2019-052 Manufactured Home Financial Risk DisclosureDate: March 15, 2019 Report No. 2019-052
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT:
Information on the City of Denton’s ability to facilitate the communication of financial risks
relating to purchase of a manufactured home.
EXECUTIVE SUMMARY:
On Jan. 8, 2019, Council Member Meltzer requested information on the feasibility of requiring
disclosure of the unique financial risk to prospective buyers of manufactured homes (historically
referred to as “mobile homes”) within manufactured/mobile home developments. While a local
ordinance requiring a disclosure is not pre-empted by state or federal law, alternative options that
involve working with local manufactured home parks and real estate agents may provide effective
communication without increasing the risk of legal liability to the City.
BACKGROUND:
Manufactured homes generally refer to a single-family structure constructed in a factory and
conforms to the standards required by the U.S. Department of Housing and Urban Development
(HUD). These homes are equipped with non-removable chassis so that they may be transported
from the factory or sales site to a permanent or non-permanent location. While the chassis allows
for transport, manufactured homes are intended to be stationary over a long period of time and
should not be confused with recreational vehicles (RV). HUD imposes building standards for
manufactured homes and, when those standards are met, requires a certification label (a “HUD
tag”) to be affixed to the home.
Housing and Urban Development (HUD) Oversight
The Safety Standards Act of 1974 authorizes HUD to establish federal standards for the design
and construction of manufactured homes to assure quality, durability, safety, and affordability.
Since 1976, manufactured homes have been subject to the Manufactured Home Construction and
Safety Standards (the “HUD code”) that regulates the home's design and construction, strength
and durability, transportability, fire resistance, energy efficiency, and quality control. HUD
enforces these standards directly or through State Administrative Agencies, inspects factories and
retailer lots, regulates installation standards for the homes, administers a dispute resolution
program for defects, establishes and collects a fee for each home built, authorizes a certification
label to be placed on homes that meet the HUD standards, and pursues a civil or criminal action
for violations of the Safety Standards Act. HUD or its State Administrative Agency offer many
resources for potential manufactured home buyers, particularly on how to seek resolution to
performance- or safety-related defects in the manufacture of the home. Retailers and
manufacturers are required by law to correct these defects if they create an unreasonable risk of
injury or death or are related to design or assembly errors.
Risk Disclosure or Notification
The Texas Department of Housing and Community Affairs (TDHCA) is the HUD State
Administrative Agency for Texas and is responsible for enforcing manufactured home
Date: March 15, 2019 Report No. 2019-052
requirements at the state level. As part of purchasing paperwork for the retail sales of new or used
manufactured homes, TDHCA requires that the purchaser sign a disclosure form that outlines
financial issues, options, and risks for the purchaser to consider (see attached form).
This form is not required in cases of non-retail sales of used homes. In situations where a
manufactured home or mobile home park requires ownership of any home within the park, the sale
may involve little more than a title transfer and exchange of funds. Other sales may involve the
use of standard Texas Real Estate Commission (TREC) forms; however, even in these cases there
is no specific financial disclosure related to manufactured homes.
As a home rule City, Denton is not pre-empted by the state of Texas in its ability to require certain
notifications or disclosures be made at a point of sale. It is important to note that the lack of
restriction does not alleviate other risks and concern in such an action. Requiring the disclosure
of any financial risks to ownership of a manufactured home could leave the city open to claims of
tortious interference with a business relation or contract. Additionally, an equal protection claim
could be made if the City is not making similar requirements of other similarly situated
transactions, such as requiring the disclosure for manufactured homes, but not site-built single-
family homes. A communications campaign would be necessary to ensure that there is broad
awareness of the local disclosure law with those parties who would be potentially involved in a
manufactured home sale within the City of Denton.
Alternatives to Required Disclosures
As an alternative to a local ordinance compelling the disclosure of financial risks or concerns to
manufactured home purchasers would be for staff to work in partnership with the management
teams of manufactured home parks to distribute information to potential buyers when opportunities
present themselves. Such managers have an interest in maintaining ownership stability within the
manufactured home park and a high rate of ownership turnover can adversely impact the proper
maintenance and upkeep of those properties and potentially erode property values of other nearby
manufactured homes.
