BILL NUMBER: AB 2256 CHAPTERED 09/20/00 CHAPTER 555 FILED WITH SECRETARY OF STATE SEPTEMBER 20, 2000 APPROVED BY GOVERNOR SEPTEMBER 18, 2000 PASSED THE SENATE AUGUST 22, 2000 PASSED THE ASSEMBLY MAY 18, 2000 AMENDED IN ASSEMBLY MAY 1, 2000 AMENDED IN ASSEMBLY APRIL 4, 2000 INTRODUCED BY Assembly Member Correa FEBRUARY 24, 2000 An act to amend Sections 18050.7 and 18070.3 of the Health and Safety Code, relating to mobilehomes. LEGISLATIVE COUNSEL'S DIGEST AB 2256, Correa. Licensing: manufactured homes and mobilehomes. Under the existing Mobilehomes-Manufactured Housing Act of 1980, the Department of Housing and Community Development is required to enforce various laws pertaining to manufactured housing, mobilehomes, park trailers, commercial coaches, special purpose commercial coaches, and recreational vehicles. The act also prohibits the department from granting an initial dealer's license to any applicant who has not met all of the specified education and experience requirements. The bill would create a manufactured home or mobilehome dealer's license, add alternative criteria for meeting the requirements of a license, and raise the maximum payment from $40,000 to $75,000 that a claimant, as defined, who has obtained a final judgment against any manufactured home dealer, salesperson, or other seller or purchaser, may receive from the Manufactured Home Recovery Fund for, among other things, failure to honor warranties or guaranties, fraud, or willful misrepresentation with respect to any one sales transaction on a new or used manufactured home. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 18050.7 of the Health and Safety Code is amended to read: 18050.7. In addition to any other requirements imposed by this part or regulations of the department, the department shall not grant an initial manufactured home or mobilehome dealer's license to any applicant who has not satisfied all of the education and experience requirements contained in this section. If the applicant for a manufactured home or mobilehome dealer's license is a partnership, corporation, or other business entity, each person designated to participate in the direction, control, or management of the sales operation of the entity shall meet all of the education and experience requirements contained in this section prior to issuance of a manufactured home or mobilehome dealer's license by the department. (a) The applicant either shall have held a valid manufactured home or mobilehome salesperson's license issued by the department for at least two years within the five-year period immediately preceding the application for an initial manufactured home or mobilehome dealer's license, or shall meet any of the following criteria: (1) Has acquired a four-year degree from an accredited college or university. (2) Has held a valid manufactured home or mobilehome salesperson's license issued by the department for one year in the past three years and acquired an associate of arts or associate of science degree from an accredited college. (3) Has been the officer of the corporation, owner or partner of, or has held a management position relating to finance, marketing, administration, or general management with, a manufacturer of manufactured housing in any state for two years within the five years immediately preceding application for an initial manufactured home or mobilehome dealer's license. (4) Holds a management position with a housing authority, redevelopment agency, or nonprofit housing corporation which is developing individual lots, a subdivision, or a park for the placement of manufactured homes or mobilehomes. (5) Has been an escrow, title, or loan officer of a land title company, bank, savings and loan association, or mortgage company in a capacity directly related to financing or conveying title to manufactured housing for two years within the five years immediately preceding application for an initial manufactured home or mobilehome dealer's license. (6) Has been a subdivider, developer, or contractor in any state for at least two years within the five years immediately preceding application for an initial manufactured home or mobilehome dealer's license, during which time the applicant developed or sold 10 lots or the equivalent. (7) Has been the officer of a corporation, the owner or partner of a mobilehome park or mobilehome park management company in any state for at least two years within the five years immediately preceding the application for an initial manufactured home or mobilehome dealer' s license. (8) Has held a manufactured home or mobilehome dealer's license from a state other than California for at least four years within the five years immediately preceding the application for an initial manufactured home or mobilehome dealer's license, and has completed 24 hours of continuing education class in California, in addition to the preliminary education requirement of subdivision (b). (9) Has previously held a valid manufactured home or mobilehome dealer's license issued by the department, or was a person designated to participate in the direction, control, or management of the sales operations of a partnership, corporation, or other business entity that previously held a valid manufactured home or mobilehome dealer's license issued by the department and the license has never been revoked for cause, and never reissued, or suspended for cause and the terms of suspension have not been fulfilled. (10) Has any combination of the above experience that would provide at least two years of experience within the five years immediately preceding the application for an initial manufactured home or mobilehome dealer's license. The two years of experience shall not be concurrent. (b) The applicant shall have met the applicable preliminary education requirements for the manufactured home or mobilehome dealer' s license under paragraph (5) of subdivision (b) of Section 18056.2. (c) The department may adopt regulations, as necessary, to implement this section. SEC. 2. Section 18070.3 of the Health and Safety Code is amended to read: 18070.3. (a) When any person (1) who has purchased a manufactured home for a personal or family residential or investment purpose or (2) who has sold a manufactured home for a personal or family residential or investment purpose, obtains a final judgment in any court of competent jurisdiction against any manufactured home dealer, salesperson, or other seller or purchaser, and the judgment is based on the grounds of failure to honor warranties or guarantees, or for fraud, or for willful misrepresentation