HB2446 - 551R

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

Section 1. Section 41-4030, Arizona Revised Statutes, is amended to read:

START_STATUTE41-4030. Trust and escrow requirements for dealers that are not also owners of mobile home parks; rules; exemptions

A. Each dealer licensed pursuant to this article shall establish an independent escrow account with an independent financial institution or escrow agent authorized to handle such an account in this state as prescribed by title 6, chapter 7 or 8, for each transaction involving:

1. A new manufactured home.

2. A new factory-built building designed for use as a residential dwelling.

3. A manufactured home, mobile home or factory-built building designed for use as a residential dwelling that is previously owned and that has a purchase price of fifty thousand dollars $50,000 or more.

B. For the purposes of subsection A of this section, a financial institution or escrow agent is independent if the individual or entity is not controlled by the licensee, a family member of the licensee or a business affiliated with the licensee and the licensee, family member or business affiliate does not have a majority interest in the financial institution or escrow agent.

C. The owner of a mobile home park who also is or owns a dealership licensed pursuant to this article to sell new units may sell a new manufactured home or a new factory-built building designed for use as a residential dwelling as a licensee without complying with subsection A of this section if all of the following apply:

1. The home will be sited in a mobile home park that is owned by the park owner.

2. At the time of the sale, the park owner has on file at the department the name and address of all mobile home parks owned by the park owner, the name, address and license number of the licensed dealership and documentation showing to the satisfaction of the department that the park owner either holds the license, owns a majority interest in the license or is controlled by an entity that holds a controlling interest in the license.

3. At the time of the sale, the licensed dealership has posted with the department a dealer bond in an amount of at least one hundred thousand dollars in a form satisfactory to the department covering sales by parks sharing common control.

D. C. Each dealer who that sells new manufactured homes or factory-built buildings designed for use as residential dwellings or a manufactured home, mobile home or factory-built building designed for use as a residential dwelling that is previously owned and that has a purchase price of less than fifty thousand dollars $50,000 shall maintain a licensee's trust account or open an escrow account with an independent financial institution or escrow agent located in this state and shall deposit all earnest money monies received for the sale of manufactured homes, mobile homes or factory-built buildings designed for use as residential dwellings in such that account. The department shall conduct an audit of each dealer's trust or escrow account, including any transactions with an independent escrow account, at least once every two years. A purchaser of a mobile home, used manufactured home or used factory-built building designed for use as a residential dwelling may request that the dealer establish an independent escrow account and if such a request is made in writing no not later than the time the purchase contract is signed, and the seller consents, the dealer shall comply with this subsection by complying with subsection A of this section. A licensee handling that handles a transaction under this subsection shall disclose to the purchaser, in writing and before or at the time the purchaser signs the purchase contract, that the purchaser may request in writing the use of an independent escrow account, and that the transaction will otherwise be handled through a trust account controlled by the licensee.

E. D. All dealers shall notify the 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.

F. E. The dealer, in writing, shall authorize the depository to release any and all information relative to trust or escrow accounts to the director or the director's agent, employee or deputy.

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

H. G. All earnest monies shall be deposited in the escrow account or trust fund account no not later than the close of the second banking business day after receipt.

I. H. The terms or instructions for any escrow account opened under subsection A or D C of this section are deemed to be enforceable as part of the purchase contract. All parties to the purchase contract and the licensee shall sign the terms and instructions. If practicable, the escrow terms or instructions shall be included in the purchase contract or stated in an addendum to the purchase contract. The licensee shall provide a copy of the purchase contract to the escrow agent even if the escrow terms or instructions are contained in a separate document. The licensee shall promptly provide the escrow account information to all parties to the purchase contract once the account is opened.

J. I. At a minimum, the escrow terms or instructions shall contain:

1. Identification of the escrow agent with information containing at least the name, address and telephone number of the escrow agent.

2. All conditions or requirements that affect or pertain to closing the escrow account and disbursement of the monies in the escrow account.

3. Any conditions or requirements where monies are to be disbursed from the escrow account in advance of the escrow account being closed.

4. Any conditions or requirements where additional monies or documents must be deposited with an escrow agent after the escrow account is opened.

K. J. A dealer or broker may deposit and maintain up to two hundred dollars $200 in the trust account to offset service charges that may be assessed by the financial institution.

L. K. Every deposit into a trust account shall be made with a deposit slip that 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.

M. L. 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 monies were 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. The date and payment for all goods and services the dealer has contracted to provide.

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

1. The consummation of sale.

2. The termination of sale, including a complete accounting of all monies.

O. N. On completion pursuant to subsection N M of this section, the earnest money monies deposit shall be conveyed to the lending institution or the dealer, purchaser, seller, manufacturer or lienholder, whichever is applicable.

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

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

R. Q. Notwithstanding any other provision of this section and except that this subsection does not apply to an independent escrow account established pursuant to subsection A of this section, before an event listed under subsection N M 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. A licensed dealer 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 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 not more than ten business days before the completion date pursuant to subsection N M of this section.

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

3. The payment is recorded in the dealer'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 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.

S. R. The board shall adopt separate rules for dealer trust and escrow accounts trust and escrow accounts. At a minimum, these rules shall contain trust and escrow account requirements for the following:

1. Recordkeeping.

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.