Additionally, to the extent that sales transactions involve licensed real estate agents, staff has the
ability to partner with local licensed real estate agents, and local real estate professional
organizations, to encourage the communication of financial risks through a disclosure-like form
or document. Real estate agents have less incentive to be concerned with the ongoing financial
stability of the purchaser beyond the actual transaction, so it is possible this option may not result
in a broad use of any disclosure or informational documents.
CONCLUSION:
In non-retail transactions, the City of Denton is not restricted from requiring a disclosure form to
be used; however, in doing so the City may be open to certain legal liabilities. Additional research
is needed on how to effectively deploy a disclosure if the Council were to proceed in this policy
direction. Non-ordinance alternatives are available, particularly working with manufactured home
park managers to communicate financial risks to potential home purchasers.
Date: March 15, 2019 Report No. 2019-052
ATTACHMENT(S):
TDHCA Manufactured Home Disclosure Form
STAFF CONTACT:
Ryan Adams
Assistant to the City Manager
(940) 349-8565
Ryan.Adams@cityofdenton.com
MHD FORM 1038 / Consumer-Disclosure.doc Page 1 of 6 Rev. 10/12/2018
Texas Department of Housing and Community Affairs
MANUFACTURED HOUSING DIVISION
P. O. BOX 12489 Austin, Texas 78711-2489
(877) 313-3023, (512) 475-2200, FAX-(512) 475-3506
Internet Address: www.tdhca.state.tx.us/mh/index.htm
MAKING AN INFORMED DECISION ABOUT BUYING A
MANUFACTURED HOME
IF YOU HAVE QUESTIONS CALL 1-877-313-3023
WWW.TDHCA.STATE.TX.US/MH
Ownership of ANY home brings many responsibilities. Buying a manufactured home involves
many important and unique considerations. This disclosure is to assist you in recognizing and
understanding many of those factors. Please read it carefully.
CHOOSING A MANUFACTURED HOME AS YOUR HOME: Manufactured homes come in
a variety of sizes, styles, design features, amenities, and price ranges. All manufactured homes are
built to federal standards established by the federal Department of Housing and Urban Development
(HUD). Also, the federal government and the state of Texas require manufacturers, retailers and
installers to give certain warranties on manufactured homes. The type of warranties you receive
will depend on whether you are purchasing a new or used manufactured home. You have the right
to see the manufacturer’s warranty and the retailer’s warranty before entering into a sales purchase
contract to purchase a manufactured home.
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CHOOSING A MANUFACTURED HOME RETAILER: The State of Texas licenses and
oversees manufacturers, retailers, brokers, salespersons, and installers of manufactured homes. The
agency responsible for this licensing and oversight is the Texas Department of Housing and
Community Affairs, Manufactured Housing Division (the “Department”). Your properly licensed
manufactured home retailer should display, or be willing to show you, its license in its sales office.
Dealing with licensed parties can provide important consumer protections.
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DEPOSITS: You may be required by a manufactured home retailer to place a deposit on a home,
regardless of whether the home is on the retailer’s sales lot, is being sold at another location, or will
be ordered from a factory. The amount of the deposit is determined between you and your retailer.
The deposit becomes a down payment upon execution of a binding sales purchase contract.
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REFUNDS: You have the right to demand a refund of the deposit or down payment, and receive
that refund within 15 days thereafter, if you timely and properly rescind the sales purchase contract.
A retailer may keep up to 5% of the estimated cash price if the consumer specially orders from the
manufacturer a manufactured home that is not in the retailer's inventory, the home conforms to the
specifications of the special order and any representations made to the consumer, the consumer fails
or refuses to accept delivery and installation of the home by the retailer, and the consumer was
given conspicuous written notice of the requirements for retaining the deposit.
A retailer may deduct from your deposit or down payment for any expenses incurred by the retailer
if you contract with the retailer to arrange for services that are performed by an appraiser of real
property or a title company in connection with real property that will be included in the purchase or
when real property is pledged by you as collateral for the purchase of the manufactured home. The
retailer must provide notice of laws relating to rescission and real property appraisal and title work
expenses before signing the contract for real property appraisal and title work services. The retailer
must also provide an itemized list of the specific real property appraisal and title work expenses
incurred by the retailer.
