10 TAC §80.136
The Manufactured Housing Division of the Texas Department
of Housing and Community Affairs (Department) adopts new §80.136 with
changes to the proposed rules as published in the September 20, 2002 issue
of the
Texas Register
(27 TexReg 8845). The
text will be republished.
The effective date of the rule is thirty (30) days following the date of
publication with the
Texas Register
of notice
that the rule has been adopted.
The following is a restatement of the rules' factual basis:
New §80.136 is adopted
(with changes)
to
address certain logistical issues that have arisen with respect to the administration
of the Texas Manufactured Housing Standards Act (the "Act") as amended by
HB 1869 (77th Legislature, 2001). The Department requires current information
on the installation of manufactured homes to enable it to schedule the newly
installed homes for inspections and to enable it to administer the Act with
complete and current information as to manufactured homes that have become
real property.
Section 80.136(a) is adopted
(with changes)
to
explain that the rule applies when a retail sale of a manufactured home occurs
and that home will be treated as real property.
Section 80.136(a)(1) is adopted
(with changes)
to clarify that the closing of the sale of a manufactured home that
is deemed to be real property must occur at one of three prescribed locations:
a title company, an attorney's office, or the offices of a federally insured
financial institution.
Section 80.136(a)(2) is adopted
(without changes)
and §80.136(a)(3) is adopted
(with changes)
to provide that when a retailer engages a third party, such as a title
company or an attorney, to surrender documents in accordance with §19(l)
of the Act, they must do so under written instructions, and the surrender
of required documents must be done on a timely basis. This will enable the
Department to assemble and maintain current and accurate data regarding the
installation of manufactured homes as real property and to schedule timely
inspections of installations, as required by the Act. This is intended to
address those situations where the documents are being obtained at closing
but are not being surrendered on a timely basis.
Section 80.136(a)(4) is adopted
(without changes)
and §80.136(a)(5) is adopted
(without
changes)
to restate the statutory requirements for the manner of installation
of manufactured homes as real property and require the installer to document
the manner in which they determine that a home has, in fact, been installed
as required.
Section 80.136(b) is adopted
(without changes)
that would require the installer of a manufactured home to determine
who owns the real property on which the home will be situated. This is essential
for determining if the installation requirements of §80.136(a)(4) are
applicable, and it would enable the Department to obtain information to enable
it to determine if installation as real property has triggered an inspection
as such, along with the payment of the required fee.
When §80.136 was initially proposed for public comment and a hearing
was held there were three comments, one in writing and two provided verbally
at the public hearing. The written comment expressed concern over a number
of the specific things that the section would accomplish if adopted as originally
proposed. It raised issues regarding the logistical concerns in surrendering
title documents within the proposed time frames, and based on those concerns
a non-substantive revision has been prepared to clarify that it is the later
of closing or installation that triggers the requirement to file the documents.
This is to accommodate the situation where the installation occurs well after
the closing, a fairly common occurrence.
In subsection (a) the second word "the" was deleted, which is a non-substantive
change.
The two public comments made at the hearing were made by organizations
believed to represent larger constituencies. Both the Texas Manufactured Housing
Association ("TMHA") and the Consumers Union expressed support for the rule,
as proposed. However, following the hearing the TMHA received additional feedback
from its membership indicating that there were additional concerns that they
would like to have addressed. The TMHA made additional comments at the November
5, 2002, meeting of the Board of Directors (the "Board") of the Manufactured
Housing Division of the Texas Department of Housing and Community Affairs
(the "Division") and it was announced at that meeting that the public comment
period would be held open until November 11, 2002. Additional written comments
were provided, and a total of 164 comments, including the three verbal comments
(one by Consumers Union and two by TMHA) were received.
The vast majority of the comments received are directed at the issue of
requiring that the closing of a transaction for the acquisition for a manufactured
home that would be deemed to be real property under §19A of the Texas
Manufactured Housing Standards Act, Texas Revised Civil Statutes, Article
5221f (the "Act") be closed at either a title company, an attorney's office,
or an insured financial institution. This was covered in §80.136(a)(1)
of the proposed rule. Specific issues raised regarding this section included
(1) objecting to the need to add cost, delay, and inconvenience in moving
the closing to another site, (2) the high costs associated with such closings,
even if the closing does not include the obtaining of any title policy, (3)
the purported unwillingness of title companies to close "cash" transactions,
and (4) a perception that cash transactions in general are not subject to
being viewed as real property and, therefore, should not be subject to these
closing requirements. In reviewing the statutory authority for the proposed
rule, there does not appear to be a clear exception for cash transactions.
