REPRESENTING MANUFACTURED HOME OWNERS AND RENTERS IN TEXAS

REPRESENTING MANUFACTURED HOME
OWNERS AND RENTERS IN TEXAS
Manual is in Essential Information: G:\TRLA\CURRENT\Publication\Housing\Manufactured Housing
and at: www.TexasLawyersHelp.org click: civil law; click: library;
search: manufactured home
Raúl Noriega, Attorney at Law
Manufactured Housing Team Manager
Texas Rio Grande Legal Aid, Inc.
1111 North Main, San Antonio, Texas 78205
Tel. 210-212-3734
Fax. 210-212-3772
E-mail: rnoriega@trla.org
Statutory Overview
• The Texas Manufactured Housing Standards Act, (MHSA) TEX. OCC. CODE §
1201.001 (2007) et seq. and Manufactured Housing Rules, 10 T.A.C. Chapter 80
(2008) are the primary state regulatory mechanisms which govern the
manufactured housing industry in Texas
• MHSA administered by Manufactured Housing Division of the Texas Department
of Housing and Community and seven field offices around the state. (TDHCAMHD)
• MHD acts as agent in Texas for the Department of Housing and Urban
Development.
• MHSA enforces the National Manufactured Housing Construction and Safety
Standards Act of 1974, 42 U.S.C. 5401 (2007) et seq. and implementing regulations
at 24 CFR Part 3280 (2008) et seq. which is enforced by HUD.
• Federal law and rules focus on the regulation of the manufacturers and the
construction of the homes before placement into the market.
• MHSA Comprehensively regulates the licensing of sales agents (“salespersons”),
dealers (“retailers”), brokers, and installers; and the sale, registration and
documentation of various aspects of ownership.
• MHSA is primary state law: vast majority of MH cases you will handle will be
under MHSA and other applicable state statutes.
Other Applicable Statutes
• Prop. Code Chapter 94, Manufactured Home Tenancies statute
• Prop. Code Chapter 92 where MH not installed in a mobile home
community.
• Prop. Code Chapter 24, Forcible Entry and Detainer
• Texas Deceptive Trade Practices Act, TEX, BUS. COMM. CODE §17.41 et
seq.
• Texas Finance Code Chap. 347 covers financing of MH.
• Texas Uniform Commercial Code, TEX. BUS. COMM. CODE §§9.601-.628
covers foreclosure on retail installment contracts where MH is personal
property.
• TEX. PROP. CODE §51.002 (2007) covers foreclosures on deeds of trust
when MH is real estate.
• Truth in Lending Act, 15 U.S.C. 1601(2008) et seq. and Texas Finance Code
Chap. 343 covers predatory loans on manufactured homes.
• Taxes and tax liens on manufactured homes are governed by a number of
different sections scattered throughout the Texas Tax Code.
• TEX. TRANS. CODE §§623.091-.105(2007) and the Oversize/Overweight
Permit Rules and Regulations, 43 T.A.C. §28.14 (2007) cover moving
permits
Other Applicable Statutes
Contd.
• TRCP Rules 523-591 cover practice in the Justice Courts
• TRCP Rules 738-755 cover F.E.D. actions generally.
• The Real Estate License Act, TEX. OCC. CODE Chap. 1101 may
apply to seller if MH is sold along with a sale of real property
• Prop. Code Chap. 5 for contracts for deed on land with MH as
part of real estate
• Texas General Arbitration Act, TEX. CIV. PRAC. REM. CODE
ANN. §§171.001-.098
• Federal Arbitration Act, 9 U.S.C.S. §§1-16(1997)
• MH’s in a “colonia” will need to comply with TEX. GOVT CODE
§2306.591 (2007) and 10 TAC § 3.16 (2008).
• Texas Fair Housing Act, TEX. PROP. CODE §301.001-.171(2007)
will apply in cases of discrimination
• Protecting Tenants at Foreclosure Act of 2009, 111 P.L. 22, 123 Stat.
1632, 111 Enacted S. 896, §701 (May 20, 2009)
The Tortured Travels Of A Problem
Plagued Manufactured Home
• Common life time of MH is twenty to thirty
years without major problems if properly
inspected, purchased, titled, installed, and
maintained. This will not be your case.
• Journey starts at the factory where issued a
– HUD label number
– Serial number
– Manufacturers Certificate of Origin (MCO)
The Tortured Travels Of A Problem
Plagued Manufactured Home
• Towed to a new home dealer’s sales lot.
• First group of problems: MH does not have all options
consumer has ordered.
• Dealer and his floor planner are battling each other over
the money which was loaned or invested for inventory
• Deceptive sales : e.g. deceptive gifts as inducement to buy
• Deceptive installation costs
• Deceptive “down payment” of old home
• Very high but legal interest rate loans in sub-prime market
The Tortured Travels Of A Problem
Plagued Manufactured Home
Bogus gifts, moving fees, inflated site
preparation costs, kickbacks to dealer bird-dog
tacked to a loan at a very high but legal
interest rate
+
Depreciating value of MH
and the result is:
CONSUMER LEFT WITH LOAN WHICH IS
DOUBLE/TRIPLE/QUADRUPLE VALUE OF
HOME
MH AS A DEPRECIATING ASSET
MH Loan Balance v. MH Value
60000.00
50000.00
Dollars
40000.00
30000.00
MH Loan Balance
MH Value
20000.00
10000.00
0.00
1
15 29 43 57 71 85
99 113 127 141 155 169 183 197 211 225 239
-10000.00
No. Pm ts. on 20 yr loan
The Tortured Travels Of A Problem
Plagued Manufactured Home
• Deceptive or illegal repossessions by Sellers, Dealers,
Finance Companies
• Example of outrageous floor planner/dealer behavior:
Shipley Brothers, Ltd. et al v. Republic National Bank and
Robert F. Larson, 2009 Tex. App. Lexis 4204 (Tex.Civ.App.Houston [1st.Dist]) total jury award of $455,000.00 in
actual plus punitive damages plus $160,596.00 attorney
fees reduced on suggested remittitur; opinion withdrawn
by joint motion after settlement at 2009 Tex. App. LEXIS
6269.
