TMHA's 85th Session Recap
Memorial Day marked the end of the 2017 Texas Legislative Session. The session that began 140 days earlier was certainly one for the ages. Conflict and compromise, hurt feelings and shared jubilation, celebratory high-fives and lots of crying into beers. This session had it all. And apparently, they are all coming back for more in a Special Session that starts July 18.
In other articles, we fill you in on the intricacies of the state budget, child welfare reform, hail storm insurance tort reform, and all the other headline grabbing stories from this session.
But in this article, I’m going to focus only on the two bills that were TMHA’s top legislative priorities, and our goals for this session. These two bills directly impact both the manufactured home retail and community industries in Texas.
But before I get to the trees, it is worth mentioning the forest. There were 6,631 bills filed. Yes, we reviewed them all. We tracked 179 bills identified as potentially having some possible impact on the industry. Of all the bills filed this session only 1,211 passed (about 18 percent). For perspective, the number of bills filed this session was the second most behind 2009’s nearly 7,500 in the last 20 years. And as for bills passed, this year marked the fewest bills passed in the last 20 years. What does that translate to? This was a massive bill killing session.
However, making it through the slew of dead bills and reaching the top of the battle field heap to gasp a lifesaving breath like John Snow (forgive the non-Game of Thrones readers or watchers), was one important community bill and one large retailer bill that passed and were signed into law by the governor.
Here is the quick summary:
S.B. 1248 by Sen. Buckingham
The bill caption is, “Relating to municipal regulation of manufactured home communities.” We more colloquially referred to this as our “right to replace,” which was sometimes slightly altered to, “right to replace, and lot preservation” bill.
The bill does two simple things. If a city changes the underlying zoning where an existing community currently is to something other than permissible for a manufactured home community (or park as many cities refer to them) deeming the existing community “grandfathered” as a “nonconforming use,” the bill protects a community owner’s right to replace homes within the community on the current lot size footprint. Simply put, the bill protects the right to replace homes, and protects the lot footprint.
The bill was a reaction to cities in Texas utilizing their interpretation of abandonment of nonconforming use to essentially tell owners, “you move it, you lose it.” They would say that if a home leaves a community and another is not in place within their abandonment period, for some cities this is as short as 30-days, then the individual lot has now abandoned its nonconforming status and the lot is dead.
The other tactic used by some cities would be to change the setback requirements so that when a home left and a replacement was brought in the new home had to abide by the new setbacks. In these instances, the setbacks were substantially increased from the original footprint resulting in much larger lots and dramatically shrinking the total number of possible lots in a community. TMHA’s contention has been that such acts are merely efforts to reduce the viability of continued existence for communities so that the city’s goal of the community closing completely became a reality.
S.B. 1248 says that for nonconforming communities the owner has at least 12 months to replace a home that leaves the community, and they can do so on the lot footprint that existed when the community was originally grandfathered as a nonconforming use.
Finally, the bill adopts a statewide definition of a manufactured home community to that of a track or parcel of land were at least four or more spaces are offered for lease for manufactured homes. This doesn’t impact any existing communities and was more of a retail driven issue.
If you are asking how, the answer is family owned land.
We have a bunch of cities adopting definitions triggering full manufactured home community regulation locally if there was a piece of land with two or more manufactured homes on it. That was it. Just two homes on the property and now you must do things like put an eight-foot masonry wall around the property line and plant ten-foot-tall trees every 25 feet along the property line. I’m not kidding; look up the current City of Lumberton manufactured home community standards.
This impacts family owned land where granddad owns 30 acres and allows son, daughter, grandson, and granddaughter to all live on his land in their manufactured homes. Grandfather isn’t going to allow this if it comes at the cost of thousands of dollars for a masonry wall or an engineered water runoff analysis.
Governor Abbott signed this bill into law on June 12. The new law will become effective on September 1, 2017, and Texas will join several other states like Wisconsin and Florida that have similar property right protection statutes.
H.B. 2019 by Rep. Tracy King
The broad bill caption for this large 62-page bill reads, ”Relating to the regulation of manufactured homes.” The purpose for this omnibus bill was to address multiple areas of existing manufactured housing law and modernize the law to many current practices. The bill also codifies certain aspects of regulation to ensure a more predictable regulatory future.
