Case Information
*1 The Attorney General of Texas December 15, 1980
Attorney General
Mr. Andy James, Administrator Opinion No. m-287 Texas Real Estate Commission
4920 N. Interregional Highway Re: Licensure of residential service Austin, Texas 78751 www
Dear Mr. James:
National Warranty Corporation, whose home offices are located in Indiana, markets a “Mobile/Modulsr Home Protection Plan.” Through signed agreements with approved mobile home dealers, the corporation offers for a fixed charge to extend for five years a manufacturer’s guarantee on mobile home units. Coverage is made available to an initial purchaser of a unit or his transferees. Service contracts warrant described units, includlng their structure, plumbing, heating and electrical systems, and new appliances or equipment to be free, under normal use, from manufacturing defects in material or workmanship. Contracts take effect lpcn expiration of the manufacturer’s warranty, at which time the corporation assumes respcnsi- bility for repairing (r replacing any parts necessary to correct defects in material or workmanship if a dealer is unable or unwilling to resolve problem.
You tave asked whether companies which market such a service program in Texas must be licensed as a residential service company pursuant to article 6573b, V.T.C.S., the Residential Service Company Act. Section 6 of the act provides, in pertinent part:
(a) No person shalL . . arrange to perform services pursuant to residential service contracts unless such person is a licensed service company or its authorized representative.
of (b) No person shall. . . arrange or solicit the sale . . . residential service contracts, unless (a). . and (b) such residential service contracts are Issued by a licensed service company.
A “service company” is defined in section 4(b) as “any person who issues and performs, or arranges to perform, services pursuant to a residential service contract,” and a “licensed service company” is a service company licensed by the Texas Real Estate Commission. Section 4(c).
Mr. Andy James - Page Two @M-287)
You assert that the service plan marketed by National Warranty Corporation constitutes a “residential service contract” within section 4(a), which &fines such a contract as:
any contract. . . whereby, for a fee, a person undertakes, for a specified period of time, to maintain, repair, or replace all or any part of the structural components, the appliances, or the electrical, plumbing, heating, cooling, or air-conditione systems of residential property.
The arporation maintains that it is exempted from licensure requirements by the following proviso in section 4(a):
provided, however, the term &es not. . . include any service. . . contract. . . sold . . or issued by any menufacturer or merchant . the manufacturer or merchant undertakes. . . to in which.. service. . . sny product or part thereof. . . manufactured or sold by such manufacturer or merchant. . . .
The corporation also relies upon section 25(e), which states that the act &es not apply to:
any service. . . amtract. . . which ptuvides for. . . the repair, service. . . of sny product or part maintenance, . . provided such service. . . contract. . . thereof. is sold,~ offered for sale, or issued by the manufacturer or merchant who manufactured or sold such product or part.
National Warranty Corporation &es not contend that mobile homes covered by its service plan are not “residential property” within article 6573b. Thus, we need not decide whether the act would cover any mobile home, without regard to its intended use, but will assume that mobile homes covered by the corporation’s service plan sre residences and are therefore within the scope of the act. See Yates v. Mobile America Sales Corporation, 582 S.W. 2d 509 (Tex. Civ. App. - BeaGnt), writ rePd n.r.e., 591 S.W. 2d 453 (Tex. 1979).
The corporation argues that because it &es not sell its service plans directly to consumers, but markets them through approved dealers who pay for the coverage and then provide it to their buyers, it is exempt from licensure requirements. However, in this argument overlooks the fact that an sgreement between our opinion, corporation and an approved dealer is itself a “residential service contract” within section 4(a) of the act: it is a contract whereby, for a fee, the corporation undertakes to service the parts of residential property specified in that section. It is equally clear, moreover, that the exemptions relied qcm by the corporation are inapplicable. Sections 4(a) and 25(e) exclude from the act service contracts issued or sold by manufacturers cr merchants of the products or parts covered by the contract. However, although a dealer with whom the corporation contracts may later make the *3 Mr. Andy James - Page Three (Mw-287)
advantages of the contract available to its customers or “resell” the contract to them, the original contract is sold to the dealw by the corporation, which is neither a manufacturer nor a merchant within article 6573b.
We therefore conclude that National Warranty Corporation is required to be licensed as a residential service company pursuant to srticle 6573b, V.T.C.S., in order to & tminess in Texas. We assume, of course, that the corporation is not already licensed as an insurance company. V.T.C.S. art. 6573b, S2(a).
SUMMARY National Warranty Corporation is required to be licensed as a residential service company under article 6573b, V.T.C.S., in order to do business in Texas.
Attorney General of Texas JOHN W. FAINTER, JR.
First Assistant Attorney General
RICHARD E. GRAY III
Executive Assistant Attorney General
Prepared by Jon Bible
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Susan L. Garrison, Acting Chairman
Jon Bible
Rich Gilpin
Nancy Lynch
Bruce Yamgblood