Title of Regulation: 13VAC6-20. Manufactured Housing Licensing and Transaction Recovery Fund Regulations (amending 13VAC6-20-400, 13VAC6-20-450).

Statutory Authority: § 36-85.18 of the Code of Virginia.

Public Hearing Information: No public hearing is currently scheduled.

Public Comment Deadline: September 29, 2021.

Effective Date: October 15, 2021.

Agency Contact: Jeff Brown, Director of State Building Codes Office, Department of Housing and Community Development, 600 East Main Street, Suite 300, Richmond, VA 23219, telephone (804) 371-7161, or email jeff.brown@dhcd.virginia.gov.

Basis: The statutory authority to update the regulation is contained in §§ 36-85.18 and 36-85.36 of the Code of Virginia.

Purpose: This regulatory action is to update the regulation so that it is in line with the Code of Virginia. The provisions related to limitations on damages retained by dealers was considered by the Manufactured Housing Board in 2009 but was erroneously left out of subsequent updates. This action will bring the regulation in line with the Code of Virginia. The changes are necessary to protect the public health, safety, or welfare to the extent that they conform with state code as related to limitations on damages retained by manufactured home dealers and limitations on manufactured housing and transaction recovery fund payments.

Rationale for Using Fast-Track Rulemaking Process: This action is noncontroversial as it aligns the regulation with state code. Affected regulants have been in compliance with state code for a number of years and will not experience a negative impact from the regulatory changes.

Substance: This is simply an editorial correction to ensure that the limitations on damages retained by dealers and limitations on recovery fund payments, in the regulation match what is already in the Code of Virginia.

Issues: The advantages to the public and the agency or Commonwealth will be that the regulations will align with state code. There are no known disadvantages to the public or the agency or Commonwealth.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. As the result of an internal review and a 2009 legislative mandate, the Board of Housing and Community Development (Board) proposes to amend 13VAC6-20 Manufactured Housing Licensing and Transaction Recovery Fund Regulations (regulation) to conform to §§ 36-85.28 and 36-85.32 of the Code of Virginia.

Background. Chapter 579 of the 2009 Acts of Assembly amended §§ 36-85.28, 36-85.31, and 36-85.32 of the Code of Virginia (Code) to provide greater financial protection to both dealers and purchasers of manufactured homes. In particular, §36-86.28 of the Code was amended to:

1. Limit to $4,000 the amount of actual damages that a manufactured home dealer may retain when a buyer fails to accept delivery of a manufactured home that is larger than a single section unit and in the manufactured home dealer's stock.

2. Raise the limit of actual damages from $5,000 to $7,000 when a buyer fails to accept delivery of a manufactured home that is larger than a single section unit and is specially ordered for the buyer.

3. Raise the limit of actual damages from $500 to $1000 when a buyer fails to accept delivery of a manufactured home that is a single section unit in the dealer's stock.

4. Raise the limit of actual damages from $1000 to $2000 when a buyer fails to accept delivery of a manufactured home that is a single section unit and is specially ordered for the buyer.

Section 36-85.32 of the Code was amended to raise the maximum claim amount of a single claimant against the Manufactured Housing Transaction Recovery Fund (recovery fund) for single or multiple violations by one or more regulants from $20,000 to $40,000.¹ The Department of Housing and Community Development (DHCD) has been operating with the understanding that these legislative changes were reflected in the regulation when it was last amended in 2012 and recently realized that they had been inadvertently excluded.² Hence, the board proposes to amend the regulation to implement the changes to the Code, as summarized above.³ In addition, the Board proposes to specify that the amount of damages awarded from the recovery fund shall be limited to actual, compensatory damages and shall not include attorney's fees for representation before the board.⁴

Estimated Benefits and Costs. The increased damages would benefit dealers of manufactured homes who are faced with situations wherein buyers make an upfront payment toward the purchase of a manufactured home but subsequently fail to accept delivery. DHCD did not specify if such occurrences were common, or the frequency had been diminished since the 2009 legislation had passed. The increased damages may also deter buyers from placing orders if they are uncertain of their ability to accept delivery.

Claimants who had not received the damages owed to them by a regulant (that had been awarded to them by the board following a hearing) are allowed to request to the board that they be paid from the recovery fund. Such claimants would benefit from the increased maximum claim amount, since it would allow them to recoup up to an additional $20,000 in damages from the recovery fund if they had been awarded $40,000 or more, but the regulant had failed to pay the award.

Lastly, to the extent that regulants as well as purchasers of manufactured housing had already been aware of the changes made by the 2009 legislation described, the proposed amendments are unlikely to create any new costs or benefits beyond conforming the regulation to the Code.