The Tortured Travels Of A Problem
Plagued Manufactured Home
• After repossession, MH sold to hapless consumer with a worthless bill of
sale without paying taxes on it
– from County from where it was taken
– from County where it now sits
• MH might then end up on the other side of the state rented to a tenant
• MH might be abandoned by finance company where it ends up in black
market
• Tenant paying lot rent to MH park now purchases it with another bill of
sale.
• Deception: Tenant not told that taxes are owed in several counties
– Bill of Sale is worthless because no SOL applied for
• Your client may now be involved in an eviction proceeding, an attempted
foreclosure disguised as an eviction proceeding, or a true foreclosure
proceeding.
The Tortured Travels Of A Problem
Plagued Manufactured Home
• APP comes to you:
– Pleading for his $5000 in life savings paid as down
payment
– Now penniless and out of a job
– Home is still in name of original owner
– Impossible to move or register it in client’s name
– Thousands due in taxes
– Chain of title cannot be established.
Your task
 Unravel this mess
 Keep your client from becoming homeless
 Save the MH if possible
 Voluntarily surrender it if not
Distinctions Between Manufactured Homes,
Modular Homes, RVs, and Trailers
• MHSA §1201.003(12) a "HUD-code Manufactured Home" means
– structure constructed on or after June 15, 1976,
– according to HUD rules
– built on a permanent chassis;
– designed for use as a dwelling with or without a permanent
foundation
– connected to the required utilities;
– transportable in one or more sections;
– at least 8 feet wide or at least 40 long or 320 square feet;
– includes the plumbing, heating, air conditioning, and
electrical systems.
• Such a home built prior to June 15, 1976 is denominated as a
“mobile home” at MHSA §1201.003(20)
Typical Manufactured Home
Modular House
• Covered under the Texas Industrialized Housing Act (IHA), TEX. OCC. CODE
Chap. 1202 (2010). Regulated by TDLR-Industrialized Building Council
• Basic differences between Modular House and Manufactured House (MH):
• A. MH completely constructed in factory; a modular house partially constructed
in a factory but assembled on site to the same construction standards as site
built housing;
• B. MH rolled on its own wheels to site where wheels removed or left on;
modular house brought in pieces or modules to permanent foundation
• C. MH can be documented as either real or personal property; modular house
becomes part of the real property
• D. A municipality may enact zoning ordinances for MH placement; modular
homes cannot be so regulated
Motor Home
• TEX. FIN.CODE §348.001(3-a) defined as a
motor vehicle designed to provide
temporary living quarters, built on a motor
vehicle chassis, and contains at least four
of: cooking facility, refrigerator; toilet, an
a.c. system, potable water supply system,
electric power supply.
Example: a Winnebago
Trailer aka “La Traila”
• TEX. TRANS. CODE 501.002(6,14)(2007) and TEX.
FIN.CODE §348.001(10)(a) defines "towable
recreation vehicle" as a non-motorized vehicle that
was originally designed and manufactured
primarily to provide temporary human habitation in
conjunction with recreational, camping, or seasonal
use and is titled and registered with the TXDOT; is
built on a single chassis, contains at least one life
support system, and is designed to be towed by a
motor vehicle. This is the true trailer.
Fundamental Information
•
•
•
•
•
Original Statement of Ownership and Location
“SOL”, is a certificate showing title to the home
An SOL is a document (record=certificate detail)
for which one applies to the MHD that reflects:
Who owns the home
Where the home is located
Whether MH is personal or real property
Whether there are any liens on MH if elected as
personal property
Fundamental Information
• Use of the MHD database is fundamental; cannot prepare without it
(http://www.tdhca.state.tx.us/mh/ownership-location.htm)
Click: “Search our Database”
Click: “View Home Ownership Records”
The HUD Label Number gets the SOL information
• The single most important identifier for a manufactured home; without
it, you are flying blind
• Go to the MHD web site, enter this number, obtain the “Certificate
Detail” which has all info on the SOL
• “View Tax Liens” link for printout of all reported tax liens on the home
• Print and scan both Certificate Detail and Tax List in Doc Index and file
Litigation or Counseling Strategy
Should Not Be Formulated Until SOL,
Taxes, Election, Liens, and Seller are
Known (Malpractice?)
•
The Personal vs. Real Property Election
MHSA §1201.2055
Critical Election requires owner to elect MH as
personal or real property.
•
If MH elected as personal property – MHSA applies
HAMP DOES NOT APPLY
•
If MH elected as real property – MHSA does not apply
HAMP APPLIES
(U.S. Dept. Treasury Guidelines, 3/4/09, pg. 2)
Litigation or Counseling Strategy
Should Not Be Formulated Until SOL,
Taxes, Election, Liens, and Seller are
Known (Malpractice?)
Registration and Perfection of Liens MHSA §1201.219
• If MH is personal property or is inventory in the name of a
dealer, all liens, including:
– inventory liens,
– purchase money liens,
– tax liens, and
– lot rent liens, are:
UNENFORCEABLE UNLESS FILED AND PERFECTED
WITH MHD
Litigation or Counseling Strategy
Should Not Be Formulated Until SOL,
Taxes, Election, Liens, and Seller are
Known (Malpractice?)
Licensees and Unlicensed Sellers - MHSA §1201.101
• Requires license for manufacturers, retailers, brokers, installers,
salespersons, and salvage rebuilders
• Most common license: Retailer-Broker-Installer (RBI)
• MHSA §1201.101(b)(c) prohibits a person from selling two or more
homes within a twelve month period unless the person holds a broker
or retailers license.
