                                           January 5,200l


Mr. Wayne Thorbum                                   Opinion No. K-0322
Administrator
Texas Real Estate Commission                        Re: Whether article 6573b of the Revised Civil
P.O. Box 12188                                      Statutes is applicable to service contract providers
Austin, Texas 78711-2188                            required to register with the Texas Department of
                                                    Licensing and Regulation under article 9034,
                                                    Revised Civil Statutes (RQ-0261-JC)

Dear Mr. Thorbum:

          The Residential Service Company Act, article 6573b ofthe Revised Civil Statutes, regulates
residential service contracts that extend coverage to residential property items or systems.
Regulation is limited to contracts offered by persons other than manufacturers or those who actually
sell the items or systems. See TEX. REV. CIV. STAT. ANN. art. 6573b, 5 4(a) (Vernon Supp. 2000);
see also id. 5 25(c). The Service Contract Regulatory Act, article 9034 ofthe Revised Civil Statutes,
regulates all other service contracts, not regulated by article 6573b, covering non-residential items
and residential property items that are warrantied by a seller or manufacturer.     See id. art. 9034,
5 2(12), added by Act ofMay 28, 1999,76th Leg., R.S., ch. 1559, 5 1, sec. 2(12), 1999 Tex. Gen.
Laws 5360, 5361. You ask, in essence, whether there is a jurisdictional overlap between articles
6573b and 9034 that would require both licensing with the Texas Real Estate Commission (“TREC”)
and registration with the Texas Department of Licensing and Regulation (“TDLR”). We conclude
that articles 6573b and 9034 ofthe Revised Civil Statutes govern different types ofcontracts and that
a person offering both “residential service contracts” governed by article 6573b and “service
contracts” governed by article 9034 must comply with both statutes.

        Whenconstruing a statute, this office must give effect to the legislature’s intent. SeeMitchell
Energy Corp. v. Ashworth, 943 S.W.2d 436, 438 (Tex. 1997). Where a statute has clear and
unambiguous language, we construe a statute according to its plain language to effect legislative
intent. See Monsanto Co. v. Cornerstones Mm Vtil. Dist.. 865 S.\ir.2d 937, 939 (Tex. 1993);
RepublicBank Dallas v. Interkal, Inc., 691 S.W.2d 605,607 (Tex. 1985).

         Article 6573b, the Residential Service Company Act, requires a person to obtain a license
from the TREC if they offer service contracts which extend coverage to residential property items
or systems. See TEX. REV. CIV. STAT. ANN. art. 6573b, 3 6 (Vernon Supp. 2000). Article 6573b in
pertinent part defines a residential service contract as:

                any contract or agreement whereby, for a fee, a person undertakes, for
                a specified period of time, to maintain, repair, or replace all or any
Mr. Wayne Thorburn      - Page 2                   (X-0322)




                part of the structural components, the appliances, or the electrical,
                plumbing, heating, cooling, or air-conditioning systems ofresidential
                property.

Id. § 4(a).

         The definition of “residential service contract” limits the application of article 6573b to
contracts offered by persons other than manufacturers or those persons who actually sell the items
or systems:

                [T]he term [residential service contract] does not mean nor include
                any service or maintenance contract or agreement sold, offered for
                sale, or issued by any manufacturer or merchant in which such
                contract or agreement the manufacturer or merchant undertakes, for
                a fee and for a specified period of time, to service, maintain, repair,
                or replace any product or part thereof, including but not limited to the
                structural components, the appliances, or the electrical, plumbing,
                heating, cooling, or air-conditioning systems ofresidential property,
                manufactured or sold by such manufacturer or merchant, or installed
                by such merchant in any building or residence.

Id. In addition, section 2(c) of article 6573b expressly excludes from its application service contracts
offered, sold, or issued by a manufacturer or seller of a product.          See id. § 2(c) (excluding
manufacturers and sellers from its application). Similarly, section 25(e) of article 6573b entirely
exempts from its application service contracts offered, sold, or issued by a manufacturer or seller of
a product. See id. § 25(e).

