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  House Engrossed Senate Bill
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  State of Arizona
  Senate
  Forty-fourth Legislature
  Second Regular Session
  2000
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        CHAPTER 118
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      SENATE BILL 1465
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AN ACT

AMENDING SECTIONS 41-2179, 41-2180 AND 41-2186, ARIZONA REVISED STATUTES; RELATING TO MANUFACTURED HOUSING.

(TEXT OF BILL BEGINS ON NEXT PAGE)

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 41-2179, Arizona Revised Statutes, is amended to read:

41-2179. Bonds, cash deposits; requirements; fund

A. Before granting an original license, the assistant director shall require of the applicant, except an applicant for salesperson or dealer or broker of manufactured homes, mobile homes or factory-built buildings designed for use as residential buildings, a surety bond in a form acceptable to the assistant director or a cash deposit pursuant to this section. A separate bond or cash deposit shall be required for each branch location of any licensed manufacturer or installer. No license shall be renewed unless the applicant's surety bond or cash deposit is in full force and effect. A change of location of a licensee's principal place of business requires a rider or endorsement to the existing bond and payment of the administrative function fee. The rider or endorsement shall indicate the new location and acceptance of claims for the previous location.

B. The bonds or cash deposit shall be in amounts promulgated PRESCRIBED by the board.

C. The surety bonds shall be executed by the applicant as principal with a corporation duly authorized to transact surety business in this state. Evidence of a surety bond shall be submitted to the assistant director in a form prescribed by the assistant director. The applicant may in the alternative establish a cash deposit in the amount of the bond with the state treasurer pursuant to the rules issued ADOPTED by the assistant director. The state treasurer shall deposit such bond funds in a special account to be known as the consumer recovery fund. Ninety per cent of THE MONIES IN the fund shall be invested by the state treasurer pursuant to laws governing such deposits. The accrued interest from such investments shall be paid quarterly to the consumer recovery fund. The remaining ten per cent of such cash bond funds shall be held by the state treasurer for the payment of current claims. Such cash deposits may be withdrawn, if there are no outstanding claims against them, two years after the termination of the license in connection with which the cash is deposited. The cash deposit may be withdrawn two years after the filing of a commercial surety bond as a replacement to the cash deposit.

D. The bond or deposit required by this section shall be in favor of the state for the benefit of any person covered by this subsection. The bond or deposit shall be subject to claims by:

1. Any consumer of a unit regulated by this chapter who enters into an agreement with any licensee, except a salesperson, manufactured home dealer or broker of manufactured homes, mobile homes or factory-built buildings designed for use as residential buildings, and is damaged by the failure of the principal to perform a sales or installation agreement or to perform repairs under a warranty.

2. The assistant director, if the principal fails to pay any of the fees or costs which the principal owes the office.

E. Any person claiming against the bond or deposit, except the department, may maintain an action against the principal and the surety. Such principal's bond or deposit may be sued upon in successive actions until the full amount is exhausted. No suit may be commenced on the bond or deposit after the expiration of two years after the date of sale or installation of the unit, whichever is later, on which the suit is based, except that the time for purposes of the claim for fraud shall be measured pursuant to section 12-543.

F. The surety bond or deposit shall be continuous in form and shall be conditioned CONTAIN THE CONDITION that the total aggregate liability of the surety or depository for all claims shall be limited to the face amount of the bond or depository irrespective of the number of years the bond or depository is in force. If the corporate surety desires to make payment without awaiting court action, the amount of the bond filed shall be reduced to the extent of any payment or payments made by the corporate surety in good faith. Any such payments shall be based on priority of written claims received by the corporate surety prior to court action. The surety bond or depository shall be continuous as long as the corporate surety or the depositor maintains the face amount of the bond or deposit. Failure to maintain the face amount of the bond or deposit constitutes a suspension of such license until the face amount of the bond or deposit is restored.

G. The corporate surety shall notify the assistant director of the intent of the principal to cancel the bond and of any monies paid from the bond. Upon receipt by the assistant director of notice to cancel a bond by any corporate surety, the assistant director shall immediately notify the licensee who is the principal on the bond of the effective date of cancellation of the bond and that the licensee shall furnish a like bond or make cash deposit on or before the effective date of cancellation or the license shall be suspended. Notice to the licensee shall be by certified mail postage fully prepaid, addressed to the licensee's last address of record with the office. The license shall be suspended on the date the bond is canceled unless a replacement bond or cash deposit in lieu of a bond is on file with the assistant director.

