REFERENCE TITLE: manufactured housing; escrow account

 

 

 

State of Arizona

Senate

Fiftieth Legislature

First Regular Session

2011

 

 

SB 1423

 

Introduced by

Senator Reagan

 

 

AN ACT

 

AMENDING SECTIONS 41-2180, 41-2186, 41-2189, 41-2190 AND 41-2193, ARIZONA

REVISED STATUTES; RELATING TO MANUFACTURED HOUSING.

 

 

(TEXT OF BILL BEGINS ON NEXT PAGE)

 



Be it enacted by the Legislature of the State of Arizona:

Section 1.  Section 41-2180, Arizona Revised Statutes, is amended to read:

START_STATUTE41-2180.  Trust and escrow requirements; rules; exemptions

A.  Beginning July 1, 2012, each dealer or broker licensed pursuant to this article shall establish an independent escrow account with an independent financial institution or escrow agent authorized to handle such an account in this state as prescribed by title 6, chapter 7 or 8, for each transaction involving:

1.  A new manufactured home.

2.  A new factory-built building designed for use as a residential dwelling.

3.  A manufactured home, mobile home or factory-built building designed for use as a residential dwelling that is previously owned and that has a purchase price of fifty thousand dollars or more.

B.  For the purposes of subsection A of this section, a financial institution or escrow agent is independent if the individual or entity is not controlled by the licensee, a family member of the licensee or a business affiliated with the licensee and the licensee, family member or business affiliate does not have a majority interest in the financial institution or escrow agent.

C.  The owner of a mobile home park who also is or owns a dealership licensed pursuant to this article to sell new units may sell a new manufactured home or a new factory-built building designed for use as a residential dwelling as a licensee without complying with subsection a of this section if all of the following apply:

1.  The home will be sited in a mobile home park that is owned by the park owner.

2.  At the time of the sale, the park owner has on file at the office of manufactured housing the name and address of all mobile home parks owned by the park owner, the name, address and license number of the licensed dealership and documentation showing that the park owner is at least a majority owner of, and controls, the licensed dealership.

3.  At the time of the sale, the park owner has posted with the office of manufactured housing a dealer bond in an amount of at least one hundred thousand dollars in a form satisfactory to the office of manufactured housing.

A.  D.  Each dealer or broker who is licensed pursuant to this article and who sells manufactured homes, mobile homes or factory‑built buildings designed for use as residential dwellings or a manufactured home, mobile home or factory-built building designed for use as a residential dwelling that is previously owned and that has a purchase price of less than fifty thousand dollars shall maintain a trust account or an escrow account with a financial institution or escrow agent located in this state and shall deposit all earnest money received for the sale of manufactured homes, mobile homes or factory‑built buildings designed for use as residential dwellings in such account.  The department shall conduct an audit of each dealer's or broker's trust or escrow account at least once every two years.  Beginning July 1, 2012, a purchaser under this subsection may request that the dealer or broker establish an independent escrow account and if such a request is made the dealer or broker shall comply with this subsection by complying with subsection a of this section.

B.  E.  All dealers or brokers shall notify the deputy director in writing when the trust or escrow account has been established by indicating the name and number of the account and the name and location of the financial institution used.

C.  F.  The dealer or broker, in writing, shall authorize the depository to release any and all information relative to trust or escrow accounts to the deputy director or his the deputy director's agent, employee or deputy.

D.  G.  The dealer's or broker's earnest money receipt book shall reflect all earnest monies received and shall be at the minimum in duplicate and consecutively numbered.

E.  H.  All earnest monies shall be deposited in the escrow account or trust fund account no later than the close of the second banking business day after receipt.

I.  The terms or instructions for any escrow account opened under subsection A or D of this section are deemed to be and enforceable as part of the purchase contract.  All parties to the purchase contract and the licensee shall sign the terms and instructions.  If practicable, the escrow terms or instructions shall be included in the purchase contract or stated in an addendum to the purchase contract.  The licensee shall provide a copy of the purchase contract to the escrow agent even if the escrow terms or instructions are contained in a separate document.  The licensee shall promptly provide the escrow account information to all parties to the purchase contract once the account is opened.

