guests sign the guest list.

Director Tyrrell noted that agenda item 10b had been added since the tentative agenda was mailed to the Commissioners.

After review of the final agenda, a motion was made by Moline and seconded by Strand to adopt the final agenda as presented. Motion carried with Moline, Poskochil, Shepard, Strand, Wiebusch, and Gale voting aye, and with Johnson not participating or voting, being absent and excused.

The minutes of the Commission meeting held on March 3, 2004, were considered.

After review, a motion was made by Moline and seconded by Shepard to approve the minutes as presented. Motion carried with Moline, Poskochil, Shepard, Strand, and Gale voting aye, with Wiebusch not participating or voting, not having been present at the meeting, and with Johnson not participating or voting, being absent and excused.

There was no Receipts and Expenditures Report to be presented at the meeting.

There were no specialized registrations to be presented at the meeting.

Deputy Director Hoffman presented for ratification the Non-Resident Licenses and Resident Licenses Issued to Persons Holding Licenses in Other Jurisdictions Report, a copy of which is attached to and made a part of these minutes.

After review, a motion was made by Moline and seconded by Strand to ratify issuance of the licenses as set forth in the report. Motion carried with Moline, Poskochil, Shepard, Strand, Wiebusch, and Gale voting aye, and with Johnson not participating or voting, being absent and excused.

Deputy Director Hoffman presented for ratification the February Examination Report, a copy of which is attached to and made a part of these minutes.

After review, a motion was made by Moline and seconded by Strand to ratify the February Examination Report for the purpose of issuing licenses. Motion carried with Moline, Poskochil, Shepard, Strand, Wiebusch, and Gale voting aye, and with Johnson not participating or voting, being absent and excused.

Deputy Director Hoffman reported that Jeff Davis from Applied Measurement Professionals (AMP) reviewed the Lincoln examination site three weeks ago, for the reported issues of sound, space, and temperature. AMP had received an estimate to insulate the room for sound and to improve the cooling system. AMP was reluctant to remove an examination station, but was looking at reconfiguring the hardware to provide more desktop work space. AMP had not made a commitment yet regarding the improvements. Deputy Director Hoffman was very pleased that they were responsive. The onsite coordinator was very professional, and since she had taken the comments, she helped ascertain the problems.

Deputy Director Hoffman presented for ratification the Continuing Education Activity Approval Report, a copy of which is attached to and made a part of these minutes.

Commissioner Poskochil questioned the approach and content of the lending activity. Deputy Director Hoffman said there were many new financing options becoming available, and the activity educated licensees on those. Deputy Director Hoffman asked if Commissioner Poskochil wanted her to have further discussion with the provider. Commissioner Poskochil said no, but he was concerned with some lending practices. Deputy Director Hoffman said she would keep his comments in mind when reviewing future offerings on the subject.

Deputy Director Hoffman presented for ratification the Continuing Education Instructor Approval Report, a copy of which is attached to and made a part of these minutes.

Deputy Director Hoffman presented for ratification the Continuing Education Activity Significant Change Report, a copy of which is attached to and made a part of these minutes.

Commissioner Wiebusch asked if the report should indicate Eau Claire, Wisconsin, not Nebraska. Deputy Director Hoffman said it should be Wisconsin, and the error would be corrected on the minutes exhibit.

After review, a motion was made by Wiebusch and seconded by Moline to ratify the reports as corrected. Motion carried with Moline, Poskochil, Shepard, Strand, Wiebusch, and Gale voting aye, and with Johnson not participating or voting, being absent and excused.

Deputy Director Hoffman presented the 2003 Annual Report Summary and the 2004 Continuing Education Renewal Report, copies of which are attached to and made a part of these minutes.

Deputy Director Hoffman said the reports were fairly typical in response rate and activity renewals. None of the activities being dropped were particularly unique, and were offered in some form by other providers. There was nothing troubling in the report. There was a nice selection of distance education available. Deputy Director Hoffman gave a brief review of the ARELLO distance education certification program, and the widespread acceptance of ARELLO-certified activities.

