After a storm destroys a manufactured home, can a Texas retailer remove its federal certification label, or does federal law block that?

Plain-English summary

Every manufactured home sold or leased in the United States has to carry a federal label certifying it meets the construction and safety standards set under the National Manufactured Housing Construction and Safety Standards Act of 1974. After Hurricane Harvey wrecked many retail manufactured homes in Texas, the Manufactured Housing Division of the Texas Department of Housing and Community Affairs issued an industry bulletin telling retailers to pull the certification labels off homes that could not be repaired and send them to the agency, electing the home as salvage. That tracked Occupations Code section 1201.461, which directs a retailer to remove and surrender the label when a new home is scrapped, dismantled, destroyed, or paid out at full insured value.

A federal agency then told the state the procedure conflicted with federal rules that, in its view, reserved label removal to federal third-party inspectors. The state agency could not actually find a conflict, and the federal agency later reversed itself and stopped asserting preemption. With the signals crossed, the agency's executive director asked the AG to settle whether federal law preempts the authority Texas gives retailers to remove these labels.

The AG concluded it does not. Congress wrote an express preemption clause into the Act, and the federal regulations bar only state action that obstructs federal purposes or impairs federal superintendence of the industry. The federal label statute requires that the certification label be permanently affixed, but neither the Act nor the cited regulations address removing a label from a home that no longer conforms because it is irreparably damaged. The federal inspection-agency rules govern affixing labels and handling repairs, and a federal informational bulletin actually says the inspectors usually have no knowledge of damaged homes and need not be told unless the manufacturer wants to repair or replace the unit. Reading those authorities together, the AG found that letting a Texas retailer remove a label from a destroyed home does not impair federal oversight, so the Act does not preempt section 1201.461.

Currency note

This opinion was issued in 2018. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant for those who asked

The Manufactured Housing Division (which requested the opinion): The opinion told the agency that its post-Harvey bulletin was on sound footing. On the AG's reading, federal law did not strip the state of authority to have retailers remove certification labels from irreparably damaged homes, so the salvage procedure in section 1201.461 could stand.

Manufactured-home retailers (as the opinion described them): The opinion treated section 1201.461 as a valid source of authority for a retailer to remove and surrender the label of a home that is scrapped, destroyed, or paid out at full insured value, concluding that doing so did not run afoul of the federal Act.

Federal inspection agencies (as the opinion described them): The opinion read the federal rules and bulletin as assigning inspection agencies a role in affixing labels and in approving or red-tagging repairs, not as giving them sole authority to remove labels from homes that cannot be repaired.

Common questions

What does the federal label on a manufactured home certify?
It certifies the home conforms to all applicable federal construction and safety standards. The Act requires the label to be permanently affixed to each home when the manufacturer delivers it to a retailer.

Why did the question come up after Hurricane Harvey?
The storm destroyed many manufactured homes sitting on retailer lots. The state agency issued a bulletin directing retailers to remove the labels from homes that could not be repaired and elect them as salvage, and a federal agency initially objected that only its inspectors could remove labels.

Did federal law actually require federal inspectors to remove the labels?
No, according to the AG. The Act requires the label to be affixed but does not address removing it from a home that no longer conforms because it is wrecked. The cited regulations cover affixing labels and handling repairs, and a federal bulletin says the inspectors generally have no knowledge of, or responsibility for, damaged homes unless a manufacturer wants to repair or replace one.

So can a Texas retailer remove the label from a destroyed home?
On the AG's analysis, yes. Because a retailer can remove the label under Occupations Code section 1201.461 without impairing federal oversight of the manufactured-housing industry, the Act does not preempt that state authority.

Background and statutory framework

The federal regime begins with the National Manufactured Housing Construction and Safety Standards Act of 1974, which sets minimum construction and safety standards (42 U.S.C. § 5401) and requires a certification label, permanently affixed, on each home (42 U.S.C. § 5415; 24 C.F.R. § 3280.11). Congress expressly defined the Act's preemptive reach in 42 U.S.C. § 5403(d), barring non-identical state standards on the same aspect of construction or safety and directing that preemption be "broadly and liberally construed." The opinion paired that with the rule from Cipollone v. Liggett Grp., Inc., 505 U.S. 504, 517 (1992), that an express preemption clause implies matters beyond its reach are not preempted.