J.  At a minimum, the escrow terms or instructions shall contain:

1.  Identification of the escrow agent with information containing at least the name, address and telephone number of the agent.

2.  All conditions or requirements that affect or pertain to closing the escrow account and disbursement of the monies in the account.

3.  Any conditions or requirements where monies are to be disbursed from the escrow account in advance of the account being closed.

4.  Any conditions or requirements where additional monies or documents must be deposited with an escrow agent after the escrow account is opened.

F.  K.  A dealer or broker may deposit and maintain up to two hundred dollars in the trust account to offset service charges that may be assessed by the financial institutions.

G.  L.  Every deposit into a trust account shall be made with a deposit slip which that identifies each transaction as follows:

1.  The amount of deposit.

2.  The names of all parties involved in the transaction.

All receipts for monies deposited in escrow shall be made accountable by containing the same information.

H.  M.  A complete record shall be retained by the dealer's or broker's office of all earnest monies received.  The record shall contain provisions for entering:

1.  The amount received.

2.  From whom the money was received.

3.  The date of receipt.

4.  The place of deposit.

5.  The date of deposit.

6.  The daily balance of the trust fund account deposit of each transaction.

7.  When the transaction has been completed.

8.  The date and payment for all goods and services the dealer has contracted to provide.

I.  N.  All earnest money deposited in the trust or escrow account shall be held in such account until one of the following is completed:

1.  An application for title transfer has been made.

2.  The transaction involved is consummated or terminated and a complete accounting is made.

J.  O.  Upon on completion of pursuant to subsection N of this section, the earnest money deposit shall be conveyed to the lending institution or the dealer, broker, purchaser, seller, manufacturer or lienholder, whichever is applicable.

K.  P.  The dealer or broker shall retain true copies of the purchase agreements, earnest money receipts, depository receipts, evidence of delivery documents and evidence of consummation of sale or termination of sale for a period of three years.

L.  Q.  The deposits referred to in this section shall not be utilized used for any purpose other than the transaction for which they were provided.

M.  R.  Notwithstanding any other provision of this section and except that this subsection does not apply to an independent escrow account established pursuant to subsection A of this section, before an event listed under subsection N of this section is completed, a licensed dealer may release trust account earnest monies to pay for flooring or inventory for the unit that is the subject of the transaction for which the earnest monies were provided.  Either a licensed dealer or broker may release trust account earnest monies to pay other lawfully imposed interim loan amounts and charges imposed by a financial institution or other bona fide lender on the unit that is the subject of the transaction for which the earnest monies were provided. The dealer or broker shall not make any payment out of trust account monies pursuant to this subsection unless done in compliance with all of the following:

1.  The payment is made no more than ten business days prior to before the completion date pursuant to subsection N of this section.

2.  The payment is made directly to the financial institution or other bona fide lender.

3.  The payment is recorded in the dealer's or broker's records under this section and documented by a receipt, a payment record or any other evidence from the financial institution or lender.

4.  If the transaction is terminated, the dealer or broker replaces the amount of the payment in the trust account within three business days after receiving written notification of the termination.

This subsection does not affect any other rights or obligations between the purchaser and the licensed dealer or broker.

N.  S.  The board shall adopt separate rules for dealer trust and escrow accounts and broker trust and escrow accounts.  At a minimum, these rules shall contain trust and escrow account requirements for the following:

1.  Record keeping.

2.  Administration.

3.  Service fees or charges.

4.  Deposits.

5.  Advances or payments out of trust and escrow accounts.

6.  Closing or termination of sales transactions.

7.  Auditing or investigation of trust or escrow account complaints.

O.  T.  This section shall not apply to a real estate broker or salesperson licensed pursuant to section 32‑2122 and pursuant to this article when the unit is sold in conjunction with real estate.END_STATUTE