Businesses and Other Entities Affected. DHCD reports that there are currently 198 licensed dealers of manufactured housing that would benefit from the increased damages. In addition, DHCD reports there are 13 licensed brokers, 38 licensed manufacturers, and 368 licensed salespersons. Although these regulants are not directly affected by the proposed amendments, clients of all four classes of licensees potentially stand to benefit from the increase in maximum damages to the extent that they may have to seek damages from the recovery fund.

Small Businesses⁵ Affected. DHCD could not provide the number of regulants that are small businesses, since they do not collect information on regulants' revenues or number of employees. However, the proposed amendments would not introduce any costs to businesses, including small businesses.

Localities⁶ Affected.⁷ The proposed amendments do not introduce new costs for local governments and are unlikely to affect any locality in particular.

Projected Impact on Employment. The proposed amendments are unlikely to affect the aggregate number of licensed manufacturers, brokers, dealers, or salespersons of manufactured homes.

Effects on the Use and Value of Private Property. The proposed amendments are unlikely to affect the use and value of private property, including manufactured homes. Real estate development costs are not affected.

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¹See https://lis.virginia.gov/cgi-bin/legp604.exe?ses=091&typ=bil&val=ch579. Note that Chapter 579 also amended § 36-85.31 of the Code to raise the minimum balance of the Fund from 250,000 to $300,000 and to authorize parts of the fund to be applied towards education programs and conducting investigations. However, the bill specified that the amendments to § 36-85.31 were to expire on July 1, 2011, rendering these changes moot as of this writing.

²See https://townhall.virginia.gov/L/ViewAction.cfm?actionid=2736 for the 2012 action.

³See https://townhall.virginia.gov/L/GetFile.cfm?File=Meeting\84\31103\Minutes_DHCD_31103_v1.pdf

⁴A statement to this effect is already included in Section 430 of this regulation, which addresses filing claims.

⁵Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

⁶"Locality" can refer to either local governments or the locations in the Commonwealth where the activities relevant to the regulatory change are most likely to occur.

⁷§ 2.2-4007.04 defines "particularly affected" as bearing disproportionate material impact.

Agency's Response to Economic Impact Analysis: The Virginia Manufactured Housing Board and Department of Housing and Community Development staff concur with the economic impact analysis prepared by the Department of Planning and Budget.

Summary:

The amendments align the regulation with the Code of Virginia regarding limitations on damages retained by dealers and limitations on recovery fund payments.

13VAC6-20-400. Limitation on damages retained by dealer; disclosure to buyer.

A. If a buyer fails to accept delivery of a manufactured home, the dealer may retain actual damages from the buyer's deposit according to the following terms:

1. If the manufactured home is a single section unit and is in the dealer's stock and is not specially ordered from the manufacturer for the buyer, the maximum retention shall be $500 $1,000.

2. If the manufactured home is a single section unit and is specially ordered from the manufacturer for the buyer, the maximum retention shall be $1,000 $2,000.

3. If the manufactured home is a multi-section home (two or more sections) larger than a single section unit in the dealer's stock and is not specially ordered from the manufacturer for the buyer, the maximum retention shall be $5,000 $4,000.

4. If the manufactured home is larger than a single section unit and is specially ordered for the buyer from the manufacturer, the maximum retention shall be $7,000.

B. A dealer shall provide a written disclosure to the buyer at the time of the sale of a manufactured home alerting the buyer to the actual damages that may be assessed of the buyer by the dealer, as listed in subsection A of this section, for failure to take delivery of the manufactured home as purchased.

13VAC6-20-450. Payment of damages; limitations; conditions.

A. If a regulant has not paid the awarded amount within 30 days as provided in 13VAC6-20-430 or filed an appeal to the circuit court as provided in 13VAC6-20-440, the board shall, upon request of the claimant pay the awarded amount to the claimant from the recovery fund under the following conditions:

1. The maximum claim of one claimant against the fund because of a single violation or multiple violations by one regulant or more regulants shall be limited to $20,000 $40,000;

2. The fund balance is sufficient to pay the awarded amount;

3. The claimant has assigned the board all rights and claims against the regulant; and

4. The claimant agrees to subrogate to the board all rights of the claimant to the extent of payment.

B. The aggregate amount of claims paid from the fund for violations by any one regulant during any license period shall be as follows:

1. For a manufacturer -- $75,000.

2. For a dealer -- $35,000.

3. For a broker -- $35,000.

4. For a salesperson -- $25,000.

C. If the board has reason to believe there may be additional claims against the fund from other transactions by the same regulant, the board may withhold any payments, involving that regulant, from the fund for a period of not more than one year from the date the board approved the original claimant's award. After this one-year period, if the aggregate of claims against the same regulant exceeds the limitations of this section, the aggregate amount shall be prorated by the board among the claimants and paid from the fund in proportion to the amounts of their awards remaining unpaid.

D. The amount of damages awarded by the board shall be limited to actual, compensatory damages and shall not include attorney fees for representation before the board.