HB2473 - Slam Dunk Legislation poses devastating "unintended consequences".

Friday, February 5, 2010


Scheduled for hearing by the House Commerce Committee February 10, 2010 at 9:00am

HB2473 includes drastic measures which if adopted into statute will significantly alter the transactional process, structure of enforcement and nearly eliminate consumer protection by an existing government agency in the Arizona manufactured housing industry. Bills like these which, by their passing actually alter the power structure of a governing body and standard transactional practices of hundreds of industry related organizations thereby impacting an industry's economic system, must be scrutinized very carefully by legislature to safeguard devastating "unintended consequences".

HB2473 was primarily drafted by members of three "special interest" associations; the Arizona Housing Association (AHA), Manufactured Housing Communities Association (MHCA) and Arizona Association of Manufactured Housing and RV Owners (AAMHO). AHA and MHCA are privately held statewide trade associations and are comprised primarily of land owners, manufacturers, installers and retailers of new manufactured homes; not residents of manufactured housing communities or brokers of resale homes existing in communities which represents a huge segment of "stakeholders" who would be affected by this legislation.

The Arizona Association of Manufactured Home and RV Owners (AAMHO) claims to be advocates for residents of land lease communities (a lobby for the little guy) in Arizona. During the negotiations it held with the leaders of the other AHA and MHCA and its lobbyists, it failed to notify and collect valuable input from the majority of its membership who will undoubtedly be affected by the legislation to which it is "conceding". Since AAMHO's members represents two of the 9 board members on the Board of Manufactured Housing, they may be assured through their cooperation with AHA and MHCA (who also members who serve on the Board of Manufactured Housing) of their continued presence (and job) in the industry as loss mitigaters will be allowed to continue conducting the mandated park manager education classes, which up to this point have been funded by grants associated with the interest from the consumer Recovery Fund.

The original verbiage of the bill as you see below indicates the delayed repeal (future elimination) of 41-2188 through 41-2192 which provides for the consumer Recovery Fund and Administrative Law process; the consumer’s main avenue toward relief from loss without costly litigation.

In the minutes of the Government Relations & Zoning Committee meeting held by the Arizona Housing Association (AHA) on June 23, 2009 the AHA discussed it's concern and plans to deal with various issues including permits and installation inspection delays, DFBLS/OMH, the Recovery Fund and the Board of Manufactured Housing. Streamlining the scope of installation contractors licenses through the Registrar of Contractors instead of DFBLS, creating escrow account requirements for all dealers/brokers would eliminate the need for dealer trust accounts and the consumer recovery fund and AHA would assert it's influence by utilizing it's position by it's members majority seating on the Board of Manufactured Housing.

It was discussed that there was talk of "breaking up the agency" (meaning DFBLS) and that OMH would become a "stand alone" agency or join the Department of Housing or Registrar of Contractors. It was also announced in this meeting that two additional AHA members, Sam Baird and Joe Stegmeyer had been appointed to the Board of Manufactured Housing to join it's other existing AHA and Board of Manufactured Housing members; Roger Wendt, Paul DeSanctis, Ken Anderson & Ross Waite. With the help of AAMHO and other "partners" to obtain an industry "buy-in" which they acknowledged "could be difficult", they would draft language for the amending language, find a sponsor and get the bill proposed by the January deadline for the next legislative session.

It is my position that an escrow account requirement for retailers/brokers may be the most realistic alternative to trust accounts; especially if the governing agency responsible for auditing is soon to find its last paycheck. There needs to be some type of governing board by which rules and standards are overseen, adopted and enforced but my concerns remain as follows:

1. Who represents the balance of power to oversees the activates of the Board of Manufactured Housing and their establishment and adoption of rules and standards? To whom is the "Board" accountable?

2. What process insures that the Board is truly representative of the public?

3. If the current enforcement agency DFBLS is dismantled, who is the next in charge to enforce the standards and rules and how will they be paid?

4. Since these are appointed positions and there are no term limits how do vacancies become available for others to serve a positions on this board?

5. AAMHO has served as a liaison between tenant and management to serve as a loss mitigation function for community ownership. AAMHO is paid to provide classes to managers to educate them about the LTA and tenant relations. AAMHO is not proficient in the transactional processes of dealers and do not represent a resale dealer or the resale transactions of a tenant residing in a manufactured housing community and therefor are not qualified to negotiate legislation which affects transactional processes or serve on the "Board" in such capacity where rules may be voted upon and adopted from this limited and inexperienced perspective.

6. Many residents and resale brokers are at a disadvantage when competing against a community owned new or resale "sales agency". It is standard knowledge within the resale industry, that this unfair playing field is taken advantage of by salespersons (often wearing two hats also as a community manager) who make exceptions for rules and guidelines for their buyers but which same consideration is not offered to the individual resident who chooses to sell on his own or hire and outside "competitive" sales agency.