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FINANCING OPTIONS: A manufactured home in Texas has tremendous flexibility when it
comes to financing because it can be financed as personal property (typically a consumer loan
secured by the home only) or, if you own the land the home is on (or have a qualifying long term
lease on the land) as real property (typically a mortgage loan secured by the home and the land).
You should talk to possible lenders about the terms they can offer. If you think one lender is
offering too high a rate, talk to another lender.
Consumer lenders must generally be registered with the Office of the Consumer Credit
Commissioner. Mortgage loans are usually originated by mortgage brokers (licensed with the
Savings and Mortgage Lending Department), mortgage bankers (registered with the Savings and
Mortgage Lending Department), or financial institutions (regulated by state and/or federal
regulators, depending on the type of financial institution).
WHEN YOU MAKE A DECISION ABOUT BUYING A
MANUFACTURED HOME, PLAN FOR FLEXIBILITY AND CHANGE.
YOUR LOAN WILL BE A MAJOR FACTOR IN DETERMINING YOUR PAYMENTS, BUT
THERE ARE OTHER IMPORTANT FACTORS YOU SHOULD ALSO THINK ABOUT, SUCH
AS:
■ Adjustable rate loans – If rates go up, your loan payments will go up.
■ Property taxes – Changes in property valuation and changes in tax rate can result in
changes in your payments.
■ Insurance – If premiums increase, your payments will go up.
■ Lot rent – If you are renting the lot your home is on, your rent may be subject to
increase.
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MHD FORM 1038 / Consumer-Disclosure.doc Page 3 of 6 Rev. 10/12/2018
LOCAL RESTRICTIONS AND REQUIREMENTS (ZONING): Depending on where a home
is to be located it may be subject to special local requirements, including zoning and deed
restrictions. These local requirements may affect where the home can be placed and may also
involve other related requirements (and expenses) such as size requirements, construction
requirements. Contact the local municipality, county, and subdivision manager to find out what, if
any, requirements of this sort may apply to any site where you are going to place a manufactured
home.
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SITE PREPARATION: The installer is responsible for proper preparation of the site where a new
manufactured home is to be installed. A consumer is responsible for proper preparation of the site
where a used manufactured home is to be installed. If you do not think you can prepare your site
properly, consider hiring someone else with the right experience and equipment to do it for you.
Proper site preparation includes a site for placement of the home that has good drainage so that
water will not collect or run under or around the home; and firm compacted soil with no stumps,
debris, or other matter. The site that is selected and prepared also needs to meet any setback or
other placement requirements and have access to any required water, septic system, and utilities.
PROPER SITE PREPARATION IS ESSENTIAL!
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INSTALLATION: If you are purchasing a NEW manufactured home. Installation must be
included. If you are purchasing a USED manufactured home, installation may or may not be
included. If installation is not included and you arrange for it yourself, remember, ONLY A
LICENSED INSTALLER may install a manufactured home. The installer who actually installs the
home must also provide a warranty.
PROPER INSTALLATION BY A LICENSED INSTALLER IS
REQUIRED BY LAW IN ORDER FOR A HOME TO BE OCCUPIED.
If you are buying a home that has already been installed, you should ask the selling retailer if they
will check the leveling, check for the presence (if required) and condition of any vapor retarder,
check anything else regarding the foundation/stabilization system, or provide any other installation-
related services.
If you acquire a used manufactured home that is already installed in a Wind Zone II county but the
home is a Wind Zone I home, which means that home was not designed or constructed to withstand
a hurricane force wind occurring in a Wind Zone II or III area, the home cannot be installed in a
Wind Zone II area unless it was constructed before September 1, 1997.
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MHD FORM 1038 / Consumer-Disclosure.doc Page 4 of 6 Rev. 10/12/2018
UPKEEP AND MAINTENANCE: ANY home requires regular upkeep and maintenance – things
like periodic checking of and repairs to the roof, keeping vents and filters clear, maintaining septic
systems and wells in safe and sanitary working order, caulking to prevent leaks, and periodic
painting. Also, depending on the foundation system you choose, a manufactured home may require
periodic checking to be sure that it is still level and that the anchors and straps are secure.