After review, a motion was made by Moline and seconded by Poskochil to ratify the reports. Motion carried with Moline, Poskochil, Shepard, Strand, Wiebusch, and Gale voting aye, and with Johnson not participating or voting, being absent and excused.

Deputy Director Hoffman said there was a recently discovered practice in Nebraska of real estate firm-sponsored study groups for real estate prelicense distance education students. The firm advertised that study groups were forming for the study of prelicense education to prepare students to enter a career in real estate. Those responding to the advertisement were then instructed to obtain approved correspondence study from an approved school, and to bring the materials with them to the study group. This group was coordinated by an individual who then served as the administrator of their study and the subject-matter expert to answer their questions on the material.

Chairperson Gale asked if the coordinator was a licensed individual. Deputy Director Hoffman said yes. Commissioner Moline asked if it was happening in rural areas where there were no schools. Deputy Director Hoffman said yes. Commissioner Moline said that, if students took correspondence courses, they would struggle either way. Deputy Director Hoffman reiterated that she had no problem with an informal study group. The problem was that it was formalized to this extent, with an individual setting himself up as a resource. In distance education, the resource was the school, with a certified instructor. Students were provided with contact numbers for instructors. In this case, the individual set himself up as an administrator and a subject matter expert. Commissioner Moline asked if schools had all that set up. Deputy Director Hoffman said yes, but students were not sophisticated enough to know to rely on the school rather than the coordinator, who was setting himself up as an authority.

Commissioner Poskochil asked if the coordinator was charging students for his services. Deputy Director Hoffman said she thought it was a recruiting tool, and that he extracted a commitment for employment rather than money.

Commissioner Moline said it was probably a broker trying to get people through the test. Tech schools took 9 months, and were not serving the public. If people wanted to get together to ask questions, that should be a positive thing. Deputy Director Hoffman said if that was needed, a licensed school could set up a satellite location. Commissioner Moline said economics was why that had not happened.

Commissioner Strand said the Commission served as the Better Business Bureau for instruction, but questioned telling people they could not help educate students for the test. He agreed that, in terms of teaching methods, the practice was questionable. Deputy Director Hoffman noted the coordinator was not just teaching for test preparation, which would have been permissible since the Commission does not approve test preparation courses. The coordinator was acting as an instructor for prelicense education courses.

Chairperson Gale asked if the coordinator had placed advertisements in the local paper. Deputy Director Hoffman said yes, and she would get an ad to show the Commission. The coordinator advertised under the real estate firm name, saying he was getting together a group for prelicense education, and to contact him. Chairperson Gale said the coordinator could be seen as a mentor to individuals, but the problem entered in when he advertised his services to the public.

Strand asked if credit hours were required, in addition to passing the examination. Deputy Director Hoffman said yes. Commissioner Strand asked if students were accumulating credit hours that did not count. Deputy Director Hoffman said no, the courses were approved, but required an instructor support mechanism and administrative support. Schools answered questions individually, and students could usually attend classroom instruction on certain nights for free if desired, if there was an area in which a student wanted additional help. This situation preempted the support mechanism.

Director Tyrrell said the Department of Education, particularly Vocational Education, may make a ruling that a school needed to be registered with them. Deputy Director Hoffman said she will also pursue that issue in her research.

Director Tyrrell presented a summary report of the pending complaints, which included a list of licensees presently under disciplinary action or on appeal. A copy of said report is attached to and made a part of these minutes.

No action was necessary on this report.

The following sworn complaints and investigative matters were presented to the Commission:

Counsel Widger presented a stipulation and consent order in the matter of Complaint #2004-001, Andria & Leslie Davidson vs. David Scott Klein. A copy of said order is attached to and made a part of these minutes. Mr. Klein was not present.

After discussion, a motion was made by Wiebusch and seconded by Poskochil to enter into the order as presented. Motion carried with Moline, Poskochil, Shepard, Strand, Wiebusch, and Gale voting aye, and with Johnson not participating or voting, being absent and excused.

