                       The Attorney                 General of Texas
                                            December 15, 1980
MARK WHITE
Attorney General

                   Mr. Andy James, Administrator               Opinion No. m-287
                   Texas Real Estate Commission
                   4920 N. Interregional Highway               Re: Licensure of residential   service
                   Austin, Texas 78751                         www
                   Dear Mr. James:

                          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 respcnsi-
                   bility 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).




                                                      p. 915
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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