Sec. 2.  Section 41-2186, Arizona Revised Statutes, is amended to read:

START_STATUTE41-2186.  Grounds for disciplinary action

The deputy director may, upon on the deputy director's own motion, and shall, upon on the complaint in writing of any person, cause to be investigated by the office the acts of any manufacturer, dealer, broker, salesperson or installer licensed with the office and may temporarily suspend or permanently revoke any license issued under this article, impose an administrative penalty or place on probation any licensee, if the holder of the license, while a licensee, is guilty of or commits any of the following acts or omissions:

1.  Failure in any material respect to comply with this article or article 2 of this chapter.

2.  Violation of any rule that is adopted by the board and that pertains to the construction of any unit or of any rule that is adopted by the board and that is necessary to effectively carry out the intent of this article, article 2 of this chapter or the laws of the United States or of this state.

3.  Misrepresentation of a material fact by the applicant in obtaining a license.

4.  Aiding or abetting an unlicensed person or knowingly combining or conspiring with an unlicensed person to evade this article or article 2 of this chapter, or allowing one's license to be used by an unlicensed person or acting as an agent, partner or associate of an unlicensed person with intent to evade this article or article 2 of this chapter.

5.  Conviction of a felony.

6.  The doing of a wrongful or fraudulent act by a licensee which that relates to this article or article 2 of this chapter, including, beginning July 1, 2012, failure to comply with section 41‑2180, subsection A.

7.  Departure from or disregard of any code or any rule adopted by the board.

8.  Failure to disclose or subsequent discovery by the office of facts which that, if known at the time of issuance of a license or the renewal of a license, would have been grounds to deny the issuance or renewal of a license.

9.  Knowingly entering into a contract with a person not duly licensed in the required classification for work to be performed for which a license is required.

10.  Acting in the capacity of a licensee under any license issued under this article in a name other than as set forth upon on the license.

11.  Acting as a licensee while the license is under suspension.

12.  Failure to respond relative to a verified complaint after notice of such complaint.

13.  Violation of title 28, chapter 10 or rules adopted pursuant to title 28, chapter 10, except for the licensing requirements of sections 28‑4334, 28‑4335, 28‑4361, 28‑4362, 28‑4364, 28‑4401 and 28‑4402.

14.  False, misleading or deceptive sales practices by a licensee in the sale or offer of sale of any unit regulated by this article or article 2 of this chapter.

15.  Failure to remit the consumer recovery fund fee pursuant to section 41‑2189.

16.  Acting as a salesperson while not employed by a dealer or broker.

17.  As a salesperson, representing or attempting to represent a dealer or broker other than by whom the salesperson is employed.

18.  Failure by a salesperson to promptly place all cash, checks and other items of value and any related documents received in connection with a sales transaction in the care of the employing dealer or broker.

19.  Failure to provide all agreed on goods and services.

20.  Failure to manufacture or install in a workmanlike manner all subassemblies, units and accessory structures which that are suitable for their intended purpose.

21.  Failure of the licensee to work only within the scope of the license held.

22.  An action by a licensee, who is also a mobile home park owner, manager, agent or representative, that restricts a resident's or prospective resident's access to buyers, sellers or licensed dealers or brokers in connection with the sale of a home or the rental of a space, that the department finds constitutes a violation of section 33‑1434, subsection B or section 33‑1452, subsection E or that violates any law or regulation relating to fair housing or credit practices. END_STATUTE

Sec. 3.  Section 41-2189, Arizona Revised Statutes, is amended to read:

START_STATUTE41-2189.  Funding and assessments

A.  A dealer or broker of manufactured homes, mobile homes or factory‑built buildings designed for use as residential dwellings shall pay, in addition to the license or renewal fee, a fee established by the board of not to exceed thirty dollars for each unit that is sold and that is subject to section 41‑2180, subsection D, for deposit into the consumer recovery fund.  The fee is payable to the office by the fifteenth day of the month following the month in which the sale is consummated.