         In contrast, article 9034, the Service Contract Regulatory Act, requires registration with the
TDLR of persons offering all other service contracts, not regulated by article 6573b, covering non-
residential items and residential property items that are warrantied by a seller or manufacturer. See
TEX. REV. Crv. STAT. ANN. art. 9034, 4 5(a) (Vernon Supp. 2000). Under article 9034, a “service
contract” is defined as:

                an agreement, entered into for a separately stated consideration and
                for a specified term, under which a provider agrees to repair, replace,
                or maintain a product, or provide indemnification       for the repair,
                replacement,    or maintenance    of a product, for operational or
                structural failure caused by a defect in materials or workmanship or
                by normal wear. A service contract may additionally provide for
                incidental payment or indemnity under limited circumstances,
                including towing, rental, and emergency road service, or for the repair
                or replacement of a product for damage resulting from power surges
                or accidental damage incurred in handling the product.
Mr. Wayne Thorburn           - Page 3                  (X-0322)




Id. 4 2(12). The application of article 9034 is broader than article 6573b in that contracts are not
restricted solely to coverage of “residential property” items. Additionally, article 9034 does not
exclude service contracts by a manufacturer or seller of a product.

         Persons offering service contracts under article 9034 are not subject to regulation under
article 6573b for contracts within the meaning of article 9034. See id. 5 5(d)(2) (exempting service
contract providers horn any other licensing requirements in Texas regarding service contracts within
the meaning of article 9034). Likewise, section 5(e)(4) of article 9034 specifically exempts from its
application “residential service contracts sold by entities licensed by the Texas Real Estate
Commission under article 6573b, Revised Civil Statutes.” Id. 5 5(e)(4). These exemptions restrict
application of article 9034 solely to contracts covering non-residential property items and contracts
covering residential property items offered or sold by the actual manufacturer or seller. See id.
9 5(d)(2), (e)(4). We believe that the clear language of these exemptions demonstrates that the
drafters of article 9034 intentionally avoided concurrent or overlapping jurisdiction of residential
service contracts regulated by TRBC.

         In addition to the plain language ofthe statutes, we also find it helpml to examine legislative
history. According to the legislative history of article 6573b, its purpose was to bring residential
service contract providers under the regulation of the TREC.] On the other hand, the bill analysis
for Senate Bill 1775, which enacted article 9034, states that its purpose is to regulate “the sale of
service contracts by a manufacturer or seller of consumer products [which] is unregulated.“2 This
language supports the conclusion that article 9034, enacted twenty years after article 6573b, was
intended to regulate an area not contemplated or governed by then existing law and was not intended
to replace existing law regarding “residential service contracts.”

         Based on the plain language of the statutes and the legislative history of articles 6573b and
9034, we believe that the types of contracts covered by the statutes were not intended to overlap.
Therefore, application of article 6573b and article 9034 should be determined by the type of contract
offered.

         We now address your specific questions.        You first ask:

                   Does article 6573b apply to a person offering a contract to repair or
                   replace the electrical, plumbing, heating, cooling, or air-conditioning
                   systems in residential property if the person is registered with the




         ‘See HOUSECOMM. ON INSURANCE,
                                     BILLANALYSIS,Tex. H.B. 962,66th Leg., R.S. (1979).


         ‘See SENATECOMM. ONECONOMICDEVELOPMENT,         BILLANALYSIS,Tex. S.B. 1775,76th Leg., R.S. (1999);
MiichellEnergv  Corp. v. Ashworth, 943 S.W.2d 436 (Tex. 1997) (explaining primary objective in conshuing statute
is to give effect t0 legislahue’s intent).
Mr. Wayne Thorbum        - Page 4                    (X-0322)




                Texas Department      of Licensing    and Regulation   (“TDLR”) under
                article 9034?3

