A BILL TO BE ENTITLED
AN ACT to change the membership of the north Carolina manufactured housing board; to provide buyers with information regarding the price of manufactured homes; to clarify the contract negotiation process and extend the cancellation period; to require manufactured home dealers to establish and maintain escrow or trust accounts for buyer deposits; and to increase certain penalties and standards applicable to the manufactured home industry.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S.  143‑143.8 through G.S. 143‑143.25 of Article 9A of Chapter 143 of the General Statutes are redesignated as Part 1 of Article 9A of Chapter 143 of the General Statutes to be entitled "Part 1.  Duties, Warranties, Purchase Transaction.". The Revisor of Statutes is authorized to make changes in the newly designated Part 1 that will reflect the results of the recodification.
SECTION 2.  G.S. 143‑143.9 reads as rewritten:
"§ 143‑143.9.  Definitions.
The following definitions apply in this Article:
(1)	Bank. – A federally insured financial institution including institutions defined under G.S. 53‑1(1), savings and loan associations, credit unions, savings banks and other financial institutions chartered under this or any other state law or chartered under federal law.
(1a)	Board. – The North Carolina Manufactured Housing Board.
(2)	Buyer. – A person  for whom a dealer performs, or is engaged to perform, any services or provides any products including the purchase and setup of a manufactured home for use as a residence or other related use.
(3)	Code. – Engineering standards adopted by the Commissioner.
(4)	Commissioner. – The Commissioner of Insurance of the State of North Carolina.
(5)	Department. – The Department of Insurance of the State of North Carolina.
(5a)	Deposit. – Any and all funds received by a dealer from a buyer or someone on behalf of a buyer for the performance of services or the provision of goods.
(5b)	Escrow or trust account. – An account with a bank that is designated as an escrow account or as a trust account and that is maintained by a dealer for the deposit of buyers' funds.
(5c)	Escrow or trust account funds. – Funds belonging to a person other than the dealer that are received by or placed under the control of the dealer in connection with the performance of services or the provision of products by a dealer for a buyer.
(5d)	Funds. – Any form of money, including cash, payment instruments such as checks, money orders, or sales drafts, and receipts from electronic fund transfers. The term does not include letters of credit or promissory notes.
(5e)	License. – A license issued under this Article.
(5f)	Licensee. – A person who has been issued a license under this Article by the North Carolina Manufactured Housing Board.
(6)	Manufactured home. – A structure, transportable in one or more sections, which, in the travelling mode, is eight feet or more in width or is 40 feet or more in length, or when erected on site, is 320 or more square feet, and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air conditioning and electrical systems contained therein.
(7)	Manufactured home dealer or dealer. – Any person engaged in the business of buying or selling manufactured homes or offering or displaying manufactured homes for sale in North Carolina. Any person who buys or sells three or more manufactured homes in any 12‑month period, or who offers or displays for sale three or more manufactured homes in any 12‑month period shall be presumed to be a manufactured home dealer. The terms "selling" and "sale" include lease‑purchase transactions. The term "manufactured home dealer" does not include banks and finance companies that acquire manufactured homes as an incident to their regular business.
(8)	Manufactured home manufacturer or manufacturer. – Any person, resident or nonresident, who manufactures or assembles manufactured homes for sale to dealers in North Carolina.
(9)	Manufactured home salesperson or salesperson. – Any person employed by a manufactured home dealer to sell manufactured homes to buyers. Manufactured home salesperson or salesperson also includes sales managers, lot managers, general managers, or others who manage or supervise salespersons.
(10)	Person. – Any individual, natural persons, firm, partnership, association, corporation, legal representative or other recognized legal entity.
(11)	Responsible party. – A manufacturer, dealer, supplier, or set‑up contractor.
(12)	Setup. – The operations performed at the occupancy site which render a manufactured home fit for habitation.
(13)	Set‑up contractor. – A person who engages in the business of performing setups for compensation in North Carolina.
(14)	Substantial defect. – Any substantial deficiency in or damage to materials or workmanship occurring in a manufactured home which has been reasonably maintained and cared for in normal use. The term also means any structural element, utility system or component part of the manufactured home which fails to comply with the Code.
(15)	Supplier. – The original producer of completed components, including refrigerators, stoves, hot water heaters, dishwashers, cabinets, air conditioners, heating units, and similar components, and materials such as floor coverings, panelling, siding, trusses, and similar materials, which are furnished to a manufacturer or dealer for installation in the manufactured home prior to sale to a buyer."