B.  If the balance remaining in the consumer recovery fund is less than two hundred thousand dollars, a dealer or broker of manufactured homes, mobile homes or factory‑built buildings designed for use as residential units shall, when renewing a license for the following calendar year, pay in addition to the renewal fee a fee of not to exceed fifty dollars for deposit into the fund.  If the balance in the consumer recovery fund exceeds four hundred thousand dollars, the board may relieve licensees of the per unit fee.

C.  B.  Chapter 6 of this title does not apply to the setting of fees under this section.

D.  C.  An amount not to exceed seventy‑five per cent of the previous fiscal year's interest earned on the consumer recovery fund may be expended by the director, with the approval of the board.  The expenditure shall be used for consumer and licensee education in connection with the manufactured housing and factory‑built building industry, and all monies up to a maximum of fifty thousand dollars remaining unexpended and unencumbered at the end of each fiscal year may be used for consumer and licensee education in succeeding fiscal years and do not revert to the consumer recovery fund. END_STATUTE

Sec. 4.  Section 41-2190, Arizona Revised Statutes, is amended to read:

START_STATUTE41-2190.  Recovery from fund; claim against licensee; subrogation; appeal; statute of limitations

A.  If any consumer who is buying or selling the consumer's home uses the services of a licensed dealer or broker of manufactured homes, mobile homes or factory‑built buildings designed for use as residential buildings and is damaged as a result of an act or omission by a licensed dealer or broker of manufactured homes, mobile homes or factory‑built buildings designed for use as residential buildings which that constitutes a violation of section 41‑2180, or rules adopted pursuant to that section, and the sale is subject to section 41‑2180, subsection D, that consumer may file a claim with the office for payment from the consumer recovery fund.  The claim shall be verified by the office.

B.  If any consumer of manufactured homes, mobile homes or factory‑built buildings designed for use as residential buildings is damaged by the failure of the principal to perform a sales agreement or to perform repairs under a warranty and the sale is subject to section 41‑2180, subsection D, the consumer may file a claim with the office for payment from the consumer recovery fund.  The claim shall be verified by the office.

C.  Upon On verification of the claim for payment, the deputy director shall provide for a hearing pursuant to chapter 6, article 10 of this title.  

D.  The board shall pay from the consumer recovery fund whatever sum the administrative law judge finds payable upon on the claim.  A decision granting a claim shall include an order suspending the license of the licensee upon on whose account the claim was filed.  Such a license shall remain on suspension until the licensee has repaid in full, plus interest at the rate of ten per cent per year, the amount paid from the consumer recovery fund on the licensee's account.

E.  Any party aggrieved by the administrative law judge's decision may apply for a rehearing by filing with the deputy director a motion in writing pursuant to chapter 6, article 10 of this title.  The filing of a motion for rehearing shall suspend the operation of the administrative law judge's order pending the decision of the director upon on the rehearing.

F.  Except as provided in section 41‑1092.08, subsection H, any person aggrieved by a final administrative decision may seek judicial review pursuant to title 12, chapter 7, article 6.

G.  The consumer recovery fund has a claim against the licensee on whose account a claim was granted or any other person who caused or contributed to a claim paid by the consumer recovery fund for the amount paid plus costs, necessary expenses and reasonable attorney fees.

H.  The deputy director is subrogated to the claim of the consumer recovery fund against the bond and other assets of the licensee.  The deputy director shall deposit any amount recovered into the consumer recovery fund.

I.  If, at any time, the money deposited in the consumer recovery fund is insufficient to satisfy any duly authorized claim or portion of a claim, the board shall, when sufficient money has been deposited in the consumer recovery fund, shall satisfy such unpaid claims or portions of claims in the order that such claims or portions of claims were originally filed.