• Critical information - is seller:
– Registered licensee under the MHSA (HORTF available)
– Unlicensed seller facing criminal sanctions for selling w/o license
or
– Consumer who is selling his own home (private causes of action)
Basic Types of Manufactured
Home Cases
•
•
•
•
•
Tax Cases
Tax issues almost sure to arise in every manufactured home
case
Main problem: undisclosed tax liens at time of sale
MHSA §§1201.220-.221 - MHD provides county tax assessor
a monthly computerized tax report on all MH.
Abatement and Deferral of taxes - TEX. TAX CODE §33.06
– 65 years old or Disabled + Tax on residential homestead =
– AUTOMATIC ABATEMENT AND DEFERRAL WHILE
HOMEOWNER ALIVE
Powerful protection against lawsuits, even default tax
judgments
Basic Types of Manufactured
Home Cases
•
•
•
•
•
•
•
•
Tax Liens - TEX. TAX CODE §§ 25.08, 32.01, 32.03, 32.014
Attach to MH on January 1 of each year
Taxed to owner only if the owner owns it on January 1 of the tax year
May not transfer ownership until all perfected tax liens have been
released
Unenforceable unless taxing authority perfects its tax lien by filing
with MHD
Can have separate liens, one for MH, one for land
Repossession leaves title in name of owner, not finance co.
so that tax lien will follow owner even if in possession of finance co.
Homestead Exemption - TEX. TAX CODE §11.432 (conflict with
§25.08?)
MH qualifies for homestead exemption along with land upon which it
is installed
Evictions
• Property Code Chap. 92 applies to
RESIDENTIAL REAL ESTATE
• Property Code Chap. 94 applies to LOTS in
MANUFACTURED HOME COMMUNITIES
Exception: §94.002(b)(1) – MH rental only
• Rules are different for routine eviction case
• Example: §94.203(d)- LL must wait 30 days (not
5) after judgment before a writ of possession will
issue if rent tendered “for that 30 day period”.
Evictions: Required Notices
• No failure to pay rent or other violations of the lease notice to vacate or offer a lease renewal “not later than” 60
days before the current lease term expires;
• Failure to pay rent – 10 days written notice that payment
delinquent §94.206.
• On non-MH FED - 3 day notice to vacate before filing suit
Prop. Code §§24.005-.0054
• Argument – 13 days of notice should be given
• If property acquired through foreclosure - 30 day notice
§24.005(b); but new Protecting Tenants at Foreclosure Act
requires 90 day notice (Public Law 111-22, §7, 5/20/09)
Evictions: Required Written
Lease and Record Book
• §94.051-.053
– LL must provide
• minimum six month written lease
• rules and specific disclosures
• written receipts for cash rental payments
• must maintain a record book - §94.007.
Evictions: Cut-Off of Utilities
• §§92.008, 92.0091(2010) completely prohibits the cutoff of utilities for
regular housing (and for non-MH park land where MH installed) and
provides for a writ of restoration
• Chapter 94 does not have the same type of provisions for MH
communities – BUT ARGUE §§92.008, 92.0091 ANYWAY
• Look to TCEQ and PUC Rules – 10 days notice required
• discontinuance of water services (sub-metered in MH park)
30 TAC §291.126 (2008)
• discontinuance of water services by public utility providers
30 TAC §291.88 (2008)
• disconnection of electrical services (sub-metered in MH park)
16 TAC §25.142(d)(2008).
• disconnection of electrical services provided by a retail electric provider
16 TAC §25.483(d) (2008)
• disconnection when the electrical services are provided by a utility
16 TAC §25.29 (2008)
Evictions: Possessory Lien for
Unpaid Lot Rent
FIN. CODE §347.402
• Land owner were MH installed has a possessory
lien for unpaid lot rent
BUT UNENFORDCEABLE
• unless a notice of the lien filed with MHD - MHSA
§1201.219(b)
Evictions: Moving Costs
• §94.055(d)
• Always paid by home owner unless home
owner required to move before the lease
expires; then park has to pay
• Moving and reinstallation costs:
– Single wide: $2,000 to $4000
– Double wide: $3,500 to $6,500
– Triple wide: $5,000 to $8,000 and more
Evictions: Health and Safety
Conditions; Retaliation
• §§94.156-159
• If conditions in MH park materially affect health
and safety of tenant
– tenant has repair and deduct remedies on written notice
• If no lease violations, LL may not retaliate and
tenant may obtain
–
–
–
–
–
repair and rent reduction orders
civil penalty of one month’s rent plus $500
actual damages
court costs, and
attorneys fees
Evictions: Violations by Park
Owners and Managers
TEX PROP. CODE §94.301
• If Park LL violates any part of Chap. 94 - liable for
–
–
–
–
actual damages
civil penalty of two month’s rent plus $500
court costs, and
attorneys fees
• Most MH park managers and owners are untrained
– Find violations (usually fairly simple) then
• Give notice of violations in answer to FED
• Counter sue in Small Claims or County Court and/or
• Use violations as negotiating tool
Attempts at Repossession
Disguised as Evictions
• Sometimes sellers try to “foreclose” or
“repossess” MH they previously sold by
filing an F.E.D. in JP courts.
• These sellers want the benefit of a sale and
a down payment, but want to avoid hassle
and expense of a true foreclosure
procedure.
Attempts at Repossession
Disguised as Evictions
“The Double Document Scam”
Lot lease
+
Bill of Sale on MH tied to Credit transaction
with large down payment w/o Application for SOL
EVICTION ON LOT LEASE CAUSING
LOSS OF MH AND DOWN PAYMENT
• Title to personal or real property is really what is at
issue - not lease violations
Attempts at Repossession
Disguised as Evictions
• If this is a contractual dispute involving ownership of MH, JP
court should not determine the issue of immediate possession
because JP court has no jurisdiction to enter judgment.
• Two contracts contemporaneously signed for same purpose is
really one contract.
• Seller has usually not perfected lien by filing it with MHD as per
MHSA §1201.219
• Strategy:
– Throw it out at JP level or on appeal to county or appellate
court
– settle with the alleged owner of the property or
– file a DTPA lawsuit for the deceptive sale of the home.