7. Will the drafters of this legislation obtain an unfair advantage by a rule of law for the members of their other special interest trade associations they also serve? Should these drafters also hold position as rule makers and enforcers?

8. If all stake holders had been represented in the negotiations of the drafting of this bill, then these items could have been addressed and negotiated via an industry task force so a true consensus could be reached rather than addressed at a house committee level.

9. Who truly will represent the voice the people and small business; the Moms and Pops of America? Please call Kara Holt, lobbyist for Moms and Pops of America.

1-800-478-3864

Please visit http://www.azactiveresorts.blogspot.com/ to learn the history of a bill which has cause harmful "unintended consequences".

Please visit http://www.parkmodelsinarizona.blogspot.com/ to preview SB1146 (Park Models-Right to Sell). If adopted into law this bill will amend ARS 33-2132 with language which provides for consumer rights which have been violated by legal loop hole technicians for over a decade causing much harm and suffering to our seniors.

Here is the most recent draft of HB2473:

Cc: activeresortcommunities@yahoo.com
Proposed Amendment to HB 2473- Reference House Introduced Version
Explanation: We are revising the bill to call for escrow on all new transactions and on transactions for used home sales that are in excess of $50k. For used home sales transactions that are less than $50k will continue to use the recovery fund, unless the buyer requests the use of an escrow.

Components of the Amendment (NEW LANGUAGE IN RED—FEEL FREE TO MODIFY AS APPROPRIATE)
Page 1, 41-2180 should read:
A. BEGINNING JULY 1, 2011, IN CONNECTION WITH EACH TRANSACTION INVOLVING A NEW MANUFACTURED HOME OR NEW FACTORY-BUILT BUILDING DESIGNED FOR USE AS RESIDENTIAL DWELLING OR IN CONNECTION WITH EACH TRANSACTION NVOLVING A PREVIOUSLY OWNED MANUFACTURED HOME, MOBILE HOME OR FACTORY-BUILT BUILDING DESIGNED FOR USE AS A RESIDENTIAL DWELLING WITH A PURCHASE PRICE IN EXCESS OF FIFTY THOUSAND DOLLARS, EACH DEALER OR BROKER WHO IS 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 IN TITLE 6, CHAPTER 8 AND TITLE 20, CHAPTER 15.
(Note: we’re referencing title 6 and 20 since those are the financial institution statutes)
We need to add a definition of independent financial institution or escrow agent.
FOR THE PURPOSES OF THIS SECTION, “INDEPENDENT FINANCIAL INSTITUTION OR ESCROW AGENT” SHALL MEAN THE INDIVIDUAL OR ENTITY CANNOT BE CONTROLLED BY THE LICENSEE, A FAMILY MEMBER OF THE LICENSEE OR A BUSINESS AFFILIATE OF THE LICENSEE AND CANNOT HAVE MAJORITY INTEREST IN THE BUSINESS.
Page 1, 41-2180 B should read:
A. B. 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 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, 2011, THIS SUBSECTION APPLIES TO THE SALE OF A PREVIOUSLY OWNED MANUFACTURED HOME, MOBILE HOME OR FACTORY BUILT BUILDING DESIGNED FOR USE AS A RESIDENTIAL DWELLING WITH A PURCHASE PRICE THAT DOES NOT EXCEED FIFTY THOUSAND DOLLARS. BEGINNING JULY 1, 2011, A HOME PURCHASER UNDER THIS SUBSECTION MAY REQUEST THAT THE DEALER OR BROKER ESTABLISH AN INDEPENDENT ESCROW ACCOUNT IN WHICH CASE THE DEALER OR BROKER MAY SHALL COMPLY WITH THIS SUBSECTION BY COMPLYING WITH SUBSECTION A OF THIS SECTION.

Page 3, new section O:
O. THE DIRECTOR SHAL BE RESPONSIBLE FOR PREPARING DRAFT RULES AND THE BOARD SHALL ADOPT RULES FOR COMPLIANCE BY DEALERS WITH SUBSECTION A OF THIS SECTION, INCLUDING RULES FOR ESCROW SCOPE AND INSTRUCTIONS, PURCHASER NOTIFICATION AND INFORMATION AND RECORDKEEPING REQUIREMENTS.Page 6, strike lines 41 through 43. (because the recovery fund is remaining intact for used home sales less than $50,000)
Add the following section changes :

41-2189. 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 sold PURSUANT TO 41-2180 B, 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. Chapter 6 of this title does not apply to the setting of fees under this section.
D. 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.

41-2190. Recovery from fund; claim against licensee; subrogation; appeal; statute of limitations
A. If any A consumer who is buying or selling the consumer's home SUBJECT TO THE PROVISIONS IN 41-2180 B 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 constitutes a violation of section 41-2180, or rules adopted pursuant to that section, 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 A consumer who is buying or selling the consumer's home SUBJECT TO THE PROVISIONS IN 41-2180 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, 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 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 the claim. A decision granting a claim shall include an order suspending the license of the licensee upon 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 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 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, 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.