J.  A consumer pursuant to subsection A or B of this section is barred from commencing an application for payment from the consumer recovery fund later than two years from the date of sale or date of installation, whichever is later. END_STATUTE

Sec. 5.  Section 41-2193, Arizona Revised Statutes, is amended to read:

START_STATUTE41-2193.  Enforcement powers of deputy director and office personnel; civil and administrative penalties

A.  The deputy director, personnel of the office and personnel under contract to the office, upon on presentation of credentials, shall be permitted to enter and inspect premises where units regulated by this chapter are manufactured, sold or installed as the deputy director may deem appropriate to determine if any person has violated this chapter.  No person licensed by the office may refuse to admit the deputy director or the personnel of the office or personnel under contract if the proper credentials are presented and the inspection is made at a reasonable time.

B.  If the deputy director has reasonable cause to believe a unit is being offered for sale by a party required to be licensed but not licensed as a dealer or broker by the office or is in violation of this chapter, or the rules, regulations or standards promulgated adopted pursuant to this chapter, the office shall serve upon on the manufacturer, dealer, broker or installer a notice of violation, which may be affixed to the unit in violation and, if affixed to the unit, shall not be removed by anyone without the authorization of the office.

C.  If there is reasonable cause to believe, from information furnished to the deputy director or from an investigation instituted by the deputy director, that any person is engaged in a business regulated by this article without being licensed as required by law, the deputy director shall issue and serve upon on the person, by certified mail, a cease and desist order requiring the person immediately, upon on receipt of the notice, to cease and desist from engaging in such business.  Upon On failure of such person to comply with the order, the deputy director shall file an action in the superior court in Maricopa county restraining and enjoining the person from engaging in such business.  The court in the action shall proceed as in other actions for injunctions.

D.  If in the judgment of the deputy director any person has engaged, or is about to engage, in any acts or practices which that constitute, or will constitute, a violation of this chapter, the rules, regulations or standards promulgated adopted pursuant to this chapter or an order issued pursuant to this chapter, the deputy director may make application to the appropriate court for an order enjoining such acts or practices.  Upon On a showing by the deputy director that such person has engaged in, or is about to engage in, any such acts or practices, an injunction, restraining order or such other order as may be appropriate shall be granted by such court without bond.  On a showing by the deputy director that a licensee has wrongfully withdrawn, or is about to wrongfully withdraw, funds required to be held in the licensee's trust account, an injunction, restraining order or such other order as may be appropriate to prevent a licensee from wrongfully withdrawing trust account funds monies shall be granted by the court.  Upon on granting a permanent injunction, the court may impose a civil penalty not exceeding one thousand dollars for each violation.

E.  In any investigation, proceeding or hearing which that the deputy director may institute, conduct or hold under this article, the deputy director, or a representative designated by the deputy director, may administer oaths, certify to official acts, issue subpoenas for attendance of witnesses and production of books, papers and records and exercise the same powers in this regard as conferred upon on public officers by the provisions of section 12‑2212.

F.  After any hearing which that the deputy director may institute, conduct or hold under this article, the deputy director or a representative designated by the deputy director may impose an administrative penalty in an amount of not to exceed one thousand dollars for each violation.  All monies collected pursuant to this subsection shall be deposited in the state general fund.

G.  Beginning July 1, 2012, the director or deputy director may refer to the attorney general or a county attorney for criminal or civil investigation the results of any investigation that indicate the existence of the elements of fraud, including investigative information regarding any person or entity that, although not a licensee under this article, has a business or other relationship to a licensee or to a manufactured home transaction under this article.

G.  h.  If an inspection reveals that a mobile home entering this state for sale or installation is in violation of this chapter, the office may order its use discontinued and the mobile home or any portion of the mobile home vacated.  The order to vacate shall be served on the person occupying the mobile home and copies of the order shall be posted at or on each exit of the mobile home.  The order to vacate shall include a reasonable period of time in which the violation can be corrected.  A person shall not occupy or use a mobile home in violation of an order to vacate.

H.  i.  If construction, rebuilding or any other work is performed in violation of this chapter or any rule adopted pursuant to this chapter, the office may order the work stopped.  The order to stop work shall be served on the person doing the work or on the person causing the work to be done. The person served with the order shall immediately cease the work until authorized by the office to continue. END_STATUTE