of the kind or quality of the product sold or purchased, or for conversion, arising directly out of any transaction which occurs on or after January 1, 1985, the person, upon termination of all proceedings, including appeals, may file a claim with the department for an order directing payment out of the fund of the amount of actual and direct loss in the transaction. (b) If any person either purchases a manufactured home used for a personal or family residential or investment purpose from, or sells a manufactured home used for a personal or family residential or investment purpose to, a licensee who is or has been the subject of a bankruptcy proceeding, the person may file a claim with the department for an order directing payment out of the fund of the actual and direct loss in the transaction based on the licensee's failure to honor warranties or guarantees, or for fraud, or for willful misrepresentation of the kind or quality of product purchased or sold, or for conversion, arising directly out of any transaction that occurs on or after January 1, 1985. (c) No person applying for recovery from the fund shall apply for judgment on any bond issued prior to January 1, 1985. (d) "Actual and direct loss," for purposes of this chapter, includes: (1) The amount of the actual and direct loss, plus court costs and reasonable attorney fees incurred in pursuit of the judgment, not to exceed 15 percent of the amount of the judgment, if the claim is based on a judgment. (2) Only the amount of the actual and direct loss, if the claim is not based on a judgment. (e) (1) The total amount of the claim shall not exceed the amount of actual and direct loss that remains unreimbursed from any source. (2) The maximum payment ordered under this section, with respect to any one sales transaction on a new or used manufactured home, shall be the amount of the judgment plus attorney's fees or, in the case of a bankrupt licensee, the amount of the actual and direct loss, as determined by the department based on information in the possession of the department and information provided by the claimant or claimants. In no event shall the actual payments exceed seventy-five thousand dollars (75,000). (3) Notwithstanding any other provision of this chapter, a person who purchases or sells a manufactured home for an investment purpose may receive payment from the fund for that purpose only once. A person who has received payment from the fund for the purchase or sale of a manufactured home for an investment purpose shall henceforth be ineligible to make a claim under this chapter, either as a natural person or as a member of a partnership, as an officer or director of a corporation, as a member of a marital community, or in any other capacity. (f) For the purposes of this chapter: (1) "Claimant" does not include a person holding a lien on, or a person possessing a secondary interest in, a manufactured home. (2) "Conversion" means the unlawful appropriation of the property of another. (g) Prior to payment of any claim against the fund, the claimant or claimants shall have first: (1) If the claim is based on a final judgment, executed judgment against all the assets of the judgment debtor or presented evidence satisfactory to the department that the debtor is judgment proof. (2) If the claim is not based on a final judgment, presented evidence satisfactory to the department that the licensee is or has been the subject of bankruptcy proceedings and, for purposes of any civil litigation or claims in bankruptcy proceedings, has assigned to the department any interest in the actual and direct loss described in subdivision (d) in the amount that the claimant or claimants recover from the fund. (h) A claim against the fund shall be filed with the department in accordance with the following: (1) If the claim is based on a final judgment, within one year from the date of the judgment. (2) If the claim is not based on a final judgment, within one year from the termination of bankruptcy proceedings or one year from the date of sale as determined by subdivision (a) of Section 18070.2, whichever event occurs later. (i) When any person files a claim for an order directing payment from the fund, the department shall conduct a review of the application and other pertinent information in its possession, and it may issue an order directing payment out of the fund as provided in subdivisions (a) to (h), inclusive, subject to the limitations of subdivisions (a) to (h), inclusive, if the claimant or claimants show all of the following: (1) That he or she is not a spouse of the judgment debtor, the bankrupt licensee, or a person representing the spouse. (2) That he or she is making an application within the time specified in subdivision (h). (3) That the claimant has satisfied the applicable requirements of subdivision (g). (4) That, if the claimant is a seller of a manufactured home used by the seller for personal, family, or household purposes, the claimant made a good faith effort to adequately secure the debt resulting from the sale of the manufactured home and with respect to which the claim is made. For purposes of this paragraph, a good faith effort to secure the debt may be demonstrated by, but shall not be limited to, providing the department with a promissory note signed by the debtor and which, pursuant to the terms thereof, is secured by collateral with a reasonable value at least equal to the debt evidenced by the promissory note. (j) Upon an order of the department directing that payment be made out of the fund, the Controller is authorized to draw a warrant for the payment of the amount of the claim approved by the department pursuant to this section. (k) In dispersing moneys from the fund, the department is authorized to give priority to claimants who have attempted to purchase or sell a manufactured home for a personal or family residential purpose. (l) Prior to July 1, 1995, the department shall completely process and render determinations upon all claims to the fund that were received by the department prior to January 1, 1993. All claims to the fund that are received on or after January 1, 1993, shall be processed, and a determination made, within one year of the original date of application. (m) The department, upon request by a Member of the Legislature, shall provide the following information: the number of claims to the fund, number of claims processed and decided within one year of their application date, the amount of fund money paid to claimants, and the amount of fund money allocated for the department's costs.