Repossession, Power of Sale, and Judicial
Foreclosure Cases on Defaults
3 basic groups of sale documents
1. Retail installment contract (RIC) with purchase
order and assorted notices
2. Promissory note + warranty deed with vendors
lien + deed of trust
3. Bill of Sale with and without credit transaction
NOTE: BILL OF SALE WITHOUT AN APPLICATION FOR S.O.L.
DOES NOT TRANSFER TITLE TO MH, REGARDLESS OF
FINANCING USED OR CASH PAID
FORECLOSURE-REPOSSESSION
• 3 types of “FORECLOSURE-REPOSSESSION”
– Repossession - on RIC w/o breach of peace
– Power of Sale – by trustee pursuant to Deed of Trust or
RIC provision
– Judicial Foreclosure – by court order on either RIC or
Deed of Trust
• Statues involved:
– Texas U.C.C., TEX. BUS. COMM. CODE §§9.601-.628.
– FIN. CODE §§347.355-.356
– TEX. PROP. CODE §51.002
FORECLOSURE-REPOSSESSION
Specific Notice for MH on Default
• Detailed 30 day written notice by registered mail
after notice of default, as per 12 C.F.R. §590.4(h)
required by FIN. CODE §347.356
• In addition to the 20 day “notice of default” and
21 day “notice of sale” required by Prop. Code
§51.02 and notices required under RIC or Deed
of Trust.
Abrogation of Holder in Due
Course Doctrine
“Holder in Due Course" = holder of an
instrument which does not bear evidence of
forgery or alteration or is not otherwise so
irregular or incomplete as to call into
question its authenticity; and the instrument
has been taken for value, in good faith,
without notice that the instrument is overdue
or has been dishonored or that there is an
uncured default. TEX. BUS. COMM. CODE
§3.302
Abrogation of Holder in Due
Course Doctrine
• Federal Trade Commission Act, 42 U.S.C. §45 (2008)
and 16 CFR
§433.2 (2008): retail installment
contracts, including those for manufactured
housing, must provide the following notice to
consumers:
– ANY HOLDER OF THIS CONSUMER CREDIT
CONTRACT IS SUBJECT TO ALL CLAIMS AND
DEFENSES WHICH THE DEBTOR COULD ASSERT
AGAINST THE SELLER OF GOODS OR SERVICES
OBTAINED PURSUANT HERETO OR WITH THE
PROCEEDS HEREOF. RECOVERY HEREUNDER BY
THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID
BY THE DEBTOR HEREUNDER
Abrogation of Holder in Due
Course Doctrine
• In Texas, the holder in due course doctrine
was abrogated in Home Savings Association v.
Guerra, 733 S.W.2d 134, (Tex. 1987) and see
MHSA §1201.601(d).
– In a nutshell: liability for any deceptive act,
deceptive financing, or predatory loan engaged
in by the seller, loan originator, or the original
lender passes right on to the current holder of
RIC
Abrogation of Election of Remedies
Doctrine
• “Election of Remedies" doctrine: once an
election is made for use of one remedy to the
exclusion of others, a party is held to that
remedy.
• U.C.C. TEX. BUS. COMM. CODE §9.601(c)
abrogates that doctrine as to secured
transactions. Creditor can now use any of the
three remedies of repossession, exercise of
power of sale, or judicial foreclosure at the same
time or simultaneously
Self Help Repossession
• Physical taking of the home without any kind of court order
authorizing the taking
• FIN.CODE §§347.355-.356 - a creditor may repossess on
default as long as the creditor complies with notice
requirements
• After a default and self-help repossession, a secured party
may “sell, lease, license, or otherwise dispose” of the home
in a “commercially reasonable” manner as per TEX. BUS.
COMM. CODE §9.610.
• TEX. BUS. COMM. CODE §9.609 - creditor can take the
home by self help repossession and without judicial
foreclosure as long as there is no breach of the peace
Breach of the Peace
• “Breach of the Peace”, comment number 3 to TEX. BUS. COMM. CODE
§9.609 indicates that this section “does not define or explain the conduct that
will constitute a breach of the peace,…”
• Chapa v. Traciers & Associates, Inc., 2008 Tex.App. Lexis 6058, (Tex.Civ.App.Houston [14th Dist.] 2008) exhaustive review of “breach of peace”.
• “Breach of the Peace" as used in UCC connotes conduct that incites or is
likely to incite immediate public turbulence, or that leads to or is likely to
lead to an immediate loss of public order and tranquility.
• Typical MH Repossesion case: Green Tree Acceptance of Texas, Inc. v. McGrath,
1998 Tex.App. Lexis 3843 (Tex.Civ.App-San Antonio, 1998)
– towing agent knocked down a fence, cut down a tree, and broke down rock
skirting to repossess the home on faulty authorization to repossess.
• Creditor is vicariously responsible and liable for all the wrongful acts of the
repossession crew, regardless of whether the creditor directs such wrongful
actions or is totally unaware of them.
Non-judicial Foreclosures through
Creditors and Trustee’s Sales
• See TEX. PROP. CODE §51.002 and TEX. BUS. COMM. CODE §9.601(a)
• Creditor or trustee auction sales of MH on the steps of the county
courthouse on the first Tuesday of the month without judicial
determination
• Check for 30 day notice of default set out in DOT or RIC + one required
by 12 C.F.R. §590.4(h) and FIN. CODE §347.356
• Check for 20 day notice to cure and 21 days notice of the sale required
by TEX. PROP. CODE §51.002(b)(d)
• Check for all procedural requirements of RIC or DOT,
– e.g. address for service incorrect
– unsigned USPO signature card (careful! Service on mailbox)
– lien not filed with MHD
– incorrect lien holder filed at MHD (pooling agreement?)