SECTION 3.  G.S. 143‑143.10 reads as rewritten:
"§ 143‑143.10.  Manufactured Housing Board created; membership; terms; meetings.
(a)	There is created the North Carolina Manufactured Housing Board within the Department. The Board shall be composed of nine members as follows:
(1)	The Commissioner of Insurance or the Commissioner's designee.
(2)	A manufactured home manufacturer or a manufactured home supplier.(3)	A manufactured home dealer or a set‑up contractor.
(4)	A representative of the banking and finance business.
(5)	A person who is approved by the North Carolina Housing Finance Agency as a home‑ownership counselor.(6)	An attorney whose primary practice involves the representation of individuals in consumer protection actions.(7)	An accountant.(8)	Two representatives of the general public.
The Commissioner or the Commissioner's designee shall chair the Board. The Governor shall appoint to the Board the member designated under subdivision (a)(2) of this section and a member of the general public. The General Assembly upon the recommendation of the Speaker of the House of Representatives in accordance with G.S. 120‑121 shall appoint the representative of the banking and finance industry and the member designated under subdivision (a)(5) of this section. The General Assembly upon the recommendation of the President Pro Tempore of the Senate in accordance with G.S. 120‑121 shall appoint the member designated under subdivision (a)(3) of this section and an attorney whose primary practice involves the representation of individuals in consumer protection actions. The Commissioner shall appoint one representative of the general public and an accountant. The members of the Board shall be residents of the State.
The members of the Board shall serve for terms of three years. In the event of any vacancy of a position appointed by the Governor or Commissioner, the appropriate appointing authority shall appoint a replacement in the same manner as provided for the original appointment to serve the remainder of the unexpired term. Vacancies in appointments made by the General Assembly shall be filled in accordance with G.S. 120‑122. In the event of any vacancy, the appropriate appointing authority shall appoint a replacement to serve the remainder of the unexpired term. Such appointment shall be made in the same manner as provided for the original appointment. No member of the Board shall serve more than two consecutive, three‑year terms.
The members of the Board designated in subdivisions (a)(5), (a)(6), (a)(7), and (a)(8) of this section shall have no financial interest connected with the manufactured housing industry. No member of the Board shall participate in any proceeding before the Board involving that member's own business.
Each member of the Board, except the Commissioner and any other State employee, shall receive per diem and allowances as provided with respect to occupational licensing boards by G.S. 93B‑5. All per diem and travel expenses shall be paid exclusively out of the fees received by the Board as authorized by this Article. In no case shall any salary, expense, or other obligation of the Board be charged against the General Fund of the State of North Carolina. All moneys and receipts shall be kept in a special fund by and for the use of the Board for the exclusive purpose of carrying out the provisions of this Article. At the end of the fiscal year, the Board shall retain fifteen percent (15%) of the unexpended funds collected and received during that year. The remaining eighty‑five percent (85%) of these funds shall be credited to the General Fund.
(b)	In accordance with the provisions of this Article, the Board shall have the following powers and duties:
(1)	To issue licenses to manufacturers, dealers, salespersons, and set‑up contractors.
(2)	To require that an adequate bond or other security be posted by all licensees, except manufactured housing salespersons.
(3)	To receive and resolve complaints from buyers of manufactured homes and from persons in the manufactured housing industry, in connection with the warranty, warranty service, licensing requirements or any other provision under this Article.
(4)	To adopt rules in accordance with Chapter 150B of the General Statutes as are necessary to carry out the provisions of this Article.
(5)	To file against the bond posted by a licensee for warranty repairs and service on behalf of a buyer.
(6)	To request that the Department of Justice conduct criminal history checks of applicants for licensure pursuant to G.S. 114‑19.13.
(7)	To administer the Manufactured Housing Recovery Fund.
(8)	To conduct random audits of dealer escrow or trust accounts."
SECTION 4.  G.S. 143‑143.13 reads as rewritten:
"§ 143‑143.13.  Grounds for denying, suspending, or revoking licenses; civil penalties.
(a)	A license may be denied, suspended or revoked by the Board on any one or more of the following grounds:
(1)	Making a material misstatement in application for license.
(2)	Failing to post an adequate corporate surety bond, cash bond or fixed value equivalent.
(3)	Engaging in the business of manufactured home manufacturer, dealer, salesperson, or set‑up contractor without first obtaining a license from the Board.
(4)	Failing to comply with the warranty service obligations and claims procedure established by this Article.
(5)	Failing to comply with the set‑up requirements established by this Article.
(6)	Failing or refusing to account for or to pay over moneys or other valuables belonging to others that have come into licensee's possession arising out of the sale of manufactured homes.
