NDT H.B. 2703 75(R)BILL ANALYSIS LICENSING & ADMINISTRATIVE PROCEDURES H.B. 2703 By: Stiles 4-15-97 Committee Report (Amended) BACKGROUND The manufactured housing industry has been regulated by the Texas Department of Housing and Community Affairs (TDHCA) since 1995; prior to 1995, the Texas Department of Licensing and Regulation regulated the industry. The purpose of the Texas Manufactured Housing Standards Act is to protect the citizens by imposing regulations on the construction and installation of manufactured housing, to provide economic stability of housing manufacturers, retailers, installers and brokers, and to provide for consumer remedies. Currently, manufacturers, retailers, brokers, installers and rebuilders are required to post bonds or other security as a condition of licensure. This bond or security is liable for, and must provide reimbursement to the recovery fund for claims made by consumers against a license holder. The amount of the retailer bond is currently $30,000. An inspection fee is imposed on every manufactured home sold. However, a backlog of inspections is growing. According to the TDHCA, unless more money and staffing resources are provided, a backlog of manufactured homes that have been installed but not inspected will reach 44,640 by the end of FY 97. Of the 22,983 installation inspections performed in FY 96, 2,803 improper inspections were found. Construction-related violations, including minor violations such as windows broken during transportation, totalled 1,190 during that period. Manufactured housing is constructed to a national building code promulgated and enforced by the federal Department of Housing and Urban Development. The code is preemptive of all state and local building codes because of the interstate shipment and transportation of homes. On July 13, 1994, a more stringent HUD regulation became effective requiring substantial additional construction standards for manufactured homes designed for Wind Zone II. The TDHCA recently proposed rules for Wind Zone II (coastal) counties which would prohibit the relocation within the Wind Zone II area of manufactured homes not meeting Zone II standards. A series of public hearings was held around the state to solicit comments on the rules. One objection raised about this proposal is that not allowing the relocation of existing homes would dramatically reduce the value of those homes. The Department has since withdrawn the proposed rule and plans to present a modified proposal. PURPOSE This legislation would prohibit homes constructed on or after July 13, 1994 from being installed in Wind Zone II unless they meet Zone II standards, and grandfather homes currently installed in Zone II. The inspection program would be changed to a random program. Local governments would be required to justify a need for standards different from those promulgated for the area by the agency. The amount of the required retailer bond would be increased from $30,000 to $100,000. Sales of nonhabitable homes to consumers would be permitted with proper notice. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 3, Texas Manufactured Housing Standards Act, by alphabetizing the definitions provided in that Section. SECTION 2. Amends Section 3A, Texas Manufactured Housing Standards Act, by requiring the definition of "mobile home," "HUD-code manufactured home," and "manufactured housing" provided by Section 3 to be binding on all persons, agencies, local political subdivisions, and home-rule cities in Texas. SECTION 3. Amends Sections 4(g) - (i), Texas Manufactured Housing Standards Act. (g) Requires local governments to justify by substantial evidence public need for construction or installation standards different from those promulgated by the director for the construction or installation of manufactured housing within the local government unit. (h) Requires the director to publish a notice and conduct a public hearing following Section 9 of this Act before altering or approving different standards than those authorized by this Act. (i) Requires the director to state an effective date for requirements, modifications, or repeals of requirements as provided by Section 9 of this Act. SECTION 4. Adds Section 4B, Texas Manufactured Housing Standards Act. (a) Requires the department to establish a random inspection program requiring inspections for at least 25% of all manufactured home installations. (b) Prohibits manufactured homes constructed on or after July 13, 1994 from being installed in Wind Zone II, unless the home was designed and constructed to meet or exceed federal construction and safety standards developed for that area. (c) Requires sellers of used manufactured homes constructed before July 13, 1994, to give notice to purchasers that the home was constructed before the effective date of federal construction and safety standards for hurricane zones and that the purchaser may not be able to install the home in Wind Zone II. (d) Allows manufactured homes installed in Wind Zone II before September 1, 1997, to remain and relocate in Wind Zone II. (e) Specifies Wind Zone II counties. SECTION 5. Amends Section 6(e) - (h), Texas Manufactured Housing Standards Act, by amending subsections (e)-(h) and adding subsection (l). (e)-(h) Substitutes "licensed" for "registered." (l) Prohibits a salesperson from providing, or assisting a consumer in providing, false or misleading information on credit applications. SECTION 6. Amends Section 7, Texas Manufactured Housing Standards Act. Section 7. Substitutes "license" for "certificate of registration" and "registration", "license holder" for "registrant", and "licensed" for "registered"; adds Subsection (r) which provides a specific procedure for the department to follow for license renewal. SECTION 7. Amends Section 7(A), Texas Manufactured Housing Standards Act. Section 7(A). Provides a new title for the section; authorizes the director to recognize, prepare or administer certification programs; requires the director to issue a certificate to a person who completes a certification or continuing education program. SECTION 8. Amends Sections 8(b), (d), (e), (f), (h), and (i), Texas Manufactured Housing Standards Act. (b) Adds an exception to the prohibition against selling a home that is not habitable; changes from 60 to 90 days the period in which a consumer is required to notify the seller of any defects making the home uninhabitable after a sale, exchange, or lease-purchase agreement; deletes provision requiring uninhabitable homes to be sold only for business use. (d) Deletes language relating to transfer of used homes for business use. (e) Allows the sale of used homes on an "as is" basis provided proper notice is given to the buyer; deletes current provision requiring inspection by the department. (f) Deletes language relating to transfer of used homes for business use. (h) Deletes language relating to procedure for transfer of uninhabitable homes. (i) Designates current subsection (i) as subsection (h). SECTION 9. Amends Section 9(d) - (g), and (m), Texas Manufactured Housing Standards Act. (d) Defines the word "rule" for purposes of Section 9; deletes current requirements for publishing of proposed changes in rules and regulations. (e) Requires rules to be adopted as provided by Chapter 2001, Government Code, and this section. (f) Provides publishing requirements for proposed rules, amendments to rules and repeal of rules; provides notice requirements for hearings on rules; requires the director to allow people to participate by providing written comments. (g) Provides publishing requirements for adopted rules and repeal of rules; requires effective dates relating to installation standards to be not less than 60 days following the date of publication of notice; requires the effective date for any other rule to be as provided by Chapter 2001, Government Code or later. (m) Substitutes the word "licensed" for "registered". SECTION 10. Amends Sections 11(c) and (d), Texas Manufactured Housing Standards Act. (c) and (d) Substitutes "license" for "certificate holder" and "registration". SECTION 11. Amends Section 13(a) and (f) - (i), Texas Manufactured Housing Standards Act. Section 13(a) and (f) - (i). Substitutes "license" for "certificate of registration" and "registration", "licensed" for "registered", and "license holder" for "registrant"; increases the amount of the retailer bond from $30,000 to $100,000. SECTION 12. Amends Section 13A(e) - (g) and (k), Texas Manufactured Housing Standards Act, Section 13A (e) - (g) and (k). Substitutes "licensed" for "registered", "license holder" for "registrant", and "license" for "certificate of registration". SECTIONS 13. Amends Section 14, Texas Manufactured Housing Standards Act, by amending subsections (f) and (k) and adding subsections (n) and (o). Subsections (f) and (k). Substitutes "license" for "registration". (n) Provides that when a new HUD-code manufactured home is permanently affixed to real estate, the manufacture's certificate of origin is canceled, a certificate of attachment must be filed in the deed records of the county, and the seller may give the purchaser a combined manufacturer and retailer warranty. (o) Provides that separate written warranties by the manufacturer and retailer are not required if a combination warranty is given; Makes the manufacturer, retailer, and seller of real estate jointly liable to the purchaser for the performance of the respective warranty responsibilities. SECTION 14. Amends Section 17(b), Texas Manufactured Housing Standards Act, by substituting "license" for "registration". SECTION 15. Amends Section 18(d), (f), and (g), Texas Manufactured Housing Standards Act. Section 18(d), (f) and (g). Substitutes "license" for "certificate of registration", "unregistered" for "unlicensed", and "licensed" for "registered". SECTION 16. Amends Section 19(k), Texas Manufactured Housing Standards Act. Section 19(k). Substitutes "license" for "registration". SECTION 17. (a) Effective date: September 1, 1997. (b) Provides for continuity of certificates of registration valid immediately before the effective date of this Act until the expiration of the registration. SECTION 18. Emergency clause. EXPLANATION OF AMENDMENTS Committee Amendment No. 1 requires local government entities, in order to obtain board approval from the Texas Department of Housing and Community Affairs for standards that are different from those promulgated by the director, to demonstrate that public health and safety require the adoption of the different standards; (2) requires the department to adopt a samplebased installation inspection program whereby at least 25% of the homes installed are inspected with priority placed on multi-section homes and homes installed in Wind Zone II; (3) increases the retailer's bond from $30,000 to $50,000; and, (4) deletes Section 8, in its entirety, from the bill. Committee Amendment No. 2 provides for wind zone regulations and restrictions regarding the placement of manufactured homes built after the effective date of this Act in Wind Zone II counties (15 counties located along the Texas Gulf coast), and grandfathers all manufactured homes built prior to the effective date of this Act.