Non-judicial Foreclosures through
Creditors and Trustee’s Sales
• If there is any violation by creditor or
trustee, file lawsuit to enjoin sale with TRO
or TI
• Bond not required for TRO or TI to enjoin
the foreclosure of the applicant’s residential
homestead if an affidavit of indigency is
filed. TEX. CIV. PRAC. REM. CODE
§§65.041-.045 (2007)
Non-judicial Foreclosures through
Creditors and Trustee’s Sales
• If sale was honest and financing complies with all
statutory requirements:
– Assess value of home and equity, if any,
– consider depreciating asset and
– possibly advise client to agree to voluntary
surrender and waiver of deficiency
Non-judicial Foreclosures through
Creditors and Trustee’s Sales
Settlement document should contain provisions, that:
1. creditor waives right to deficiency; no deficiency judgment
taken
2. homeowner allowed to stay in the home to certain date to
prevent vandalism
3. within thirty days of repossession, the creditor will file a
Universal Data Form (or similar form)with Experian, TransUnion, and Equifax credit reporting agencies removing bad
credit entries and reporting problem as “dispute resolved”
4. within forty five days of repossession, the creditors attorney
will provide written confirmation that the reports to the
credit reporting agencies have been sent and received.
Judicial Foreclosures
• On default, cautious creditor will file a lawsuit for breach of
– RIC pursuant to TEX. BUS. COMM. CODE §9.601(a) or
– promissory note and DOT pursuant to TEX. PROP. CODE §51.002.
• Creditor eliminates risks with self help repossessions and
avoids getting hit with a restraining order
• Judicial foreclosure remedy provides the best control for
both parties
Judicial Foreclosures
• To collect on a promissory note, a plaintiff creditor
must establish:
1. the existence of the note in question,
2. the defendant signed the note,
3. the plaintiff is the owner and holder of the note,
and
4. a certain balance is due and owing on the note.
• Go through analyses as with RIC and consider
filing counter-suit with same settlement as goal
Lack of Document of Title and
Application for SOL
• A person may not sell, exchange, or lease-purchase
a used manufactured home without the appropriate
transfer of good and marketable title - MHSA
§1201.451
• Ownership of MH does not vest at a sale or transfer
of the home until a completed application for SOL
is filed with MHD - MHSA §1201.206(e)
• Common complaint: homeowner cannot prove he
owns MH because of lack of documents
Lack of Document of Title and
Application for SOL
• Contract for Deed and Bill of Sale for personal property MH
is NOT “good and marketable title”
• Sale of MH without “good and marketable title” and
without application for SOL is a violation of the act and is a
deceptive trade practice
Breach of Warranty under the
MHSA
Express warranties for NEW MH provided by MHSA are:
• 1 year manufacturers warranty that the home is assembled
as required by the NMHCSSA - MHSA §1201.351;
• 1 years retailer’s warranty that the home and its
appliances installed in accordance with all department
rules and that the consumer will receive a copy of the
warranty within 30 days of the installation - MHSA
§1201.352;
• 1 year installers warranty that the home is installed in
accordance with all department rules - MHSA §1201.361;
and
• For USED MH: 60 day warranty of habitability pursuant
to MHSA §§1201.453-.456 (applicable to licensees )
Breach of Warranty under the
MHSA
• If not addressed and satisfied by the responsible licensee, compensation
for damages resulting from warranty violations comes from the Home
Owners Recovery Trust Fund.
• Warranty protection revolves around fixing defects
• Problem: absence in the MHSA of a definition for “defect”
• MHD uses Federal Definition: "defect" includes any defect in the
performance, construction, components, or material of a manufactured
home that renders the home or any part thereof not fit for the ordinary
use for which it was intended;... NMHCSSA, 42 U.S.C. §5402(3),
• MHSA§1201.351(a)(2) and1201.352(a)(2)(B) allow for the exclusion of
cosmetic defects
• 10 TAC '80.2(5) the word “cosmetic” is defined as: matters of flaws and
finish, appearance, materials or workmanship not covered by 24 CFR
Part 3280.”
Breach of Warranty under the
MHSA
Practical considerations
• Shortage of MHD staff available to conduct
inspections
• MHD interprets these statutes to mean:
-Cosmetic defects are never covered and
-Non-cosmetic defects are not covered
if they:
- do not prevent intended use and
- do not also cause an imminent threat to
health or safety
Breach of Warranty under the
MHSA
• MHD still does require corrective action for
blatant violations and sometimes consumers
actually do recover from the HORTF.
• Focus on “intended use” and “threat to
health or safety” rather than just “defect”
Breach of Warranty and Deceptive
Sales under the DTPA
• DTPA definition of “goods” is found at
DTPA, TEX.BUS.COMM. CODE §17.45(1) and
means “tangible chattels or real property
purchased or leased for use”; includes a
manufactured home and the land upon which
it sits.
• Whole “laundry list” of deceptive practices
found in DTPA 17.46(b)
Breach of Warranty and Deceptive
Sales under the DTPA
• Most likely found in sale of MH as violations of DTPA §17.46(b)
• (5) representing that goods or services have sponsorship, approval, characteristics,
ingredients, uses, benefits or quantities which they do not have or that a person has a
sponsorship, approval, status, affiliation, or connection which he does not have;
• (6) representing that goods are original or new if they are deteriorated, reconditioned,
reclaimed, used, or secondhand;
• (7) representing that goods or services are of a particular standard, quality or grade,
or that goods are of a particular style or model, if they are of another; ...
• (9) advertising goods or services with intent not to sell them as advertised; ...
• (20) representing that a guarantee or warranty confers or involves rights or remedies
which it does not have or involve…
• (22) representing that work or services have been performed on, or parts replaced in,
goods when the work or services were not performed or the parts replaced;...
• (24) failing to disclose information concerning goods or services which was known at
the time of the transaction when such failure to disclose such information was
intended to induce the consumer into a transaction into which the consumer would
not have entered had the information been disclosed;...