T. S. 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. END_STATUTE

Sec. 2. Title 41, chapter 37, article 4, Arizona Revised Statutes, is amended by adding section 41-4030.01, to read:

START_STATUTE41-4030.01. Trust and escrow requirements for dealers that are also owners of mobile home parks; rules

A. The owner of a mobile home park that also is or that owns a dealership licensed pursuant to this article to sell units may sell a manufactured home, mobile home or a factory-built building designed for use as a residential dwelling as a licensee if all of the following apply:

1. The home will be sited in a mobile home park that is owned by the park owner.

3. At the time of the sale, the licensed dealership has posted with the department a dealer bond in an amount of at least $150,000 in a form satisfactory to the department covering sales by parks sharing common control.

4. At the time of the sale, the dealer shall either maintain a licensee's trust account or open an escrow account with an independent financial institution or escrow agent located in this state. The licensee shall deposit all earnest monies received for the sale of manufactured homes, mobile homes or factory-built buildings designed for use as residential dwellings in the trust or escrow account. The department shall conduct an audit of each dealer's trust or escrow account, including any transactions with an independent escrow account, at least once every two years. The purchaser of the manufactured home, mobile home or factory-built building designed for use as a residential dwelling may make a written request that the dealer establish an independent escrow account and if such a request is received by the dealer no later than the time the purchase contract is signed and the seller consents, the dealer shall comply with the request. A licensee that handles a transaction under this paragraph shall disclose to the purchaser, in writing and before or at the time the purchaser signs the purchase contract, that the purchaser may request in writing the use of an independent escrow account and that the transaction will otherwise be handled through a trust account controlled by the licensee.

B. For the purposes of this section, a financial institution or escrow agent is independent if the individual or entity is not controlled by the licensee, a family member of the licensee or a business affiliated with the licensee and the licensee, family member or business affiliate does not have a majority interest in the financial institution or escrow agent. END_STATUTE

Sec. 3. Section 41-4042, Arizona Revised Statutes, is amended to read:

START_STATUTE41-4042. Funding and assessments

A. A dealer of manufactured homes, mobile homes or factory-built buildings designed for use as residential dwellings shall pay, in addition to the license or renewal fee, a fee established by the director of not to exceed fifty dollars $50 for each unit that is sold and that is subject to section 41-4030, subsection D C, for deposit into the consumer recovery fund. The fee is payable to the department by the fifteenth day of the month following the month in which the sale is consummated.

B. Chapter 6 of this title does not apply to the setting of fees under this section.

C. An amount not to exceed seventy-five percent of the previous fiscal year's interest earned on the consumer recovery fund may be expended by the director, with the approval of the board. The expenditure shall be used for consumer and licensee education in connection with the manufactured housing and factory-built building industry, and all monies up to a maximum of fifty thousand dollars $50,000 remaining unexpended and unencumbered at the end of each fiscal year may be used for consumer and licensee education in succeeding fiscal years and do not revert to the consumer recovery fund. END_STATUTE

Sec. 4. Section 41-4043, Arizona Revised Statutes, is amended to read:

START_STATUTE41-4043. Recovery from fund; claim against licensee; subrogation; appeal; statute of limitations

A. If any consumer who is buying or selling the consumer's home uses the services of a licensed dealer of manufactured homes, mobile homes or factory-built buildings designed for use as residential buildings and is damaged as a result of an act or omission by a licensed dealer of manufactured homes, mobile homes or factory-built buildings designed for use as residential buildings that constitutes a violation of section 41-4030, or rules adopted pursuant to that section, and the sale is subject to section 41-4030, subsection D C, that consumer may file a claim with the department for payment from the consumer recovery fund. The claim shall be verified by the department.

B. If any consumer of manufactured homes, mobile homes or factory-built buildings designed for use as residential buildings is damaged by the failure of the principal to perform a sales agreement or to perform repairs under a warranty the consumer may file a claim with the department for payment from the consumer recovery fund. The claim shall be verified by the department.

C. On verification of the claim for payment, the director shall provide for a hearing pursuant to chapter 6, article 10 of this title.

D. The director shall pay from the consumer recovery fund whatever sum the administrative law judge finds payable on the claim. A decision granting a claim shall include an order suspending the license of the licensee on whose account the claim was filed. Such a The license shall remain suspended until the licensee has repaid in full, plus interest at the rate of ten percent per year, the amount paid from the consumer recovery fund on the licensee's account.

E. Any party aggrieved by the administrative law judge's decision may apply for a rehearing by filing with the director a motion in writing pursuant to chapter 6, article 10 of this title. The filing of a motion for rehearing shall suspend the operation of the administrative law judge's order pending the decision of the director on the rehearing.

F. Except as provided in section 41-1092.08, subsection H, any person aggrieved by a final administrative decision may seek judicial review pursuant to title 12, chapter 7, article 6.

G. The consumer recovery fund has a claim against the licensee on whose account a claim was granted or any other person who caused or contributed to a claim paid by the consumer recovery fund for the amount paid plus costs, necessary expenses and reasonable attorney fees.

H. The director is subrogated to the claim of the consumer recovery fund against the bond and other assets of the licensee. The director shall deposit any amount recovered into the consumer recovery fund.

I. If, at any time, the money deposited in the consumer recovery fund is insufficient to satisfy any duly authorized claim or portion of a claim, the director, when sufficient money has been deposited in the consumer recovery fund, shall satisfy such unpaid claims or portions of claims in the order that such claims or portions of claims were originally filed.

J. A consumer pursuant to subsection A or B of this section is barred from commencing an application for payment from the consumer recovery fund later than two years from the date of sale or date of installation, whichever is later. END_STATUTE