Deputy Director Mayrose presented two stipulation and consent orders in the matter of Complaint #2004-020, Commission vs. Carla J. Mason & Janell Dianne McMann. Copies of said orders are attached to and made a part of these minutes. Ms. Mason and Ms. McMann were not present.

After discussion, a motion was made by Moline and seconded by Strand to enter into the orders as presented. Motion carried with Moline, Poskochil, Shepard, Strand, Wiebusch, and Gale voting aye, and with Johnson not participating or voting, being absent and excused.

There were no hearings scheduled for this meeting.

Chairperson Gale reviewed the procedure for informal special appearances.

Mr. Steinmark said that his criminal history when he was younger was really bad. He did some really stupid things because of alcohol. He still goes to Alcoholics Anonymous, and felt that, at age 43, if he got a license it would be a good future for him.

Mr. Steinmark said he got the telemarketing job through the Sunday paper. The owner did the hiring, and had 40 employees working 2 shifts per day. Mr. Steinmark worked on the night crew, but got out after 2 months. People would charge the water purifiers on their credit cards, and then would call back and say they did not get the prize they were promised. Mr. Steinmark told his wife that something was not right, and got out of it. Three years later, he was told the federal government had used wiretaps at the business. He went in front of a grand jury and went to trial, because he did not take the plea bargain. His lawyer said he did not see how they could convict him. He probably would have received probation if he had accepted the plea bargain.

After discussion, a motion was made by Moline and seconded by Poskochil to not allow Mr. Steinmark to sit for the salesperson examination at this time.

Motion carried with Moline, Poskochil, Shepard, Strand, Wiebusch, and Gale voting aye, and with Johnson not participating or voting, being absent and excused.

Director Tyrrell presented exhibits regarding the request for proposals (RFP) on the errors and omissions insurance plan for 2005. Copies of said exhibits are attached to and made a part of these minutes.

Director Tyrrell noted that Rice Insurance Services Company LLC currently administers all mandatory errors and omissions insurance programs. Commissioner Moline asked if any states had lost coverage. Director Tyrrell said that Alabama lost coverage because of too many claims. No carriers would pick up their policy without underwriting. That left Alabama licensees to get market coverage, which Director Tyrrell imagined was expensive. Alabama had received no bids the last time their errors and omissions policy went out. They also put in their contract that, if the carrier did not get a certain percentage of licensees enrolled, the carrier could cancel the policy. There were a number of reasons they could not get coverage. Commissioner Poskochil asked what else affected their coverage. Director Tyrrell said that Alabama was the most litigious state, according to the Alabama Real Estate Commission.

Commissioner Strand asked if the Commission should negotiate an aggregate of $500,000 for $5 more, like South Dakota. Director Tyrrell said he could not guarantee that would be the price. Commissioner Moline said the $300,000 aggregate was not enough. Director Tyrrell noted that when the Commission started the plan, there was no aggregate, so coverage was unlimited. The insurance industry killed the Commission on that. At the time, all carriers agreed on a $300,000 aggregate. It ended up the same cost for insurance with or without the aggregate.

Commissioner Moline noted it was $300,000 for each person, which was required by state law. If a broker wanted to negotiate his own insurance, he could not buy a million-dollar aggregate for all employees, because coverage had to be on the individual. Director Tyrrell agreed that the coverage had to be on the individual. If not, it would not be equivalent coverage.

Commissioner Moline said that agents would think he had lost his mind, but he thought the Commission should push the deductible up. 4-6% did not look like much additional cost now, but if the premium kept going up, it added up. Director Tyrrell said that had created a problem with equivalent coverage. There was a provision in the proposed rule change that, if a policy was written in July and expired in June, it used the deductible limit in effect during the calendar year the policy went into effect. That way, if the Commission changed the deductible on the Commission-offered plan, licensees would not have to renegotiate equivalent coverage in the middle of their policy period.