• DTPA is powerful statute; provides for treble damages, attorney fees, and court
orders as deemed appropriate by court
Predatory Loans
• MH buyers tend to be much more susceptible to predatory lending
practices
– less educated and less savvy consumers
– less than prime credit records
• Usual protections such as title insurance and closing documents prepared
by attorney are not utilized when dealing with an MH loan.
• MH lender does not need to be licensed, only registered with the Office of
the Texas Consumer Credit Commission
• RESULT: Significantly greater chance of finding a predatory loan with
MH sale
• Identifying the Predatory Loan
– Use checklists provided by Elizabeth Renuart and the National
Consumer Law Center found in MH Manual
Finance Code Issues
1. Lenders Pattern and Practice Regarding High Cost Loans
• Statutory prohibition against “high cost loans”
• similar to predatory loans under T.I.L.A.
• Texas Finance Code, Chap. 343. See §343.201(1)(B)(i) for
coverage
– MH more than $ 20,000
– a.p.r. exceeds the rate formula indicated in 12 CFR
§226.32.
Finance Code Issues
2. Required Notice in Retail Installment Contracts-re Double Document
Transactions
• TEX. FIN. CODE §347.051 requires that the following notice be included
in the document in at least eight point type:
NOTICE TO THE CONSUMER-DO NOT SIGN THIS DOCUMENT
BEFORE YOUREAD IT OR IF IT CONTAINS ANY BLANK SPACES.
YOU ARE ENTITLED TO A COPY OF THE DOCUMENT YOU SIGN.
UNDER THE LAW YOU HAVE THE RIGHT TO PAY OFF IN
ADVANCE THE FULL AMOUNT DUE AND OBTAIN A
SUBSTANTIAL REFUND OF THE CREDIT CHARGE, KEEP THIS
DOCUMENT TO PROTECT YOUR LEGAL RIGHTS.
• Penalty for failure to have notice: twice the time price differential plus
reasonable attorney’s fees.
Finance Code Issues
3. Required Disclosures Regarding Insurance
• TEX. FIN. CODE §§347.201-.253: requirements for
notice and disclosure of payments regarding
insurance on manufactured homes
• TEX. INS. CODE §549.0551: prohibits a lender from
requiring a borrower to purchase homeowners
insurance coverage for a manufactured home in an
amount that exceeds the replacement value of the
dwelling and its contents, regardless of the amount
borrowed.
Finance Code Issues
4. Maximum Interest Rate and the Time Price Differential
• FIN. CODE §347.110(b)(f):
13.32% simple interest or
alternative18% rate for loans under $20,000; for loans more
than this, see FIN. CODE §343
• “time price differential” defined at TEX. FIN. CODE
§301.002(16) and means
• an amount that is added to the price at which a seller offers to
sell services or property to a purchaser for cash payable at
the time of sale and payable to the seller by the purchaser
for the privilege of paying the offered sales price after the
time of sale.
Finance Code Issues
5. Definition of a Credit Transaction - TEX. FIN.
CODE §347.002(3)
• Any sale, loan, or other transaction involving a
retail purchase of a manufactured home under
which a person in a written agreement, including a
credit sales contract or a loan instrument, grants to
another person a purchase money lien on the
manufactured home to secure an extension of
credit that is subject to a finance charge or is
payable in more than 4 installments, not including
a down payment.
Finance Code Issues
6. Registered Creditor/Authorized Lender - FIN.
CODE §347.451
• person making manufactured home loan must be
– a registered creditor or
– an authorized lender
• creditor cannot come to court in violation of law
and the “clean hands doctrine.”
Finance Code Issues
7. Penalty Provisions - TEX. FIN. CODE §349.003
• Penalties for violation of Finance Code are for the
amount of three times the actual economic loss or
twice the interest or time price differential
contracted for, charged, or received, not to exceed
$2,000 in a transaction in which the amount
financed does not exceed $5,000 or $4,000 in a
transaction in which the amount financed exceeds $
5,000, plus reasonable attorneys fees.
Disputes Between Retailers and
Lenders Affecting the Home Owner
• MHSA §1201.204(b):
– At the first retail sale of a manufactured home, a
manufacturer’s certificate automatically converts to a
document that does not evidence any ownership interest
in the manufactured home described in the document. A
security interest in inventory evidenced by a properly
recorded inventory finance lien automatically converts to a
security interest in proceeds and cash proceeds.
• Constitutionality upheld: Shipley Brothers, Ltd. et al v.
Republic National Bank and Robert F. Larson, 2009 Tex. App.
Lexis 4204 (Tex.Civ.App.-Houston [1st.Dist])
Arbitration
• Texas General Arbitration Act, TEX. CIV. PRAC.
REM. CODE ANN.
§§171.001-.098 (Vernon 2005)
• Federal Arbitration Act, 9 U.S.C.S. §§1-16(1997)
• Clauses allow Manufacturer
– to elect to opt out of arbitration and
– allow the dealer and finance company to elect either
• to file litigation or
• to settle disputes through binding arbitration
Arbitration
Buyer is not given this choice,
– waives the right to a jury trial, and
– required to arbitrate regarding any dispute
• regarding any issue
• against any party
Arbitration
• First question: can client be compelled to
arbitrate.
• Second question: should precious resources
be used:
– To contest being forced into arbitration or
– To prepare to participate in arbitration
“Enforceability of Arbitration Clauses”
by Honorable Alice Oliver-Parrot
• “Reviewed 24 opinions including seven Texas Supreme court opinions.
• Courts enforced the arbitration clause in 16; did not enforce it in the
other 8.
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–
–
–
–
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Of the eight arbitration clauses that were not enforced,
1 was not under the arbitration agreement
1 plaintiff was not a party to the arbitration agreement;
1 clause was not binding against non-signing party
1 clause was not binding on a party not named
1 arbitration agreement was found unconscionable;
2 clauses were not enforced because of procedural issues; and
1 agreement procured through economic duress.