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FOUNDATION MAINTENANCE: You must accept all responsibility for maintenance of the site
upon closing. These responsibilities include: maintaining good drainage around the home,
preventing soil erosion, periodic inspections of foundation supports and anchorage, and any leveling
or adjustment that may be required unless contractually agreed otherwise. Homes located in areas
that have soils with high clay content that expands and contracts must maintain consistent moisture
levels. This may include watering around the foundation during dry summer months and managing
the size and proximity of the vegetation near the foundation.
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LOT RENT: If you rent the lot your home is on, in addition to the possibility of rent increases, it is
possible that the property owner could decide to change the use of the land and not renew your
lease. Although you would be given advance notice, this would mean that you would have to move
your home and have it installed somewhere else.
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WATER AND UTILITIES: Be sure that your lot has access to water. If you must drill a well,
consider contacting several drillers for bids. If water is available through a municipality, utility
district, water district, or cooperative, you should inquire about the rates you will have to pay and
the costs necessary to join the water system. Be sure that any utilities you will need are available at
your site and, if they are not, find out what will be involved in getting them delivered and
connected.
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SEWER CONNECTIONS OR SEPTIC SYSTEMS: If your lot is not serviced by a municipal
sewer system or utility district, you will have to install an on-site sewer facility (commonly known
as a septic system). There are a number of concerns or restrictions that will determine if your lot is
adequate to support a septic system. Check with the local county or a licensed private installer to
determine the requirements that apply to your lot and the cost to install such a system.
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HOMEOWNERS ASSOCIATIONS AND FEES: Many subdivisions have mandatory
assessments and fees that lot owners must pay. Check with the manager of the subdivision in which
your lot is located to determine if any fees apply to your lot.
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PROPERTY TAXES: Manufactured homes are appraised and subject to property taxes.
Depending on the type of loan you have, your lender may escrow for these taxes, and this will
increase your monthly payments. Whether you select personal property or real property status for
your home may impact any homestead exemption that you may obtain to reduce your tax liability.
Talk with the county tax office if you have any questions. Failing to pay your taxes or make
arrangements with the tax assessor-collector may place you at risk of having tax liens recorded on
your home and, possibly, having the home foreclosed for non-payment of taxes. If you do not have
a lender that escrows for the taxes, the tax assessor-collector will work out an escrow arrangement
with you if requested.
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INSURANCE: Your lender will almost certainly require you to obtain insurance. You should
request quotes from the agent of your choice to obtain the insurance. Even if you do not have a
lender, it is a good idea to obtain insurance to protect your home and yourself.
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THE MANUFACTURED HOMEOWNER CONSUMER CLAIMS PROGRAM (the
“CLAIMS PROGRAM”): The Claims Program is established by law to protect consumers who
incur certain actual damages arising from specified violations of law involving acts or omissions of
licensees. To learn more about the Claims Program you can check the Department’s website at:
www.tdhca.state.tx.us/mh or call the Department for a printed description of the Claims Program
and how it works. Claims on the Claims Program must be verified and must be made within two
years from the date of the act or omission or when it was discovered or reasonably should have been
discovered.
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RIGHT OF RESCISSION: Once you enter into a contract with a selling retailer to acquire a
manufactured home, you have a right to rescind the contract. You may, not later than the third day
after the applicable contract is signed, rescind the contract without penalty or charge. The right to
rescind may be modified or waived only if you have a bona fide emergency. The Department has
rules about the detailed requirements for waivers and modifications.
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This Six Page Disclosure was provided to me/us by the retailer and/or lender shown below on this
date. It was provided to me/us before I/we completed a credit application (if a financed
transaction), or before I/we signed a contract to purchase or exchange a manufactured home.
_______________________ ____________________________________________
DATE RETAILER or LENDER
____________________________________________
LICENSE NUMBER (if a retailer)
_____________________________________ ______________________________________
CUSTOMER signature CUSTOMER signature
_____________________________________ ______________________________________
CUSTOMER printed name CUSTOMER printed name
Date:_________________________________ Date:__________________________________