Furthermore, there does not appear to be any basis for not treating a manufactured
home as real property if it is permanently attached to real estate owned by
the same person as the owner of the home, even if it is purchased for cash.
While there does not appear to be any statutory basis for treating a cash
transaction differently from a financed transaction, there is a concern about
adopting any rule that would increase costs to consumers without obtaining
any meaningful protections or other benefits, and there is a concern over
promulgating any rule that might create an "impossible" situation for a retailer
if they could not find a title company willing to close cash transactions.
One commenter questioned what constituted a "closing," arguing that if
a home was sold for cash there was no "closing." In looking for authority
to support this conclusion, everything that the Division has found indicates
that a closing occurs when consideration is exchanged and the ownership of
the manufactured home passes to the purchaser.
After receiving these comments the Division began receiving information
about situations where licensees were unable to find qualified third parties
to conduct closings on cash sales, and after investigating these circumstances,
the Division has found that there are, in fact, instances where title companies,
financial institutions, and attorneys will not close cash sale transactions.
Furthermore, in those situations where title companies have been identified
that would close such transactions, the fees charged are significant but no
significant services that would promote consumer protection, such as ensuring
proper disclosures, providing a policy of title insurance, or providing any
advice or guidance to the consumer appeared to be involved. Presumably the
same level of services found in a financed transaction could be obtained,
but it was viewed as probable that these would entail additional fees.
In light of the foregoing concerns and in light of comments attributed
to various legislators that it was never intended that this provision apply
to cash transactions, §80.136(a)(1) has been reworded to reflect what
is stated in the statute.
A number of commenters objected to the proposed language of §80.136(a)(2),
arguing against imposing a compliance responsibility on a party, in this case
a retailer, when they are not in a position to comply, since it is a third
party, such as a title company, that is in a position to surrender title documents
for cancellation. It is not the intention of the Division to pursue enforcement
action against retailers who take all reasonable steps to comply but have
ultimate compliance thwarted by third parties who do not surrender title documents.
Rather, it is the Division's intent to be sure that retailers have a clear
understanding with their third party closers wherein those third parties are
instructed, in writing, as to their responsibilities. That way, if a third
party, such as a title company, receives documents that must be surrendered
for cancellation or filing and it fails to do so, the retailer will have a
basis for taking action with respect to them to ensure that compliance is
achieved.
With respect to §80.136(a)(3), a number of commenters expressed concern
over the logistical problem of surrendering documents within 31 days of closing
if the installation occurs substantially later. This has been revised to clarify
that the transaction that gives rise to the requirement to surrender the documents
is the later of the sale or the installation.
There were comments concerning §80.136(a)(4) that centered chiefly
on two issues: confusion as to which requirements were applicable and a request
that the rule go on to state that a foundation that met the state's "generic"
requirements for installation would satisfy the requirements for FHA Title
II. The reference to FHLMC are references to the Federal Home Loan Mortgage
Corporation, also known as Freddie Mac. The references to FNMA are to the
Federal National Mortgage Association, also known as Fannie Mae. FHA, the
Federal Housing Administration, offers two basic group of mortgage programs
known as Title I and Title II. In order to meet the requirements of §19A
of the Act, a manufactured home installed as real property must meet any one
of these requirements. If the purchase is financed and the lender has other
requirements, they, too must be met. It is the Division's understanding that
at present FNMA will accept a foundation that meets the state's "generic"
installation requirements, but it is not believed appropriate to state this
in a rule since FNMA, FHLMC, and FHA may change their requirements at anytime.
Several commenters voiced concern over the documentation requirements set
forth in §80.136(a)(5), indicating that in a cash transaction these documents
would not be present and it would entail additional expense to produce a third
party report to substantiate the method of installation. The documentation
listed is illustrative. The rule clearly states this. The requirement is simply
that the installer maintain files to show the basis for deciding that the
installation, as performed, discharged his or her legal obligations.
Several concerns over §80.136(b) were voiced. There were concerns
that installers would be required to conduct title research in order to verify
ownership. All that was intended was, in those instances where the documentation
already obtained did not address the matter that the installer as the owner,
"Do you own the real estate on which I will be installing this home or does
someone else own it? If it is someone else, who is the owner?" The installer
would then record the homeowner's response. No independent research or additional
cost would be involved.