• In Re Palm Harbor Homes, Inc., 195 S.W.3rd 672 (Tex., 2006) = typical case,
MH owner forced into arbitration on defective home; warranty issues
Deciding to Arbitrate
Perry Homes v. Cull, 2008 Tex. Lexis 423, (Tex., 2007)
• exhaustive review of arbitration case law:
– (1) post-arbitration review of orders compelling arbitration is
allowed,
– (2) courts rather than arbitrators should decide whether
litigation waives arbitration,
– (3) a totality of circumstances test should be used to decide
whether litigation is substantially invoked so as to waive
arbitration but a strong presumption against waiver should
govern, and
– (4) waiver of arbitration requires a showing of prejudice
Manufactured Homes Sold
With Land
The Real Estate License Act - TEX. OCC. CODE, Chap. 1101
• If MH has been converted to real property and sold as real property the
person involved in putting together deal should be licensed
• Problem:
– consumer is talked into purchasing MH as personal property while
installing it on land purchased at the same time from another party.
• MHSA §1201.511 prohibits a dealer from engaging in the sale of real
estate or from commingling the down payment or sale proceeds of the
home with the down payment or sale proceeds of the land.
• MHSA §1201.102(d) makes exception for licensed real estate brokers or
salespersons to handle the transaction without being licensed by MHD
Contracts for Deed
TEX. PROP. CODE §§5.061-.085
• If MH has been elected as real estate
– then the home and land can be purchased on an executory
contract for deed if…
– Contract meets all the statutory requirements
– But see Farias v. Vera, 2010 Tex. App. Lexis 4541 (Tex. Civ. App.Corpus Christi, June 17, 2010) No mention of MHSA, no
identification of MH, no determination of real property election,
no mention of any liens at TDHCA-MHD.
• ESPECIALLY IMPORTANT
TEX. PROP. CODE §5.068
– transaction documents must be in the language of the
negotiations
Waivers of Consumer Rights
•
•
•
•
Absolute Prohibition - MHSA §1201.005
A waiver by a consumer of any part or any right provided by MHSA is
void under any circumstances
Rather than look for the word “waiver” in a document, instead focus on
any substantive right that consumer may be losing or giving up
Examples:
document from dealer (but not another homeowner) which requires a
consumer to accept MH “as is” may be
– attempted waiver of the warranty of habitability
• Contract for sale requiring consumer to accept MH contingent on
consumer’s payment of outstanding taxes on the home
– attempted waiver of right to receive good and marketable title
Waivers of Consumer Rights
• DTPA §17.42 also protects against waiver by a
consumer of the provisions of DTPA
– however, rights under the DTPA can be waived
under certain conditions
• Without case law to interpret the MHSA
prohibition, the MHSA statutory prohibition
– should be absolute and without
regardless of the DTPA exceptions
exceptions,
MHD Inspections
• MHSA §§1201.351-.362
– MHD enforces MHSA’s manufacturer and
installer warranties through MHD’s inspection
and enforcement procedures
Required Practices and Notices
MHSA §§1201.1505-.164
• deposits must be refunded no later than fifteen days
– after a written request from a consumer is received
– conditions under which a retailer may retain the deposit are
set out
• deposits become down payments upon execution of a contract
– unless three day right of recision exercised under MHSA
§1201.1521.
– on failure to return deposit
• consumer can recover three times the deposit
• plus attorney fees - MHSA §1201.604
• Sales from unlicensed manufacturers, retailers, brokers, and
installers
– voidable for two years as per MHSA §1201.152
Required Practices and Notices
• Retailers must provide consumers a formaldehyde health notice
• Retailers and lenders must provide disclosures regarding
– costs and obligations associated with home ownership,
– financing costs,
– related costs, and
– other matters related to the acquisition and ownership of MH
• If sale of MH not subject to the Real Estate Settlement Procedures
Act,
– retailer must give consumer an advance copy of the contract at
least twenty four hours before the contract is signed
Prohibited Practices
•
•
•
•
•
MHSA 1201.501-.513
Manufacturers cannot construct MH in Texas without
– design approval
– inspections by HUD and assignment of HUD number
Mfg. cannot alter a HUD-code home without approval from a licensed
engineer
Licensee may not sell MH that does not have a HUD label or MHD seal
Retailer may not purchase for resale an MH constructed by unlicensed
manufacturer
Retailers and brokers must comply with all provisions of
– Texas Finance Code and TILA, 15 U.S.C. 1601 et seq.
– may not advertise an interest rate or finance charge that is not
expressed as a.p.r.
Prohibited Practices
• Retailers and sales agents prohibited from
– assisting consumers in providing false financing information or
documents
– submitting false docs or info to a lending institution
• Retailers must receive entire down payment at the time of execution
of loan
– document and must state whether the down payment is
provided in any
– form other than cash.
• Retailer may not require down payment until the installment
contract is signed
• Retailer may not provide down payment as a gift
• A retailer or salesperson may not refuse to refund a deposit
• A retailer or installer may not contract with unlicensed a.c.
contractors
Prohibited Practices
• Dealer may not engage in sale of real estate or commingle the down
payment or sale proceeds
• Retailer, broker, or salesperson may not sell MH to be installed in a flood
zone
• Retailer may not sell a trade-in MH before closing on the sale of the new
home
• Retailer may not permit a consumer to occupy MH before the closing of
any required financing unless the consumer is notified that the consumer
may be required to vacate the home if the financing does not close
Required Move Permits
•
•
•
•
•
MHSA §1201.161
To move MH on state roads, it is necessary to
– obtain permit from DOT -TEX. TRANS. CODE §§623.091-.105(2007)
– Comply with Oversize/Overweight Permit Rules and Regulations,
43 TAC §28.14 (2007)
TXDOT website posts move permits
TEX. TRANS. CODE §623.093(d) previously required that all taxes be
paid on MH before a permit would issue (now repealed)
Legitimate haulers will not move MH if the owner listed on the MHD
website does not match the name of the purported homeowner
“Hot Hauling” - Moving a manufactured home without a permit –
misdemeanor
– tip-off that MH subject to tax liens
Installation
MHSA §1201.255 and 10 TAC §80.20-80.26
• Must comply with the standards, rules, and orders of the
MHD.
