Home warranty scams have been a dark shadow over the home warranty industry for ages. Texas has taken steps to regulate the home warranty companies offering residential service contracts to protect the customers. Residential service contract Texas focuses on saving the customers from malpractice, offenses, and fraud. Here, the article will discuss the regulation of home warranty companies in detail, including:
- Difference Between Home Warranty Regulation and Home Insurance Regulation
- The Texas Real Estate Commission (TREC)
- What Is a Residential Service Contract in Texas?
- Who Can Sell Residential Service Contracts?
- Requirements for Obtaining a License from TREC
- Tips for Residential Service Companies in Texas To Comply With TREC Requirements.
Difference Between Home Warranty Regulation and Home Insurance Regulation
Before understanding residential service contracts regulating the home warranty companies in Texas, it is crucial to under the basic difference between Home Insurance and Home Warranty regulation.
- Home Insurance is regulated by the Federal Insurance Office Directly. This office falls under the Department of Treasury. Additionally, the Financial Stability Oversight Council and the National Association of Insurance Commissioners also regulate the industry. On the other hand, a home warranty is regulated by both state-level and federal organizations. While adhering to the federal requirements, the state can regulate home warranty companies based on their flexible approach.
- In-home insurance regulations, the focus is on the financial ability of the insurance companies to meet the claims. On the other hand, state law enforcement and licensing issues are at the forefront of the responsibility of regulatory bodies in-home warranty regulation.
The Texas Real Estate Commission (TREC)
In Texas, the licensing of home warranty companies, formally known as residential service companies (RSC), is under the Texas Real Estate Commission (TREC). It operates under the directives of the Texas Occupations Code Chapter 1303 from the Residential Service Company act. However, everything is maintained to follow federal orders.
The commission was formed in 1949 with a focus on real property valuations and transactions. It operates using a shared approach with Texas Appraiser Licensing and Certification Board (TALCB). This board focuses on appraisal regulations.
Both TALCB and TREC work together to regulate the home warranty companies in Texas.
What Is a Residential Service Contract in Texas?
Based on Chapter 1303, an agreement undertaken by a company to repair and replace appliances and components of the home system for a fee is called a residential service contract. Residential service contracts include different systems and appliances, including dishwashers, heating systems, and plumbing.
However, some things that do not fall under a residential service contract in Texas are as follows:
- A maintenance agreement or service contract that is offered for sale or is issued by the manufacturer.
- The contract is where the manufacturer or the merchant is responsible for repairing and replacing systems and appliances in the home.
- A contact where the manufacturer or merchant gives the replacement for the things they installed in a building.
Who Can Sell Residential Service Contracts?
Under the rules of the TREC, there is a limited category of people and organizations who can sell residential service contracts.
- Residential service contracts can be sold in Texas by licensed individuals, including insurance agents or real estate brokers. However, the contracts they sell must be provided by a licensed Residential Service Company.
- A Residential Service Company can authorize its employees to sell the home warranties.
- Any authorized representative can sell the home warranty on behalf of a licensed residential service company without holding a contract themselves.
Requirements for Obtaining a License from TREC
The application and the related fee have to be paid by the person who wishes to offer the residential service contract. All the required documents mentioned under the Texas Occupations Code Section 1303 have to be supplied with the application. The TREC reviews these documents before determining if the license application is approved. If the application is disapproved, the applicant may appeal to the decision based on the provision given in the same section. An approved license remains effective as long as the application maintains its adherence to the provisions mentioned in Chapter 1303. In case the provisions are not met, the license is suspended and revoked.
Tips for Residential Service Companies in Texas To Comply With TREC Requirements.
A company offering residential service contracts in Texas can maintain its compliance with the provisions of Chapter 1303 by submitting a mid-year and annual report. Similarly, the TREC must be notified before changing company details, documents, practices, and prices.
Otherwise, there could be a conflict between the documents of the company and the documents present at TREC. In some cases, the TREC may end up taking disciplinary action against the company as well.
These disciplinary actions may include license suspension on a temporary or permanent basis, disciplinary hearings, and administrative penalties imposed on the company. Finally, civil cases may be filed against the company as well in case the breach is massive.
Conclusion
The TREC regulates the home warranty companies and their residential service contracts in Texas. Adhering to its policies is important to avoid lawsuits and other disciplinary actions against the home warranty provider.