We also went after the unfortunate title acronym. For those possibly unaware, the name for a manufactured home title in Texas is the “statement of ownership and location.” This name came to be in 2007 with a law change that has a long background, which we won’t go into here, but will say that this same bill netted more for the industry than bad, but did have some flaws based on current circumstances and a cantankerous bill sponsor. The result was the unpleasant acronym of an “SOL.”
The term “statement of ownership and location” is used 96 times in Chapter 1201, Texas Occupations Code, which is the main chapter in the law regulating manufactured homes. There is no legislative drafting equivalent of “find and replace” like you could use in a word processing program. Nope, to draft this change requires that everywhere it is used in the law a legislative drafting section must be written, even if it is only to delete the words “and location,” 96 times. This was a main driver of the length of the bill.
Another important deletion in the bill is to remove all references to “lease purchase” in the current law. Similar to the gem of the SOL, also in 2007 the same bill created the definition of a “lease purchase.” The problem is the definition is contrary to federal and other state law. It created confusion for industry and consumers. The current definition also gave the false impression of permissible “lease purchase” contracts that if not done properly could be disguised credit transactions under other state and federal law. I want to be clear that this deletion doesn’t eliminate a person’s ability to use proper leases with options to purchase contracts. These contracts are still allowed so long as they follow state and federal laws. The deletion simply removes the confusing and contradictory term from the Occupations Code.
Other key industry provisions of the bill:
- Greater clarity as to when the consumer’s 3-day right of rescission begins in response to the post-Dodd/Frank reality of lending switching to a direct loan model rather than the previous retail installment contract model
- Industry protection against administrative rule increases that result in industry costs greater than $50 by triggering a cost benefit analysis to be done and presented to the MH Division’s board
- Preserves the licensing tests high passage rate of approximately 95 percent for the future
- Allows for the retailer to retain a portion of a consumer’s deposit to offset the expense of appraisal or title work if the purchase includes land and the consumer rescinds the contract after those services have been paid for
- Streamlines the “warehouse” and “warehouseman” provisions so that a retailer taking a home out of a community can move the home onto their lot and sell the home as they would any other home to recover their transportation and storage fees, and selling in such a manner is deemed “commercially reasonable”
- Allows a consumer to waive the 3-day right of rescission in the event of a personal disaster like a fire or flood so they can replace their home more quickly
- Clarifies the inventory versus personal property tax treatment process and changes the definition of inventory and the Tax Code to ensure that homes titled as inventory with TDHCA are only taxed as inventory and not at the higher appraised value of personal property
- Removes the requirement to prepay the current year taxes on real property sales of manufactured homes that are conducted through a title company that will pro-rate the tax burden among the parties
- Eliminates the habitability inspection requirement if a home that was real property is converted back to personal property and purchased by a retailer
- Allows for a home that had been previous declared abandoned, then re-abandoned again by a later buyer to be declared abandoned again by the community owner
- Ensures the department will maintain the titling, tax and licensing records on its website
H.B. 2019 included other changes to better describe current industry and department practices, and updated the chapter in the Texas Finance Code that regulates manufactured home personal property lending in Texas to have the correct references to the federal laws and regulations post-Dodd/Frank.
The comprehensive bill was also signed by Gov. Abbott and goes into effect on September 1, 2017. The changes in the bill will require administrative rule changes, which we expect will occur during the summer months to match up new rules with the September effective date.
TMHA was thrilled to achieve success on both of our ambitious legislative priorities. These changes will improve the industry, ensure a more predictable regulatory future, benefit consumers, and protect the private property rights of community owners. Both of these efforts mark the culmination of two years’ worth of work, planning, negotiating, drafting, re-drafting, and lobbying. We greatly appreciate all the help we had along the way from TMHA members, as well as the support of our board of directors and officers that provided us with the tools and resources to give us the best chance of success.
Now, like the day after the end of a football season, we get back to recruiting, planning and preparing for the next session in 2019. We plan to grow on our success from this session and maintain our aggressive goals as we continue to advance and improve the manufactured housing industry in Texas.
This is the first of TMHA's 85th Legislative Session Recap posts. The series includes these additional posts: