# The Attorney General of Texas
December 15, 1980 MARK WHITE Attorney General Mr.Andy James, Administrator Texas Real Estate Commission 4920N.Interregional Highway Austin, Texas 78751 Dear Mr.James: Opinion No. m-287 Re: Licensure of residential service www

National Warranty Corporation, whose home offices are located in Indiana, markets a“Mobile/Modulsr Home Protection Plan.” Through signed agreements with approved mobile home dealers, the corporation offers for a fixed charge to extend for five years a manufacturer’s guarantee on mobile home units. Coverage is made available to an initial purchaser of a unit or his transferees. Service contracts warrant described units, includlng their structure, plumbing, heating and electrical systems, and new appliances or equipment to be free, under normal use, from manufacturing defects in material or workmanship. Contracts take effect lpcn expiration of the manufacturer’s warranty, at which time the corporation assumes respcnsibility for repairing (r replacing any parts necessary to correct defects in material or workmanship if a dealer is unable or unwilling to resolve the problem. You tave asked whether companies which market such a service program inTexas must be licensed as aresidential service company pursuant to article 6573b, V.T.C.S., the Residential Service Company Act. Section 6 of the act provides, inpertinent part:

(a) Noperson shalL

..arrange to perform services pursuant to residential service contracts unless such person isalicensed service company or its authorized representative. of (b)No person shall.

.. arrange or solicit the sale

. ..residential service contracts, unless (a).

.and (b) such residential service contracts are Issued by a licensed service company. A“service company” is defined in section 4(b)as “any person whoissues and performs, or arranges to perform, services pursuant to aresidential service contract,” and a“licensed service company” isaservice company licensed by the Texas Real Estate Commission. Section 4(c).

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You assert that the service plan marketed by National Warranty Corporation constitutes a “residential service contract” within section 4(a), which &fines such a contract as:any contract.
.. whereby, for a fee, a person undertakes, for a

specified period of time, to maintain, repair, or replace all or any part of the structural components, the appliances, or the electrical, plumbing, heating, cooling, or air-conditione systems of residential property. The arporation maintains that it is exempted from licensure requirements by the following proviso insection 4(a):

provided, however, the term &es not.
..include any service.

.. contract.
.. sold

. .or issued by any menufacturer or merchant in which..

. the manufacturer or merchant undertakes.

.. to service.

.. sny product or part thereof.

..manufactured or sold by such manufacturer or merchant.

.. . The corporation also relies upon section 25(e), which states that the act &es not apply to: any service.

.. amtract.
.. which ptuvides for.

.. the

maintenance, repair, service.

.. of sny product or part thereof.

.. provided such service.

.. contract.
.. is sold,~ offered for sale, or issued bythe manufacturer or merchant who manufactured or sold such product or part. National Warranty Corporation &es not contend that mobile homes covered by its service plan are not “residential property” within article 6573b. Thus, weneed not decide whether the act would cover any mobile home, without regard to its intended use, but will assume that mobile homes covered by the corporation’s service plan sre residences and are therefore within the scope ofthe act. See Yates v.Mobile America Sales Corporation, 582 S.W. 2d 509 (Tex. Civ. App. - BeaGnt), writ rePd n.r.e., 591 S.W.2d453 (Tex. 1979). The corporation argues that because it &es not sell its service plans directly to consumers, but markets them through approved dealers whopay for the coverage and then provide it to their buyers, it is exempt from licensure requirements. However, in our opinion, this argument overlooks the fact that an sgreement between the corporation and an approved dealer is itself a “residential service contract” within section 4(a) of the act: it is acontract whereby, for a fee, the corporation undertakes to service the parts of residential property specified in that section. It is equally clear, moreover, that the exemptions relied qcm by the corporation are inapplicable. Sections 4(a) and 25(e) exclude from the act service contracts issued or sold by manufacturers cr merchants of the products or parts covered by the contract. However, although a dealer with whom the corporation contracts may later make the

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advantages of the contract available to its customers or“resell” the contract to them, the original contract is sold to the dealw by the corporation, which is neither a manufacturer nor a merchant within article 6573b. We therefore conclude that National Warranty Corporation is required to be licensed as a residential service company pursuant to srticle 6573b, V.T.C.S., in order to & tminess in Texas. We assume, of course, that the corporation is not already licensed as an insurance company. V.T.C.S. art. 6573b, S2(a). SUMMARY National Warranty Corporation is required to be licensed as a residential service company under article 6573b, V.T.C.S., in order to dobusiness inTexas.

MARK WHITE Attorney General ofTexas JOHN W.FAINTER, JR. First Assistant Attorney General RICHARD E. GRAYIII Executive Assistant Attorney General Prepared byJon Bible Assistant Attorney General APPROVED: OPINION COMMITTEE Susan L.Garrison, Acting Chairman Jon Bible Rich Gilpin Nancy Lynch Bruce Yamgblood

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