H. The director and assistant director shall have no personal liability for the performance of duties relating to the bond and cash deposit requirements of this section if such duties are performed in good faith.

Sec. 2. Section 41-2180, Arizona Revised Statutes, is amended to read:

41-2180. Trust and escrow requirements; rules; exemptions

A. 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.

B. All dealers or brokers shall notify the assistant director in writing when the trust or escrow account has been established by indicating the name and number of the account and the name and location of the financial institution used.

C. The dealer or broker, in writing, shall authorize the depository to release any and all information relative to trust or escrow accounts to the assistant director or his agent, employee or deputy.

D. The dealer's or broker's earnest money receipt book shall reflect all earnest monies received and shall be at the minimum in duplicate and consecutively numbered.

E. All earnest monies shall be deposited in the escrow account or trust fund account no later than the close of the second banking business day after receipt.

F. A dealer or broker may deposit and maintain up to two hundred dollars in the trust account to offset service charges that may be assessed by the financial institutions.

G. Every deposit into a trust account shall be made with a deposit slip which identifies each transaction as follows:

1. The amount of deposit.

2. The names of all parties involved in the transaction.

All receipts for monies deposited in escrow shall be made accountable by containing the same information.

H. A complete record shall be retained by the dealer's or broker's office of all earnest monies received. The record shall contain provisions for entering:

1. The amount received.

2. From whom the money was received.

3. The date of receipt.

4. The place of deposit.

5. The date of deposit.

6. The daily balance of the trust fund account deposit of each transaction.

7. When the transaction has been completed.

8. Date and payment for all goods and services the dealer has contracted to provide.

I. All earnest money deposited in the trust or escrow account shall be held in such account until one of the following is completed:

1. An application for title transfer has been made.

2. The transaction involved is consummated or terminated and a complete accounting is made.

J. Upon completion of subsection I of this section the earnest money deposit shall be conveyed to the lending institution or the dealer, broker, purchaser, seller, manufacturer or lienholder, whichever is applicable.

K. The dealer or broker shall retain true copies of the purchase agreements, earnest money receipts, depository receipts, evidence of delivery documents and evidence of consummation of sale or termination of sale for a period of three years.

L. The deposits referred to in this section shall not be utilized for any purpose other than the transaction for which they were provided.

M. Notwithstanding any other provision of this section, before an event listed under subsection I of this section is completed, a licensed dealer may release trust account earnest monies to pay FOR flooring or inventory for the unit that is the subject of the transaction for which the earnest monies were provided. Either a licensed dealer or broker may release trust account earnest monies to pay, other lawfully imposed interim loan amounts and charges imposed by a financial institution or other bona fide lender on the unit that is the subject of the transaction for which the earnest monies were provided. The dealer or broker shall not make any payment out of trust account monies pursuant to this subsection unless done in compliance with all of the following:

1. The payment is made no more than ten business days prior to the completion date pursuant to subsection I.

2. The payment is made directly to the financial institution or other bona fide lender.

3. The payment is recorded in the dealer's or broker's records under this section and documented by a receipt, a payment record or any other evidence from the financial institution or lender.

4. If the transaction is terminated, the dealer or broker replaces the amount of the payment in the trust account within three business days after receiving written notification of the termination.

This subsection does not affect any other rights or obligations between the purchaser and the licensed dealer or broker.

N. THE BOARD SHALL ADOPT SEPARATE RULES FOR DEALER TRUST AND ESCROW ACCOUNTS AND BROKER TRUST AND ESCROW ACCOUNTS. AT A MINIMUM, THESE RULES SHALL CONTAIN TRUST AND ESCROW ACCOUNT REQUIREMENTS FOR THE FOLLOWING:

1. RECORD KEEPING.

2. ADMINISTRATION.

3. SERVICE FEES OR CHARGES.

4. DEPOSITS.

5. ADVANCES OR PAYMENTS OUT OF TRUST AND ESCROW ACCOUNTS.

6. CLOSING OR TERMINATION OF SALES TRANSACTIONS.

7. AUDITING OR INVESTIGATION OF TRUST OR ESCROW ACCOUNT COMPLAINTS.

N. O. This section shall not apply to a real estate broker or salesperson licensed pursuant to section 32-2122 and pursuant to this article when the unit is sold in conjunction with real estate.

Sec. 3. Section 41-2186, Arizona Revised Statutes, is amended to read:

41-2186. Grounds for disciplinary action

The assistant director may, upon the assistant director's own motion, and shall, upon the complaint in writing of any person, cause to be investigated by the office the acts of any manufacturer, dealer, broker, salesperson or installer licensed with the office and may temporarily suspend or permanently revoke any license issued under this article, impose an administrative penalty or place on probation any licensee, if the holder of the license, while a licensee, is guilty of or commits any of the following acts or omissions:

1. Failure in any material respect to comply with the provisions of this article or article 2 of this chapter.

2. Violation of any rule THAT IS adopted by the board pertaining AND THAT PERTAINS to THE construction of any unit, or of any rule THAT IS adopted by the board which AND THAT is necessary to effectively carry out the provisions and intent of this article, article 2 of this chapter or the laws of the United States or of this state.

3. Misrepresentation of a material fact by the applicant in obtaining a license.

4. Aiding or abetting an unlicensed person or knowingly combining or conspiring with an unlicensed person to evade the provisions of this article or article 2 of this chapter, or allowing one's license to be used by an unlicensed person or acting as an agent, partner or associate of an unlicensed person with intent to evade the provisions of this article or article 2 of this chapter.

5. Conviction of a felony.

6. The doing of a wrongful or fraudulent act by a licensee which relates to this article or article 2 of this chapter.

7. Departure from or disregard of any code or any rule adopted by the board.

8. Failure to disclose or subsequent discovery by the office of facts which, if known at the time of issuance of a license or the renewal of a license, would have been grounds to deny the issuance or renewal of a license.

9. Knowingly entering into a contract with a person not duly licensed in the required classification for work to be performed for which a license is required.

10. Acting in the capacity of a licensee under any license issued under this article in a name other than as set forth upon the license.

11. Acting as a licensee while the license is under suspension.

12. Failure to respond relative to a verified complaint after notice of such complaint.

13. Violation of the provisions of title 28, chapter 10 or rules adopted pursuant to such chapter, except for the licensing requirements of sections 28-4334, 28-4335, 28- 4361, 28-4362, 28-4364, 28-4401 and 28-4402.

14. False, misleading or deceptive sales practices by a licensee in the sale or offer of sale of any unit regulated by this article or article 2 of this chapter.

15. Failure to remit the consumer recovery fund fee pursuant to section 41-2189.

16. Acting as a salesperson while not employed by a dealer or broker.

17. As a salesperson, representing or attempting to represent a dealer or broker other than by whom the salesperson is employed.

18. Failure by a salesperson to promptly place all cash, checks and other items of value and any related documents received in connection with a sales transaction in the care of the employing dealer or broker.

19. Failure to provide all agreed on goods and services.

20. Failure to manufacture or install in a workmanlike manner all subassemblies, units and accessory structures which are suitable for their intended purpose.

21. Failure of the licensee to work only within the scope of the license held.

22. AN ACTION BY A LICENSEE, WHO IS ALSO A MOBILE HOME PARK OWNER, MANAGER, AGENT OR REPRESENTATIVE, THAT RESTRICTS A RESIDENT'S OR PROSPECTIVE RESIDENT'S ACCESS TO BUYERS, SELLERS OR LICENSED DEALERS OR BROKERS IN CONNECTION WITH THE SALE OF A HOME OR THE RENTAL OF A SPACE, THAT THE DEPARTMENT FINDS CONSTITUTES A VIOLATION OF SECTION 33-1434, SUBSECTION B OR SECTION 33-1452, SUBSECTION D OR THAT VIOLATES ANY LAW OR REGULATION RELATING TO FAIR HOUSING OR CREDIT PRACTICES.

APPROVED BY THE GOVERNOR APRIL 03, 2000.

FILED IN THE OFFICE OF THE SECRETARY OF STATE APRIL 03, 2000.