Commissioner Wiebusch noted that, on page 5, the RFP asked what the premium would be with a deductible of $2500. Director Tyrrell said that was what the Commission had asked him to do. Currently, the Commission could ask the question, but could not accept a bid based on it, because the rules specify no more than a 1% deductible. This question would allow the Commission to collect the information, but the Commission would need a rule change before accepting a bid with a higher deductible.

After discussion, a motion was made by Moline and seconded by Wiebusch to approve Exhibit 13 as presented for the RFP on the errors and omissions insurance plan for 2005, with appropriate wording changes as needed, and with the additional deductible question. Motion carried with Moline, Poskochil, Shepard, Strand, Wiebusch, and Gale voting aye, and with Johnson not participating or voting, being absent and excused.

Director Tyrrell presented an exhibit which was a preliminary hearing draft of proposed changes to Title 299, Chapter 8. A copy of said exhibit is attached to and made a part of these minutes.

Director Tyrrell noted that Commissioners had requested a draft of proposed changes at the March meeting, in case raising the deductible on the errors and omissions insurance program would significantly lower the premium. Per Commission instructions, a change allowing a deductible up to 3% was noted, and licensees with equivalent coverage would not be required to renegotiate coverage if the Commission plan changed during their policy period.

Chairperson Gale asked if the deductible should be higher. Commissioner Moline said yes, for brokers. For individuals, a higher deductible may be prohibitive. Commissioner Poskochil asked if the Commission should consider coverage changes. Director Tyrrell said that the per claim limit of $100,000 was pretty standard. Chairperson Gale noted that claims would be fully defended, and a licensee would only have to pay the deductible if found negligent. Director Tyrrell said there were approximately 50 claims per year, on average.

Commissioner Poskochil asked what would happen if one claim was over $100,000. Director Tyrrell said the insurance company would pay the first $100,000, then the agent would be liable for the rest. Commissioner Poskochil asked about mold coverage. Director Tyrrell said he did not believe there was any coverage for that. Commissioner Poskochil asked about fraud coverage. Director Tyrrell said the licensee would be criminally liable.

Commissioner Moline asked if Rice had sent information to brokers regarding additional coverage, because he had not seen it. Director Tyrrell said he would call them and check. Deputy Director Hoffman said she thought that information went out months ago.

After discussion, a motion was made by Wiebusch and seconded by Moline to use the preliminary hearing draft as presented for the public hearing on Title 299, Chapter 8. Motion carried with Moline, Poskochil, Shepard, Strand, Wiebusch, and Gale voting aye, and with Johnson not participating or voting, being absent and excused.

Director Tyrrell presented an exhibit which consisted of the revised State Data Communications Network Acceptable Use Policy. A copy of said exhibit is attached to and made a part of these minutes.

Director Tyrrell noted that this was an office policy. Since 1995, the Commission had adopted the State Data Communications acceptable use policy. This was their new, improved version.

After discussion, a motion was made by Wiebusch and seconded by Moline to adopt the policy as presented.

Commissioner Strand asked if item #5 meant a staff member could use the network to notify people of United Way fundraising. Director Tyrrell said that it could, if those notified were within the state system.

Motion carried with Moline, Poskochil, Shepard, Strand, Wiebusch, and Gale voting aye, and with Johnson not participating or voting, being absent and excused.

Director Tyrrell noted that LB 845 was on Final Reading.

No action was necessary on this report.

Director Tyrrell noted that the ARELLO Mid-Year Meeting will be held in Omaha on April 21-24, 2004.

Commissioner Moline noted that he could not attend the Omaha meeting, but he had a letter regarding the Comptroller of Currency rule on exempting banks. Commissioner Moline asked that those attending the meeting bring back the lending roundtable discussion information for him. Director Tyrrell said he would.

No action was necessary on this report.

Director Tyrrell presented an exhibit which consisted of updated information regarding the ARELLO District 3 Meeting. A copy of said exhibit is attached to and made a part of these minutes.