The implementing regulation, 24 C.F.R. § 3282.11(d), sets the operative test: a state rule is valid unless it stands as an obstacle to federal purposes or cannot be enforced without impairing federal superintendence of the industry. The federal agency pointed to 24 C.F.R. § 3282.362 and its subsections (including § 3282.362(c)(2)(i)(F) on who provides labels to manufacturers, and § 3282.362(c)(2)(i)(G) on red-tagging during repairs), but the AG found those provisions address affixing labels and repairs, not removing labels from irreparably damaged homes. On the Texas side, Occupations Code section 1201.461(c) directs a retailer to remove and surrender the label for a statement of ownership marking the home as salvaged when the home is scrapped, dismantled, destroyed, or paid out at full insured value. Finding no federal authority that reserved removal to the inspection agencies, the AG concluded the state law could be enforced without impairing federal superintendence, so 42 U.S.C. §§ 5401-5426 did not preempt it.

Citations

Cases:

• Cipollone v. Liggett Grp., Inc., 505 U.S. 504, 517 (1992)

Statutes and regulations:

• Tex. Occ. Code § 1201.461, 1201.461(c)
• 42 U.S.C. §§ 5401, 5401-5426, 5403(d), 5415
• 24 C.F.R. §§ 3280.11, 3282.11(d), 3282.362, 3282.362(c)(2)(i), (ii), 3282.362(c)(2)(i)(F), 3282.362(c)(2)(i)(G)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0199
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2018/kp0199.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

KEN PAXTON
ATTORNEY GENERAL OF TEXAS

May 16, 2018

Mr. Joe A. Garcia Opinion No. KP-0199
Executive Director
Manufactured Housing Division Re: Whether the authority granted by section
Texas Department of Housing and 1201.461 of the Occupations Code to a
Community Affairs manufactured home retailer to remove the label
Post Office Box 12489 of a salvaged manufactured home is preempted
Austin, Texas 78711-2489 by federal law (RQ-0194-KP)

Dear Mr. Garcia:

    Regulations promulgated by the United States Department of Housing and Urban Development ("federal agency"), pursuant to the National Manufactured Housing Construction and Safety Standards Act of 1974 ("Act"), require that a manufactured home for sale or lease in the United States bear a label certifying its compliance with federal construction and safety standards. 24 C.F.R. § 3280.11 (describing certification label); see generally 42 U.S.C. §§ 5401-5426. You tell us that Hurricane Harvey damaged many retail manufactured homes within the State, and in the storm's aftermath, the Texas Department of Housing and Community Affairs Manufactured Housing Division ("state agency") issued an industry bulletin based on section 1201.461 of the Occupations Code directing retailers to remove certification labels from irreparably damaged homes. [1] See Attachments at 1 (Industry Bulletin No. 2017-002) ("For homes that cannot be repaired the Retailer should remove the ... labels and send them to the [state agency] along with an Application for Statement of ownership electing the home as SALVAGE."); see also TEX. OCC. CODE § 1201.461(c) (providing that if a new manufactured home is scrapped, dismantled, or destroyed, or if an insurance company pays the full insured value of the home, the "retailer shall remove the label and surrender [it] ... to the director for issuance of a statement of ownership that indicates that the home is salvaged"). Shortly after the bulletin's issuance, you tell us the federal agency advised that this procedure conflicts with federal procedures requiring third-party inspectors, known as Production Inspection Primary Inspection Agencies ("inspection agencies"), to "remove all ... Labels from manufactured homes." Request Letter at 2. After reviewing the authorities cited by the federal agency as preempting Texas law, however, you tell us you "could not identify a conflict between our statute and the federal regulations" and that on its own website, the federal agency "provided different methods of how to handle salvaged manufactured homes." Id. You further tell us that in later communications, the federal agency advised that it reversed its position and was no longer asserting preemption. [2] Given these inconsistencies, you seek clarification as to whether federal law preempts the authority given to retailers under Texas law to remove certification labels. Id. at 1-2.

    Passed by Congress to improve the quality of manufactured homes, the Act sets minimum construction and safety standards for manufactured homes. 42 U.S.C. § 5401. Congress expressly defined the preemptive reach of the Act, stating:

            Whenever a Federal manufactured home construction and safety standard established under this chapter is in effect, no State ... shall have any authority either to establish, or to continue in effect, with respect to any manufactured home covered, any standard regarding the construction or safety applicable to the same aspect of performance of such manufactured home which is not identical to the Federal manufactured home construction and safety standard. Federal preemption under this subsection shall be broadly and liberally construed to ensure that disparate State or local requirements or standards do not affect the uniformity and comprehensiveness of the standards promulgated under this section nor the Federal superintendence of the manufactured housing industry as established by this chapter.

42 U.S.C. § 5403(d); see also Cipollone v. Liggett Grp., Inc., 505 U.S. 504, 517 (1992) ("Congress' enactment of a provision defining the pre-emptive reach of a statute implies that matters beyond that reach are not pre-empted."). Federal regulations passed pursuant to the Act additionally contain express preemption provisions, providing in part:

            No State or locality may establish or enforce any rule or regulation or take any action that stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress. The test of whether a State rule or action is valid or must give way is whether the State rule can be enforced or the action taken without impairing the Federal superintendence of the manufactured home industry as established by the Act.