(6a)	Failing to comply with the escrow or trust account provisions under Part 2 of this Article.
(7)	Using unfair methods of competition or committing unfair or deceptive acts or practices.
(8)	Failing to comply with any provision of this Article.
(9)	Failing to appear for a hearing before the Board or for a prehearing conference with a person or persons designated by the Board after proper notice or failing to comply with orders of the Board issued pursuant to this Article.
(10)	Employing unlicensed salespersons.
(11)	Offering for sale manufactured homes manufactured or assembled by unlicensed manufacturers or selling manufactured homes to unlicensed dealers for sale to buyers in this State.
(12)	Conviction of any crime listed in G.S. 143‑143.10A.
(13)	Having had a license revoked, suspended or denied by the Board; or having had a license revoked, suspended or denied by a similar entity in another state; or engaging in conduct in another state which conduct, if committed in this State, would have been a violation under this Article.
(14)	Employing or contracting with any person to perform setups who is not licensed by the Board as a set‑up contractor.
(b)	Repealed by Session Laws 1985, c. 666, s. 38.
(c)	In addition to the authority to deny, suspend, or revoke a license under this Article, the Board may impose a civil penalty upon any person violating the provisions of this Article. Upon a finding by the Board of a violation of this Article, the Board shall order the payment of a penalty of not less than two hundred fifty dollars  ($250.00) nor more than one thousand dollars($1,000). In determining the amount of the penalty, the Board shall consider the degree and extent of harm caused by the violation, the amount of money that inured to the benefit of the violator as a result of the violation, whether the violation was committed willfully, and the prior record of the violator in complying or failing to comply with laws, rules, or orders applicable to the violator. Each day during which a violation occurs shall constitute a separate offense. The penalty shall be payable to the Board. The Board shall remit the clear proceeds of penalties provided for in this subsection to the Civil Penalty and Forfeiture Fund in accordance with G.S. 115C‑457.2.
Payment of the civil penalty under this section shall be in addition to payment of any other penalty for a violation of the criminal laws of this State. Nothing in this subsection shall prevent the Board from negotiating a mutually acceptable agreement with any person as to the status of the person's license or certificate or as to any civil penalty."
SECTION 5.  G.S. 143‑143.20A reads as rewritten:
"§ 143‑143.20A.  Display of pricing on manufactured homes; and notice of warranties; material comparison checklist.
(a)	The dealer shall prominently display the following information at the front entrance of each manufactured home:
(1)	The price of the home.
(2)	The individual cost of the specifications and options included in or available for the home.
(3)	A statement of estimated set‑up costs not included in the price of the home.
(b)	Each manufactured home dealer shall prominently display a sign and provide to each buyer a notice, developed by the North Carolina Manufactured Housing Board, containing information about the Board, including how to file a consumer complaint with the Board and the warranties and protections provided for each new manufactured home under federal and State law."
SECTION 6.  G.S. 143‑143.21A reads as rewritten:
"§ 143‑143.21A.   Conditional sales contract; final manufactured home retail installment sales contract; buyer cancellations.
(a)	A conditional sales contract for a manufactured home shall include all of the following:
(1)	A description of the manufactured home and all accessories included in the purchase.
(2)	The purchase price for the home and all accessories.
(3)	The estimated amount of deposit to be paid by the buyer towards the purchase price of the manufactured home and accessories.
(4)	The date the retail purchase agreement is signed.
(5)	The estimated terms of financing of the purchase, if any, including the estimated interest rate, number of years financed, and the amount of the monthly payment.
(6)	The buyer's signature.
(7)	The dealer's signature.
(a1)	The conditional sales contract shall also contain in at least 10 point, all uppercase Gothic type the following statement in immediate proximity to the space reserved for the signature of the buyer:
'I UNDERSTAND THIS IS NOT A BINDING AGREEMENT AND THAT I DO NOT HAVE TO PAY ANY MONEY TOWARDS THE PURCHASE OF A MANUFACTURED HOME UNTIL I SIGN A FINAL MANUFACTURED HOME RETAIL INSTALLMENT SALES CONTRACT. IN THE EVENT THAT I INTEND TO PURCHASE A NEW MANUFACTURED HOME WITH LAND I UNDERSTAND THAT I HAVE THE RIGHT TO HAVE AN APPRAISAL PERFORMED AT MY OWN COST.'