Concerns were also expressed over the requirement that a secondary move
and installation be handled in the same way. When an installer is installing
a manufactured home it is the Division's belief that the installation should
be in accordance with all applicable legal requirements. On secondary installations,
unless the installer determines whether the home is to be installed as real
property, that installer will not know what those requirements are. The Division
believes that if a manufactured home is to be moved and re-installed as real
property, the installer should verify the applicable requirements and comply
with them.
One commenter noted that HB 1869 (77th Legislature), which amended the
Act, applied to situations where "a sale" occurs. Based on that, the Division
should not be concerned with secondary moves that do not involve sales. Section
19A(a) of the Act defines those homes that are classified and taxed as real
property, and that section does not require that a sale occur. Section 19A(c)
describes the installation requirements for all homes meeting the definitional
requirements of §19A(a). The Division believes that the requirements
of the law apply to both initial and secondary installations and that the
rule is appropriate to clarify this.
One commenter objected to the requirement that when a retailer receives
a home on trade-in it cannot be moved without checking and paying any real
property taxes that are due. The proposed rule does not address this requirement
of law. The Division does not believe that it would have any latitude to alter
or suspend this requirement of law.
Several commenters expressed overall support for the rule, as proposed.
One such commenter asked that the Division consider addressing by rule instances
where a consumer and/or licensee takes measures to circumvent the law, such
as situations where real estate is transferred out of the home buyer's name,
a title to the manufactured home is obtained, and the underlying real estate
is conveyed back to the homeowner, leaving a homeowner with a manufactured
home that is classified and taxed as real property under §19A of the
Act still in possession of a title document rather than evidencing ownership
in the county deed records.
The new section is adopted under the Texas Manufactured Housing
Standards Act, Texas Civil Statutes, Article 5221f, §9, which provides
the Department with authority to amend, add, and repeal rules governing the
Manufactured Housing Division of the Department and under Texas Government
Code, Chapter 2306, §2306.603, which authorizes the director to adopt
rules as necessary to administer and enforce the manufactured housing program
through the Manufactured Housing Division.
No other statute, code, or article is affected by the adopted section.
§80.136.Homes Acquired on or after January 1, 2002.
(a)
When a retail sale of a manufactured home occurs and that
home will be treated as real property under §19A of the Standards Act:
(1)
The closing of that sale must occur at either a title company
authorized to do business in Texas, an attorneys' office, or an office of
a federally insured depository institution, regardless of whether the manufactured
home or the real property on which it will be located is or will be the homestead
of the purchaser.
(2)
It is the responsibility of the seller of the home to surrender
the document of title or Manufacturer's Certificate of Origin for cancellation
in accordance with §19(l) of the Standards Act. If the document of title
or Manufacturer's Certificate of Origin has been delivered to a third party,
such as an inventory lender or a title company, that third party must agree,
in writing, to act as the retailer's agent and surrender such documents as
required by §19(l) of the Standards Act and these rules.
(3)
If §19(l) of the Standards Act requires a document
of title or Manufacturer's Certificate of Origin to be surrendered for cancellation,
the surrender is to be effected not later than one calendar month, not to
exceed thirty-one (31) days, from the later of the date of the closing of
the transaction or the date of actual installation and availability for occupancy
that gave rise to the requirement of surrendering for cancellation.
(4)
The installation must occur in a manner that satisfies
either:
(A)
the requirements for Federal Housing Administration (FHA)
Title I mortgage insurance;
(B)
the requirements for FHA Title II mortgage insurance;
(C)
the requirements of Federal Home Loan Mortgage Corporation
(FHLMC) for long term mortgages, or
(D)
the requirements of Federal National Mortgage Association
(FNMA) for long term mortgages.
(5)
The method or manner of installation must be supported
by documentation establishing the particular requirement with which it complies
and the basis on which it was concluded that such particular requirement and
particular department standard were met, such as a report by;
(A)
an FHA, FNMA, or FHLMC approved inspector;
(B)
an engineer, architect, real estate inspector, or appraiser
licensed by the state of Texas; or
(C)
an inspector employed by and inspecting for the state of
Texas or a local government in Texas.
(b)
When a manufactured home is installed or re-installed,
the licensed installer (or, in the case of a retail sale of a new home, the
retailer) shall provide to the Department a statement as to the name of the
legal owner(s) of the property on which such manufactured home is being installed.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on January 24, 2003.
TRD-200300484
Bobbie Hill
Executive Director, Manufactured Housing Division of TDHCA
Texas Department of Housing and Community Affairs
Effective date: March 9, 2003
Proposal publication date: September 20, 2002
For further information, please call: (512) 475-2206