Commissioner Wiebusch, the District 3 Vice President, noted that the North Dakota Real Estate Commission voted that they could not afford to host the ARELLO District 3 meeting in Bismarck this July, as originally planned. Commissioner Wiebusch thanked Ms. Burklund for coordinating the emails with the district administrators. Group consensus was to join the District 2 meeting, which will be held in Charleston, South Carolina, on June 24-27, 2004. Director Tyrrell noted that the Commission had already approved attendance at the district meeting, this was just a different location and cost. Commissioners could go ahead and make their hotel reservations.

No action was necessary on this report.

Director Tyrrell presented the Errors and Omissions Insurance Loss Report through 12-31-03. A copy of said report is attached to and made a part of these minutes.

Director Tyrrell noted that there was nothing unusual in the report, which will be incorporated into the RFP.

No action was necessary on this report.

Commissioner Moline said he had received an email containing suggestions from a licensee, which he would like to discuss.

The first suggestion was about prelicense education. The licensee felt that a lot of material in prelicense education courses was not on state law. The licensee suggested that current course content be condensed, perhaps in the Finance class, and a section added on Nebraska license law. Deputy Director Hoffman said that had been looked at over the years. The curriculum was designed by national experts, and was education-based, focusing on theory and general practice. Commissioner Moline said that the chapters on federal home laws and the Federal Modernization Act were no longer useful. Deputy Director Hoffman said she would be happy to look at the curriculum. She noted that it also depended on how each school used the course outline. Director Tyrrell said schools had options to adapt the curriculum to current laws and textbooks. Staff reviewed the curriculum every so often. Commissioner Moline asked that staff look into it. Director Tyrrell noted that the philosophy for prelicense education courses was that the courses should give potential licensees a broad, general knowledge of the real estate industry and how it worked, but that the Commission could always change the philosophy. Study of the License Act was considered to be examination preparation. Commissioner Moline said that the material covered in the Finance class was never used or retained.

Director Tyrrell said he had been asked to speak to a flood plain task force last year, and that was one issue discussed. The consensus was that nobody would know the answer. One person pushed for it, but could not convince the task force. The Commission could add it to the Seller Property Condition Disclosure Statement by holding a rule change hearing. The discussion would probably end up the same, because people did not know, and would always indicate that they did not know. The issue stemmed from the Antelope Valley project. Commissioner Wiebusch asked if every county had a FEMA map, and a floodplain contact person. Director Tyrrell said people may be able to find out from the Corps of Engineers. Commissioner Wiebusch said she thought one person was the point person, and if that person did not have the answer, then surveyors would have to be brought in.

May 19-20, 2004 - Days Hotel Carlisle, Omaha

June 14-15, 2004 - Ramada Limited South, Lincoln

August 17-18, 2004 - Staybridge Suites, Lincoln

At 9:53 a.m., Chairperson Gale declared a brief recess, and reconvened the meeting at 10:05 a.m.

At 11:04 a.m., Chairperson Gale declared a brief recess, and reconvened the meeting at 11:12 a.m.

At 11:57 p.m. on April 1, there being no further business to come before the Commission, a motion was made by Wiebusch and seconded by Poskochil that the meeting adjourn. Motion carried with Moline, Poskochil, Shepard, Strand, Wiebusch, and Gale voting aye, and with Johnson not participating or voting, being absent and excused.

I, Les Tyrrell, Director of the Nebraska Real Estate Commission, do hereby certify that the foregoing minutes of the April 1, 2004, meeting of the Nebraska Real Estate Commission were available for inspection on April 13, 2004, in compliance with Section 84-1413(5) R.R.S. 1943, of Nebraska.

Respectfully submitted,
Les Tyrrell
Director

Harding Collis, NP Dodge, Omaha
Monica Humpal, CBSHOME Real Estate, Omaha
Beth Lube, Re/Max Real Estate Group, Omaha
Mike Matukewicz, Omaha