(a2)	At the time the buyer and the dealer execute the conditional sales contract, the dealer shall provide to the buyer an executed copy of the document and a list of appraisers approved by the Board. If the buyer intends to obtain financing to purchase the home, the buyer shall have the option of obtaining financing independently of the dealer or to have the dealer arrange for the financing. If the dealer arranges the financing through referral or otherwise, the provisions of Chapter 25A of the General Statutes shall apply. The dealer shall also disclose in writing to the buyer any business relationship the dealer has with any of the financial entities or appraisers.
(a3)	The dealer shall not request, demand, or accept any funds from a buyer prior to the execution of a final manufactured home retail installment sales contract. The dealer shall not commence set‑up procedures until after the buyer and the dealer execute a final sales contract.
(a4)	In addition to any other provisions required by law, the final sales contract shall include all of the following:
(1)	A description of the manufactured home and all accessories included in the purchase.
(2)	The purchase price for the home and all accessories.
(3)	The amount of deposit to be paid by the buyer towards the purchase price of the manufactured home and any accessories.
(4)	The date the final manufactured home retail installment sales contract is signed.
(5)	The final terms of financing the purchase, if any, including the interest rate, number of years financed, and monthly payment.
(6)	The buyer's signature.
(7)	The dealer's signature.
(8)	The date of the fifth business day after the date the buyer executes the final manufactured home retail installment sales contract.
(b)	The final manufactured home retail installment sales contract shall contain, in immediate proximity to the space reserved for the signature of the buyer and in at least ten point, all upper‑case Gothic type, the following statement:
"I UNDERSTAND THAT I HAVE THE RIGHT TO CANCEL THIS PURCHASE BEFORE MIDNIGHT OF THE FIFTH BUSINESS DAY AFTER THE DATE THAT I HAVE SIGNED THIS CONTRACT. I UNDERSTAND THAT THIS CANCELLATION MUST BE IN WRITING. IF I CANCEL THE PURCHASE AFTER THE FIVE‑DAY PERIOD, I UNDERSTAND THAT THE DEALER MAY NOT HAVE ANY OBLIGATION TO GIVE ME BACK ALL OF THE MONEY THAT I PAID THE DEALER. "
(c)	At the time the dealer receives the buyer's deposit, the dealer shall give the buyer an executed copy of the final manufactured home retail installment sales contract and a completed form in duplicate, captioned "Notice of Cancellation". The Notice shall be attached to the executed copy of the final sales contract, be easily detachable, and explain the buyer's right to cancel the purchase and how that right can be exercised.
(d)	The dealer shall return the deposit to the buyer if the buyer cancels the purchase before midnight of the fifth business day after the date the buyer signed the final manufactured home retail installment sales contract. To make the cancellation effective, the buyer shall give the dealer written notice of the buyer's cancellation of the purchase. The dealer shall return the deposit to the buyer within three business days after receipt of the notice of cancellation. For purposes of this section, "business day" means any day except Sunday and legal holidays. (e)	If the buyer cancels the purchase after the five‑day cancellation period, and 	the manufactured home had been in the dealer's inventory, the dealer may retain from the deposit actual damages up to a maximum of ten percent (10%) of the purchase price.	If the buyer cancels the purchase after the five‑day cancellation period, and the manufactured home  was specially ordered from the manufacturer for the buyer, the dealer may retain actual damages up to the full amount of the buyer's deposit.
	"
SECTION 7.  Part 1 of Article 9 of Chapter 143 of the General Statutes is amended by adding a new section to read:
"§ 143‑143.21B.  Independent appraisals.
The Board, in consultation with the North Carolina Appraisers Board, shall develop a list of approved appraisers and adopt a uniform appraisal form to be provided to buyers under G.S. 143‑143.21A."
SECTION 8.  Article 9A of Chapter 143 of the General Statutes is amended by adding a new Part to read:
"Part 2. Buyer Deposit, Escrow or Trust Accounts.
"§ 143‑143.50.  Escrow or trust account required.
(a)	Dealers shall maintain buyers' deposits in an escrow or trust account with a bank. A dealer shall not commingle any other funds with buyers' deposits in the escrow or trust account. The account shall not be interest bearing.
(b)	Dealers shall notify the Board in writing when the escrow or trust account is established. The notification shall include the name and number of the account and the name and location of the bank holding the account.
(c)	All buyer funds shall be placed in the escrow or trust account no later than the close of the second banking business day after receipt.
(d)	Dealers shall provide buyers with a receipt for all buyer deposits received by the dealer. The receipt shall include the amount of the buyer deposit, the date the deposit was provided to the dealer, and the name and address of the bank where the buyer's funds will be deposited.