• Unless MH installed by a licensed installer, installation is
incomplete and MH is “uninstalled”
• an uninstalled MH many not be occupied for any purpose MHSA §1201.255(a)
Used and Salvaged Homes
MHSA §§1201.451-.461
• Licensee may not sell a used MH without providing
– a written 60 day warranty of habitability which warrants that
– there is no defect that creates a dangerous situation
– the plumbing, heating, and electrical systems are safe
– the walls, floor, and roof are free from substantial openings
– all exterior doors and windows operate properly
• Consumer to consumer sales are exempt from the warranty of
habitability requirement - MHSA §1201.456
• Once MH declared for business use or as salvage
– may not be resold in a consumer transaction unless
– restored to habitability and approved by MHD
• Procedures for selling MH as salvage set out at MHSA §1201.461
Abandoned Homes
MHSA §1201.217 and 10 TAC §80.100, forms 39 and 40
• Simple procedure for land owner to obtain SOL to abandoned MH
– MH has been continuously unoccupied for at least 4 months
– debt secured by the home is delinquent.
• Land owner obtains free and clear title to the home and all liens on the
home are extinguished IF
– MH is not claimed and removed within 45 days after “Notice of
Intent to Acquire Ownership of Abandoned Home” is sent to
all record owners
all lien holders, and
county tax assessor-collector
• Persons who cannot take title to abandoned MH include any person who
is related or affiliated with anyone who has ever owned an interest in
MH
Enforcement Authority for
MHD
MHSA §1201.607 and §1201.610
• MHD may now
– inspect licensee records without advance notice,
– issue subpoenas,
– carry out undercover "sting” operations, and
– issue cease and desist orders
• MHD Unlicensed Activities Task Force works jointly with
local police departments, sheriffs’ offices, and district
attorneys
Civil Penalties
MHSA §1201.605
• MHD director may assess administrative
penalties
–
–
–
–
in an amount not to exceed $10,000 per violation,
plus attorney’s fees, administrative costs,
witness fees, investigative costs, and
deposition costs
Criminal Penalties
• MHSA §1201.461(h) - Sale of a salvaged home by a licensee to a consumer
-constitutes an imminent threat to health and safety
-Class B misdemeanor
• MHSA §1201.606 - A director, officer, or agent of a corp. who knowingly
and willfully violates the MHSA in a manner that threatens health and
safety
-Fine of not more than $4,000
-confinement in county jail for not more than one year, or both
-Class A misdemeanor
• MHSA §1201.609 - a non-exempt unlicensed person who performs act that
requires a license
-Class B misdemeanor
-class A misdemeanor for second and subsequent violation
MH Owners Recovery Trust Fund
(HORTF)
• MHSA §§1201.401-.410; HORTF Rules, 10 TAC §80.80
– Funded up to one million dollars
– available to pay claims against licensees who violate MHSA
– Damages are capped at $35,000 plus
– attorneys’ fees not to exceed 20% of the claim
• MH case must involve licensee
• Insure you preserve a HORTF claim by submitting estimates for repair
work within the time frames
Manufactured Homes Installed in
“Colonias”
TEX. GOVT CODE § 2306.581(1) (2007)
• A "colonia" means
– a geographic area that is located in a county within 150 miles of
border and consists of 11 or more dwellings located in close
proximity to each other in an area that may be described as a
community or neighborhood, and that has a majority population
composed of individuals and families of low income and very low
income, and
• meets the qualifications of an economically distressed area under
– TEX. WATER CODE §17.921; or that has the physical and economic
characteristics of a “colonia” as determined by the TDHCA
• If MH owner in a “colonia” wants grant loan program offered by
TDHCA, MH must
– comply with TEX. GOVT CODE §2306.591 (2007) and 10 TAC § 3.16
(2008) and must comply with MHSA and rules.
Application Procedure to MHD
for SOL in Natural Disasters
• Proof of ownership is critical in obtaining grants and loans
• MHD itself does not provide funds for disaster assistance, it only helps
– facilitate disaster assistance by placing a priority on SOL applications
• Actual monetary assistance comes from
– FEMA by way of grants,
– SBA by way of loans, or
– private insurance companies by way of payment on covered claims.
• Procedure for applying for an SOL remains the same, just speeded up
• SOL then used to process loans and grants
The Texas Fair Housing Act
TEX. PROP. CODE §301.001-.171(2007)
• Also prohibits discriminatory conduct against MH owners and renters.
• Heart of the TFHA is
– §301.021 which prohibits discrimination on the basis of race, color, religion,
sex, familial status, or national origin; and
– §301.025 which prohibits discrimination on the basis of disability and
requires a “reasonable accommodation” to rules, policies, or
practices, to afford the disabled person equal opportunity to enjoy
the dwelling.
• Enforced by civil rights division of the Texas Workforce Commission
PART II Intake Procedure
• Collection of information into the MH Module is critical for understanding
which statutes apply; TRY NOT TO LEAVE BLANK SPACES
• DO NOT fill in information by simply referring to other documents; fill in
the actual information; financial info is critical to assess settlement
• Should be filled in by intake personnel, NOT APPLICANT
• Checkmark or fill in “Y” or “N” in blanks, DO NOT circle answers
• Intake personnel should read HUD Label description to Applicant so that
applicant can physically find HUD Label number; DO NOT RELY ON
DOCUMENTS, which could be fraudulent
• Initial intake may take one or two phone calls or visits
• Fill in, then scan or save as a Word File, the MH Module into CTS
Document Index
• Print MHD Certificate Detail (MHD Cert Det) and MHD tax list from MHD
website and scan into CTS Document Index
• MH Module