          Application of article 6573b is triggered by the type of contract offered. See TEX. REV. CIV.
STAT. ANN. art. 6573b, 5 2(c) (Vernon Supp. 2000) (excluding application to contracts by a
manufacturer or seller of a product or service of residential property); id. 5 4(a) (regulating contracts
to repair, replace, maintain all or part of items or systems of residential property); id. 5 25(e)
(exempting from application of article 6573b, contracts by a manufacturer or seller of a product or
system of residential property). Thus, if the contract falls within the meaning of “residential service
contract” under article 6573b, the provider must obtain licensing with the TREC regardless of
whether the provider is already registered with TDLR under article 9034. See id. 5 6. Conceivably,
if a provider offers various service contracts, some within the meaning of article 6573b and others
within the meaning of article 9034, the provider would be required to comply with the licensing and
registration requirements of both statutes, depending upon the contract.

        In your second question, you ask:

                What are the licensing or registration requirements for a person to
                offer a contract to repair or replace appliances in a residence?4

         This question, in essence, inquires into the general licensing and registration requirements
of article 6573b and article 9034. Our answer turns upon whether the contract falls within the
coverage of article 65731, or article 9034. If a contract falls within the meaning of “residential
service contract” under article 6573b, and the provider is a third party, then the provider must be
licensed with the TREC. See TEX. REV. CIV. STAT. ANN. art. 6573b, 5 6 (Vernon Supp. 2000). A
person cannot sell, offer to sell, arrange or solicit the sale of, or receive applications for residential
service contracts, unless the person is employed by a licensed service company or is a licensed “real
estate salesman, real estate broker, mobile home dealer, or insurance agent” in Texas. Id. 3 6(b).
Additionally, a licensed service company must issue the residential service contract. See id. 5 6(a);
see also id. § 4(b), (c) (defining a licensed service company). The specific licensing requirements
are set forth in article 6573b and include compliance with financial security requirements and tiling
of an annual report. See id. $3 7-10.

         If a contract falls within the meaning of a “service contract” under article 9034 (including
those offered by a manufacturer or seller), then the provider must register with the TDLR. See id.
art. 9034,s 5(a). The primary requirements ofarticle 9034 are registration with the TDLR, payment
of an annual fee, and compliance with financial security requirements. See id. $5 5,6.




        ‘Letter fromhlr. Wayne Thorbum, Administrator,Texas Real EstateCommission, to Honorable John Comyn,
Texas Attorney General (July 31,200O) (on file with Opinion Committee).

        ‘Id
Mr. Wayne Thorburn      - Page 5                  (X-0322)




        In sum, article 6573b requires licensing with the Texas Real Estate Commission of persons
offering contracts on residential property items or systems that are not issued by the actual seller or
manufacturer of the items or systems. In contrast, article 9034 requires registration with the Texas
Department of Licensing and Regulation of persons offering contracts covering non-residential
property items, residential property items issued by the seller or manufacturer of the item, or any
other service contract not regulated by article 6573b. Thus, we conclude that articles 6573b and
9034 of the Revised Civil Statutes govern different types of contracts, and a person offering both
“residential service contracts” governed by article 6573b and “service contracts” governed by article
9034 must comply with both statutes.
Mr. Wayne Thorbum      - Page 6                  (JC-0322)




                                        SUMMARY

                        Article 6573b ofthe Revised Civil Statutes requires licensing
               with the Texas Real Estate Commission of persons offering contracts
               on residential property items or systems that are not issued by the
               actual seller or manufacturer of the items or systems. In contrast,
               article 9034, Revised Civil Statutes, requires registration with the
               Texas Department of Licensing and Regulation of persons offering
               contracts covering non-residential property items, residential property
               items issued by the seller or manufacturer of the item, or any other
               service contract not regulated by article 6573b. A person who
               provides contracts governed by both statutes is required to comply
               with article 6573b with respect to contracts governed by that statute
               and to comply with article 9034 with respect to contracts governed by
               that statute.




                                              Attorney General of Texas



ANDY TAYLOR
First Assistant Attorney General

CLARK KENT ERVIN
Deputy Attorney General - General Counsel

SUSAN D. GUSKY
Chair, Opinion Committee

Polly McCann Pruneda
Assistant Attorney General - Opinion Committee