"§ 143‑143.51.  Use of escrow or trust funds; penalty for violations.
(a)	Buyer funds in the dealer's escrow or trust account may only be used for purposes authorized under the contractual obligations of the dealer to the buyer for the direct benefit of the buyer for whom the funds are held.
(b)	Notwithstanding any other provision of law and in addition to any other sanction the Board may impose under this Article, if the Board finds that a dealer has used a buyer's funds for a purpose that is not authorized under subsection (a) of this section or if the Board finds that a dealer has failed to place deposits in the dealer's escrow or trust account, the Board shall fine the dealer an amount that is equal to the amount that the dealer misappropriated or failed to place in the account.
"§ 143‑143.52.  Minimum requirements for dealer records for escrow or trust accounts at banks.
The minimum records required for escrow or trust accounts maintained at a bank shall consist of the following:
(1)	All bank receipts or deposit slips listing the source and date of receipt of all funds deposited in the account and the name of the buyer to whom the funds belong.
(2)	All cancelled checks or other instruments drawn on the account, or printed digital images thereof furnished by the bank, showing the amount, date, and recipient of the disbursement.
(3)	All instructions or authorizations to transfer, disburse, or withdraw funds from the escrow or trust account.
(4)	All bank statements and other documents received from the bank with respect to the escrow or trust account, including notices of return or dishonor of any instrument drawn on the account against insufficient funds.
(5)	A ledger containing a record of receipts and disbursements for each buyer from whom and for whom funds are received and showing the current balance of funds held in the escrow or trust account for each buyer.
(6)	Any other records required by law to be maintained for the escrow or trust account.
"§ 143‑143.53.  Quarterly reconciliation of escrow or trust accounts.
At least quarterly, individual buyer balances shown on the ledger of an escrow or trust account shall be totaled and reconciled with the current bank balance for the trust account as a whole.
"§ 143‑143.54.  Accountings for escrow or trust funds.
The dealer shall provide to the buyer a written accounting of the receipts and disbursements of all escrow or trust funds upon the complete disbursement of the escrow or trust accounts, upon the request of the buyer, and at least quarterly if the funds are retained for a period of more than three months.
"§ 143‑143.55.  Audits and record inspection.
All financial records required by this Part shall be subject to audit for cause and to random audit at the discretion of and by the Board, the Commissioner, or the Attorney General. The Board may inspect these records periodically, without prior notice and may also inspect these records whenever the Board determines that the records are pertinent to an investigation of any complaint against a licensee. The dealer shall provide written authorization to the bank that holds the escrow or trust account to release any and all information relative to the account to the parties authorized under this section to inspect those records."
SECTION 9.  G.S. 143‑151(a) reads as rewritten:
"§ 143‑151.  Penalties.
(a)	Any person who is found by the Commissioner to have violated the provisions of the Act, this Article, or any rules adopted under this Article, shall be liable for a civil penalty not to exceed ten thousand dollars  ($10,000) for each violation. Each violation shall constitute a separate violation for each manufactured home or for each failure or refusal to allow or perform an act required by the Act, this Article, or any rules adopted under this Article. The maximum civil penalty may not exceed one million dollars ($1,000,000) for any related series of violations occurring within one year after the date of the first violation. In determining the amount of the penalty, the Commissioner shall consider the degree and extent of harm caused by the violation, the amount of money that inured to the benefit of the violator as a result of the violation, whether the violation was willful, and the prior record of the violator in complying or failing to comply with laws, rules, or orders applicable to the violator. The clear proceeds of civil penalties provided for in this section shall be remitted to the Civil Penalty and Forfeiture Fund in accordance with G.S. 115C‑457.2."
SECTION 10.  The North Carolina Manufactured Housing Board shall increase the standards for licensure of set‑up contractors.  The revised standards shall be at least as stringent as the most stringent standards adopted by another state.
SECTION 11.  The Manufactured Housing Board shall not issue any new licenses under Article 9 of Chapter 143 of the General Statutes unless and until a final rule for obtaining criminal background checks on all applicants is in place and effective.
SECTION 12.  The Commissioner of Insurance shall review the standards for installation of manufactured homes and revise the standards to be at least as stringent as the most stringent standards adopted by another state. 
SECTION 13.  Sections 3, 10, 11, 12, and 13 of this act are effective when this act becomes law, and the terms of the current appointed members of the North Carolina Housing Board shall terminate. The remainder of this act becomes effective January 1, 2006.  Section 8 applies to deposits and funds collected on or after January 1, 2006.