24 C.F.R. § 3282.11(d) (emphasis added).

    We must therefore determine whether the authorization given to retailers under Texas law to remove certification labels from irreparably damaged homes impairs the federal superintendence of the manufactured home industry. See id. The Act provides that, upon delivery of a manufactured home, a manufacturer must provide a retailer with a label that is to be "permanently affixed to each manufactured home" certifying that it "conforms to all applicable Federal construction and safety standards." 42 U.S.C. § 5415. The Act does not address the removal of a label from a manufactured home that no longer conforms to federal standards. See id. §§ 5401-5426. In your correspondence with the federal agency, however, it identified two provisions as preempting the Texas law. See Attachments at 24-26. Foremost, the federal agency asserted that its regulations, under 24 C.F.R. § 3282.362, require that only the inspection agencies remove a certification label from a damaged manufactured home. Id.; see 24 C.F.R. § 3282.362(c)(2)(i), (ii). These regulations contain numerous specifications for the certification label, including requiring that the "label shall be provided to the manufacturer only by the [inspection agencies]." 24 C.F.R. § 3282.362(c)(2)(i)(F) (emphasis added). The regulations do not, however, address the removal of a certification label from an irreparably damaged manufactured home. See id. § 3282.362(c)(2)(i), (ii).

    The federal agency additionally asserted preemption under an informational bulletin it issued discussing procedures for the labeling of manufactured homes damaged in transit:

            If an [inspection agency] has no knowledge that a mobile home is damaged in transit, as will often be the case, the [inspection agency] has no responsibility. Further, there is no requirement to inform the [inspection agency] that a home has been so damaged, except when the manufacturer wants [inspection agency] approval of the repair or wants to replace the damaged unit. When an [inspection agency] knows that a home bearing its label has been damaged, it shall, at its discretion ... red-tag the unit in question, or if the mobile home is going to be junked or destroyed rather than repaired, the [inspection agency] shall remove and destroy the label.

See Attachments at 15 (Informational Bulletin 2-77) (emphases added). Contrary to the federal agency's initial assertions, the plain language of the bulletin provides that when a manufactured home is damaged the inspection agencies will generally have no knowledge of the event nor responsibility, and "there is no requirement to inform [them]." See Attachments at 15. Rather, the federal bulletin requires only that a manufacturer contact the inspection agencies regarding a damaged manufactured home if it intends to repair or replace the damaged unit. Id. If contacted, the inspection agencies then at their discretion may either begin the process for approving repairs or destroy the certification label if the home cannot be repaired. See id.; see also 24 C.F.R. § 3282.362(c)(2)(i)(G) (describing process for inspection agencies to red-tag manufactured homes during repairs). [3]

    Collectively, neither the Act nor these federal publications require a retailer to contact the inspection agencies to remove a certification label from an irreparably damaged home that no longer conforms to federal standards. Nor do these federal authorities vest the inspection agencies with the sole authority to remove such certifications. "The test of whether a State rule ... is valid or must give way is whether the State rule can be enforced ... without impairing the Federal superintendence of the manufactured home industry." 24 C.F.R. § 3282.11(d). As a retailer may remove a certification label from an irreparably damaged home under the authority granted by Texas law without impairing the federal superintendence of the manufactured home industry, the Act therefore does not preempt the authority given to retailers.

                                 SUMMARY

                 The National Manufactured Housing Construction and Safety Standards Act of 1974 does not preempt the authority provided to retailers of manufactured homes under Texas Occupations Code section 1201.461 to remove labels certifying compliance with federal standards from irreparably damaged manufactured homes.

                                      Very truly yours,

                                      KEN PAXTON
                                      Attorney General of Texas

JEFFREY C. MATEER
First Assistant Attorney General

BRANTLEY STARR
Deputy First Assistant Attorney General

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

ASHLEY FRANKLIN
Assistant Attorney General, Opinion Committee

[1] Letter and Attachments from Mr. Joe A. Garcia, Exec. Dir., Tex. Dep't of Hous. & Cmty. Affairs, Mfd. Hous. Div., to Honorable Ken Paxton, Tex. Att'y Gen. at 1-2 (Nov. 27, 2017), https://www.texasattorneygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter" and "Attachments," respectively) (Attachments on file with the Op. Comm.).

[2] Telephone Conference with Amy Morehouse, Gen. Counsel, Tex. Dep't of Hous. & Cmty. Affairs, Mfd. Hous. Div. (Dec. 6, 2017).

[3] As the federal bulletin does not conflict with Texas procedures, we need not address whether it has the potential to preempt state law.