The Attorney General of Texas 

December 15, 1980 

MARK WHITE 

Attorney General 

Mr. Andy James, Administrator 

Texas Real Estate Commission 

4920 N. 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 in Texas must be licensed as a residential service company pursuant 

to article 6573b, V.T.C.S., the Residential Service Company Act. Section 6 

of the act provides, in pertinent part: 

(a) No person shalL . . arrange to perform services 

pursuant to residential service contracts unless such 

person is a licensed 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 who issues and 

performs, or arranges to perform, services pursuant to a residential service 

contract,” and a “licensed service company” is a service company licensed by 

the Texas Real Estate Commission. Section 4(c). 

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Mr. Andy James - Page Two @M-287) 

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 in section 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 by the 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, we need 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 of the 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. 2d 453 (Tex. 1979). 

The corporation argues that because it &es not sell its service plans directly to 

consumers, but markets them through approved dealers who pay 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 a contract 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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Mr. Andy James - Page Three (Mw-287) 

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 do business in Texas. 

MARK WHITE 

Attorney General of Texas 

JOHN W. FAINTER, JR. 

First Assistant Attorney General 

RICHARD E. GRAY III 

Executive Assistant Attorney General 

Prepared by Jon Bible 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

Susan L. Garrison, Acting Chairman 

Jon Bible 

Rich Gilpin 

Nancy Lynch 

Bruce Yamgblood 

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