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Spring 2004
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State Outlook and Legal Perspectives

State Outlook and Legal Perspectives

Legislative Issues

The Idaho legislature recently completed work on HB 585, which makes changes in state law regarding modular home construction in Idaho. Until now, in-state manufacturers had to build to the Idaho modular code (UBC in general) plus if the home was to be shipped to an out of state location, also to that state’s modular code. This increased costs considerably for those units being exported out of state. The biggest expense was that Idaho required all plumbing and electrical work be done by licensed persons, but many of adjoining states did not have that requirement.

Under the changes approved this week, Idaho modular manufacturers will no longer be required to use licensed electricians or plumbers if the state code where the home is being shipped to doesn’t have that requirement. Two of the biggest export markets, California and Colorado, don’t have those requirements. The changes take effect on the Governor’s signature.

The Maryland legislature has introduced legislation that would amend the sales tax treatment of modular homes. Currently modular homes are being taxed at the full manufacturers invoice. The legislation would amend this to be 60% of the invoice price. The legislation is being supported by the Maryland Manufactured Housing Institute.

New York
After years of difficulty in obtaining modular plan approvals in New York, the modular industry, working through the New York Manufactured Housing Association, had a very successful meeting with the NY Department of State last month. New York is one of the last states that does not use a third party approval system. However, in the meeting with NY MHA, modular manufacturers, and representatives of the Modular Building Systems Council and the Building Systems Council, the Department of State set forth a preliminary draft of a pilot program using third party approvals. While details of the program still need to be ironed out, this drastic shift in policy is a great achievement for the modular industry.

North Carolina
In response to a growing concern that modular housing would be subject to discriminatory zoning practices, in the 2003 legislative session the North Carolina MHI successfully sponsored and enacted HB 1006, which focused on setting aesthetic standards for modular housing that include roof pitch, exterior siding materials, foundation requirements, and eave overhang. HB 1006 also amended the sales tax treatment of modular housing in order to bring parity with site-built homes.

Earlier this year the Ohio Manufactured Housing Association (OMHA) was able to successfully obtain an amendment to HB 230 to exempt modular manufacturers and/or retailers from registering and paying a $70 fee for “trailers” used to transport modular homes in Ohio. The industry is estimated to save approximately $125,000 per year as a result of the amendment. HB 230 passed the Ohio House of Representatives 89-3 with OMHA’s amendment deleting modular “trailers” from the registration fee. The bill now moves to the Ohio Senate for consideration.

South Carolina
Due to the success of its northern neighbor last year, the MHI of South Carolina this year introduced HB 4735. Like the North Carolina bill, this legislation sets out aesthetic requirements for modular housing in similar areas, such as roof pitch, wall height, foundation materials, and exterior siding standards. The South Carolina bill also intends to remedy the unfair taxation of modular homes within the state.
Another bill filed at the SC Statehouse would make it much easier to increase label, plan review and other fees paid by modular builders. MHISC opposes the legislation.

HB 4918, filed by Rep. Herb Kirsh (D-Clover, SC) would remove the requirement that modular fees be approved by the legislature. Under the bill, only one vote by a state agency, the Building Codes Council, would be all that’s required to raise fees.

The association is battling the issue on two fronts. Similar wording was buried in the 450-page state government budget on a seemingly routine motion. MHISC "picked up" on the wording and is working with state Senators who can take the wording out when the bill goes to the Senate, according MHISC Executive Director Mark Dillard.

State agency officials have suggested a fee increase as one way the state Modular Program could add staff to shorten the turn-around time for plan review and issuing labels.

MHISC, however, believes that state agencies should first work with companies they regulate to determine what specific benefits would be funded by an increase and whether it is necessary.

In order to address a growing concern over modular home placements, the Texas MHA last year worked hard on legislation to protect the industry in the Lone State State.

SB 1326 provided that a municipality may adopt regulations that require single-family or duplex industrialized housing to have a value equal to or greater than the median taxable value for each single-family dwelling located within 500 feet of the lot on which the industrialized housing is proposed to be located; have exterior siding, roofing, foundation fascia and fenestration compatible with the single-family dwellings located within 500 feet of the lot, comply with municipal aesthetic standards, building setbacks, side and rear yard offsets, subdivision control, architectural landscaping, square footage, and other site requirement; and be securely fixed to a permanent foundation.

However, a municipality may not adopt a regulation under this section that is more restrictive for industrialized housing than that required for a new single-family or duplex dwelling constructed on-site.

Legal Issues

Last fall the Florida Manufactured Housing Association played a key role in stopping Port Orange, FL from it’s year long effort to discriminate against modular housing despite such action being a direct violation of Florida statutes.

In response to a handful of citizens being unhappy about a modular home being placed, the city placed a ban on issuing any permits for modular housing. The moratorium was set to expire last fall, and was not renewed due to pressure from FMHA.

Earlier this year the Iowa Court of Appeals issued a favorable ruling in Kruse et. al v. Claar Construction protecting modular homes from discriminatory deed restrictions. In the opinion the Iowa Court of Appeals, in a case dealing with a modular home and subdivision restrictions, has determined that a restriction against moving a home constructed off site does not apply to a modular home. The opinion basically states that the two modules of the home are building materials until all the site work is accomplished.

Other victories do exist for the modular industry and are cited in the Iowa Case.

Ussery Investments v. Canon & Carpenter, Inc., 663 S.W.2d 591, 592 (Tex. Ct. App. 1983)

Ruling: The term “structure,” as used in the restrictions, clearly means a whole, pre-existing, and habitable building, and its clear purpose is to require that only newly-erected, permanent buildings be placed on the subdivision lots. . . . The restrictions did not require that the structure be “built in place” or otherwise indicate a prohibition against modular construction . . . . Here the separate elements were never joined together to form a structure until they were permanently anchored to the foundation at the building site. Until all of the component elements comprising the basic structure were actually assembled, the unit could not be considered a “structure” within the meaning of the restrictive covenant.

Kennedy v. Classic Designs, Inc., 722 P.2d 504 (Kan. 1986).

Ruling: [U]se of the word “building” clearly imports some sort of assembled or completed structure, rather than various component parts that are intended to be attached together to comprise a finished product. We think it is clear that the restrictive covenant . . . contemplated a completed building rather than a method of construction. When the restrictive covenants are considered as a whole, it would appear the intent is to prevent moving used or inferior buildings or structures onto the property as opposed to new construction whether stick-built or modular.

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